Date: 2024-10-12 Page is: DBtxt003.php txt00026468
US INDUSTRIAL MODERNISATION
Biden’s Clean-Industry Grants Punch Above Their Weight
The $6 billion for projects aimed at decarbonizing manufacturing is a
minuscule amount overall but stands to pay off in a big way.
Biden’s Clean-Industry Grants Punch Above Their Weight
The $6 billion for projects aimed at decarbonizing manufacturing is a
minuscule amount overall but stands to pay off in a big way.
Decarbonizing industrial processes is vital and difficult.Photographer: Spencer Platt/Getty Images North America
Original article: https://www.bloomberg.com/opinion/articles/2024-03-26/climate-change-biden-s-clean-industry-grants-punch-above-their-weight
Peter Burgess COMMENTARY
Peter Burgess
The $6 billion for projects aimed at decarbonizing manufacturing is a minuscule amount overall but stands to pay off in a big way.
Written by Liam Denning ... Liam Denning is a Bloomberg Opinion columnist covering energy. A former banker, he edited the Wall Street Journal’s Heard on the Street column and wrote the Financial Times’s Lex column.
March 26, 2024 at 10:51 AM EDT
One measure of success for President Joe Biden’s green energy agenda is that $6 billion of funding for new projects doesn’t even sound like that much anymore. The conditional grants announced this week for 33 projects aimed at decarbonizing industrial processes are equivalent to perhaps 1% of the headline clean-energy budgets of the Inflation Reduction Act and bipartisan Infrastructure Investment and Jobs Act. They should punch above their weight, nonetheless.
Making the manufacturing of metals, cement and chemicals green is especially tough, not least because of their high heat requirements, for which fossil fuels are perfectly suited. Doing so is essential for any net-zero plans, however, because industrial emissions are one of the big three sources of US greenhouse gas emissions; at roughly a quarter, they are almost as big as for the electric power sector. Yet, in terms of clean-energy investment, industry is a sideshow.
Cottage Industry
Clean industry spending represents only around 5% of US energy transition investment in recent years
Source: BloombergNEF
Note: Clean industry includes co-located carbon capture, hydrogen and industrial processes. Data exclude power grid spending.
The aggregate $20 billion of investment expected to be mobilized by the grants equates to almost as much as the entire amount invested in clean industry over the past two years. For every dollar spent on clean industry since 2018, more than four were spent on renewable energy or electrified transport. Moreover, the bump in clean-industry spending since Biden took office is dwarfed by other sectors in both absolute and relative terms. While 2023’s investment was $8.5 billion, or 234% higher, than in 2020, that compares with a gain of $62 billion, or 339%, for electrified transport.
One way to think about the subsidies of the IRA, especially, and the infrastructure act is as cleantech venture capital. In the absence of a clear market signal like universal carbon pricing, enticing the private sector into early stage decarbonization technologies is tough. Yet wind and solar power and even electric vehicles — plus the associated technology of battery storage — have already had more than a decade to develop and reduce their costs, sometimes spectacularly so. Federal subsidies for those, such as the production and investment tax credits for renewable energy projects, are long-running and can be thought of at this point as being aimed at scaling up technologies that are more or less established.
When it comes to decarbonizing industry — including associated technologies like carbon capture or green hydrogen production — the sector is closer to true venture-stage investments, where the failure rate is higher but so is the potential for breakthroughs. Apart from the sheer technological barriers, an industrial plant is inherently long-lived. Persuading someone to swap a 10-year-old gas guzzler for a new EV is one thing; getting a corporation to upgrade a furnace slated to last for a generation is quite another. The Green Aluminum Smelter project, due to receive up to $500 million, would be the first primary aluminum smelter built in the US in almost half a century. The six selected cement and concrete projects are a smorgasbord of piloted chemical, energy and carbon capture processes.
Politics is an essential part of the mix, too, of course. The US lags China and, in some respects, Europe when it comes to progress on energy transition, not just in terms of deploying technologies but owning the value chains to build them. The IRA’s green industrial policy aims at both elements. While catching up to China on critical minerals and EVs will be tough, the field is more open when it comes to developing clean manufacturing, hydrogen and carbon capture — all sectors that also figure large in both swing states and red states. While blue strongholds like California, New York and Massachusetts will benefit from some of the new grants, states in the Ohio River valley and on the Gulf Coast figure more prominently in the list of projects, along with Michigan, Georgia and Arizona. In terms of bang for the buck, this $6 billion plan may be one of Biden’s more useful ventures.
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To contact the author of this story: Liam Denning at ldenning1@bloomberg.net
To contact the editor responsible for this story: Daniel Niemi at dniemi1@bloomberg.net
Liam Denning is a Bloomberg Opinion columnist covering energy. A former banker, he edited the Wall Street Journal’s Heard on the Street column and wrote the Financial Times’s Lex column.
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