Clean energy law encourages U.S. production, sparks EU response

The Associated Press has reported a new U.S. clean energy law offering generous tax credits — up to 40% of costs — is a massive incentive for producing in America. The law aims to kick-start the U.S. transition away from climate-changing fossil fuels with tax credits and rebates that favor clean technology made in North America.

When it became law in August, putting the U.S. on course to eclipse Europe in the global push to reduce carbon emissions, the European Union’s executive branch responded with plans aimed at ensuring least 40% of clean technology is produced in Europe by 2030 and limiting the amount of strategic raw materials from any single third country — typically China — to 65%. It also opened negotiations with President Joe Biden on making Europe-sourced minerals for EV battery manufacturing eligible for U.S. tax credits. European business leaders say the U.S. incentives could upend the global ways of producing technology.

Executives are hailing the U.S. program’s simplicity. Some complain that the EU plan is underwhelming, confusing, and bureaucratic, putting Europe at risk of falling behind in the green energy transition, notably as the auto industry moves to EVs.

Volkswagen said last month that its new PowerCo battery business would build its first gigafactory for EV battery cells outside Europe in St. Thomas, Ontario — following two others under construction in Germany and Spain. A Scandinavian battery startup, Sweden’s Northvolt, was poised to build a third gigafactory, and the first outside its home country, in northern Germany, but the U.S. law led it to hit pause. Freyr, a Norwegian startup, is expanding its footprint from its first battery gigafactory being built in Mo i Rana in northern Norway to a second in Coweta County, Georgia, each costing $1.7 billion.

The Inflation Reduction Act has stoked so much demand for standalone energy storage systems like the ones that Freyr makes — big banks of batteries that utility companies use to store renewably generated electricity — that the company moved the U.S. completion date up by a year to 2025.