Market Update: Section 45U Zero-Emission Nuclear Production Credits

What Are Nuclear Credits?

Nuclear plants produce approximately 20% of the total electricity in the US and about half of the zero-emission power produced in the US. Despite this, nuclear credits were not available for nuclear power plants until the creation of the Inflation Reduction Act in 2022 (IRA). Today, nuclear power has gained bipartisan support through the One Big Beautiful Bill Act (OBBBA) enacted in 2025 which preserved the nuclear credit phaseout till 2032.

45U zero-emission nuclear production credits created under Section 13105 of the IRA are transferable tax credits generated as a result of electricity produced at a qualified nuclear power facility placed in service before August 16, 2022, that can be sold by the taxpayer to an unrelated third party beginning after December 31, 2023, and ending on December 31, 2032. They are federal tax incentives designed to support the continued operation of existing nuclear power plants in the United States. These credits were created to ensure that nuclear facilities remain economically viable in competitive electricity markets.

Unlike wind or solar production tax credits, which are tied to new development, §45U credits primarily apply to existing nuclear facilities that generate electricity without emitting greenhouse gases. The goal is to prevent premature retirements of nuclear plants that are critical for grid reliability and decarbonization in the U.S., specially in today’s context of AI and electricity demands of data centers. 

Qualification Criteria

To qualify for Section 45U credits, a facility must meet several criteria:

• Be a qualified nuclear power facility using nuclear fission to generate electricity.
• Have been placed in service before the enactment of the Inflation Reduction Act (with some exceptions after legislative updates).
• Sell electricity to an unrelated party.
• Not receive certain overlapping federal subsidies.

While qualification is generally straightforward, nuclear plants are highly regulated and well-documented, there are technical compliance requirements around ownership structure, market participation, and reporting.

Impact of OBBBA Expansion

We expect around $1 billion of eligible credits to come online in 2026 thanks to the certainty the One Big Beautiful Bill Act (OBBBA) and related legislation generated in the last half of 2025.

Recent legislative updates under the OBBBA expanded the definition of what constitutes a “qualified nuclear facility.” This expansion has two major implications:

• Broader Eligibility: Facilities previously excluded, such as certain restarted plants or those undergoing significant upgrades, now qualify. For example, repowered nuclear facilities are now eligible for the §45Y technology-neutral tax credit if they meet the 80/20 repowering test, which translates into the requirement that 80% of project’s value comes from new equipment.
• Increased Credit Supply: By widening the pool of eligible plants, the total volume of available credits is expected to grow over the next few years.

This change is particularly relevant given the wave of reactivations and life extensions currently underway across the U.S. nuclear fleet.

How Nuclear Credits Work

At a high level, nuclear credits function as a per-kilowatt-hour (KWh) production-based incentive. Eligible nuclear facilities earn credits based on the amount of electricity they produce and sell into the grid.

Key mechanics include:

Credit Amount and Bonus: The base credit value is $0.003/KWh of electricity produced, sold to an unrelated third party and placed into the grid.

Gross receipts are counted towards credit calculation, including other state and federal zero-emission credit subsidies and/or programs. If the facility’s gross receipts are 0.025/kWh or lower, base credit is $0.003/KWh. If the facility’s gross receipts are over 0.025/kWh, 16% above that threshold is subtracted from base credit value.

Income Phase-Out: The credit amount is reduced if electricity market prices exceed certain thresholds.

PWA adder: If facilities comply with prevailing wage and apprenticeship adder requirements, base credit can be multiplied five times, increasing the credit to $0.015/kWh of electricity produced.

Transferability: Credits can be transferred, creating a secondary market for buyers such as corporations looking to reduce their federal tax liability. The seller will typically sell at a discounted price creating instant cash tax savings for buyers. Additionally, there are several cash disbursement strategies that can increase the cash tax benefit over time.

Production Math

 As an example, a 1,000 MW nuclear plant operating at about a 92% capacity factor produces roughly 8.1 million MWh per year. Under Section 45U, the baseline credit amount is $0.003 per kWh, which can be multiplied by five to $0.015 per kWh if the facility complies with prevailing wage and apprenticeship requirements. Using those rates, a 1,000 MW plant would generate about $24.2 million of annual gross credits at the base rate, or about $120.9 million at the increased rate, before any reduction tied to power prices. Applying the same approach, an 800 MW plant such as Palisades (described below) would generate about $19.3 million at the base rate, or about $96.7 million at the increased rate, while an 835 MW unit such as Three Mile Island Unit 1 / Crane would generate about $20.2 million at the base rate, or about $100.9 million at the increased rate. Taken together, those two restart projects could add roughly $39.5 million of annual credits at the base rate, or about $197.7 million at the increased rate, before statutory reductions.  

Pricing Trends

 Nuclear credit pricing in 2025 remained tight, averaging $0.962 and ranging from $0.960 to $0.970, which is among the highest across all tax credit categories. Price variation was minimal across transaction sizes and timing, reflecting the strong association of nuclear credits with operating assets, stable production output, and low eligibility risk. As output increases in the next 2-3 years, we should start to see better pricing across the nuclear credit market. 

Upcoming §45U Projects

Driven by the increase in energy demand in the US, and the expansion of eligibility under OBBBA, several repower projects and new microreactors and large-scale reactors are planned to come online before 2030, of which the main projects include:

Additionally, there are many other projects underway to expand existing nuclear capacity at many different nuclear sites by implementing power upgrades through small engineering upgrades, improved fuel efficiency systems, and turbine and system enhancements.

Security and Reliability of Nuclear Credits

Today nuclear credits are on their way to becoming one of the most attractive credits in the energy credit market thanks to several factors, including bipartisan support, and the fact that credits are generated by longstanding, baseload facilities owned by investment-grade sponsors which make them attractive to buyers.

One of the most compelling aspects of nuclear credits is their exceptional reliability.

1. Regulatory Certainty

Unlike other credit types, nuclear credits are:

• Highly verifiable: There is no ambiguity about whether a nuclear plant exists or is producing power.
• IRS-friendly: Compliance is straightforward, reducing audit risk.

There is virtually no scenario where the IRS would challenge the legitimacy of a qualifying nuclear facility.

1. Operational Stability

Nuclear plants differ significantly from wind or solar assets:

• Continuous Baseload Power: They operate nearly 24/7.
• Minimal Interruption Risk: No dependence on weather conditions.
• Strict Oversight: Regulated by federal agencies with rigorous standards.
• Decommissioning Constraints: nuclear plants cannot simply shut down overnight. Decommissioning is a multi-year process that requires regulatory approval and planning, which makes them extremely unlikely to disappear suddenly.

In contrast to other renewable assets that may face operational or financial instability, nuclear facilities represent one of the most durable sources of tax credits available today.

Conclusion

Section 45U nuclear production credits occupy a unique position in the clean energy tax credit landscape. They combine strong regulatory clarity, reliability, continuous generation, and a growing supply driven by increasing energy demands backed by bipartisan support.

With restarts like Three Mile Island and Palisades Nuclear Plant, alongside emerging technologies such as SMRs and micronuclear reactors, the market for §45U nuclear transferable tax credits is growing, which will result in better pricing and availability.

For buyers, §45U credits offer a rare combination of stability, transparency, and long-term value, making them an increasingly attractive component of tax credit portfolios over the next 2–3 years.