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What happens when America’s biggest source of clean energy pivots to hydrogen?
After the Inflation Reduction Act was signed into law, and initial excitement about its historic investment in tackling climate change turned to deeper analysis, researchers made an alarming discovery. One of the IRA’s big ticket items, a tax credit for clean hydrogen, risks underwriting a major increase in emissions if not implemented carefully. That finding has erupted into a high-stakes debate over how the Treasury Department should define “clean hydrogen.”
Treasury’s decision, which is expected in the coming weeks, will have many implications, but one that deserves more scrutiny is what it could mean for nuclear power, still the largest and most reliable source of carbon-free energy in the U.S.
Nuclear reactors are uniquely well-suited to power hydrogen production, which in turn holds great promise to clean up some of the hardest parts of the economy to decarbonize.
But there's a trade-off: If any of the existing nuclear fleet pivots to making hydrogen, coal and natural gas plants are likely to fill in for that lost power on the grid. That would drive up emissions in the near term and make it harder for states to achieve their clean energy goals.
The debate boils down to whether it’s more advantageous to use our existing nuclear fleet to kickstart a hydrogen economy — likely sacrificing near-term emission reductions in the process — or to shore up a carbon-free grid.
This is what the Treasury Department must grapple with as it writes the rules for the new tax credit. In an exclusive interview with Heatmap, officials from the Department of Energy, which is advising the Treasury, said they want to see existing nuclear plants qualify. But as Daniel Esposito, a senior policy analyst at the nonprofit Energy Innovation, told me, “There's just a lot of layers to how bad this can get.”
Hydrogen already plays an essential, yet small role in the global economy as an ingredient in the production of fertilizer and oil refining. But as the world looks for alternatives to fossil fuels, hydrogen, which burns without releasing carbon, could play a much bigger role by powering industries that are proving difficult to decarbonize with renewable electricity, like shipping, aviation, and steelmaking. The challenge is that it takes energy to make hydrogen in the first place. Today the vast majority is made in a carbon-intensive process involving natural gas or coal.
There is an alternative method, called electrolysis, which extracts hydrogen from water using electricity and doesn’t directly release emissions. But it’s too expensive to be competitive with the fossil fuel version right now. The tax credit in the Inflation Reduction Act could change that, but to qualify, hydrogen producers would have to prove their electricity is carbon-free, too.
That’s where nuclear power comes in.
There are many reasons nuclear plants are considered a good fit for this process. Electrolyzers, the enabling technology for electrolysis, are still relatively new and expensive. Nuclear reactors could power them 24/7, maximizing production.
Nuclear plants are also well-located. They sit near bodies of water, which is necessary for electrolysis. They’re often adjacent to rail lines that could transport the resulting hydrogen. And many are close to heavy industrial sites that could become customers.
There’s potential for efficiency gains — a lot of nuclear reactors already require a bit of hydrogen for their operations, so they could produce their own instead of shipping it in.
And perhaps most thrillingly, nuclear reactors produce a lot of heat. With a more nascent version of the technology called high temperature electrolysis, that heat could be harnessed to boil water into steam, reducing the amount of energy required to extract hydrogen from it.
Unfortunately, there’s one big drawback. The nation’s existing nuclear plants already run at more than 90% capacity. They supply nearly 20% of total annual electricity generation. They don’t exactly have more energy to give.
Esposito and others warn that the hydrogen tax credit is so lucrative that if the Treasury’s upcoming rules allow existing reactors to qualify as a zero-emissions source of electricity, it would create a perverse incentive for nuclear companies to start diverting their power to hydrogen production. Nuclear plants currently earn about $30 per megawatt-hour from energy markets, but Esposito estimates they could earn $60 to $70 per megawatt-hour by producing hydrogen. Though indirectly, this would almost certainly increase U.S. emissions in the near term.
“You could see a world where all of the U.S. nukes pivot to supplying electrolyzers and just print money that way,” said Esposito. “Then you're pulling off 20% of U.S. power, and fossil fuels would be what fill in for that, because we just can't build clean energy fast enough to replace it.”
But Constellation Energy, the country’s largest owner of nuclear plants, with big plans to produce hydrogen, argues that letting its reactors qualify under the tax credit rules isn’t about printing money, but about making clean hydrogen cheap enough that customers actually buy it.
“By lowering the cost of the hydrogen, the tax credit is going to increase the ability of manufacturers and other hydrogen users to decarbonize their operations,” Mason Emnett, senior vice president of public policy at Constellation, told me. “Without that support, there's just not going to be a market for clean hydrogen.”
