The US climate law is fueling a factory frenzy. Here’s the latest tally

Canary Media thanks KORE Power for its support of our special coverage of the Inflation Reduction Act’s first year.

The U.S. clean energy revolution must be (mostly) Made in America.

At least, that’s what the text of the country’s record-shattering climate law says. Indeed, much of the $391 billion (or more) in climatetech funding in the Inflation Reduction Act can be disbursed only when the product in question — be it an electric vehicle, a sprawling solar array or the whirring blade of a wind turbine — is made at least partially in the U.S. The legislation is literally paying companies to manufacture their products domestically, all in service of making the country more self-sufficient regarding clean energy. 

This policy has rapidly shifted the economic viability of building clean energy equipment in the U.S., attracting 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, senior principal in the U.S. program of clean energy think tank RMI. ​“The United States is effectively now the most attractive destination for global capital in clean energy and cleantech.” (Canary Media is an independent affiliate of RMI.)

More than 100 new clean energy manufacturing facilities or factory expansions were announced in the U.S. since President Biden signed the law last August, adding up to nearly $80 billion in new investment, according to Canary Media analysis. In fact, in the two months since we initially published this piece, we’ve counted an additional 20 battery, EV, solar and wind manufacturing projects that have been announced across the U.S.

Companies have so far gravitated toward a handful of states to build their production facilities. Much of this activity is concentrated east of the Mississippi, in a geographic stretch spanning from the Great Lakes to Georgia that has been dubbed the ​“Battery Belt.” While Michigan’s historic grip on the auto industry is still reflected in the battery and EV production plans announced so far, the South has become a bustling hub for the industry as well. 

Solar manufacturing is headed for the South, too. Planned factories are concentrated in Alabama, Georgia and South Carolina, with some also coming to Ohio and solar giant Texas. 

Another 12 clean energy manufacturing projects that account for more than $8.5 billion in investment have been announced but don’t have a location yet, so those are not shown in the map above.

According to RMI’s Brickman, some of the leading states have courted clean-energy manufacturing investment with an array of tactics, such as providing state-level tax incentives, ensuring the availability of shovel-ready sites, training workers and investing in infrastructure.

South Carolina, for example, advertises itself as an EV industry destination, in part because of the 75,000 people already employed in the automotive industry in the state. And in Georgia — the state currently on track to get the most investment in clean energy manufacturing — officials have touted low taxes, good universities, workforce development and, to the dismay of labor groups like the United Auto Workers, low unionization rates. 

The geographic proximity of these facilities will likely yield other benefits, such as cheaper transportation from manufacturing sites to assembly plants. Production clusters in the Battery Belt and the South are also likely to benefit from a growing trained workforce and emerging educational programs intended to meet the hiring demand. 

At least so far, most of the manufacturing investments look likely to go to communities represented by Republican lawmakers in Congress, all of whom voted against the Inflation Reduction Act. 

The U.S. clean energy boom is a global affair

Impressive as this state-spanning 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 U.S. to meet its lofty Made-in-America goals without relying heavily on clean energy tech and investment from firms based outside of the country.

U.S.-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. 

In particular, South Korean firms are powering the U.S. domestic manufacturing boom. 

South Korea–based companies have made around one-fifth of the announcements so far — the second-most after the U.S. — and firms from the country account for almost one-third of the investment announced in U.S. clean energy projects since last August, nearly the same percentage as U.S. companies.

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 U.S. 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, it has pretty much one other option — Japan’s Panasonic — and things are progressing on that front, too. Panasonic is currently preparing a site in Kansas for a $4 billion battery plant, and in May, it said it would build at least two additional factories in North America by 2030.

“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.”

Despite geopolitical tensions, some Chinese firms are building facilities in the U.S.

But not every foreign investment has been welcomed with open arms. A few Chinese firms that have made clean energy manufacturing announcements since the Inflation Reduction Act passed have already faced opposition from lawmakers and, in at least one case, local residents.

