For decades, people have been wringing their hands and bemoaning the fate of America’s once great industrial empire. They are used to seeing the smokestacks in Youngstown, Pittsburgh, and other industrial cities highlighted silently against the sky. They refer to America’s industrial heartland as the “Rust Belt.” The Inflation Reduction Act has changed all that. Thanks to some actual leadership by President Biden and Democrats in Congress, manufacturing in America is roaring back.
According to Canary Media, in just the first 9 months after its passage, the Inflation Reduction Act (which has virtually nothing to do with inflation) has shifted the economic viability of building clean energy equipment in the US. It has spurred tens of billions of dollars in private investment from both domestic and foreign firms hoping to capitalize on the clean energy boom.
“What has taken place as a result of and since the Inflation Reduction Act can simply not be overstated,” said Aaron Brickman, a senior member of the clean energy team at RMI (formerly known at the Rocky Mountain Institute). “The United States is effectively now the most attractive destination for global capital in clean energy and cleantech.”
Nearly 100 new clean energy manufacturing facilities or factory expansions totaling almost $80 billion in new investment have been announced in the America since the Inflation Reduction Act was passed and signed into law last August. More are being announced every week.
The Inflation Reduction Act & The Rust Belt
Companies have so far gravitated toward a handful of states to build their production facilities — many of them states once lumped into the Rust Belt category. Almost all of this new economic activity is located in states that are east of the Mississippi River. Almost all of them are so-called red states whose Congressional representatives vigorously opposed the Inflation Reduction Act. There’s more than a little fine irony there.
Battery manufacturing will see an upsurge in those mostly southern states and solar manufacturing is headed to the South as well. The planned factories are concentrated in Alabama, Georgia, and South Carolina, with some also coming to Ohio and solar giant Texas. Another 11 clean energy manufacturing projects that account for more than $7.5 billion in investment have been announced but don’t have a location.
Impressive as this explosion in clean energy manufacturing may be, it’s not happening without some serious help from abroad. In fact, it’s not currently possible for the US to meet its lofty “made in America” goals without relying heavily on clean energy tech and investment from firms based outside of the country, Canary Media reports.
US-based companies account for less than half of the clean energy manufacturing announcements made since the passage of the Inflation Reduction Act, and just about one-third of the promised investment dollars. Companies based in South Korea have announced more than $30 billion in US clean energy projects since last August, topping the US company total of around $26 billion.
Although several key solar and EV announcements have come from South Korean firms, the country’s impact is felt most when it comes to batteries. That’s because South Korea is one of only three countries with mature battery manufacturing sectors, China and Japan being the others. So if the US wants batteries right now (it does), and if it wants to avoid Chinese battery giants (it really does), it has few options other than purchasing from South Korean firms.
In fact, Panasonic is pretty much the only other game in town. The Japanese company is planning a $4 billion battery factory in Kansas. Last month, it said it would build at least two additional factories in North America by 2030. The key is the production credits baked into the Inflation Reduction Act — $45 per kilowatt-hour for battery packs made in the US, $35 per kWh for the battery cells, and $10 per kWh for battery modules.
“Before the Inflation Reduction Act, the U.S. was still taking a leadership role on R&D in cleantech and climatetech and clean energy, but oftentimes those technologies could not be commercially scaled here,” said RMI’s Brickman. “That’s changed now. And so instead of looking elsewhere, those South Korean and Japanese companies and those European companies…they’re going to scale up, and they’re going to make their next expansion decisions [and] capital allocation decisions here in the U.S.”
The exception is the deal between Ford and CATL. Ford has stressed that this is not a regular joint venture; instead, the automaker is licensing the tech, meaning that “zero tax dollars will go to CATL.” Four other projects involving Chinese firms are moving forward. Chinese solar panel manufacturer Longi and Invenergy have announced a plant in Ohio they claim will become the largest US solar manufacturing facility.
Three other Chinese companies have announced plans to construct their own plants in the US. JA Solar is building a 2 GW solar panel factory in Arizona (if there is enough water to support production). Hounen Solar is planning a 1 GW solar panel plant in South Carolina. Gotion is building a $2.4 billion battery plant in Michigan.
Friends & Neighbors
The benefits of the Inflation Reduction Act won’t last forever. Many of them begin to phase out toward the end of this decade, and so the majority of the benefits will flow to those who get production going quickly. Of the firms that have announced target production dates, nearly 70% plan to go live by the end of 2024. Most of the facilities aiming for 2025 or later are the big money battery plants like the $5.5 billion LG Energy Solution Arizona factory.
Even if all of these new factories get built and come online almost immediately, America will still rely on suppliers in foreign countries to meet surging demand. Domestic supply chains are not on track to meet the exploding demand for clean energy technologies — at least for the foreseeable future.
Dozens of gigawatts of solar, wind, and storage capacity are expected to be added to the US grid each year through the end of the decade, and not all of the hardware will be manufactured in the US despite the incentives offered by the Inflation Reduction Act. Just over 22 gigawatts of solar were added to the US energy grid in 2022 and BloombergNEF predicts that figure will exceed 40 GW each year starting in 2025. By 2028, Bloomberg says more than 50 GW of solar power will be added to that each year.
Wind is expected to grow more modestly, but annual additions will still double by 2027. Growth of grid-scale storage capacity is also projected to be slower than solar, but the industry is ramping up. In 2022, the US installed 4.7 GW of storage capacity. That’s expected to more than double to 10.2 GW in 2023 and rise to more than 15 GW in 2027.
When it comes to electric cars and trucks, more than 1 million are projected to be sold in the US this year, but the industry’s staggering growth is barely getting started, Canary Media says. BloombergNEF estimates nearly 5 million EVs will be sold in the US in 2026 and close to 9.5 million in 2030. A March report from the Environmental Defense Fund found that the US could be capable of producing nearly 4.4 million EVs by 2026. That’s a massive increase from just over 600,000 last year, and potentially enough to keep pace with the estimates made by BloombergNEF.
Whether or not the US is able to completely onshore its supply chains, one thing is for certain. In just nine short months, America has transformed the trajectory of its clean energy future. If you have a job in a cleantech industry, thank the “woke” Democrats in Congress. Woke means planning for the future. Anti-woke means wallowing in the past and blaming someone else for your troubles.
Republicans have no plan to rebuild American manufacturing. All they can focus on is whining about the decline in coal mining and steel production. If pocketbook issues are important to you, support those who are helping provide paychecks to American workers. If reactionaries regain control of the government, the first thing they will do is repeal the IRA, which will put tens of thousands of hardworking Americans out of work. Please vote responsibly.
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