*

Treasury adjusts rules to favor portions of nuclear

reactors in

hydrogen production

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Natural gas plants could earn credits with carbon capture

technology

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Some environmental groups oppose nuclear reactors

qualifying for

clean hydrogen credits

(Recasts with comment from Constellation utility, detail of

rules)

By Timothy Gardner

WASHINGTON, Jan 3 (Reuters) - The Biden administration

said on Friday portions of nuclear power plants will be able to

secure tax credits to produce clean hydrogen if the credits help

to prevent reactors from retiring.

The new rules address one of the last and most contentious

issues related to the Inflation Reduction Act, a 2022 law that

is intended to fight climate change by subsidizing technologies

that curb greenhouse gas emissions.

Some environmental groups say energy sources such as nuclear

reactors should not qualify for the IRA's clean hydrogen program

and that using nuclear plants to produce hydrogen removes clean

energy from the grid that could have been used by other

electricity consumers.

Industry analysts say clean hydrogen, or hydrogen produced

from non-fossil energy sources, is needed to decarbonize heavy

industry and some vehicles.

The Treasury Department rebuffed concerns about using

nuclear to produce hydrogen.

"If a nuclear retirement is averted, then the additional

demand from hydrogen production will not have induced emissions

(elsewhere)," it said in a statement.

The Treasury adjusted a draft plan from 2023 to allow

nuclear power and other industries, such as natural gas using

carbon capture to prevent the release of emissions, to qualify

for billions of dollars worth of credits to make hydrogen.

It offers technology-neutral hydrogen production credits of

$3 per kilogram, but it was not immediately clear which

producers could obtain the full benefit.

The rules provide "certainty that hydrogen producers need to

keep their projects moving forward and make the United States a

global leader in truly green hydrogen," said John Podesta, the

senior adviser to Biden for international climate policy.

Currently, most hydrogen is produced using fossil fuel

energy at a fraction of the cost of hydrogen that relies on

emissions-free power.

CONSTELLATION EVALUATES HYDROGEN PROJECT

The rules stipulate that a maximum of 200 megawatts of a

reactor's power-generation capacity can be considered new clean

power eligible for credits if they were otherwise at risk of

being shut down due to poor economics. U.S. reactors typically

range from 300 MW to more than 1,000 MW.

The rules also allow reactors that restart after being shut

to obtain credits.

Constellation Energy ( CEG ), the country's largest

generator of nuclear power, said the rules were a win for the

industry.

But the rules' restrictions complicate the path for using

nuclear to make hydrogen.

Constellation said it will have to evaluate the feasibility

of its proposed $900 million hydrogen project at its LaSalle

nuclear plant in Illinois, and its role in a Midwest hydrogen

hub.

It is uncertain how the incoming administration of

President-elect Donald Trump will approach hydrogen.

Frank Wolak, CEO of the Fuel Cell and Hydrogen Energy

Association, said in a statement the industry can "look forward

to conversations with the new Congress and new Administration

regarding how federal tax and energy policy can most effectively

advance the development of hydrogen."

The rules allow some natural-gas-fired facilities that

produce hydrogen to access the credits if they install equipment

to capture and bury their carbon-dioxide emissions.