The Biden administration finalized guidelines meant to spice up home manufacturing of hydrogen gas by a brand new tax credit score, a transfer that may additionally preserve struggling nuclear energy vegetation on line for longer.
The extremely anticipated pointers stipulate what sorts of hydrogen initiatives can qualify for the tax credit score. Hydrogen combustion releases water vapor as a substitute of greenhouse fuel emissions, which is why the Biden administration sees it as a extra sustainable different to fossil fuels. But it surely takes power to provide hydrogen, and the place that power ought to return from has been contentious.
After quite a lot of political wrangling, the Biden administration finally loosened the foundations to incorporate hydrogen made with the assistance of some current nuclear energy vegetation. Particularly, nuclear reactors vulnerable to shuttering due to monetary causes would possibly be capable to profit from the tax credit score.
The place that power ought to return from has been contentious
“The ultimate rule is a vital step in the best route,” Joe Dominguez, president and CEO of the biggest nuclear energy plant operator within the US, Constellation, mentioned in a press statement. “The ultimate rule permits a good portion of the prevailing service provider nuclear fleet to earn credit for hydrogen manufacturing.”
The tax credit score, known as 45V, was established by the Inflation Discount Act and is value as much as $3 per kilogram of hydrogen manufacturing. To qualify, firms have to fulfill strict necessities to restrict air pollution.
That’s as a result of whether or not hydrogen might be thought-about a clear gas will depend on the way it’s made. At the moment, 95 percent of hydrogen produced in the US is made using gas in a course of known as steam-methane reforming. Methane is an excellent more potent greenhouse gas than carbon dioxide. And steam-methane reforming additionally produces carbon emissions.
The extra climate-friendly different is to create hydrogen by electrolysis, splitting water into oxygen and hydrogen utilizing electrical energy. The electrical energy must come from carbon pollution-free sources like photo voltaic and wind farms — or nuclear reactors, in fact.
However all of the latest hype over hydrogen has sparked issues that the burgeoning business would possibly dissipate an excessive amount of of America’s still-limited carbon-free electrical energy provide. The fear is that energy grids would possibly attempt to meet rising electrical energy demand utilizing fuel and coal-fired vegetation, resulting in increased greenhouse fuel emissions.
To ease these issues, the Biden administration proposed rules for the hydrogen tax credit score greater than a 12 months in the past that require firms to get electrical energy from new sources of fresh power. The hope was that, by doing so, the hydrogen business would possibly assist add extra renewable power to the facility grid slightly than siphoning off restricted assets.
It’s quite a bit tougher to construct new nuclear energy vegetation than new photo voltaic and wind farms, nevertheless. The proposal subsequently faced backlash from the nuclear energy companies saying they wouldn’t be capable to profit from the hydrogen tax credit score in consequence.
After receiving greater than 30,000 feedback on the proposal, the Biden administration loosened its pointers. The Division of the Treasury and Inner Income Service launched the ultimate rules on Friday. They carve out eventualities through which an current nuclear energy plant vulnerable to retirement can profit from the tax credit score if it’s used to provide hydrogen and meets sure monetary exams.
Constellation opposed any necessities that hydrogen manufacturing use electrical energy from newly constructed sources with a purpose to qualify for the tax credit score. The corporate is concerned in plans to build a major hub for hydrogen production in Illinois, a project awarded funding from the Bipartisan Infrastructure Law.
The ultimate guidelines additionally ease necessities for renewable power and make it simpler for builders to qualify for the tax credit score in states that have already got robust clear electrical energy requirements. There are additionally new carveouts for hydrogen produced with methane that wafts out of landfills, farms, wastewater services, or coal mines that may in any other case escape into the ambiance. As well as, firms can make the most of the tax credit score if hydrogen is made with electrical energy from a fossil gas energy plant that installs know-how to seize its carbon dioxide emissions.
“The in depth revisions we’ve made on this remaining rule present the knowledge that hydrogen producers must preserve their initiatives shifting ahead and make the USA a world chief in really inexperienced hydrogen,” John Podesta, senior adviser to the president for worldwide local weather coverage, said in a press release.
Most of America’s nuclear energy vegetation had been constructed within the Seventies or ’80s, and the average age of a nuclear reactor within the US is 42 years outdated. Development of the first all-new nuclear reactor within the US in a long time finished in 2023 — seven years previous its authentic deadline and $17 billion over finances. Subsequent-generation nuclear reactors are smaller and modular, which is meant to make them simpler and extra reasonably priced to construct. However these designs aren’t anticipated to turn into commercially viable till the 2030s.
The nuclear power business has additionally seen a growth of curiosity over the previous 12 months from tech companies in want of more carbon-free energy for AI data centers. Microsoft inked a cope with Constellation to assist restart a retired reactor at Three Mile Island, whereas Google and Amazon introduced plans to assist the event of superior small modular reactors.
