NEW YORK/WASHINGTON, Dec 6 (Reuters) - The U.S. nuclear power industry is pressuring the administration of President Joe Biden to include existing reactors in a subsidy program for hydrogen, arguing that U.S. goals to jumpstart a "clean hydrogen" economy could fail without them.

The lobbying push reflects the big stakes for the nuclear industry, which has been struggling for years amid an upswing in low-cost electricity from natural gas-fired power plants and rapidly expanding wind and solar.

The U.S. Treasury is expected to issue guidance later this month on a hydrogen tax credit known as 45V that was outlined in the Inflation Reduction Act. The agency declined to comment.

So-called "green hydrogen" is a fuel made from water using electrolyzers; industry and government officials say it can be considered “clean” if its production is powered by virtually carbon-free energy sources like solar, wind, and nuclear.

Virtually no green hydrogen is produced now due to high costs. The Biden administration sees clean hydrogen as vital to tackling hard-to-decarbonize industries like aluminum and cement, and is offering production subsidies of $3 per kilogram through the Inflation Reduction Act.

The Treasury is weighing the details of the 45V credit, including a so-called "additionality" proposal backed by groups that support renewable energy that would make the perks available only to hydrogen producers that power their facilities with new, instead of existing, low-carbon energy sources.

A decision is expected later this month.

Deputy Secretary of Energy David Turk said at the COP28 summit in Dubai that agencies are split over the design of 45V. "It's a big tax credit. We have to get it right," Turk said.

RAISING THE STAKES

Proponents of additionality say diverting existing nuclear electricity from the power grid to produce hydrogen would leave a gap in power generation that would have to be made up by burning fossil fuels that cause climate change.

U.S. electricity grids will still need power if nuclear power is diverted to produce hydrogen, said Julie McNamara, deputy policy director with the Climate & Energy program at the Union of Concerned Scientists, a science-based advocacy group.

With the renewable energy capacity still nascent, this "means that the only thing that has the capacity to ramp up when that nuclear power is diverted for electrolysis is coal plants and gas plants," she said.

But nuclear industry backers say a more flexible approach is needed to make a hydrogen economy work.

“Allowing existing nuclear reactors to qualify will help ensure that clean hydrogen is available and affordable enough to be used by customers across a wide range of industries," Senator Tom Carper, a Democrat, said in a recent letter to Treasury Secretary Janet Yellen.

"It would be a huge unforced error to exclude existing nuclear from eligibility,” said Doug Vine, director of energy analysis at the environmental policy think tank the Center for Climate and Energy Solutions. Nuclear power is efficient at producing hydrogen as opposed to solar and wind power which is intermittent, Vine said.

Raising the stakes, the Department of Energy in October awarded $7 billion in grants to seven proposed clean hydrogen hubs as part of its strategy to jumpstart production. Three of the hubs plan to use existing nuclear.

Constellation, a nuclear power plant operator, says it plans to build a $900 million clean hydrogen facility at its LaSalle plant in Illinois with a portion of the $1 billion hydrogen hub award it received for the Midwest.

"The economics of the project are such that you really need... access to the tax credit in order to make it work," said Mason Emnett, Constellation's senior vice president of public policy.

Xcel Energy, a nuclear plant operator also set to receive money from the hub program, said in a recent letter to the Treasury that excluding existing facilities would limit the industry's ability to develop hydrogen. (Reporting by Nicole Jao and Timothy Gardner; additional reporting by Valerie Volcovici; Editing by Aurora Ellis)