Top Department of Energy officials seem to agree. “We're very hopeful that [the tax credit] will be applicable to existing reactors,” Dr. Kathryn Huff, assistant secretary of the Office of Nuclear Energy, told me in an interview.
The Department of Energy has long been excited by the synergies between nuclear plants and hydrogen production. In fact, just a few years ago, the agency saw hydrogen as a new market that could save the nation’s nuclear plants, which were shutting down left and right as they struggled to compete with the cheap natural gas of the fracking boom.
But today, natural gas prices are up. There’s a bevy of new government grants and subsidies from the Bipartisan Infrastructure Law and the Inflation Reduction Act to keep nuclear plants open. Now hydrogen looks more like a great business opportunity than a savior for the industry.
Last September, not long after the Inflation Reduction Act was signed, Morgan Stanley issued a report noting that Constellation was poised to unlock new opportunities for its nuclear plants and “attractive returns for hydrogen facilities,” according to S&PGlobal. If the company dedicated just 5% of its capacity to hydrogen production, the report said, it could increase its annual earnings before taxes by $300 to $350 million.
Constellation made its first big move in February, announcing plans to build a $900 million hydrogen production facility in the Midwest that will use 250 MW of its existing capacity. That’s only about 1% of the company’s total nuclear fleet. But to Esposito, it’s a worrisome sign.
“It’s very likely we’d see many other similar announcements,” he told me. “And crucially, as these clean energy resources switch from powering the grid to producing hydrogen, we’d be losing our cheapest existing sources of clean electricity.”
It’s also concerning to climate advocates in Illinois, where Constellation owns six nuclear plants. The state has an ambitious clean energy goal, and is counting on those reactors to be a source of always-available, carbon-free electricity as it shuts down coal plants and builds more renewables.
“Even if it's small, that's still headed in the wrong direction in a world where we are fighting as hard as we can to quickly decarbonize the power sector,” said JC Kibbey, a clean energy advocate with the Natural Resources Defense Council in Illinois.
Constellation doesn’t see that as the company’s problem. Emnett said that much of its nuclear generation is already contracted out to local utilities for the benefit of customers for the next several years, meaning it can’t be “diverted” to hydrogen, at least until those contracts are up. The rest is theirs to sell to whomever wants to buy it. “There's no diversion of electricity,” he said. “There's electricity that is available for use, and we can sell electricity to power a shopping center or we can sell electricity to power an electrolyzer for hydrogen production.”
Constellation also makes the case that if one of its reactors are powering a hydrogen plant on-site, without using the grid at all, there should be no question that the process is carbon-free.
But Rachel Fakhry, a senior climate and clean energy advocate at the Natural Resources Defense Council, said it doesn’t matter whether a hydrogen facility is connected directly to a clean power source or whether it gets power through the grid. The issue is when no new, clean resources have been built to support this big new source of demand. In either case, less nuclear power will be flowing to other customers, and more coal or gas-fired generation will ramp up to fill in the gap. Electrolysis is so energy-intensive that those indirect emissions would be higher than emissions from current hydrogen production using natural gas. “Treasury must account for those induced emissions,” Fakhry said.
Many climate and energy policy experts agree that the resulting hydrogen should not be subsidized, or considered “clean.”
The law itself sends mixed messages to the Treasury about what Congress intended. It says the Department must account for “lifecycle” greenhouse gas emissions from hydrogen production, but it also includes a clause that explicitly permits existing nuclear plant operators to claim the tax credit.
Fakhry argued this should not be interpreted to mean nuclear companies are entitled to the credit. She said one way existing plants could qualify is if they are modified to increase their power output.
Some experts see a middle ground. Adam Stein, director of the Nuclear Energy Innovation program at the Breakthrough Institute, said those induced emissions are not the full picture.
He cited a number of other factors to consider, like the fact that one of the main obstacles to building new sources of clean energy right now is a clogged electric grid. If diverting some nuclear power to hydrogen frees up some room on the grid, that could be a good thing. “The question does not become, in my view, whether nuclear power plants should be eligible for this,” he said. “It’s at what point in the sliding scale of percentage of the tax credit they should be eligible for.” The tax credit is tiered, such that companies can earn different amounts depending on the carbon intensity of their production process.
In a sense, the debate is also about short-term and long-term priorities.
When I asked Huff, the assistant secretary in the Office of Nuclear Energy, whether she felt there were any risks of pairing nuclear and hydrogen, she only noted the shortcomings of not doing so. “I think there are risks in terms of whether or not we can successfully scale up a hydrogen economy,” she said. “There is this risk that it never materializes.”
