Dive Brief:
- Public Service Enterprise Group will consider "small but important value-added investments" at its nuclear plants, capitalizing on production tax credits in the Inflation Reduction Act, President and CEO Ralph LaRossa said Tuesday.
- The IRA will “offer our nuclear generation a level of much-needed stability” when the nuclear production tax credit for reactors goes into effect in 2024, he told industry analysts on a conference call reviewing the company’s 2022 results.
- The IRA’s nuclear production tax credits extending through at least 2032, LaRossa said, will allow PSEG to consider capacity upgrades at its Salem, New Jersey, plant; a fuel cycle extension at its Hope Creek, New Jersey, site; and license extensions at both plants.
Dive Insight:
The passage of the IRA last August will “help to preserve the financial viability of our carbon-free nuclear fleet into the next decade,” the Newark, New Jersey-based parent company of Public Service Electric and Gas said in a statement.
“While the industry waits for clarifications, we believe the Inflation Reduction Act is a game-changer that should provide the stability required for long-term viability of the U.S. nuclear fleet,” LaRossa said.
Guggenheim analyst Shahriar Pourreza said in a client note Tuesday that “longer term upsides for nuclear” could come from U.S. Treasury Department guidance on production tax credits. Guidance will take time and “further drive strategic decision-making,” he said.
PSEG did not commit to any change in its approach to capital spending, hedging and financing “despite what we see as a strong federal support construct” for nuclear power, Pourreza said.
Daniel Cregg, executive vice president and chief financial officer, said PSEG is engaged in a “waiting game” as the Treasury Department provides details on the nuclear production tax credits. “I don’t even have a date to tell you when Treasury is going to come out with it,” he told analysts.
The IRA, with $369 billion in climate provisions, provides tax credits for existing nuclear power plants and new facilities, advanced reactors and small modular reactors. The law provides a choice between a technology-neutral production tax credit of $25/MWh for the first 10 years of plant operation or a 30% investment tax credit on new zero-carbon power plants that begin operating in 2025 or later.
Tax credits have drawn interest from other energy companies. Constellation announced Tuesday it will spend $800 million for new equipment to increase the output of two nuclear generating stations in Illinois by about 135 MW.
“Support for nuclear in the IRA has made extending the lives of U.S. nuclear assets to 80 years more likely assuming continued support,” Constellation said. “It has caused Constellation to examine nuclear uprate opportunities that were canceled a decade ago due to market forces.”
LaRossa reiterated PSEG’s decision to exit offshore wind generation.
PSEG announced in January it will sell its 25% equity stake in its Ocean Wind 1 offshore wind energy project to Danish renewable energy company Ørsted, which will take full ownership. Ørsted will proceed with development of the project and PSEG will support onshore infrastructure construction.
The closing is expected in the first half of the year. Asked about the timing of the sale, LaRossa said PSEG “will keep an eye on the market and see what makes sense.”
The decision was “consistent with our goal to increase the predictability of our business,” he said.
