Peter Carlsson had a plan when he gave an interview to the German newspaper Frankfurter Allgemeine Sonntagszeitung in early October 2022, just weeks after the passage of the US Inflation Reduction Act (IRA). The U. S. government is calling for the U. S. government to publicly suspend the allocation of the mobile battery giga-factory in Heide, a small town in northern Germany. Their reasons were twofold: high energy costs at the time and the $600 million to $800 million in IRA subsidies, which eclipsed the $155 million in Germany. State aid. Instead, Carlsson put into play the option of advancing investments in the United States.
Unsurprisingly, his well-planned shot through the arc did not go unnoticed, causing quite a stir at the levels of government.
After months of persuasive efforts, Northvolt still made the decision to continue its German giga-factory with 3,000 direct jobs associated. It is no secret that this will be accompanied by substantial additional public funding, as yet to be disclosed.
Northvolt’s resolution, a real nail rodent for Europe, but at least with a happy ending.
In the case of Volkswagen, for example, the jury would likely still be absent, but it has recently made decisions in favor of North America.
Just weeks after a $2 billion investment in an off-road electric vehicle plant in South Carolina, the world’s second-largest automaker announced that its largest mobile battery plant to date would be built in St. Thomas, Ontario, Canada, putting plans in position for a pending production plant in the Czech Republic. To be sure, the resolution made much less difficult through a “hospitality gift” from CA. $10 billion from the Canadian government to accommodate expected ERI grants.
Conquered through IRA provisions, Tesla also halted a major assignment for a 50-gigawatt-hour battery factory at its car gathering site in Gruenheide, outside Berlin. Instead, it will invest another $3. 6 billion in expanding its Nevada Gigafactory.
Taavi Madiberk, CEO of Skeleton Technologies, an Estonian-German manufacturer of ultracapacitors, summarized the IRA’s situation in Europe in the Wall Street Journal as follows:
“We have a five-year investment plan. And until the IRA, EE. UU. no was on our five-year horizon. It is now [. . . ]. This is a discussion that each and every board of directors of each and every corporation in Europe has.
To say the least: everyone in Europe likes it.
At a meeting with U. S. lawmakers last November, French President Emanuel Macron said the IRA was “super aggressive” toward European companies. With many in Europe, it struck a chord.
So what about the IRA ruffling the feathers of the Atlantic?
Obviously, these are the IRA’s consumption tax credits of up to $7,500. In fact, subsidies for electric car purchases in many parts of Europe have been just as generous, if not more so. In Germany, for example, until the end of last year, middle-class all-electric car buyers were entitled to an “innovation bonus” of about $10,000 (€9,000).
What European Union (EU) leaders see as most problematic are eligibility criteria in the form of local content requirements. you will have to take a stand in North America. The same applies to the 40% of critical unfired fabrics that want to be extracted, processed or recycled in the U. S. Or in one of its loose industrial partners (of which the EU is not a member). These percentages will be accumulated through 10 emissions each year.
DRESDEN, GERMANY – JUNE 8: Volkswagen ID. 3 electric cars are located in the afterArray garage tower. [ ] meeting at the production plant “Gläserne Manufaktur” (“Glass Manufacturing”) on June 08, 2021 in Dresden, Germany. The Dresden plant lately produces 35 ID. 3 cars consistent with the day. The ID. 3 and ID. 4 cars are also produced at VW Zwickau in the same region. (Photo via Sean Gallup/Getty Images)
In the eyes of Macron and many of his fellow European heads of state, those criteria are a disadvantage for European automakers.
In a 2022 report assessing the potential effect of ERI’s local content requirements, the International Council on Clean Transportation (ICCT) evaluated other assumptions and defined three scenarios for 2030. In those scenarios, U. S. imports of electric cars will either remain solid or fall. to 20 % or 10 % from the current benchmark of 30 %. While the absolute number of electric cars imported into the U. S. once the hockey stick effect on adoption comes into play.
However, Europe’s real headache with the IRA is the Section 45X (Section 13052) tax credits for complex production.
These credits guarantee fixed, long-term, predictable dollar amounts per kilowatt hour produced. Not only subsidies, technically speaking, have no limit. They provide a full decade of security in crafting production projects, making them bankable.
In concrete terms, a manufacturer of mobile batteries receives up to $35/kWh, module brands up to $45/kWh (if the module does not use mobiles), differently up to $10/kWh. For a popular 75kWh battery, the mobile manufacturer can claim up to $2,625 in direct payment from the Treasury, or sell the rights to a third party.
A battery and GM’s new Hummer EV are facing an occasion when General Motors announced an investment of more than $7 billion in 4 Michigan production services on January 25, 2022 in Lansing, Michigan. – General Motors will create and retain 4,000 new jobs, and, In particular, increase the production capacity of battery-powered electric and mobile trucks. This is the biggest investment announcement in GM’s history. The investment includes the structuring of a new mobile Ultium Cells battery plant in Lansing and the conversion of GM’s meeting plant in Orion Township, Michigan to production of the Chevrolet Silverado EV and GMC Sierra Electric, GM’s planned plant meeting time to build large-scale electric vehicles. Microphones. (Photo by JEFF KOWALSKY/AFP) (Photo by JEFF KOWALSKY/AFP Getty Images)
This is serious money! In a recent Forbes article, Christine McDaniel showed that, under safe assumptions, global investments can amount to $196. 5 billion through 2032. That’s a cry from the Congressional Budget Office’s $30. 6 billion estimate.