Her colleague Jason Tokey, the team lead for reactor optimization and modernization chimed in. “As a country, we're not seeking to just decarbonize the power grid, we're seeking to decarbonize the entire economy,” he said. “Clean hydrogen has a critical role to play in that economy-wide decarbonization, and using clean energy sources like nuclear to produce hydrogen really enables that.”
The agency is also excited about the prospect of innovations that could help decarbonize both the grid and the rest of the economy. There are already hours of the day in some places where nuclear plants aren’t needed because there’s so much solar power being produced, said Huff. She said the “operational vision” is to have nuclear operators learn how to switch back and forth between serving the grid and offloading their power into hydrogen when it’s not needed, which will enable more renewable resources to come online. “It is absolutely imperative that we make sure nuclear plants can flex with the grid.”
Emnett said Constellation is planning to test this out at Nine Mile Point, a nuclear plant in upstate New York that received $5.8 million from the DOE for a hydrogen production pilot project.
“We are excited about the possibility of creating flexibility for nuclear plants,” he said. “You can start to think about a system where nuclear with flexible hydrogen production is pairing with variable wind and solar and batteries in a decarbonized future world. And so we're at a point now where we're proving out those capabilities.”
But without the tax credit, he said, “there's just not any conversation, there's no ability to explore the innovation, because we never get out of the gate.”
Whether that gate should be swung open or shut is now in the hands of the U.S. Department of Treasury.
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On Energy Transfer’s legal win, battery storage, and the Cybertruck
Current conditions: Red flag warnings are in place for much of Florida • Spain is bracing for extreme rainfall from Storm Martinho, the fourth named storm in less than two weeks • Today marks the vernal equinox, or the first day of spring.
A jury has ordered Greenpeace to pay more than $660 million in damages to one of the country’s largest fossil fuel infrastructure companies after finding the environmental group liable for defamation, conspiracy, and physical damages at the Dakota Access Pipeline. Greenpeace participated in large protests, some violent and disruptive, at the pipeline in 2016, though it has maintained that its involvement was insignificant and came at the request of the local Standing Rock Sioux Tribe. The project eventually went ahead and is operational today, but Texas-based Energy Transfer sued the environmental organization, accusing it of inciting the uprising and encouraging violence. “We should all be concerned about the future of the First Amendment, and lawsuits like this aimed at destroying our rights to peaceful protest and free speech,” said Deepa Padmanabha, senior legal counsel for Greenpeace USA. The group said it plans to appeal.
The Department of Energy yesterday approved a permit for the Calcasieu Pass 2 liquified natural gas terminal in Louisiana, allowing the facility to export to countries without a free trade agreement. The project hasn’t yet been constructed and is still waiting for final approvals from the independent Federal Energy Regulatory Commission, but the DOE’s green light means it faces one less hurdle.
CP2 was awaiting DOE’s go-ahead when the Biden administration announced its now notorious pause on approvals for new LNG export facilities. The project’s opponents argue it’s a “carbon bomb.” Analysis from the National Resources Defense Council suggested the greenhouse gases from the project would be equivalent to putting more than 1.85 million additional gas-fueled automobiles on the road, while the Sierra Club found it would amount to about 190 million tons of carbon dioxide equivalent annually.
President Trump met with 15 to 20 major oil and gas executives from the American Petroleum Institute at the White House yesterday. This was the president’s first meeting with fossil fuel bosses since his second term began in January. Interior Secretary Doug Burgum and Energy Secretary Chris Wright were also in the room. Everyone is staying pretty quiet about what exactly was said, but according to Burgum and Wright, the conversation focused heavily on permitting reform and bolstering the grid. Reuters reported that “executives had been expected to express concerns over Trump’s tariffs and stress the industry view that higher oil prices are needed to help meet Trump’s promise to grow domestic production.” Burgum, however, stressed that oil prices didn’t come up in the chat. “Price is set by supply and demand,” he said. “There was nothing we could say in that room that could change that one iota, and so it wasn’t really a topic of discussion.” The price of U.S. crude has dropped 13% since Trump returned to office, according to CNBC, on a combination of recession fears triggered by Trump’s tariffs and rising oil output from OPEC countries.
The U.S. installed 1,250 megawatts of residential battery storage last year, the highest amount ever and nearly 60% more than in 2023, according to a new report from the American Clean Power Association and Wood Mackenzie. Overall, battery storage installations across all sectors hit a new record in 2024 at 12.3 gigawatts of new capacity. Storage is expected to continue to grow next year, but uncertainties around tariffs and tax incentives could slow things down.
