Thanks to the Inflation Reduction Act, nuclear developers now have access to the investment tax credit (ITC) for the first time—a substantial improvement in federal support that reduces the breakeven cost of nuclear projects by 30 to 50 percent. The last two reactors completed in the United States, Vogtle 3 and 4, did not have this benefit. Imagine if they did: the federal government would have reimbursed over $10.5 billion of their final $35 billion price tag, shifting much of the burden of cost overruns from nuclear plant construction away from ratepayers. The ITC is an essential tool for making the economics of building greenfield nuclear work. But is it sufficient? 

Nuclear energy developers are already grappling with these monetization challenges. At the recent Nuclear Energy Institute summit in New York, attendees expressed skepticism that tax credits alone would be sufficient to unlock new projects: One participant told Barron’s, anonymously, that tax credits are hard to claim for logistical reasons. Some panelists at the summit argued that they do not believe the current suite of federal tools—or recent announcements of apparent Japanese investment into new nuclear energy projects—provide project developers with enough certainty to kickstart greenfield project development.

What explains this hesitance? Developers could, in principle, proceed to financial close without fully monetizing their ITC in advance. But nuclear developers have practical reasons to be concerned that the ITC, large as it is, cannot easily provide them with upfront construction-period support.

The problem with utilizing the ITC as a form of upfront completion support is the design of the ITC itself:

• Project completion uncertainty will prevent ITC monetization, even with concessional financing available.
• Holding the ITC as a loss reserve reduces its ability to support construction costs.
• Most developers lack sufficient tax liability to monetize the full value of their tax credit, and there is scant precedent for deal structures to spread out monetization across the project’s construction period.
• Tax credit market participants have not yet demonstrated the capacity to monetize an ITC sized for a nuclear project.

To summarize: The ITC is essential to nuclear project economics, but monetizing it during construction poses distinct challenges for nuclear developers that do not arise for renewable energy projects. Absent a public agency’s ability to leverage access to the elective payment of tax credits, it is challenging to see a path forward for attracting sufficient risk capital for a new nuclear project under the current circumstances.

The ins and outs of the ITC

Although nuclear projects are the world’s most capital-intensive energy projects, the ITC scales with project costs. The tax credit is therefore the best available way for nuclear developers to reduce overall capital costs. The breakeven cost of producing nuclear power would be far higher without this reimbursement, which ranges between 30 to 50 percent of project costs depending on project characteristics.

But project completion uncertainty will prevent ITC monetization, even with concessional financing available. In practice, nuclear developers must complete their projects to fully monetize an ITC. A developer with a strong enough balance sheet could proceed without resolving this uncertainty in advance, accepting the ITC as a back-end reimbursement. But given the high construction costs and design complexities of nuclear projects, project completion is neither easy nor predictable regardless of how expensive its financing costs are.

Even under the best of circumstances, nuclear power development takes years and has uncertain buildout timelines, and therefore carries extreme risk to private investors—which must provide construction finance to get a project running well before the project receives tax credits and earns operating revenues. Investors may not extend what would be a massive construction loan without collateral—collateral from the developer and the project’s sponsors testifying to their repayment ability, including by the future receipt of a tax credit. The prospect of delays, cost overruns, supply chain snarls, domestic content, or workforce issues (all of which threaten project viability) will further complicate investors’ willingness to extend financing, particularly against sources of collateral (like tax credits) that depend on project completion.

To be sure, LPO financing can substantially help reduce nuclear projects’ overall financing costs. While the LPO mostly provides fixed and long-term loan products, which are better suited to term loans with long amortization periods rather than construction finance, the LPO can also set up contingent debt and equity facilities to provide developers with extra financing to draw on as needed if costs rise. The contingent facilities represent flexible lines of credit that help mitigate project development uncertainty at minimal additional interest cost—but, since it must be negotiated in advance, it cannot totally insure a developer against construction cost increases over the pre-arranged amount. Still, the LPO’s contingent facility structure represents a meaningful step toward addressing construction-period risk, and public assurances from the LPO about its willingness to use these facilities to mitigate overrun risks would further strengthen developer confidence.

Holding the ITC as a loss reserve reduces its ability to support construction costs. Nuclear energy developers, like all other clean energy developers, would much rather monetize the ITC as soon as possible to maximize the “time value” of money, the principle that the best time for a developer to get paid is as soon as possible. To be sure, both tax equity and tax credit transfer market deals are often finalized relatively late into the construction process, when risk is lowest. So, for all developers, needing to wait to monetize the ITC ends up both sharply reducing the ITC’s value and complicating the process of securing upfront construction financing beforehand. Nuclear is no exception. This claim still holds even when a developer could access cheaper capital from the LPO.

