How the US Inflation Reduction Act Changed the Nuclear Game
The 2022 law did something no one fully predicted: it made nuclear power financially competitive again, and SMRs are the biggest beneficiaries.
Before August 2022, nuclear energy was the clean energy sector’s awkward stepchild. Wind and solar got generous federal tax credits. Nuclear got nothing. Existing plants were bleeding cash, facing early retirement, and struggling to compete against cheap natural gas. New reactors were a pipe dream. Then Congress passed the Inflation Reduction Act, and almost overnight, the math on nuclear changed.
The IRA is best known for its roughly $369 billion in climate provisions, the largest climate investment in US history. Most of the headlines went to solar panels and electric vehicles. But buried in the legislation was something that nuclear advocates had wanted for decades: direct federal support, structured not as a grant program or a subsidy, but as a production tax credit available to zero-emission electricity generators. Any zero-emission generator. Including nuclear.
That one word, “any,” rewrote the rules. And for small modular reactors, which were already building momentum on the technology side, it may turn out to be the most consequential sentence in federal energy policy in a generation.
The three credits that actually matter
The IRA created or expanded three distinct mechanisms for nuclear, each solving a different problem. It helps to understand them separately rather than lumping them together.
The first is the Section 45U Zero-Emission Nuclear Power Production Credit, which covers the existing fleet. Before 2022, plants like Quad Cities in Illinois, which had nearly been shut down due to negative electricity prices caused by grid congestion and wind oversupply, had no federal backstop whatsoever. Section 45U changed that. The credit:
Applies to plants that began supplying electricity before August 16, 2022
Pays a base rate of 0.3 cents per kilowatt-hour, inflation-adjusted annually
Scales up to 1.5 cents per kWh if prevailing wage requirements are met
Runs through the end of 2032
Is eligible for direct payment or transfer, which matters enormously for nonprofit utilities
The Joint Committee on Taxation projects that Section 45U will reduce federal revenues by $13.1 billion between FY2024 and FY2028, roughly $2.6 billion a year. That is real money going to keep real carbon-free generators running. It is worth pausing on that number. These are operational plants that produce about 20% of US electricity and nearly half of all zero-emission electricity. Keeping them online at a cost of $2.6 billion annually is, by any reasonable measure, a bargain.
The second mechanism targets new advanced reactors, including SMRs: Sections 45Y and 48E, the technology-neutral clean electricity production and investment credits. This is where things get genuinely interesting. ⚡
The production tax credit (45Y) pays $15 per megawatt-hour for 10 years after a qualifying zero-emission facility is placed into service, with annual inflation adjustments
The investment tax credit (48E) covers 30% of construction costs for qualifying facilities placed in service after December 31, 2024
A 10% bonus applies if the plant is built on a brownfield or fossil-fuel community site 🏭
A new nuclear-specific energy community adder was added by the One Big Beautiful Bill Act in 2025, rewarding areas with existing nuclear employment
Developers can choose one or the other but not both. For SMRs with very high first-of-a-kind capital costs, the 30% ITC is probably the right pick. As costs fall with subsequent builds and manufacturing scale, the PTC becomes more attractive.
The third piece is the $700 million for HALEU fuel research and production. This matters because most advanced reactor designs, including many SMR concepts, need high-assay low-enriched uranium, which barely exists in commercial quantities in the US right now. Without a domestic HALEU supply chain, no SMR can be built at scale regardless of what the tax code says. The IRA at least started the clock on solving that problem. 🔬
Why SMRs specifically benefit
The technology-neutral framing of 45Y and 48E is the key insight here. Previous nuclear tax credits were narrow, technically complex, and practically useless. Section 45J, the old advanced nuclear credit, has existed since 2005. As of mid-2023, not a single taxpayer had ever received it. Georgia Power’s Vogtle Units 3 and 4 finally claimed 45J credits in late 2023, but that was the first time in 18 years the credit did anything.
The IRA flipped that failure by making nuclear compete alongside wind and solar on the same credit terms, rather than through a separate, harder-to-access regime. According to a 2024 study published in Frontiers in Nuclear Engineering, which modeled IRA credit impacts on a 300 MWe representative SMR in the ERCOT market, the credits meaningfully improve SMR economics across a range of variable operating costs. That is not a guarantee of profitability, but it shifts SMRs from “probably uneconomic” to “competitive with careful project selection.”
The Center for Strategic and International Studies ran the numbers on overall capital costs, using first-of-a-kind estimates of $3.7 billion to $7.7 billion per gigawatt of overnight capital cost. At those price points, the ITC and PTC materially reduce the levelized cost of energy and make nuclear competitive with other generation technologies. For higher-cost projects, the ITC wins. As costs fall, both approaches converge. 📈
The public power angle deserves more attention than it usually gets. Nonprofit utilities, co-ops, rural electric associations: these organizations have historically been locked out of federal tax credit financing because they do not owe federal income tax. The IRA’s direct pay option changes that. Nonprofits can now receive the credit value as a payment, not just as an offset against taxes they do not owe. This matters enormously for SMRs, because small modular reactors are sized to serve the demand profiles of medium-sized utilities, many of which are nonprofits. Have you thought about what this means for rural electric co-ops that have been buying power from coal plants for decades?