China is delaying approval for construction of BYD’s Mexico plant because authorities worry the electric carmaker’s technology could leak into the United States, according to the Financial Times. “The commerce ministry’s biggest concern is Mexico’s proximity to the U.S.,” sources told the FT. As Heatmap’s Robinson Meyer writes, BYD continues to set the global standard for EV innovation, and “American and European carmakers are still struggling to catch up.” This week the company unveiled its new “Super e-Platform,” a new standard electronic base for its vehicles that it says will allow incredibly fast charging — enabling its vehicles to add as much as 249 miles of range in just five minutes.
Tesla has recalled 46,096 Cybertrucks over an exterior trim panel that can fall off and become a road hazard. This is the eighth recall for the truck since it went on sale at the end of 2023.
This fusion startup is ahead of schedule.
Thea Energy, one of the newer entrants into the red-hot fusion energy space, raised $20 million last year as investors took a bet on the physics behind the company’s novel approach to creating magnetic fields. Today, in a paper being submitted for peer review, Thea announced that its theoretical science actually works in the real world. The company’s CEO, Brian Berzin, told me that Thea achieved this milestone “quicker and for less capital than we thought,” something that’s rare in an industry long-mocked for perpetually being 30 years away.
Thea is building a stellarator fusion reactor, which typically looks like a twisted version of the more common donut-shaped tokamak. But as Berzin explained to me, Thea’s stellarator is designed to be simpler to manufacture than the industry standard. “We don’t like high tech stuff,” Berzin told me — a statement that sounds equally anathema to industry norms as the idea of a fusion project running ahead of schedule. “We like stuff that can be stamped and forged and have simple manufacturing processes.”
The company thinks it can achieve simplicity via its artificial intelligence software, which controls the reactor’s magnetic field keeping the unruly plasma at the heart of the fusion reaction confined and stabilized. Unlike typical stellarators, which rely on the ultra-precise manufacturing and installment of dozens of huge, twisted magnets, Thea’s design uses exactly 450 smaller, simpler planar magnets, arranged in the more familiar donut-shaped configuration. These magnets are still able to generate a helical magnetic field — thought to keep the plasma better stabilized than a tokamak — because each magnet is individually controlled via the company’s software, just like “the array of pixels in your computer screen,” Berzin told me.
“We’re able to utilize the control system that we built and very specifically modulate and control each magnet slightly differently,” Berzin explained, allowing Thea to “make those really complicated, really precise magnetic fields that you need for a stellarator, but with simple hardware.”
This should make manufacturing a whole lot easier and cheaper, Berzin told me. If one of Thea’s magnets is mounted somewhat imperfectly, or wear and tear of the power plant slightly shifts its location or degrades its performance over time, Thea’s AI system can automatically compensate. “It then can just tune that magnet slightly differently — it turns that magnet down, it turns the one next to it up, and the magnetic field stays perfect,” Berzin explained. As he told me, a system that relies on hardware precision is generally much more expensive than a system that depends on well-designed software. The idea is that Thea’s magnets can thus be mass manufactured in a way that’s conducive to “a business versus a science project.”
In 2023, Thea published a technical report proving out the physics behind its so-called “planar coil stellarator,” which allowed the company to raise its $20 million Series A last year, led by the climate tech firm Prelude Ventures. To validate the hardware behind its initial concept, Thea built a 3x3 array of magnets, representative of one section of its overall “donut” shaped reactor. This array was then integrated with Thea’s software and brought online towards the end of last year.
The results that Thea announced today were obtained during testing last month, and prove that the company can create and precisely control the complex magnetic field shapes necessary for fusion power. These results will allow the company to raise a Series B in the “next couple of years,” Berzin said. During this time, Thea will be working to scale up manufacturing such that it can progress from making one or two magnets per week to making multiple per day at its New Jersey-based facility.
The company’s engineers are also planning to stress test their AI software, such that it can adapt to a range of issues that could arise after decades of fusion power plant operation. “So we’re going to start breaking hardware in this device over the next month or two,” Berzin told me. “We’re purposely going to mismount a magnet by a centimeter, put it back in and not tell the control system what we did. And then we’re going to purposely short out some of the magnetic coils.” If the system can create a strong, stable magnetic field anyway, this will serve as further proof of concept for Thea’s software-oriented approach to a simplified reactor design.
The company is still years away from producing actual fusion power though. Like many others in the space, Thea hopes to bring fusion electrons to the grid sometime in the 2030s. Maybe this simple hardware, advanced software approach is what will finally do the trick.
The Chinese carmaker says it can charge EVs in 5 minutes. Can America ever catch up?
