Overview
With electricity demand rising across the United States, nuclear power is receiving renewed attention from energy developers, investors, and financiers – both for existing facilities and new projects. As a clean and reliable resource, nuclear energy aligns well with carbon-neutral objectives and the significant load requirements of data centers and other energy-intensive users.
Combined with vocal federal support and access to federal tax incentives established under the Inflation Reduction Act of 2022 (IRA) and extended by the One Big Beautiful Bill Act (OBBBA), nuclear power is well positioned to play a larger role in the US energy market. Following a series of strong federal policy signals, market confidence in nuclear offtake has increased, with renewed interest in long-term procurement emerging from technology companies scaling data centers.
Headlines have focused on the life extension of existing light-water reactor (LWR) nuclear plants and the commercial advancement of small modular reactors (SMRs). Such projects are often supported by long-term data center offtake agreements or federal guarantees, and economics have been further strengthened by the availability of production tax credits (PTCs) and investment tac credits (ITCs) enacted under the IRA.
In Depth
Existing nuclear plants: Section 45U PTC
To discourage retirement of existing nuclear facilities, the IRA added Section 45U (the zero-emission nuclear power PTC) to the Internal Revenue Code.
Section 45U provides an income tax credit for electricity that is (i) produced at a qualified nuclear power facility and (ii) sold to an unrelated person during the period from December 31, 2023, through January 1, 2033. A “qualified nuclear power facility” is one that was placed in service before enactment of the IRA and uses nuclear energy to generate electricity.
The credit is calculated by:
- Multiplying the number of megawatt-hours of electricity produced and sold during the taxable year by 0.3 cents (as adjusted annually for inflation)
- Subtracting the applicable “reduction amount”
- Multiplying the result by five if prevailing wage requirements are satisfied.
The reduction amount is the lesser of (i) the total credit amount otherwise available or (ii) 16% of the excess (if any) of gross receipts from electricity sales over a benchmark price of 2.5 cents per kilowatt-hour (adjusted for inflation). As a practical matter, no credit is available when the electricity sales price equals or exceeds approximately $43.75 per megawatt-hour.
New nuclear projects: Sections 45Y and 48E
The IRA also introduced Sections 45Y (the clean electricity PTC) and 48E (the clean electricity ITC) for electricity-generation facilities that achieve a zero-greenhouse-gas emissions rate. For facilities to qualify, they must be placed in service after December 31, 2024.
Proposed US Department of the Treasury regulations confirm that facilities using nuclear fission or fusion technologies are eligible for either the PTC under Section 45Y or the ITC under Section 48E (but generally not both). Project owners must elect which credit to claim.
If prevailing wage requirements are satisfied:
- The Section 48E ITC equals 30% of a project’s qualified basis.
- The Section 45Y PTC equals $15 per megawatt-hour of electricity generated, subject to annual inflation adjustments.
Both credits may be increased through additional “adders” if the facility is located in an energy community and/or meets domestic content requirements.
Importantly, ITCs under Section 48E and PTCs under Sections 45U and 45Y may be transferred for cash to unrelated taxpayers, providing flexibility for developers that cannot fully utilize the credits themselves.
Financing outlook
Public sentiment toward nuclear power has shifted meaningfully in many regions, with increasing recognition of (and enthusiasm for!) its potential to meet growing electricity demand. While significant hurdles remain, particularly development and construction capital intensity, the availability of federal tax credits for existing facilities and new SMR projects materially improves project feasibility.
As the policy landscape continues to evolve, the OBBBA’s enactment in July 2025 stands out as a pivotal moment for the nuclear sector. US Congress ultimately chose not to alter the Section 45U PTCs, a notable decision given earlier legislative drafts that sought to accelerate its repeal. While this inaction may appear uneventful, it is telling: The decision to leave nuclear untouched, even as wind, solar, and hydrogen incentives were substantially pared back, signals a firm and deliberate endorsement of nuclear energy’s long‑term role in the US energy mix. The legislation goes a step further by introducing a new nuclear‑specific energy community bonus for facilities located in metropolitan statistical areas with historical ties to nuclear employment, underscoring policymakers’ intention to support the technology and the communities that have sustained it. Together, these measures position nuclear power to play an increasingly consequential role in US energy’s future.
In the near term, LWR projects benefiting from long operating histories and proven technology are likely to remain the most financeable component of a nuclear resurgence. At the same time, interest from offtakers in advanced reactor technologies, including SMRs, continues to grow.
Any large-scale nuclear development will require innovative financial structures. These projects are likely to involve a combination of common equity, preferred equity, multiple debt tranches, and tax credit monetization, all within a complex regulatory framework that demands careful and sophisticated structuring.
If you have any questions about financing the next generation of nuclear projects, please reach out to the authors or your regular McDermott Will & Schulte lawyer.