The big tech catalyst
The IRA did not just improve nuclear economics in spreadsheets. It triggered a wave of power purchase agreements between tech companies and nuclear developers that probably would not have happened without the policy certainty the credits provided. 💡
Consider what happened in the fall of 2024:
Google signed an agreement with Kairos Power to build six to seven reactors totaling 500 megawatts, targeting the first unit online by 2030
Amazon partnered with X-energy to develop a four-unit 320 megawatt project with Energy Northwest, with an option to scale to 12 units and 960 megawatts, plus a broader collaboration targeting more than 5 gigawatts by 2039
In May 2025, Google and Elementl Power agreed to develop three project sites totaling at least 600 megawatts each
These are not research announcements. They are commercial commitments. According to Third Way’s analysis, these agreements are largely predicated on the existence of the IRA tax credits. Remove the credits, and the risk calculus for tech companies changes significantly.
The AI data center buildout is driving this. Data centers need reliable, around-the-clock baseload power that cannot be provided by solar panels that stop working at night. Nuclear, and specifically SMRs that can be sited close to load centers, is one of the very few technologies that meets that need. The IRA gave developers the financial confidence to start making commitments, and tech companies the assurance that the projects would get built.
What the One Big Beautiful Bill changed, and what it did not
In July 2025, President Trump signed the One Big Beautiful Bill Act, which rewrote large chunks of the IRA’s clean energy framework. For wind and solar, the news was mostly bad. For nuclear, the story is more nuanced.
What the OBBBA did not do is just as important as what it did. Wind and solar faced aggressive timelines: projects must be placed in service by the end of 2027 to qualify for the tech-neutral credits. Nuclear did not face the same accelerated phaseout. According to Arnold & Porter’s analysis, the OBBBA:
Retains Section 45U for existing nuclear facilities through December 31, 2032
Maintains transferability provisions for the full credit window
Preserves the tech-neutral 45Y and 48E credits for nuclear with a 2032 phase-out schedule
Adds a new nuclear energy community bonus tied to local nuclear employment
Allocates $125 million specifically for developing small modular reactors for military use
The OBBBA did add one significant new constraint: restrictions on foreign entities of concern, meaning any nuclear project with ties to China, Russia, North Korea, or Iran loses credit eligibility. Given that Russia’s ROSATOM still supplies enriched uranium to several US reactors, the fuel sourcing provision is a live complication, not just a theoretical one. 🌍
The Council on Foreign Relations noted that nuclear’s relative preservation in the bill reflects genuine bipartisan support. No Republican voted for the original IRA. But when the OBBBA’s earlier drafts threatened to accelerate nuclear credit phaseouts, Republican lawmakers from nuclear-heavy districts pushed back hard. Rep. Claudia Tenney of New York made the case directly: her district depends on four nuclear reactors for a substantial share of the state’s electricity.
The political lesson here is real: nuclear has a coalition that wind and solar do not, cutting across party lines in ways that make it more durable in a changing political environment.
The uncertainty that remains
None of this means SMRs are a done deal. The IRA created the financial conditions for nuclear resurgence. It did not actually build any reactors.
First-of-a-kind construction risk is still enormous. The Vogtle Units 3 and 4 in Georgia came in years late and billions over budget. The industry argues, with some justification, that SMRs avoid many of those problems through factory fabrication and modular assembly. But that argument has not yet been stress-tested against actual SMR construction. The Argonne National Laboratory’s modeling, which is the most credible independent analysis of IRA impacts on SMRs, shows that the credits significantly improve SMR economics but do not guarantee competitiveness across all scenarios. Variable operating costs, grid pricing, and local market conditions still matter a lot.
The HALEU fuel supply chain is still not solved. $700 million is a start, not a solution. Commercial quantities of HALEU for a fleet of advanced reactors require years of infrastructure investment that has not fully materialized.
And the credits themselves have a clock. The 45U credit expires in 2032. The tech-neutral credits begin phasing out around the same year. For developers making 20-year investment decisions, a 7-year incentive window is better than nothing, but it is not the same as long-term policy certainty. The Breakthrough Institute makes a strong case that IRA credits are necessary to attract private capital at this stage of development, when first-of-a-kind costs are highest and project risk is greatest. The question is whether the window stays open long enough for SMRs to reach cost reductions that make them self-sustaining without credits.
What does your read on the policy risk look like? Is a decade of credits enough to get SMRs to commercial maturity, or does the industry need longer-term certainty to make the capital commitments required?
The honest answer, as of April 2026, is that we do not know yet. What we do know is that the IRA opened a door that had been effectively closed for 30 years. The nuclear industry is walking through it. Whether SMRs can reach commercial scale before the credits expire is the central question of US energy policy for the rest of this decade. The next few investment decisions by TVA, Kairos Power, X-energy, and others will tell us more than any policy analysis can. Watch those announcements closely.