The Chinese automaker BYD might have cracked one of the toughest problems in electric cars.
On Tuesday, BYD unveiled its new “Super e-Platform,” a new standard electronic base for its vehicles that it says will allow incredibly fast charging — enabling its vehicles to add as much as 249 miles of range in just five minutes. That’s made possible because of a 1,000-volt architecture and what BYD describes as matching charging capability, which could theoretically add nearly one mile of range every second.
It’s still not entirely clear whether the technology actually works, although BYD has a good track record on that front. But it suggests that the highest-end EVs worldwide could soon add range as fast as gasoline-powered cars can now, eliminating one of the biggest obstacles to EV adoption.
The new charging platform won’t work everywhere. BYD says that it will also build 4,000 chargers across China that will be able to take advantage of these maximum speeds. If this pans out, then BYD will be able to charge its newest vehicles twice as fast as Tesla’s next generation of superchargers can.
“This is a good thing,” Jeremy Wallace, a Chinese studies professor at Johns Hopkins University, told me. “Yes, it’s a Chinese company. And there are geopolitical implications to that. But the better the technology gets, the easier it is to decarbonize.”
“As someone who has waited in line for chargers in Pennsylvania and New Jersey, I look forward to the day when charging doesn’t take that long,” he added.
The announcement also suggests that the Chinese EV sector remains as dynamic as ever and continues to set the global standard for EV innovation — and that American and European carmakers are still struggling to catch up. The Trump administration is doing little to help the industry catch up: It has proposed repealing the Inflation Reduction Act’s tax credits for EV buyers, which provide demand-side support for the fledgling industry, and the Environmental Protection Agency is working to roll back tailpipe-pollution rules that have furnished early profits to EV makers, including Tesla. Against that background, what — if anything — can U.S. companies do to catch up?
The situation isn’t totally hopeless, but it’s not great.
BYD’s mega-charging capability is made possible by two underlying innovations. First, BYD’s new platform — the wiring, battery, and motors that make up the electronic guts of the car — will be capable of channeling up to 1,000 volts. That is only a small step-change above the best platforms available elsewhere— the forthcoming Gravity SUV from the American carmaker Lucid is built on a 926-volt platform, while the Cybertruck’s platform is 800 volts — but BYD will be able to leverage its technological firepower with mass manufacturing capacity unrivaled by any other brand.
Second, BYD’s forthcoming chargers will be capable of using the platform’s full voltage. These chargers may need to be built close to power grid infrastructure because of the amount of electricity that they will demand.
But sitting underneath these innovations is a sprawling technological ecosystem that keeps all Chinese electronics companies ahead — and that guarantees Chinese advantages well into the future.
“China’s decisive advantage over the U.S. when it comes to innovation is that it has an entrenched workforce that is able to continuously iterate on technological advances,” Dan Wang, a researcher of China’s technology industry and a fellow at the Paul Tsai China Center at Yale Law School, told me.
The country is able to innovate so relentlessly because of its abundance of process knowledge, Wang said. This community of engineering practice may have been seeded by Apple’s iPhone-manufacturing effort in the aughts and Tesla’s carmaking prowess in the 2010s, but it has now taken on a life of its own.
“Shenzhen is the center of the world’s hardware manufacturing industry because it has workers rubbing shoulders with academics rubbing shoulders with investors rubbing shoulders with engineers,” Wang told me. “And you have a more hustle-type culture because it’s so much harder to maintain technological moats and technological differentiation, because people are so competitive in these sorts of spaces.”
In a way, Shenzhen is the modern-day version of the hardware and software ecosystem that used to exist in northern California — Silicon Valley. But while the California technology industry now largely focuses on software, China has taken over the hardware side.
That allows the country to debut new technological innovations much faster than any other country can, he added. “The comparison I hear is that if you have a new charging platform or a new battery chemistry, Volkswagen and BMW will say, We’ll hustle to put this into our systems, and we’ll put it in five years from now. Tesla might say, we’ll hustle and get it in a year from now.”
“China can say, we’ll put it in three months from now,” he said.“You have a much more focused concentration of talent in China, which collapses coordination time.”
That culture has allowed the same companies and engineers to rapidly advance in manufacturing skill and complexity. It has helped CATL, which originally made batteries for smartphones, to become one of the world’s top EV battery makers. And it has helped BYD — which is close to unseating Tesla as the world’s No. 1 seller of electric vehicles — move from making lackluster gasoline cars to some of the world’s best and cheapest EVs.
It will be a while until America can duplicate that manufacturing capability, partly because of the number of headwinds it faces, Wang said.