By Avi Salzman

The Republican tax bill making its way through the House of Representatives could end certain tax incentives early for nuclear energy, a major blow to an industry that had just begun rebounding after years of losses. The text of the bill from the House Ways and Means committee includes provisions to sunset a tax credit known as 45U that essentially sets a base price for nuclear power.

It came as a surprise to Wall Street.

"Nuclear has been bipartisan and was expected to be intact so the phaseout is one of the most adverse surprises from the draft," wrote Jefferies analyst Julien Dumoulin-Smith.

For years, owners of nuclear reactors had been struggling because the price of the power they generated couldn't compete at power auctions with low-cost natural gas, and was often pricier than solar and wind power too. That caused several owners to shut down their reactors. The Inflation Reduction Act introduced the 45U production tax credit to stop those closures, offering subsidies to the nuclear plants so they could make money even when wholesale power prices fell. It essentially set a floor for their power prices, analysts said.

Most Democrats and Republicans support nuclear power today because it produces carbon-free power and is considered more reliable than solar and wind. But the Ways and Means bill has a provision that would phase the credit down to 80% of its expected level in 2029, 60% in 2030, 40% in 2031, and 0% in 2032. The industry could also be impacted by changes to rules that would allow certain tax credits to be transferred among companies.

Companies that could be hurt by changes to the law include Constellation Energy, Vistra, Talen Energy, Public Service Enterprise Group, Duke Energy, Dominion Energy, and American Electric Power. It could also eventually impact upstart nuclear companies like Oklo and NuScale Power, which have not yet built reactors but would likely qualify for the credits if they do complete them. Most of those stocks have been up in recent days, indicating that investors are either still digesting the changes or don't expect them to affect the companies. Constellation, the country's top owner of reactors, was up 2.4% on Tuesday.

Dumoulin-Smith thinks there's a chance that this provision will change before the bill is enacted. But the fact that it could be phased down is clearly a negative.

Write to Avi Salzman at avi.salzman@barrons.com

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May 13, 2025 15:20 ET (19:20 GMT)

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