The unexpected inflation reduction legislation announced by Sen. Joe Manchin (D-W.V.) and Majority Leader Chuck Schumer has lawmakers and clean advocates scrambling to read the 725-page bill.
The sweeping bill includes nearly $370 million on energy and climate change initiatives. Congressional Democrats, who have pushed an ambitious climate and clean energy package, claimed it would reduce carbon emissions roughly 40% by 2030.
It’s broken down to include $60 billion for a clean energy manufacturing tax credit and $30 billion for a production tax credit for wind and solar, seen as ways to boost and support the industries that can help curb the country’s dependence on fossil fuels.
“The Inflation Reduction Act of 2022” also includes incentives for hydrogen, nuclear and energy storage.
Credit for clean hydrogen producers
The legislation includes a tax credit for qualified clean hydrogen producing facilities.
According to bill language, the credit is equal to a percentage of $0.60 multiplied by the kg of clean hydrogen produced during a taxable year. That percentage would be based on the amount of greenhouse gas emissions released through the hydrogen producing process.
- In the case of any clean hydrogen which is produced through a process that results in a greenhouse gas emissions rate of less than 4 kg of CO2e per kg of hydrogen, and not less than 2.5 kg of 4 CO2e per kg of hydrogen, the applicable percentage would be 20 percent.
- For clean hydrogen producing facilities that release emissions at a rate less than 2.5 kgs of CO2e per kg of hydrogen, and not less than 1.5 kilograms of CO2e per kg of hydrogen, the percentage would be 25 percent.
- For clean hydrogen producing facilities that release emissions at a rate less than 1.5 kg of CO2e per kg of hydrogen, and not less than 0.45 kilograms of CO2e per kg of hydrogen, the percentage would be 33.4 percent.
- For clean hydrogen producing facilities with emissions rates of less than 0.45 kg of CO2e per kg of hydrogen, the percentage would be 100 percent.
The bill includes a nuclear power production credit based on plant revenue and scalable if certain labor requirements are met. According to the bill, the credit is equal to 0.3 cents multiplied by the KWh of electricity produced by a qualified nuclear power facility in that given year; and in excess of what the bill calls the “reduction amount.”
Bill language defines the reduction as equal to the lesser of the last calculation, or the amount equal to 80 percent of the excess of gross receipts from electricity produced by the facility, over the amount equal to 2.5 cents multiplied by the KWh of energy produced by the facility. Depending on the year, the numbers used in these equations could be adjusted for inflation, according to the bill.
“Qualified nuclear power facilities” would have to have been placed into service before the bill is enacted and does not include advanced nuclear facilities.
Other energy appropriations in the bill include:
- $10 million for oversight by the U.S. Department of Energy’s Office of Inspector General
- Money for the national labs: $133 million to carry out activities for science laboratory infrastructure projects, $303.6 million to carry out activities for high energy physics construction and major items for equipment projects, $280 million to carry out activities for fusion energy science construction and major items for equipment projects; $217 million included for nuclear physics construction, $163.8 million for advanced scientific computing research facilities; $294.5 million for basic energy sciences projects; and $157.8 million for isotope research and development facilities.
- $150 million for infrastructure and general plant projects carried out by the DOE’s Office of Fossil Energy and Carbon Management
- $150 million for the Office of Nuclear Energy
- $150 million for the Office of Energy Efficiency and Renewable Energy
- A total of $700 million related to supporting the availability of high-assay low-enriched uranium (HALEU) nuclear fuel for research, development and demonstration
Other items in the bill include tax credits for drivers who buy new or used electric vehicles, $30 billion in grants and loans for utilities and states to convert to clean energy and $27 billion to reduce emissions.
More on this portion of the bill can be found at our partner publication Renewable Energy World.
The full text of the bill is here.
Manchin had been a year-long holdout over Democrats’ plans to use the once-in-a-decade reconciliation process to push through what had been billed as most ambitious climate and clean energy package in history. Even recently he had publicly expressed reservations over a budget package, citing inflation concerns plaguing the U.S. economy.
The Senate plans to hold a vote on the reconciliation bill next week.
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