Constellation Energy sounded upbeat about its existing nuclear fleet as well as future prospects for hydrogen production as it reported third quarter financial results on November 8.

The Baltimore-based utility holding company cited both state and federal support for carbon-free generation resources as it outlined a scenario that would keep its nuclear power plants in service until 2070.

In a press release announcing the quarterly results, Joe Dominguez, president and CEO, said that support for carbon-free energy in the federal Inflation Reduction Act that was passed into law in August “creates opportunities for us to extend the life of our nuclear fleet past mid-century.”

The law is also expected to better enable the company to pursue hydrogen production to emissions from difficult-to-decarbonize sectors of the economy. 

“Now there are both state and federal policies that recognize the essential role our zero-carbon nuclear assets must play in achieving our nation’s climate goals,” the statement said.

Higher expenses

The upbeat outlook was tempered by a net loss of $188 million during the quarter, which ended September 30. That compared to net income of $607 million for the same quarter a year earlier. The company reported fuel and power purchase costs of nearly $4.7 billion during the quarter, up from nearly $1.55 billion a year earlier.

Total operating expenses for the quarter topped $6 billion, up from nearly $3.5 billion in the third quarter of 2021. 

Constellation has more than 32,400 MW of generating capacity. During the quarter its nuclear fleet, including output from the Salem Generating Station, produced 43,794 GWh in the quarter, compared with 44,350 GWh a year earlier. Excluding Salem, its nuclear plants achieved a 96.4% capacity factor, compared with 97.7%1 for the third quarter of 2021.

Also during the quarter Constellation announced its intent to seek renewal of the operating licenses for its Clinton and Dresden nuclear power plants. If granted by the Nuclear Regulatory Commission, the renewals would allow the plants to operate for another 20 years: Clinton could operate until 2047 and Dresden could operate until 2049 (Unit 2) and 2051 (Unit 3).

‘Material improvement’

Constellation said its credit rating improved during the third quarter as S&P rating services raised its issuer credit rating to ‘BBB’ from ‘BBB-’, reflecting what the utility said was S&P’s view of a “material improvement” in its business risk profile. In particular, S&P cited the passage of the Inflation Reduction Act as a “material credit positive” for the utility.

In S&P’s view, the earnings statement said, the nuclear production tax credits (PTC) provide “long-term visibility into the cash flows for our nuclear fleet” and benefit potential future hydrogen production.

Constellation noted the PTC recognizes the contributions of carbon-free nuclear power by providing a federal tax credit of up to $15/MWh, subject to phase-out, beginning in 2024 and continuing through 2032. 

Source: Constellation Energy Q3 earnings statement

The hydrogen PTC provides a 10-year federal tax credit of up to $3/kilogram for clean hydrogen produced after 2022 from facilities that begin construction prior to 2033. Both tax measures include adjustments for inflation. Constellation said the hydrogen PTC creates additional opportunities for its nuclear fleet to enable decarbonization of other industries through the production of clean hydrogen.

In late 2021, the Department of Energy approved construction and installation of an electrolyzer system at Constellation’s Nine Mile Point nuclear station in New York. The system is designed to separate hydrogen and oxygen molecules in water to produce carbon-free hydrogen. 

Additional state funding is intended to help demonstrate hydrogen fuel cell technology at the nuclear plant to provide long-duration energy storage for the electric grid. That project is currently being designed and is expected to be operational in 2025. The projects could set the stage for possible deployment at other nuclear power plants. 

And the company said it is working with public and private entities to pursue development of regional hydrogen production and distribution hubs, including participation in the Midwest Alliance for Clean Hydrogen, or “MachH2” hydrogen hub.

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