And this even takes into account the fact that brands of battery parts and critical unfired fabrics can claim up to 10% of their total production costs.
Therefore, it is not so unexpected that the announced capacity of the US gigafactory will not be able to take place. The US rate has risen by 35% since congressional approval of the IRA in late summer 2022. This is more than double the expansion seen in Europe (17%) this period. .
So what has Europe’s reaction been to counter the US spending frenzy?Avoid a mass exodus of blank generation production to the U. S. Are you in the U. S. ?
Considering that the EU is not a monolithic bloc but is made up of 27 sovereign member states, it is remarkable how it has turned anxiety into regulatory action. In a short time.
In February 2023, Commission President Ursula von der Leyer presented the EU’s Green Deal Industrial Plan, the continent’s model for driving progression and keeping net-zero industries. It is based on 4 pillars, a predictable and simplified regulatory environment, more to finance, conversion and upgrade initiative – wishes amount to 800,000 in the battery sector alone – and an expansion of industrial agreements.
European Commission President Ursula von der Leyen speaks to the media at Berlaymont, home of the European Commission Array. [ ] on 1 February 2023 in Brussels, Belgium. Today, the Commission presents a Green Deal business plan for the competitiveness of European industry net-0 and to support the immediate transition to climate neutrality. The plan aims to provide a more favourable environment for expanding EU production capacity for the net-0 technologies and products needed to meet Europe’s ambitious climate targets. (Photo by Thierry Monassé/Getty Images)
In a very short time, this plan followed through a coherent set of policies and regulations.
In the Net Zero Industry Act (NZIA) of mid-March, the EU explained 8 net 0 strategic sectors, such as wind, solar photovoltaic, heat pumps and batteries, setting a local production target of 40% for each. At the same time, the law especially speeds up authorization procedures, reducing them to a maximum of 12 months for strategic projects (the so-called Net Zero strategic projects).
Launched simultaneously, the European Critical Raw Materials Act (CRMA) also reduces authorization periods from 10 to 15 years to a maximum of 24 months for strategic projects involving extraction and to 12 months for repair and recycling permits. Like the NZIA, the CRMA sets ambitious local production criteria for the EU until 2030. These range from a local percentage of 10% of annual extraction needs, 15% for recycling to 40% for remedy. no longer exceed 65% for a given strategic product. A replacement, of course, for Europe, considering it now gets a dazzling 98% rare earths and 97% magnesium from China.
But how does the EU plan to counter the enormous monetary temptations posed through the state subsidy and IRA programmes?
This is achieved through a combination of transitional remainder of state aid regulations for its member states and a redirection of some $270 billion in grants and loans. It builds on the unused budget of existing programmes such as the EU Recovery and Resilience Fund that it brought in in early 2021 in reaction to the COVID-19 pandemic.
And this is the first step. In the medium term, new sources of funding will be made available. A key instrument, called the European Sovereign Fund, is expected to be announced this summer.
Essentially, the EU technique for keeping generation production blank at home has relied much more on the carrot than the stick.
Will this be enough to prevent more corporations like Volkswagen, Norwegian battery maker Freyr and others from turning to the US?What is the U. S. pushing its European production plans down the slow path?Who will emerge victorious from the transition to electric mobility?¿USA. Is it in the USA or Europe?Or China?
To be sure, the race for leadership in key cleantech sectors is in full swing. While many of those industries are still in their infancy, they are already part of a geopolitical power game and the stakes are high. Think of all the problems related to force security or the millions of good-paying jobs.
But this unique aspect in the global region that will end up on the winning side misses a key point: the climate doesn’t care!
So, let’s recalibrate, just for a moment, the debate and take a closer look at the concrete and expected effects of those on EV adoption.
In a white paper in January of this year, the International Council on Clean Transportation did exactly that for the United States. Using other assumptions about how IRAs and other incentives for individual dispositions at the state point will be transferred to consumers, the authors proposed a low, moderate and upper IRA has an effect on the scenario. The effects are impressive!
According to its projections, the IRA will boost the percentage of electric vehicle sales for the light-duty vehicle segment from well below the current 10% to between 56% and 67% until 2032. For the heavy-duty vehicle sector, the ICCT forecasts a jump of less than five years to a diversity of 44% to 52%.
BERLIN, GERMANY – OCTOBER 29: A VW ID. 3 electric car charging at an onArray public charging station. [ ] October 29, 2021 in Berlin, Germany. Berlin, like most major German cities, is vigorously increasing its number of public charging stations for electric cars, either to meet developing demand and meet environmental goals. (Photo via Carsten Koall/Getty Images)
Viewed from an angle, the authors expect price parity between battery electric cars and combustion engine cars to be reached between 2023 and 2025. This is 3 to 5 years earlier than in your baseline situation without those incentives.
Beyond that, given Europe’s improvised legislative “countermeasures,” the IRA has created an upward spiral of harsh climate policies that will ultimately gain advantages for all the corporations driving the mobility transition, on both sides of the pond.
In the fight against climate change, every day counts. A healthy festival for the most effective policies would be exactly what we need.
And with a new law on the horizon, this race is over.
In my book, this is very news, and everyone wins!