Nuclear energy could make a comeback under Democrats' new bill

Constrained by the capacity limits of renewable energy and ambitions to reduce reliance on fossil fuels, nuclear energy is getting a second look in the U.S. as lawmakers race to keep their climate goals intact in the face of historically high energy costs.

The Democrats’ climate and tax bill may just provide the tailwind in needs.

The $430 billion Inflation Reduction Act (IRA) provides a $30 billion lifeline to dozens of nuclear power plants under threat of closure, potentially reviving an industry-long cast aside over fears of safety and cost overruns.

“There's a pretty large vocal community of nuclear power advocates who think that it's the future and that any energy system in the future that is low carbon is going to have to have nuclear power and possibly lots of it,” Edwin Lyman, director of nuclear power safety at the Union of Concerned Scientists, told Yahoo Finance.

The U.S. remains the largest producer of nuclear power globally, with reactors generating roughly 20% of the country’s electricity, according to the U.S. Energy Information Administration.

However, just one nuclear power plant has come online in more than 25 years. Meanwhile, the average age of the country’s 93 nuclear reactors is about 40 years old.

The IRA commits $369 billion in climate spending, with a wide net of tax credits and subsidies intended to accelerate the clean energy transition. That includes the Zero-Emissions Nuclear Power Production Credit, which subsidizes existing nuclear power plants over the next decade. If signed into law, those plants would be eligible for a credit of $0.03 per kilowatt-hour. Plants that pay higher wages would be eligible for credits up to five times the base rate.

The bill also commits $700 million for HALEU (high assay low enriched uranium), a critical fuel source for the next generation of advanced reactors.

The proposed tax credits come as policymakers look to prolong the life of nuclear power plants in order to keep climate goals intact, amid a global energy crunch brought on by the Russia-Ukraine war.

As much as 64% of existing U.S. reactors are on track to be decommissioned by 2030, according to the Rhodium Group. Just 45% of that energy generation is likely to be replaced by wind and solar, with natural gas replacing 55%, adding to the carbon intensity of the grid.

'Look at what happened in Germany'

The Biden administration sees nuclear power — a carbon-free energy source — as a critical bridge to reach its stated goal of slashing greenhouse gas emissions to half of 2005 levels by 2030.

“We have to invest enormously today to increase our reliance on cleaner and more renewable sources. And that includes nuclear,” Amos Hochstein, special coordinator for international energy affairs for President Biden, told Yahoo Finance. “We haven't built a nuclear power plant in the United States in decades. We have a fleet that needs more support in order to be able to stay up. Look at what happened in Germany by taking offline nuclear. They’re now burning coal ... that's something we shouldn't be doing here.”

That reality has turned former nuclear skeptics into advocates. In California, Sen. Dianne Feinstein (D-CA) recently penned an op-ed for the Sacramento Bee under the headline “Why I changed my mind,” opposing the closure of the state’s last remaining nuclear power plant Diablo Canyon, stating it “made little sense” under the current circumstances.

“Closing Diablo Canyon would remove 18,000 gigawatt-hours from the grid, nearly 10% of the state’s electricity generation," she wrote. "This is an extraordinary amount of power for a grid facing reliability concerns amid heat waves and wildfires. When the power goes out, lives are endangered.”

Lyman maintained that nuclear power remains the most "reliable" carbon-free energy source in the absence of full scale wind and solar. He is worried, however, that the sole focus on accelerating clean energy adaptation risks overlooking underlying safety concerns around aging reactors, saying U.S. regulators have not done enough “to address the lessons of Fukushima.”

“The industry is very focused on minimizing the amount of safety regulations that they have to follow for the operating plants and also for new ones,” Lyman said. “I really do worry that if that message takes hold, that we may end up in a situation where there’s more risk to the public instead of less. That’s not a good outcome.”

Akiko Fujita is an anchor and reporter for Yahoo Finance. Follow her on Twitter @AkikoFujita

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