Climate Denial Crock of the Week

In a previous post on this page, I talked about the coming explosion in clean energy investments, magnetized by the Inflation Reduction Act’s clean energy incentives.
It’s not theoretical – it’s already happening.

Silvio Marcacci in Forbes:

The Inflation Reduction Act is the most important climate legislation in United States history, but will it actually generate private investment in new manufacturing? 

In a word, absolutely.

Roughly $28 billion in new manufacturing investment has been announced in the weeks following the IRA’s signing. These investments have primarily happened in the electric vehicle, battery, and solar manufacturing sectors – but the trend is just getting started. 

The economic upside is massive. Energy Innovation modelingprojects the IRA will increase GDP nearly 1% in 2030, and the Blue Green Alliance predicts it could add 9 million jobs in the next ten years. But securing the IRA’s full economic development potential hinges upon state and utility implementation. 

The legislation could become America’s most significant investment in clean manufacturing and build a 21^st century economy by leveraging tax dollars to generate roughly $1.7 trillion in new investment within a decade, according to Credit Suisse.

The IRA’s clean energy tax credits completely change the economics of electricity generation in the U.S., using long-term policy to efficiently leverage government funds to accelerate renewable energy and battery storage deployment for utilities and corporations.

Renewable energy manufacturing investments are just starting, but the first announcements are a harbinger of things to come. Woods Mackenzie forecasts renewable energy investments will total $1.2 trillion by 2035, substantially more than without the IRA, and solar energy investment will be two-thirds higher because of the law. Two of the largest U.S. solar manufacturers have already increased their investments.

FirstSolar announced it will spend $1.2 billion to build a new solar panel manufacturing plant, its fourth in the U.S., and expand three existing Ohio plants. The manufacturing investments will create nearly 1,000 new jobs. “In passing the Inflation Reduction Act of 2022, Congress and the Biden-Harris Administration has entrusted our industry with the responsibility of enabling America’s clean energy future and we must meet the moment in a manner that is both timely and sustainable,” said FirstSolar CEO Mark Widmar.” We continue to evaluate further investments in incremental capacity and could announce further expansion plans in the future.”

And in the Southeast U.S., REC Silicon announced an agreement with Mississippi Solar to develop a low-carbon U.S.-based solar supply chain from raw materials to fully assembled modules, noting “passage of the Inflation Reduction Act which includes SEMA (Solar Energy Manufacturing for America) legislation will drive increases in the U.S. production of polysilicon and metallurgical grade silicon.”

While almost every U.S. automaker has announced EV model expansions, the future of consumer uptake was uncertain due to several popular EV automakers reaching the 200,000-vehicle cap on federal EV tax credit eligibility, with several more expected to reach that point as soon as 2023. 

Even though most EVs are cheaper than internal combustion engineson a monthly basis from the day they’re purchased, those economics depend upon the federal EV tax credit, and without them consumers may not choose to drive electric over fossil fuels. The IRA removes that roadblock by extending the credit for ten years and lifting the manufacturer cap. 

While the IRS incentives are expected to modestly increase passenger EV sales, adding the new commercial EV incentives could have a powerful impact on that portion of the market. Automakers are already responding.

GM will invest $760 million at its existing Toledo Propulsion Systems plant to expand manufacturing to make drive units for planned EV models – the automaker’s first U.S. EV-only powertrain or propulsion facility. It also recently said it will invest $491 million at an existing Indiana stamping plant to make various parts for future vehicles. 

Foreign automakers are also focusing on the U.S. Kia announced it will shift some of its EV assembly to the U.S. by 2024 to qualify for IRA incentives. Kia currently holds the second largest market share for U.S. EVs, but only manufactures them in South Korea.
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But even with new EVs made in America, powering those vehicles on the road is another issue. Battery manufacturing and the associated supply chain is largely concentrated in other countries. Designing incentives to gradually require more and more domestic content alongside the IRA’s battery production tax credit will accelerate investments from domestic and international sources eager to power EVs in the world’s second largest auto market.

