The billion-dollar pink H2 strategy is now on hold in the face of potential tax credit limits.

Constellation Energy Corp. has announced that it is placing its $1 billion nuclear hydrogen plan on hold – and could be scrapping it completely – as it waits to find out if the US government intends to provide the expected tax credit that would play a vital role in the project.

The tax credits would be a part of a strategy to support heavy industry decarbonization in the United States.

In coming months, the US Treasury Department will be providing guidance to clarify how H2 suppliers will be able to qualify for a subsidy as high as $3 per kilogram as a part of the Inflation Reduction Act. Companies like Constellation Energy and its nuclear hydrogen plan have been waiting for these rules to be released since the law was first signed in August 2022.

Constellation has now announced that the future of its pink H2 project will be decided on the types of limits that will be imposed by the Biden administration, which is facing pressure from environmental groups and some lawmakers to ensure that this plan focused on decarbonization will indeed be an environmentally friendly one. That said, determining what constitutes environmental friendliness has yet to be determined.

Constellation would be the first to produce nuclear hydrogen at volume, should the plan proceed.

The pink H2 would be produced at the company’s plant in upstate New York. Its intention is to also start installing the technology at a number of reactors to be able to supply H2 to a number of industrial customers throughout the Midwest. That said, the plan is on hold until it knows whether it will be able to rely on the assistance it was counting on from the US government.

Carbon-intensive factories producing chemicals, steel, fertilizer produce approximately one quarter of global greenhouse gas emissions. Replacing fossil fuel use with nuclear hydrogen can help to provide a low-carbon alternative to power those processes. That said, despite how comparatively quickly it could begin production compared to green hydrogen from renewable energy sources, there is some hesitation in a dependence on pink nuclear hydrogen.

“The uncertainty around the regulations has brought us pretty much to a full stop,” said Joe Dominguez, Constellation’s CEO. He explained that the limits to the support they were expecting would threaten climate targets in the US. “If this doesn’t get interpreted correctly, we’re not going to have the hydrogen to meet the goal.”