Economy ministers from France and Germany are traveling to Washington this week to lay bare concerns about unfair competition sparked by $370 billion in US federal clean energy subsidies.
But there is another level of government support over which they have less influence: the incentives offered by US states and localities.
Developers of projects ranging from electric car factories to green hydrogen refineries are getting red carpet treatment from state and local authorities. Long in competition with each other for inbound investment, some states have revamped grant programs in response to the passage last year of the US Climate Act, America’s Inflation Reduction Act.
In Georgia, Norwegian battery company Freyr announced a $2.57 billion investment in a factory after receiving around $360 million in state subsidies. The Coweta County Local Development Authority also offered Freyr 20-year tax breaks and job creation grants worth $250 million – and served a lunch to executives prepared by a local fast food restaurant Chick-fil-A.
“It’s the kind of project you want to attract,” said Sarah Jacobs, chairwoman of the county authority.
In October, Michigan awarded at least $715 million in incentives to strike a deal with Chinese battery company Gotion, which will build a $2.36 billion plant in Grand Rapids. The states of Texas, Georgia, Kentucky, South Carolina and Illinois were also in the running for the plant.
“The IRA is federal policy and we will continue to aggressively ensure that we leverage it as much as possible for the benefit of Michigan,” said Quentin Messer, chief executive of the Michigan Economic Development Corporation.
State and local economic development agencies have for decades dangled tax breaks and other grants to businesses planning to expand or relocate. Ohio is keeping 25 or more properties across the state ready for major industrial projects, while Indiana says it has half a dozen sites “shovel ready” and Michigan has touted three sites with lines electricity, water and railway in place.
Federal climate law has changed the equation, making it likely that more of these sites will be used to manufacture electric vehicles, batteries or renewable energy equipment, all of which qualify for credits. new or expanded federal taxes. The Illinois state legislature last month passed additional appropriations for cleantech developers, for example.
“Speed is the new incentive [for] those companies that are interested in the energy transition,” said Indiana Secretary of Commerce Brad Chambers. In May, three months before the IRA was passed, the state awarded Stellantis and Samsung more than $186 million for a battery factory, including $25 million to cover capital and maintenance costs. infrastructure.
The IRA has sparked “more serious conversations” in US states about how to capture clean energy investment, said Alejandro Perellón, head of Americas business for Hy24, a Paris-based fund focused on fuel projects. to hydrogen. “So they can focus on things like permits, helping attract companies with maybe more tax-friendly systems for doing business. You see that everywhere.
Last year, Hy24 struggled to find a single project to invest in in the United States. Now he chooses from a long list of 10 to 15 thanks to federal IRA grants and state programs. “On August 16, when the IRA was passed, it was like someone turned on a light bulb,” Perellón said.
Italy’s Enel, which plans to build a solar module factory in the United States with an annual production capacity of 6 gigawatts, said it “takes into account the availability of land, the presence of a skilled labor, connections to transportation networks, and tax and incentive structures in manufacturing”. its location decision.
Ohio reached a $4.4 billion electric vehicle battery deal with Honda and LG Energy Solution in October after showcasing a ready-to-use site near Interstate Highway 71 and a set of $156 million in incentives.
States that had secured significant clean energy investments before the IRA was enacted are now enjoying a second phase of investment. Tesla last month announced a $3.6 billion expansion plan in Nevada to build more battery cells and its first electric tractor-trailer factory. The company has been operating in Nevada since 2014 and has benefited from huge state grants.
Among the states dangling incentives for clean energy developers are those led by governors who opposed the bill that became the IRA. Brian Kemp of Georgia was among 22 Republican governors who called it “reckless taxing and spending.”
As of January 31, Georgia had secured more than $15 billion in clean technology projects since passing the IRA, surpassing any other state, according to a recent report by Climate Power. This includes the announcement of a $4-5 billion EV battery plant by Hyundai and SK Group and a $2.5 billion expansion of solar module manufacturing by Hanwha Q-Cells.
Freyr spent months scouring 130 sites in 25 states before choosing Georgia in November. The company attributed its decision to Georgia’s strong workforce and a 368-acre industrial-zone site with rail, water and power lines in place. The company also said Coweta County’s strong incentive program was a key reason for choosing the site for its “Giga America” plant.
“Our decision to select Georgia was a combination of several factors, but the overall financial incentives for Giga America of course play a part,” said Jeremy Bezdek, President of Freyr USA.
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