Battery manufacturing investment announcements have quickly surged ahead. Honda and LG Energy Solutions announced a joint venture to build a $4.4 billion battery factory in Ohio where Honda’s main U.S. factory is located, aiming for 40 gigawatt-hours annual production capacity – enough to power more than 700,000 vehicles according to the companies. LG’s joint venture with Honda is part of its roughly $10 billion investment plan to open four new battery manufacturing plants in North America by 2025 to capture IRA-fueled consumer demand for EVs.

Panasonic, which supplies batteries to Tesla, is in discussions to build a new $4 billion battery plant in the U.S., potentially in Oklahoma. Panasonic already jointly operates a battery factor in Nevada with Tesla, and the new plant is being described as a “twin” plant with another $4 billion EV battery factory Panasonic announced in July for Kansas which could create up to 4,000 direct jobs.

Toyota announced it will more than double a planned EV battery plant in North Carolina, adding $2.5 billion in new investment to a previously announced $1.3 billion plant construction project. The larger plant, which will total $3.8 billion in investment, will create 2,100 new jobs.

Michigan will be home to two new battery manufacturing plants. Local startup Our Next Energy is planning a $1.6 billion cell manufacturing facility that will eventually employ 2,100 people. And Gotion Inc, the U.S. subsidiary of Chinese EV battery manufacturer Guoxuan High-Tech Co., is planning to develop a $3.6 billion manufacturing plant in the state which will create 2,000 new jobs. That’s notable since Chinese companies control most of the world’s battery manufacturing.

U.S.-based companies are also expanding. Mining company Piedmont Lithium announced a $600 million lithium processing and manufacturing plant for EV batteries, citing a need to reduce U.S. dependence on Chinese suppliers, creating 120 new jobs, and crediting recent legislation incentivizing the use of domestically sourced critical materials and providing tax credits for U.S. producers.

EV battery recycler Cirba Solutions announced a $200 million expansion of its existing Ohio facility and a new battery recycling facility in Arizona which will create 185 jobs, both part of the company’s plan to expand battery recycling 600%.

Council on Foreign Relations:

In recent decades, the United States has fallen behind on clean energy production. Take solar, for example. The United States’ share of solar manufacturing has declined by 80 percent in the past decade, while China has grown to dominate virtually the entire solar supply chain. This trend has become true for other clean energies. China is currently the top producer of wind energy, the principal investor in renewable energy, and also leads in the production of mineralsneeded for most types of clean energy production. While the production of clean energy abroad is not inherently bad, its concentration in China means the United States loses the opportunity to diversify clean energy supply chains, foster more competition, create domestic manufacturing jobs, and reduce the risks posed by geopolitical factors—most recently emphasized by the Russian invasion of Ukraine.

The IRA seeks to address exactly this issue. It is a budget reconciliation bill; every provision translates to money being spent or collected through spending, tax credits, tax revenue, or loans. Its allocation of $369 billion to clean energy and decarbonization projects is largely focused on deployment—meaning it provides incentives for clean energy technologies to be produced and implemented in the United States. Much of the bill’s provisions can be described as demand-pull policies, which promise a market for clean energy products and components. It offers tax credits to clean energy suppliers that essentially pay those firms to operate. It also includes subsidies and rebates that make clean energy cheaper for consumers. Other provisions are supply-push policies, offering low-interest government loans and tax credits for new factories and clean energy projects. Together, these investments create a landscape where consumers are incentivized to buy clean energy and firms are incentivized to produce it. 

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As for innovation? The IRA does not invest in what some people traditionally think of as innovation, such as the early stages of research and development (R&D) or prototyping. But it does create markets for innovative industries. By extending clean-energy tax credits, technologies that are not yet ready for deployment can take advantage of the promise of a stable market over the next ten years as they develop. This helps bring developing technologies from the lab to the market. Additionally, the bill benefits innovation with its “learning by doing” aspect. The more the federal government invests in financing and building clean energy, the better it will get at it. Ultimately, though, the IRA’s effect on clean energy innovation will be how it complements two other recent major pieces of legislation—the Infrastructure Investment and Jobs Act and the CHIPS and Science Act. These three bills create generous incentives for new clean energy technology at each stage of the innovation pipeline—investing billions in early R&D, funding demonstration projects to help new technologies showcase their viability, providing the infrastructure needed to scale these technologies, and enabling deployment by driving investment growth. Together, these laws will accelerate American innovation across clean energy industries.