The problem for nuclear project developers is that, unlike their renewable energy developer counterparts, is that the high completion risk means that it is even harder to predict and negotiate the timing of a tax credit monetization. If the project isn’t likely to be completed (or has a number of uncertainties that limit investors’ ability to make reliable projections for sizing the volume and risk of necessary finance), or if it isn’t being completed on a predictable schedule, this certainty may never materialize and monetization may be delayed indefinitely. (The sector also appears vulnerable to adverse Foreign Entity of Concern rules. Material assistance cost ratio tables for nuclear still lack formal clarification.) This means that securing bridge financing—borrowing against expected future tax credit monetization—is even more difficult. In fact, cost overruns that change the basis of the expected tax credit financing may actually increase the project’s overall financing cost. Tax equity and transfer market investors look for certainty in the size and security of their tax credits; here, they do not have it.

For this reason, tax credit investors and lenders will treat an investment tax credit for a solar project as far more bankable than an investment tax credit for a clean firm project like nuclear or geothermal energy. Despite being identical from the perspective of the IRS, these tax credits are two entirely different financial products, each with a distinct risk profile. Even though the price for a solar energy investment tax credit is now falling, that tax credit is a fairly liquid money market asset with an established market price; the market price of a clean firm investment tax credit does not yet exist. (This distinction is worth bearing in mind when assessing the One Big Beautiful Bill Act’s preservation of full ten-year tax credit eligibility for clean firm projects: Eligibility alone does not resolve the underlying monetization challenge.) In short, tax credits make nuclear projects more solvent, but, as they are currently designed, they do not make them more liquid.

Most developers—even some nuclear energy developers—lack sufficient tax liability to monetize the full value of their tax credit, and there is scant precedent for deal structures that spread out monetization across the construction period for large fixed-capital projects. The federal energy tax credits are nonrefundable against developers’ tax liabilities.¹ This might be fine for nuclear developers with larger tax liabilities, such as Southern Company, but perhaps not for smaller developers of advanced reactor designs. If developers wait to monetize the ITC, they will likely be unable to use the whole credit. This is why developers go to tax equity and transfer markets in the first place: to find partner investors that can use the whole credit.

To be sure, there is a provision in the tax code allowing developers of ITC-qualified projects to claim portions of the ITC during construction, assuming construction lasts longer than two years, for “qualified progress expenditures” (QPE). However, the task of creating special tax equity structures that spread out ITC monetization (or even reserve some of the ITC as a loss reserve later on) faces many potential problems. Claiming the ITC during construction lowers the final taxable basis of a project, making projects less attractive to a tax equity investor. Even then, it would be impossible to monetize that early ITC drawdown without a tax equity deal in place, because developers would not have tax liability during the construction period. But, to our knowledge, there are no tax equity deals for projects that have ever drawn down the tax credit for QPE during construction, mostly because renewables projects (most often solar and storage projects) that have historically used tax equity have predictable construction costs and timelines, precluding their developers from needing to make use of this provision—but also because this provision did not exist before the Inflation Reduction Act was passed in 2022. All the while, these kinds of deal structures are not eligible on the tax credit transfer market.

The final obstacle to monetizing the ITC through tax equity or tax credit transfers is that market participants have not yet demonstrated the capacity to monetize an ITC sized for a nuclear project. In 2025, the total volume of ITC and PTC transactions for solar, wind, and battery projects was $35 billion—in fact, the total cost of Vogtle reactors 3 and 4. Even if Vogtle claimed an ITC, there is no evident market actor that, on its own, carries a tax liability large enough to monetize an $11 billion (30 percent) investment tax credit either through tax equity or a credit transfer. (We have independently confirmed this point with developers and other energy finance analysts.) Norton Rose Fulbright and Crux data from 2024 suggest that individual ITC deals do not exceed $300 million in face value—two orders of magnitude smaller than Vogtle.

While tax equity deals between private partners allow for a syndicate of private investors to split a tax credit among themselves in line with their participation interests (whether through a partnership flip or through a tenancy-in-common arrangement), the task of arranging a tax equity syndication worth billions of dollars is unprecedented in energy markets and would be extremely complex. Additionally, tax credits cannot be resold, limiting tax equity investors’ ability to leverage the asset, and the IRS prevents tax credit “chaining,” which would further support tax credit liquidity by allowing public entities with large balance sheets to purchase and monetize credits. To be sure, a syndication would improve the liquidity of the tax credits—but it would not address any of the above obstacles to project completion risk, preventing a syndicated nuclear ITC from becoming a liquid money market instrument like its solar, battery, and wind tax credit counterparts.

