Key Issues
Highlights of Nuclear Energy Provisions in Energy Policy Act of 2005
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Production Tax Credits For New Plants
The legislation provides a production tax credit of 1.8 cents per kilowatt-hour for 6,000 megawatts (MW) of capacity from new nuclear power plants for the first eight years of operation.
A qualifying advanced nuclear facility is a nuclear facility for which a company (or companies) has received an allocation of megawatt capacity and which is placed in service before 2021.
The 6,000 MW of capacity eligible for the credit is allocated by the secretary of the treasury (in consultation with the secretary of energy). If more than 6,000 MW of new nuclear generating capacity is operating in any given year and is eligible for the production tax credit, the treasury secretary will presumably apportion the 6,000-MW allocation on a pro rata basis among the nuclear plants in operation. (The legislation requires the secretary to issue regulations within six months of enactment to implement this section.)
The aggregate amount of credit that a taxpayer may claim in any year during the eight-year period is subject to two limitations, based on allocated capacity and an annual limitation.
The company may claim credit only for production of electricity equal to the ratio of the allocated capacity that the taxpayer receives from the secretary to the rated nameplate capacity of the company’s facility. For example, if the company receives an allocation of 750 MW of capacity from the 6,000 MW, and the company’s facility has a rated nameplate capacity of 1,000 MW, then the company may claim three-quarters of the allowable credit, or 1.35 cents per kilowatt-hour, for each kilowatt-hour of electricity produced at the facility (subject to the annual limitation described below).
A company operating a qualified facility may claim no more than $125 million in tax credits per 1,000 MW of allocated capacity in any one year of the eight-year credit period. If the company operates a 1,350-MW plant and has received an allocation for 1,350 MW of capacity eligible for the credit, the company’s annual limitation on credits that may be claimed is equal to 1.35 times $125 million, or $168.75 million.
If the company operates a facility with a nameplate rated capacity of 1,000 MW but has received an allocation from the secretary for 750 MW of credit-eligible capacity, then the two limitations apply such that the company may claim a credit equal to 1.35 cents per kilowatt-hour of electricity produced (as described above), subject to an annual credit limitation of $93.75 million in credits (three-quarters of $125 million).
The production tax credit places nuclear energy on equal footing with other sources of emission-free power, including wind and closed-loop biomass. These other sources have received a production tax credit since 1992.
Production Tax Credits For New Plants
The legislation provides a production tax credit of 1.8 cents per kilowatt-hour for 6,000 megawatts (MW) of capacity from new nuclear power plants for the first eight years of operation.
A qualifying advanced nuclear facility is a nuclear facility for which a company (or companies) has received an allocation of megawatt capacity and which is placed in service before 2021.
The 6,000 MW of capacity eligible for the credit is allocated by the secretary of the treasury (in consultation with the secretary of energy). If more than 6,000 MW of new nuclear generating capacity is operating in any given year and is eligible for the production tax credit, the treasury secretary will presumably apportion the 6,000-MW allocation on a pro rata basis among the nuclear plants in operation. (The legislation requires the secretary to issue regulations within six months of enactment to implement this section.)
The aggregate amount of credit that a taxpayer may claim in any year during the eight-year period is subject to two limitations, based on allocated capacity and an annual limitation.
The company may claim credit only for production of electricity equal to the ratio of the allocated capacity that the taxpayer receives from the secretary to the rated nameplate capacity of the company’s facility. For example, if the company receives an allocation of 750 MW of capacity from the 6,000 MW, and the company’s facility has a rated nameplate capacity of 1,000 MW, then the company may claim three-quarters of the allowable credit, or 1.35 cents per kilowatt-hour, for each kilowatt-hour of electricity produced at the facility (subject to the annual limitation described below).
A company operating a qualified facility may claim no more than $125 million in tax credits per 1,000 MW of allocated capacity in any one year of the eight-year credit period. If the company operates a 1,350-MW plant and has received an allocation for 1,350 MW of capacity eligible for the credit, the company’s annual limitation on credits that may be claimed is equal to 1.35 times $125 million, or $168.75 million.
If the company operates a facility with a nameplate rated capacity of 1,000 MW but has received an allocation from the secretary for 750 MW of credit-eligible capacity, then the two limitations apply such that the company may claim a credit equal to 1.35 cents per kilowatt-hour of electricity produced (as described above), subject to an annual credit limitation of $93.75 million in credits (three-quarters of $125 million).
The production tax credit places nuclear energy on equal footing with other sources of emission-free power, including wind and closed-loop biomass. These other sources have received a production tax credit since 1992.