The Biden administration has finalized rules for a new tax credit aimed at boosting domestic hydrogen production, a move that could also help struggling nuclear power plants stay online. The tax credit, called 45V, was established through the Inflation Reduction Act and is worth up to $3 per kilogram of hydrogen production. To qualify, companies have to meet strict requirements to limit pollution.

The guidelines stipulate what kinds of hydrogen projects can qualify for the tax credit. Hydrogen combustion releases water vapor instead of greenhouse gas emissions, making it a more sustainable alternative to fossil fuels. However, the production of hydrogen requires energy, and the source of that energy has been a contentious issue. After much political wrangling, the Biden administration has loosened the rules to include hydrogen made with the help of some existing nuclear power plants.

Nuclear reactors at risk of shuttering due to financial reasons might be able to benefit from the tax credit. This move is seen as a significant step forward for the nuclear energy industry, which has been struggling in recent years. "The final rule is an important step in the right direction," said Joe Dominguez, president and CEO of Constellation, the largest nuclear power plant operator in the US. "The final rule allows a significant portion of the existing merchant nuclear fleet to earn credits for hydrogen production."

The tax credit is part of the Biden administration's efforts to promote clean energy and reduce greenhouse gas emissions. However, the production of hydrogen is not without its challenges. Currently, 95% of hydrogen produced in the US is made using gas in a process called steam-methane reforming, which produces carbon emissions. The more climate-friendly alternative is to create hydrogen through electrolysis, splitting water into oxygen and hydrogen using electricity from carbon pollution-free sources like solar and wind farms – or nuclear reactors.

There have been concerns that the burgeoning hydrogen industry might use up too much of America's still-limited carbon-free electricity supply, leading to higher greenhouse gas emissions. To ease these concerns, the Biden administration proposed rules for the hydrogen tax credit that require companies to get electricity from new sources of clean energy. However, this proposal faced backlash from nuclear energy companies, which argued that they wouldn't be able to benefit from the tax credit as a result.

After receiving over 30,000 comments on the proposal, the Biden administration loosened its guidelines. The final rules carve out scenarios in which an existing nuclear power plant at risk of retirement can benefit from the tax credit if it's used to produce hydrogen and meets certain financial tests. The rules also ease requirements for renewable energy and make it easier for developers to qualify for the tax credit in states that already have tough clean electricity standards.

In addition, the final rules include new carveouts for hydrogen produced with methane that wafts out of landfills, farms, wastewater facilities, or coal mines that might otherwise escape into the atmosphere. Companies can also take advantage of the tax credit if hydrogen is made with electricity from a fossil fuel power plant that installs technology to capture its carbon dioxide emissions.

The nuclear energy industry has seen a boom of interest over the past year from tech companies in need of more carbon-free energy for AI data centers. Microsoft, Google, and Amazon have all announced plans to support the development of advanced small modular reactors. The industry hopes that the new tax credit will provide the certainty needed to keep projects moving forward and make the US a global leader in truly green hydrogen.

The final rules are seen as a significant step forward for the hydrogen industry, which has been gaining momentum in recent years. The industry hopes that the new tax credit will provide the necessary boost to help it grow and become a major player in the clean energy sector.

As the US continues to transition to a cleaner energy mix, the role of hydrogen and nuclear energy will be closely watched. The Biden administration's finalization of the hydrogen tax credit is a significant step forward in promoting clean energy and reducing greenhouse gas emissions.