Market participants in the energy finance landscape are well aware of these obstacles to ITC monetization for nuclear energy projects. Equity sponsors, construction lenders, long-term creditors, and prospective power offtakers will all treat a greenfield nuclear energy project as riskier if its lead developer keeps tax credits on its books as a loss reserve—doing so signals that the project carries meaningful downside risk. Developers with sufficient balance sheet capacity could absorb this risk, but it raises the cost of capital for the project as a whole and complicates the process of assembling a financing consortium.

Elective pay for nuclear energy

These monetization dynamics affect private developers most acutely. Public entities eligible for elective payment (direct payment) of tax credits, such as the Tennessee Valley Authority and the New York Power Authority, face a different and more favorable set of conditions.

Thanks to elective pay, public entities do not need a tax equity partner or a tax credit buyer on the transfer market; their ITC comes as a cash refund from the IRS. So, unlike their private counterparts, public entities need not depend on equity partners to work through capital markets to help them monetize their ITC. This advantage remains under-discussed in most policymaker discussions concerned with supporting nuclear deployment.

Public entities may also be able to creatively monetize QPE in order to draw down the value of their elective payments in tranches. They could take out construction loans sized to accommodate potential overruns collateralized by a drawdown of QPE, which, thanks to elective pay provisions, would come in the form of cash rather than tax relief. Public nuclear developers could structure a revolving line of credit with a consortium of lenders, collateralized by their draws of elective payment. This structure, ambitious as it is, would still require some general agreement between the project sponsor and its creditors on the cost structure of the nuclear project. While this strategy seems plausible, it may still take time to arrange.

To be sure, even a creative use of QPE may not derisk investors’ worries about project completion risk. Nuclear has the same problem as offshore wind: Lenders are loath to let developers start projects they can’t finish, for whatever reason. This is why public entities must still secure the support of the state balance sheet to insure investors against the risk of non-completion. A state or federal government guarantee of project completion would sit on a public nuclear developer’s balance sheet as a contingent asset, an IOU of sorts. In the event of project abandonment, the state pays out its IOU—but, in the event of project completion, the project receives an elective payment sized to the project’s final cost, compensating for a share of the overrun. The state is collateral for itself. 

Given the structural advantages available to public entities, the ITC monetization challenges described above are particularly acute for private developers pursuing greenfield nuclear projects without access to elective pay. This does not mean private nuclear development is impossible. Developers with strong balance sheets, supportive regulatory environments, or creative capital structures may yet find workable paths forward. But the ITC will likely function as a back-end return-enhancer than a source of construction-period liquidity.

Fission requires finance

Policymakers should approach the financing of new nuclear energy projects with the awareness that tax credits and concessional finance, while essential to improving project economics, do not on their own address the construction-period liquidity gap that remains the binding constraint on new nuclear development. An ITC for nuclear energy is vulnerable to the same cost hikes, delays, and project uncertainty problems that already deter private financing from investing in nuclear energy. The ITC monetization challenges faced by nuclear project developers can be addressed through financial products designed to support project completion. In doing so, developers will be able to leverage the ITC’s heft to effectively mitigate cost increases.

As we have previously covered at length in our American Nuclear Moonshot report and in our report last summer on the uncertain status of the Loan Programs Office, the U.S. nuclear sector’s prospects also depend on a broader ecosystem of support—including supply chain rebuilding, skilled nuclear engineering workforce development, strategic equity participation where needed, energy offtake contracting to ensure projects are bankable to co-investors, and clear mechanisms for managing project completion risk. Westinghouse’s collaboration with the Department of Energy to create a “long-lead item” procurement facility for the nuclear supply chain and the recent reintroduction of the Accelerating Reliable Capacity (ARC) Act to allow the LPO to provide some overrun support will both help attenuate the uncertainties facing nuclear project deployment.

Nonetheless, of the available pathways, public entities eligible for elective payment are best positioned to build new nuclear projects: They can monetize the ITC as cash without relying on transfer markets, draw down QPE during construction, and backstop completion risk with the state balance sheet. We anticipate that near-future nuclear deals will leverage creative use of elective pay and QPE provisions alongside other forms of derisking to see projects through to completion.

While this blog post will not discuss potential frameworks for supporting project completion, energy policy analysts interested in rapidly expanding energy supply growth would do well to socialize supplementary financial structures that mitigate these vulnerabilities and provide nuclear projects with offtake certainty, upfront financing, economies of scale, and a pipeline of projects to cement supply chain and workforce development.

1. A nonrefundable tax credit is one where the value of the credit is capped at the value of the recipient’s tax liability, regardless of how the tax credit is calculated. The ITC is a nonrefundable tax credit. Because energy project developers often do not have a high enough tax liability to monetize the full value of their ITCs, they use tax equity and transfer market transactions to monetize them instead by selling the credits to recipients with higher tax liabilities. ↩︎