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The rubber meets the road for US climate funding

In "This Week in Climate", we look at how new IRA funds are rolling out.
Julian Moore
Feb 21, 2023 9 min read
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Ford Comes Home

Ford Motor Company announced it will build a new $3.5 billion factory in Michigan to manufacture lower-cost electric vehicle batteries. The factory is expected to start rolling out batteries by 2026, supplying enough batteries for 400,000 vehicles per year.

The announcement is another sign that the political deal-making that led to the Inflation Reduction Act is paying near-term dividends.

Ford initially considered building the plant in Canada or Mexico before incentives in the IRA lured them back stateside. Pulling emerging EV supply chains into the US was a sticking point for West Virginia Senator Joe Manchin in exchange for aggressive renewable energy targets.

Two incentives in the IRA were decisive for Ford:

  • Tax credits for battery cell production worth up to $35 per kilowatt hour of capacity and an additional $10 per kilowatt hour of capacity for the module.
  • Incentives to locate battery plants near assembly facilities due to the sheer weight of vehicle batteries, which adds cost and emissions to the total lifecycle of the battery.

The Marshall factory will produce lithium-iron-phosphate batteries, which are cheaper than the current nickel-cobalt-manganese chemistry used in many electric vehicle batteries and reduces exposure to complex supply chain disruptions and emissions that we covered here a couple weeks ago.

It also means that the buying car in the EV era will be different than previous generations. Consumers will be able to choose between a battery with lower range and cost or pay more for higher range and power.

The aim is to make electric vehicles more affordable and accessible to customers, but there’s still uncertainty about how consumers will react to having to make new choices that they never asked for. Internal combustion vehicles also offer upgrade packages, but they typically upsell for speed and towing capacity, not how far the car can take you.


Road Rules for Charging

Keeping those concerns in mind, the Department of Transportation also issued the first comprehensive guidelines for the installation, operation and maintenance of EV charging stations, which will apply to all federally funded projects.

The guidelines are part of the Biden administration's plan to build a national network of 500,000 charging stations by 2030, and address payment methods, plug types, price transparency, station reliability, and charging speeds.

In addition to charging capacity, the new rules also include consumer protections to eliminate some frustrations that current EV drivers have faced already. Charging companies will be prohibited from requiring memberships and will have to include contactless payment options. Federally funded chargers will also have to demonstrate an average annual uptime greater than 97 percent.

Charger availability problems have already arisen for drivers in developed EV markets such as the San Francisco Bay Area. A survey from last year showed that roughly 73 percent of Bay Area chargers were operational despite promises from providers of an average 95-98 percent uptime.

The Biden administration plans to direct $7.5 billion toward the expansion of EV infrastructure, while S&P Global Mobility estimates the United States will need more than two million public chargers within seven years to support the 28 million EVs it expects to see on the road by then.


Just Transition in Coal Country

The US Treasury Department, Department of Energy and IRS issued guidance on $10 billion in tax credits for clean energy projects in the IRA. At least $4 billion from the Qualifying Advanced Energy Project Credit will go towards projects at closed coal mines and retired coal-fired power plants for fuel cells, carbon capture and retaining critical minerals.

Meanwhile, the Low-Income Communities Bonus Credit program will increase the investment tax credit for wind and solar projects in low-income communities by 20 percent over current levels. The credits will translate to 1.8 GW of projects, with 700 MW of that in economically disadvantaged parts of the country.

One hitch is that those municipalities will have to apply for the funds, and federal agencies still haven’t made public exactly which geographic areas will qualify.

“Energy communities” are regions where a local economy previously depended on fossil fuel extraction, and they are the intended target of the Qualifying Advanced Energy Project Credit. It’s still unclear if the funds will prioritize regions with the highest employment needs, brownfield sites, closed mines and generators, or a combination of the three (S&P produced a useful map of all three).

The same goes for defining “low-income communities”, although they are likely to overlap with areas that previously qualified for federal incentives like the New Markets Tax Credit.



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The Author

Julian Moore