Taxes and Nuclear Power

Joe Somsel, a contributor and frequent commenter here on the blog, asked me to share this with our readers:

Since I'm posting on the day my US and state income taxes are due, let me expound a bit on relative tax treatments for nuclear generation compared to wind and solar generation.

In the US, the Internal Revenue Service allows accelerated depreciation (actually "Modified Accelerated Cost Recovery System" (MACRS)) that classifies assets into classes then gives the percent of first cost (basis) that can be deduced per year from taxable income. [Note - I'm not a tax accountant - I just took some classes!]

Solar and wind equipment used to make electricity is a five year asset class while a nuclear plant is a 15 year asset class. Both exclude the underlying land values which do not depreciate.

That means that the owner of two new $3000/kW plants, one wind (or solar) and one nuclear, could write-off $960 the first full year for his wind or solar plant but only $285 for his nuclear plant per kilowatt of capacity.

At the 39 percent top corporate tax bracket for 1,500 MWe installed, that's almost a $40 million a year difference to solar or wind in after tax earnings that can be used for dividends whether electricity is sold or not.

For perspective, with 50% equity and 6% ROE, total before-tax profits would be about $135 million if everything went well. The after-tax profits available for distribution or re-investment at the top rate would be about $83 million. This favorable tax treatment increases the cash available for dividends from wind or solar by almost 50% over nuclear for that second year of operation.

Again, I'm no tax or financial accountant but this is a reasonable ballpark estimate of the difference that tax treatments make in investment decisions for new generation. Specialists in taxation are welcome to correct or expound on this estimate in the comments.

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A Design Team Pictures the Future of Nuclear Energy

For more than 100 years, the shape and location of human settlements has been defined in large part by energy and water. Cities grew up near natural resources like hydropower, and near water for agricultural, industrial and household use.

So what would the world look like with a new generation of small nuclear reactors that could provide abundant, clean energy for electricity, water pumping and desalination and industrial processes?

Hard to say with precision, but Third Way, the non-partisan think tank, asked the design team at the Washington, D.C. office of Gensler & Associates, an architecture and interior design firm that specializes in sustainable projects like a complex that houses the NFL’s Dallas Cowboys. The talented designers saw a blooming desert and a cozy arctic village, an old urban mill re-purposed as an energy producer, a data center that integrates solar panels on its sprawling flat roofs, a naval base and a humming transit hub.

In the converted mill, high temperat…

Sneak Peek

There's an invisible force powering and propelling our way of life.
It's all around us. You can't feel it. Smell it. Or taste it.
But it's there all the same. And if you look close enough, you can see all the amazing and wondrous things it does.
It not only powers our cities and towns.
And all the high-tech things we love.
It gives us the power to invent.
To explore.
To discover.
To create advanced technologies.
This invisible force creates jobs out of thin air.
It adds billions to our economy.
It's on even when we're not.
And stays on no matter what Mother Nature throws at it.
This invisible force takes us to the outer reaches of outer space.
And to the very depths of our oceans.
It brings us together. And it makes us better.
And most importantly, it has the power to do all this in our lifetime while barely leaving a trace.
Some people might say it's kind of unbelievable.
They wonder, what is this new power that does all these extraordinary things?

New Home for Our Blog: Join Us on NEI.org

On February 27, NEI launched the new NEI.org. We overhauled the public site, framing all of our content around the National Nuclear Energy Strategy.

So, what's changed?

Our top priority was to put you, the user, first. Now you can quickly get the information you need. You'll enjoy visiting the site with its intuitive navigation, social media integration and compelling and shareable visuals. We've added a feature called Nuclear Now, which showcases the latest industry news and resources like fact sheets and reports. It's one of the first sections you'll see on our home page and it can be accessed anywhere throughout the site by clicking on the atom symbol in the top right corner of the page.
Most importantly for you, our loyal NEI Nuclear Notes readers, is that we've migrated the blog to the new site. Moving forward, all blog posts will be published in the News section, along with our press releases, Nuclear Energy Overview stories and more. Just look for the &qu…

NEI Nuclear Notes

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