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Xcel Energy will participate in a novel study of whether nuclear plants can cost-effectively produce hydrogen, an effort aimed at bolstering the competitiveness of nuclear power and ultimately reducing greenhouse-gas emissions.

Minneapolis-based Xcel and two other U.S. utilities will participate in the approximately $11 million project, which is mostly funded by the U.S. Department of Energy’s Office of Nuclear Energy. The DOE’s Idaho National Laboratories is leading the effort, which was unveiled this week.

“This is a first-of-its-kind demonstration,” said Bruce Hallbert, director of the DOE’s light water reactor sustainability program at the Idaho labs. Akron, Ohio-based FirstEnergy Solutions and Phoenix-based ­Arizona Public Service are the other two utilities participating in the project.

Nuclear power makes up about 20% of U.S. electricity generation and 23% of Minnesota’s power output. While the quandary of storing nuclear waste remains, nuclear power is the nation’s largest source of carbon-free power — a plus considering the specter of global warming.

But the nuclear industry is under stress.

In deregulated electricity markets, nuclear plants have become the high-cost producer, prompting some states to subsidize them (and sending FirstEnergy Solutions into bankruptcy in 2018). The nuclear industry has fared better in regulated electricity states like Minnesota, though it’s still stressed by the evolving power grid.

Nuclear plants were built to run full-bore, 24 hours a day, making them an important source of baseload or constant power. But growing solar and wind energy production has made balancing the grid trickier. Solar and particularly wind are variable, so utilities are working to adjust the generation levels of traditional sources like nuclear.

“The grid is changing considerably with wind and solar becoming more prominent, and that’s changing the expectations for all energy sources,” said Tim O’Connor, Xcel’s chief nuclear officer.

Over the past year, Xcel has successfully demonstrated it can “flex” the production of its three nuclear reactors, gradually ramping down output as much as 25%, O’Connor said. But ramping down production means ramping down electricity revenue, which is vital to cover a nuclear plant’s many fixed costs.

By producing hydrogen — which has several industrial uses — a nuclear plant could create an additional revenue stream, potentially a strong one. “The idea is that a [nuclear plant] could produce a fairly large volume of hydrogen,” O’Connor said.

A nuclear plant could use excess electric generation to produce hydrogen. Or it could use a combination of excess steam and electricity, which Xcel believes will be the most effective method.

“This technology could very much be a game-changer,” O’Connor said.

Both methods are examples of electrolysis, the use of electricity to separate hydrogen and oxygen in water.

The fertilizer and oil-refining industries are among the largest buyers of hydrogen. Clean-energy advocates hope that hydrogen fuel cells — which create no carbon emissions — will one day play a significant role in transportation.

Most hydrogen is now produced with fossil fuels, particularly natural gas.

“The overall objective [of the project] is to produce hydrogen without carbon,” said the DOE’s Hallbert. The DOE is paying $9.2 million for the hydrogen study; Xcel is getting $1.3 million of that money. Separately, the company is putting in $300,000 of staff time and resources.

Xcel has already started its work and by mid-2020 expects to complete an economic analysis of producing hydrogen, including looking at the hydrogen market. If the study shows that Xcel could cost-effectively produce hydrogen, a pilot project at one of its nuclear plants in Minnesota could be the next step, O’Connor said.

Mike Hughlett • 612-673-7003