Trillions Pouring into US Energy Transition

April 26, 2023

Wall Street Journal:

Colleton County in South Carolina is a quiet rural district best known for its hunting, fishing and, recently, a sensational murder trial

Now it is also a player in America’s new gold rush: a scramble for $1 trillion in federal tax incentives and loans for green energy that is fueling a flood of corporate investments and reshaping local economies.

The spending is one of the biggest outlays of taxpayer-financed industrial stimulus since Franklin D. Roosevelt’s New Deal. If successful, it could transform the nation’s economy by creating millions of jobs and driving up to $3 trillion in total clean-energy investments during the next decade.

The made-in-Washington initiative also demands a leap of faith from small communities around the country that are committing significant local resources to attract businesses, sometimes in unproven industries. Some have been burned before.

In December, Colleton snagged a $279 million investment from Kontrolmatik Technologies Energy and Engineering, a Turkish firm that is hoping to get nearly $1 billion in federal tax credits over the next decade by building a battery-making plant in the U.S. Kontrolmatik wants to tap into the renewable-energy sector’s need to store electricity for release onto the grid when the sun isn’t shining or the wind isn’t blowing.

The Colleton facility plans to produce three gigawatt-hours’ worth of batteries each year—enough to power 540,000 homes for an hour. It promises to employ 575 people at some of the highest wages around. In return, the state and county are offering land, grants and local tax breaks.

“I’ll be honest, I have no idea what a gigawatt-hour is,” Colleton County Council Chairman Steven D. Murdaugh told local leaders at a February groundbreaking ceremony. “But I do know what a $279 million investment will do for our county, and I know what impact 575 jobs will have on our community.”

Kontrolmatik Chief Executive Sami Aslanhan traveled to the ceremony from Turkey, conspicuous with a diamond stud in one ear and long hair pulled back in a bun. Locating the facility in rural South Carolina was “a surprise for me,” he said. Kontrolmatik had considered sites in Europe and the Middle East for its second plant, he said, noting that the U.S. law that introduced the tax credits “was an important point to shift our investments to here,” he said.

The federal laws, most notably the Inflation Reduction Act passed in August, offer huge subsidies aimed at shifting the nation to renewables and building new industries to compete with clean-energy powerhouse China. They sparked about $150 billion in investment announcements in renewables and battery storage in the eight months after the act passed, according to the American Clean Power Association, a clean-energy industry group. 

Tens of billions of dollars more have been announced for electric-car batteries, clean hydrogen and carbon capture. The 2021 infrastructure law provides billions on top of that in federal grants and direct spending. 

Estimates of the total private-sector and public spending over the next decade driven by the Inflation Reduction Act alone range from several hundred billion to about $3 trillion.

“This is massive and unprecedented investment,” said Philip Jordan, vice president at BW Research, which studies how policies impact the workforce and economy. “It will reshape some local economies and it will revitalize and strengthen others.” 

More investments will come after the Treasury Department clarifies the fine print of how the tax credits will work. SolarEdge Technologies Inc., which makes equipment that converts energy from the sun into electricity, will invest between $125 million and $250 million in its first factory in the U.S., depending on how Treasury characterizes its devices, chief financial officer Ronen Faier said. The company previously built plants in cheaper countries such as China, Mexico and Vietnam.

Mr. Faier recently toured several potential sites in southern states and was shown old factory locations that used to house electronics or medical-device manufacturing that could be repurposed. 

Large swaths of the investment so far are flowing to southern, Republican-leaning states such as South Carolina, Georgia and Tennessee that generally have lower labor costs and taxes. 

Skeptics warn the subsidies could stoke already high inflation and waste money without creating lasting economic benefits. Some of the proposed investments will flop or never materialize as financiers balk at funding them or business models fail to pencil out—particularly for new technologies such as clean-hydrogen production. When projects fail, they could leave taxpayers in some communities with little to show.

In West Virginia, some state senators recently opposed the state contributing funding to a manufacturing facility for a new energy-storage technology: iron-air batteries that could store clean power for several days.


Big money — from the three biggest economies in the world, as well as scores of ambitious venture capitalists — is suddenly flying toward startups promising to help the world build a carbon-free future.

It’s a shift from the world of software into the actual world, following the trajectory of a tech founder like Peter Reinhardt, who sold a software company for $3.2 billion in 2020 and now leads carbon-storage company Charm Industrial. The newer startup, which he co-founded in 2018, turns carbon-rich biomass into sludge that can be safely buried underground. “We need to rebuild almost all the infrastructure around us to eliminate fossil fuel emissions and return the atmosphere to pre-industrial CO2 levels,” Reinhardt says. “That will require a tectonic shift.”

That’s why horizon-scanning investors are suddenly less interested in reseeding yesterday’s innovations (solar, wind and lithium-ion batteries) than doing deals that push forward the frontiers of climate tech. Decarbonized food, carbon-removing contraptions, futuristic materials and next-generation fuels are now portfolio targets for venture capitalists.

For early-stage investors, solar panels and electric vehicles are so 2011. By now these are relatively mature products built on the work of previous decades. They’re doing the job they were built for: gradually replacing fossil fuels. In fact, solar and wind are cheaper than coal in most of the world today. That means market forces will turn power grids a deeper shade of green with each passing year, and VCs can focus on electrifying everything else.

“There is capital available for great entrepreneurs — and good entrepreneurs — to tackle really hard problems in a way that wasn’t available in that first wave” of renewables investment, says Gabriel Kra, co-founder of Prelude Ventures. During the last 15 years, he adds, “the core technologies have changed, the participants have changed, the capital availability has changed, the building blocks have changed. And that’s what’s leading to this second, more successful wave of innovation.”

Venture capital investment in climate tech reached a record $70.1 billion last year, according to HolonIQ Global Impact Intelligence. That was an enormous 89% rise over 2021 at a time when overall VC investment retreated, the tech sector shed jobs and Russia’s war in Ukraine spiked oil and gas prices and unleashed a scramble for fossil fuels.


One Response to “Trillions Pouring into US Energy Transition”

  1. rhymeswithgoalie Says:

    Skeptics warn the subsidies could stoke already high inflation and waste money without creating lasting economic benefits.

    Funny how that was never a problem with fossil fuels, moviemaker tax cuts, stadiums for privately-owned sports teams, etc.

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