The highest-profile example is the $3.5 billion partnership between Ford and the biggest battery maker in the world, CATL.

The two are working together to produce lithium ferro phosphate (LFP) batteries, an increasingly popular chemistry that brings down costs by using iron in the cathode instead of the more expensive (and difficult-to-source) elements nickel and cobalt. The partnership is seen as a potential key pillar in the storied U.S. automaker’s bid to compete with Tesla, which already uses LFP batteries in some of its vehicles. 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.” 

Even so, the plant has been banished from Virginia, harrumphed at by Senator Joe Manchin (D-West Virginia), and excoriated by Senator Marco Rubio (R-Florida). In fact, Rubio introduced legislation in March to make federal tax credits off-limits to EV firms using Chinese battery tech and also asked the U.S. Treasury Department’s Committee on Foreign Investment in the United States to review the deal. 

Beyond the Ford-CATL plant, several other projects involving Chinese firms are moving forward. China-based Longi and U.S.-based Invenergy announced a plant in Ohio that they claim ultimately will be the largest U.S. solar manufacturing facility. And three Chinese companies have announced plans to construct their own plants in the U.S. JA Solar is building a 2-gigawatt solar panel factory in Arizona. Hounen Solar is planning a 1 GW solar panel plant in South Carolina. And Gotion is building a $2.4 billion battery plant in Michigan. 

The latter project, which won the state subsidies it sought by a razor-thin margin of 10–9, has met with resistance from locals who have reportedly accused Gotion of evangelizing Communism and acting as a Trojan horse for Chinese ballistic missiles. The company has denied these claims.

Time is of the essence for clean energy manufacturing

Pulling together the required financing and securing a site for a major manufacturing facility are feats in themselves, but they’re just two early steps toward production. Next come the permits, the excavators and mounds of dirt, then the construction teams and steel beams, and, eventually, the reams of employees who need to be trained. And then production begins.

Still, some companies are building fast: Of the firms that have announced target production dates, 70 percent aim to go live by the end of 2024. Most of the facilities aiming for 2025 or later are big-money battery plants, such as LG Energy Solution’s $5.5 billion Arizona factory.

Only about 70 percent of the projects in our data set have publicly shared timelines — the remaining are mum on exactly when their commitments will solidify into shipments.

Self-sufficiency isn’t happening just yet 

But even if all of these plants magically flipped online tomorrow, the U.S. would still need help from its trusty old clean-energy friend, the import, in order to meet surging demand. 

Despite the jaw-dropping pace of manufacturing onshoring and the dozens of production facilities already breaking ground, 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 U.S. grid each year through the end of the decade. 

Solar and wind generated 14 percent of electricity in the country in 2022, a percentage that has been steadily growing for the past decade and is projected to keep doing so. Last year, just over 22 gigawatts of solar were added to the U.S. grid; BloombergNEF projects that figure will exceed 40 GW each year starting in 2025 and reach over 50 GW annually by 2028. 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 U.S. installed 4.7 GW of storage capacity; that’s expected to more than double to 10.2 GW in 2023, then rise to more than 15 GW in 2027. 

As for EVs, more than 1 million are projected to be sold in the U.S. this year, but the industry’s staggering growth is barely getting started. BNEF estimates nearly 5 million EVs will be sold in the U.S. in 2026, and close to 9.5 million in 2030. A March report from the Environmental Defense Fund found that the U.S. could be capable of producing nearly 4.4 million EVs by 2026. That’s a massive increase from just over 600,000 last year — potentially enough to keep pace with BNEF’s estimates.

But whether or not the U.S. is able to completely onshore its supply chains, one thing is undeniable: In just nine short months, the country has transformed the trajectory of its clean energy future.

Hat tip to Jack Conness and American Clean Power for their analyses of manufacturing project announcements, which were immensely helpful in collecting this data.

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