Credit for Electricity Produced from Advanced Nuclear Power Facilities

Section 1310 of the CEB adds Section 45L to U.S. Code Title 26, Section 45, which provides a 1.8-cent-per-kilowatthour tax credit (unadjusted for inflation) for production from advanced nuclear facilities for the first 8 years of their operation. To receive the credit, new facilities must be built before January 1, 2021. The total amount of the credit is limited to $125 million annually per 1,000 megawatts of new capacity, and the total amount of new capacity that can receive the credit is 6,000 megawatts.

EIA projects that this credit would stimulate the development of 6,000 megawatts of new nuclear capacity. The increased use of nuclear will lead to lower use of natural gas. For example, in 2020, natural gas wellhead prices and natural gas use in the power sector are projected to be 3 percent lower in the nuclear PTC case. Because of the long lead times associated with permitting, licensing, and constructing a new nuclear plant in the United States, the first new plant is not expected until 2013. While the development of 6,000 megawatts of new nuclear capacity will lead to cost reductions for future plants, the cost reductions are not expected to be large enough to make additional plants economical. As a result, once the credit capacity limit has been exhausted, no further new nuclear plants are projected.

Table 3 provides the nuclear capacity and tax revenue impacts of the nuclear PTC. As each new nuclear plant is brought online, its output is assumed to ramp up to full production over a 3-year period. As a result, the $125 million annual credit limit per 1,000 megawatts of capacity is not reached in the first 2 years of each plant’s operation and the total tax revenue loss falls slightly below $6 billion. Because of the long lead times associated with bringing on new nuclear plants, the tax revenue impacts through 2013 are relatively low, totaling $170 million in nominal terms, $133 million in 2002 dollars, and $72 million discounted to 2004 using a 7-percent real discount rate. The $170 nominal figure through 2013 is very similar to the $167 million estimate from the JCT. However, through 2025, these values are much larger, $5,692 million, $3,849 million, and $1,565 million, respectively. The impact on oil imports of these new plants is negligible.

Table 3