The Future of U.S. Nuclear Energy Depends on the Inflation Reduction Act

In Secretary of Energy Chris Wright’s first secretarial order, he called for the United States to lead the commercialization of nuclear energy and for the Department of Energy to enable the rapid deployment and export of next-generation nuclear technology. The private sector has also reinforced the need for rapid, large-scale nuclear capacity additions by signing the Large Energy Users Pledge, which supports the goal of at least tripling global nuclear capacity by 2050. As a notably ambitious target, this could require approximately 35 gigawatts (GW) of new nuclear capacity to be under construction by 2035. For context, 11 GW of new nuclear plants began construction globally in 2024; 15 GW under construction equates to about 14 more new Vogtle 4 reactors reaching final investment decision (FID) by 2030.

 New Nuclear Electricity in the United States Depends on the Tech-Neutral Tax Credits

Despite the bipartisan support for expanding nuclear energy generation, the rarity of new nuclear reactors over the last several decades in the United States points to the enormous challenges of constructing a new nuclear power plant. Key challenges include extended permitting and construction timelines, high capital costs, and limited access to financing. Public funding is critical to help manage these risks and incentivize investment.

The IRA technology-neutral tax credits include both a production tax credit (PTC) known as 45Y and an investment tax credit (ITC) known as 48E (Table 1). Unlike the legacy tax credits these replace, which targeted only renewable energy, any carbon-free source of electricity can qualify for the IRA technology-neutral tax credits. This scope expansion creates a meaningful opportunity for other, nonrenewable clean electricity, such as nuclear.

The PTC and ITC materially lower the cost of nuclear energy projects. Assuming first-of-a-kind (FOAK) overnight capital costs of $3.7 billion per GW to $7.7 billion per GW, the ITC and PTC can reduce nuclear energy’s LCOE (Figure 2) and increase its competitiveness with other generation technologies (Figure 3). For projects with higher capital costs, the ITC is most advantageous; as capital expenditure decreases, the PTC and ITC yield similar outcomes, all else being equal. However, there are also other noncapital considerations for choosing between the two, such as timing and performance risk.

Nuclear Developers Could Be a Surprisingly Large Beneficiary of the IRA

Using the U.S. Energy Information Administration (EIA) projections for wind, solar, and battery additions between 2025 and 2030 and simplified average overnight capital expenditure costs for each generation technology, the percentage of the ITC that could go toward nuclear energy over the next five years can be estimated. For this estimate, assume an across-the-board ITC of 40 percent (base + prevailing wage bonus + either energy community or domestic content bonus), which is reasonable given that most projects will be incentivized to meet the wage bonus requirements and are likely to further qualify for one of the two other bonuses. Nuclear power projects are especially likely to receive both the prevailing wage and the energy community bonuses, since large-scale projects rely primarily on union workers and many proposed locations are on or near retired coal plants.

While other qualifying clean technologies such as natural gas with carbon capture and geothermal are also eligible for the technology-neutral tax credit, there is unlikely to be large-scale uptake in the next five years, so this estimate focuses on wind, solar, batteries, and nuclear power. There are two key unknown variables. First, how likely are wind and solar projects to select the ITC vs. PTC? (Stand-alone battery storage is only eligible for the ITC.) Second, what new capacity of nuclear will begin construction in the next five years? On the loftiest end this could be up to 15 GW to align with the highly ambitious target of tripling nuclear capacity by 2050.

By varying these two parameters, it’s apparent that if the United States reaches half of its ambitious nuclear goal (7.5 GW of nuclear under construction by the end of 2030), around one third of ITC outlays (about 20 percent of total ITC and PTC) could go to nuclear energy (Table 2). Realizing 10 GW of new nuclear construction, which is short of the pace needed to triple global nuclear capacity by 2050 but is still quite ambitious, around 40 percent of the ITC outlays (over a quarter of total ITC and PTC) would be directed toward nuclear energy projects. With the expected reduction in projected wind capacity in today’s market vs. the 2023 EIA projections, and with the anticipation of small modular reactor (SMR) commercialization occurring in the next five years, the percentage of the ITC dedicated to funding nuclear power is likely to increase from this baseline estimate.

These estimates demonstrate that these tax credits are in fact “technology neutral,” with a meaningful portion of their outlays supporting nonrenewable generation, especially as the next five years unfold and ambitious nuclear deployment targets are integrated into the projected clean energy project pipeline. In the near term, the tax credit will primarily go toward batteries and renewable projects with short construction financing and lower up-front capital costs; however, as public sector support coalesces around facilitating accelerated nuclear deployment and additional pressure for long-term dispatchable power solutions mount, the balance of the tax credit outlays will shift from supporting renewable projects to nuclear generation. To further shift the tech-neutral tax credit outlays toward nuclear deployment, the ITC and PTC could be expanded to include a higher base tax credit for nuclear and/or other dispatchable power, a dispatchability bonus, and/or a bonus for FOAK projects to help support the commercialization of innovative technology. Each of these expansions would also further benefit advanced geothermal and natural gas with carbon capture projects as well.

U.S. Nuclear Energy Ambition Is Contingent upon Public Sector Support

Replacing the legacy renewable tax credits with technology-neutral tax credits created an opportunity for a resurgence of advanced nuclear capacity growth in the United States. From this back-of-the-envelope estimate, the tax credits have the potential to channel a meaningful portion of outlays toward nuclear deployment, especially if nuclear construction accelerates toward stated ambitious capacity goals. Meeting said ambitious nuclear deployment targets is likely contingent upon the continued existence of the technology-neutral tax credits; however, even these may not be sufficient. The bipartisan support for nuclear capacity additions should be leveraged to maintain and expand the technology-neutral tax credits and expand other public sector support mechanisms to facilitate private sector deployment, reduce investment risk, and otherwise stimulate domestic nuclear technology commercialization and deployment.

Leslie Abrahams is a deputy director and senior fellow with the Energy Security and Climate Change program at the Center for Strategic and International Studies in Washington, D.C.