Experts Weigh the Pros and Cons of Biden’s EV Grants

The $550 billion bipartisan infrastructure bill signed into law last week includes $6 billion in federal grants for companies making batteries or processing materials for the components they use.

The legislation will allow the Energy Department to dole out $50 million or $100 million matching grants to applicants over five years, giving priority to companies owned and operated in the U.S., with North American intellectual property. Companies that create jobs in low-income areas, or reduce greenhouse gas emissions, get preference too.

These provisions are designed to address the fact that the U.S. doesn’t produce the materials needed to make batteries and lacks the capacity to process them. China controls over half the global capacity to refine battery metals, and 80% of cell manufacturing, according to BloombergNEF.

The $6 billion will not close this gap, but the grants will lower risks of investing in the EV supply chain. The financing will help companies add capacity before they have the customers to justify it.

This harkens President Obama policy in 2009. In this case the president earmarked $90 billion for clean energy investments and tax breaks to pull the U.S. out of the Great Recession. Tesla received a $465 million loan from the DOE to develop a plant in Fremont, California. A123 Systems also received funds. This battery manufacturer eventually went bankrupt and was acquired by a Chinese company.

Today, one startup, Imperium3 New York, uses equipment purchased from A123 and transported from Michigan to a factory in upstate New York. It plans to start battery production next year.

Peter Adriaens, a professor of entrepreneurship at the University of Michigan, criticized the DOE loans in 2012 but is in favor of today’s loans, even if some firms are bound to fail. “What we do have now that we didn’t have in 2009 is a lot more market demand,” he told Bloomberg.

But for many, the infrastructure bill feels a resurrection of Obama’s failed policy. Mike McKenna, who served as an adviser to President Trump on energy issues, told Bloomberg that Biden’s initiative will fail because its scale is woefully inadequate, and predicts the push toward EVs will increase the country’s dependence on China.

Still, the bill’s advocates say the U.S. must engage in this policy if it wants to avoid battery shortages, price spikes, and manipulation by China.

“If we don’t try and we don’t put this investment in, we won’t have an industry here period,” Ben Steinberg, a DOE veteran-turned-lobbyist who pushed for the battery provisions in the bill, told Bloomberg. “This is a long road, and we need to be able to have a little bit of grit here as a nation, and determination that even if things don’t go as planned, we still continue on the course to building a sustainable North American industry.”

Originally posted on Auto Dealer Today