Electrolysers

Nuclear hydrogen 'makes a lot of intellectual sense': US energy loans head

But is endorsement cold comfort for an industry likely to be disadvantaged by additionality rules when seeking tax credits for production?

. Jigar Shah, director of the Loan Programs Office at the US Department of Energy.
. Jigar Shah, director of the Loan Programs Office at the US Department of Energy.Photo: US Department of Energy

The head of the US Department of Energy (DOE)’s Loan Programs Office (LPO) has strongly endorsed nuclear hydrogen in a recent interview with news agency Reuters.

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“The whole concept of nuclear and hydrogen is one that makes a lot of intellectual sense,” said LPO director Jigar Shah, a former solar power magnate who founded SunEdison, which in 2014 was the world’s largest renewable energy developer.

While nuclear power plants currently generate baseload power, with excess energy generally stored via pumped hydropower, they have been suggested as a high-capacity electricity source on which to run electrolysers around-the-clock to produce so-called “pink” hydrogen at relatively low cost.

Analysis by French bank Lazard earlier this year suggested that pink hydrogen would only cost $2.75-5.29/kg to make, depending on electrolyser size and type, compared to $3.47-7.37/kg for green H2 produced using variable renewable energy.

Nuclear power stations also use hydrogen within their operations anyway — which could mean some guaranteed offtake for volumes produced using the plant’s electricity.

However, since grey hydrogen made using unabated fossil gas generally costs less than $2/kg in the US, pink H2 would likely have to draw on the clean hydrogen production tax credit, which offers a top rate of $3/kg, in order to be cost-competitive with carbon-intensive alternatives.

But while the tax credit was passed in November last year, as part of the Inflation Reduction Act, guidance is yet to be released on exactly how the lifecycle emissions for hydrogen will be calculated and whether similar rules to the EU, requiring new zero-carbon electricity to power electrolysers, will be implemented.

These “additionality” measures have been strongly opposed by the nuclear industry — which would be heavily disadvantaged as new reactors can take many years to build.

However, the US government has previously been widely supportive of pink hydrogen, with the Bipartisan Infrastructure Law setting out that the $8bn Regional Hydrogen Hubs programme must include at least one hub based on nuclear H2.

The DOE also announced late last year that it would back four pink hydrogen pilots, with the first — run by Constellation, which operates the largest nuclear fleet in the US — already under way, having received a $5.8m grant from the department.

“We hope that the data that comes from those pilot projects gives them the confidence to hit the final investment decisions [FIDs] on a much larger rollout,” Shah told Reuters.

However, while Shah estimated that there are around $30bn of US hydrogen plants ready to take FID next year, with $5-8bn of projects in the LPO’s pipeline, the office has only approved loan guarantees worth $1.5bn for two facilities to date — Monolith’s turquoise hydrogen plant in Nebraska and the Chevron-led ACES green H2 complex in Utah.
And while loan guarantees can push the dial on a project securing finance, they do not solve the problem of whether the cost of production will allow the final volumes of H2 to compete with fossil alternatives on cost.
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Nuclear hydrogenUSConstellation EnergySubsidies
Published 2 October 2023, 14:50Updated 2 October 2023, 14:50