French and German economy ministers are travelling to Washington this week to lay bare concerns about unfair competition sparked by $370bn in federal US subsidies for clean energy.
But there is another layer of government support over which they have less sway: incentives offered by US states and localities.
Developers of projects from electric car plants to green hydrogen refineries are getting red-carpet treatment from state and local officials. Long vying with one another for inbound investment, some states have revamped subsidy schemes in response to last year’s passage of the landmark US Inflation Reduction Act climate law.
In Georgia, the Norwegian battery company Freyr announced a $2.57bn factory investment after receiving about $360mn worth of subsidies from the state. The local Coweta County Development Authority also offered Freyr property tax breaks for 20 years and job creation grants worth $250mn — and served executives lunch catered by a local Chick-fil-A fast-food restaurant.
“This is the kind of project that you want to attract,” said Sarah Jacobs, president of the county authority.
Michigan in October awarded at least $715mn in incentives to secure a deal with Chinese battery company Gotion, which will build a $2.36bn factory in Grand Rapids. The states of Texas, Georgia, Kentucky, South Carolina and Illinois were also in the running for the factory.
“IRA is a federal policy and we’re going to continue to aggressively make sure we leverage it for Michigan’s benefit as much as possible,” 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 subsidies to companies considering expansion or relocation. Ohio is keeping 25 or more properties across the state ready for large industrial projects, while Indiana advertises having half a dozen “shovel-ready” sites and Michigan has touted three sites with power, water and rail lines in place.
The federal climate law has changed the equation, making it likely that more of these sites will be used for manufacturing of EVs, batteries or renewable energy equipment, all of which benefit from new or expanded federal tax credits. The state legislature of Illinois last month passed extra credits for cleantech developers, for example.
“Speed is the new incentive [for] these companies looking into the energy transition,” said Brad Chambers, Indiana’s secretary of commerce. In May, three months before the IRA passed, the state awarded Stellantis and Samsung more than $186mn for a battery plant, including $25mn to cover capital and infrastructure costs.
The IRA had prompted “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 hydrogen fuel projects. “So they can focus on things like permitting, helping attract businesses with maybe more tax-friendly systems for doing business. You’re seeing that all over the place.”
Last year Hy24 struggled to find a single project to invest in across the US. Now it is picking from a long list of 10 to 15 thanks to the federal IRA subsidies and state programmes. “On August 16, when the IRA was passed, it was like someone switched on a lightbulb,” Perellón said.
Italy’s Enel, which is weighing construction of a solar module plant in the US with 6 gigawatts of annual production capacity, said it was “considering land availability, the presence of a skilled workforce, connections to transportation networks, and tax and incentive structures in making its siting decision”.
Ohio secured a $4.4bn EV battery deal with Honda and LG Energy Solution in October after presenting a ready-made site near Interstate Highway 71 and a $156mn incentives package.
States that had secured large clean energy investments before the IRA was enacted are now enjoying a second phase of investment. Tesla last month announced a $3.6bn plan to expand in Nevada to build more battery cells and its first electric semi-truck factory. The company has operated in Nevada since 2014 and enjoyed huge state subsidies.
Among the states dangling incentives before clean energy developers are those led by governors who opposed the bill that became the IRA. Georgia’s Brian Kemp was among 22 Republican governors who attacked it as a “reckless tax and spending spree”.
As of January 31, Georgia has secured more than $15bn in cleantech projects since the IRA’s passage, topping any other state, according to a recent report from Climate Power. The include an announcement of a $4bn-$5bn EV battery plant by Hyundai and SK Group and a $2.5bn expansion of solar module manufacturing by Hanwha Q-Cells.
Freyr spent months scouring 130 sites across 25 states before choosing Georgia in November. The company attributed its decision to Georgia’s strong workforce and an industrial-zoned 368-acre site with rail, water and power lines in place. The company also said Coweta County’s strong incentive programme was one of the main reasons for selecting the site for its “Giga America” plant.
“Our decision to select Georgia was a combination of several factors, but the total package of financial incentives for Giga America does of course play a role,” said Jeremy Bezdek, US president of Freyr.