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Tax Credit Uncertainty Could Derail $1-Billion Pink Hydrogen Project

The largest U.S. nuclear power operator, Constellation Energy, may see a $1-billion major project to produce hydrogen using nuclear energy deferred or abandoned due to still unclear guidance over the tax credits for clean hydrogen production under the Inflation Reduction Act (IRA).

The Act, passed in August last year, provides for the so-called 45V credit for the production of clean hydrogen, but the U.S. Treasury Department has yet to provide detailed guidance on who is eligible for the subsidy, which could be as high as $3 per kilogram of hydrogen.

Constellation Energy wants to make the so-called pink hydrogen, generated through electrolysis of water by using electricity from a nuclear power plant.

However, if energy from nuclear power plants is diverted for hydrogen production, this could reduce the amount of carbon-free electricity generation. At the same time, the basic principle for clean hydrogen is that there should be no increase in overall emissions of the electricity supplied to the grid, environmentalists tell Bloomberg.

As the guidance is pending, Constellation Energy is not sure its plan would receive tax credits and thus be viable for commercial production.  

“The uncertainty around the regulations has brought us pretty much to a full stop,” Constellation Energy’s chief executive officer Joe Dominguez told Bloomberg in an interview.

While green hydrogen is produced using renewables at a 20 percent to 40 percent capacity factor, pink hydrogen would use nuclear power at a capacity factor of 90 percent, thereby reducing costs. The carbon footprint of pink hydrogen is believed to be similar to that of green hydrogen using renewables.

If the expected guidance doesn’t include nuclear power-generated hydrogen, the U.S. could miss its clean hydrogen and clean energy targets, Constellation Energy’s Dominguez told Bloomberg.

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In March, the company launched hydrogen production at the first U.S. 1 MW demonstration scale, nuclear-powered clean hydrogen production facility at Constellation’s Nine Mile Point Nuclear Plant in Oswego, New York. The clean Hydrogen Generation System operating at Nine Mile Point uses 1.25 megawatts of zero-carbon energy per hour to produce 560 kilograms of clean hydrogen per day, more than enough to meet the plant’s operational hydrogen use.

By Tsvetana Paraskova for Oilprice.com

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