Making Nuclear Power Economical: Congress Passes Tax Benefits for New Nuclear

By: John Wagner

Previously untapped oil and natural gas reserves have revved up a fossil-fuel boom recently, as new drilling techniques and decreased regulation open up new parts of the world for mining. This fossil-fuel boom has pushed the prices of both natural gas and oil far below predicted levels, making fossil-fuel power plants more economical than those using renewable energy sources. In an attempt to make nuclear energy more competitive, congress recently extended the production tax credit for commercial nuclear reactors.

While this helps, the nuclear industry is still plagued with the exponential rise of power plant construction cost. In the past, the U.S.’s private sector competed with other forms of energy thanks to its fairly inexpensive operational costs. In 2011, research from The Institute for Energy estimated that operational cost for nuclear reactors was $0.02 per kilowatt hour, while natural-gas power plants sat at $0.045. While there isn’t a lot of U.S. data on the construction cost of new reactors, similar facilities in China cost about $2,440 per kilowatt hour, while newly constructed natural gas power plants run at a mere $700 per kilowatt hour.

The high upfront costs are a main reason private companies simply aren’t investing in nuclear. Congress hopes to reduce these costs by extending the production tax credit for nuclear power plants. This credit goes towards construction costs for nuclear power plants that will be on the grid after the end of 2020. These lowered taxes greatly reduce pressure on nuclear reactor construction projects and free up capital for unplanned expenses. The extension benefits several commercial reactors, particularly Vogtle reactors three and four, in addition to a proposed small modular reactor at the Idaho National Lab.

The extension of the production tax credit is critical for nuclear energy in the United States. It enables the U.S.’s power system to prepare for the inevitable increase of fossil fuel prices. Nuclear energy will continue to provide the United States with vast amounts of carbon free energy, and this production tax credit is a big step in the right direction.

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