Clean energy was boosting manufacturing. Now investment is at risk

By Lydia DePillis, NYT News Service
Last Updated: February 21, 2025, 09:54 AM IST

U.S. manufacturing has witnessed a significant influx of investments in clean energy and semiconductor plants. This surge has been primarily driven by two major categories of subsidies introduced under the Biden administration. Historically, U.S. manufacturing has struggled due to high borrowing costs and a robust dollar, which hampers the competitiveness of exports. However, a bright spot has emerged with billions of dollars flowing into factory construction, indicating a possible rebound in production and employment.

The significant investment has been spurred by two main subsidy initiatives. One provides incentives for the construction of several large semiconductor plants that are expected to commence operations in the coming years. The other is aimed at enhancing the production of equipment essential for renewable energy deployment. Unfortunately, this latter initiative is now under threat as the Trump administration and a Republican-controlled Congress seek to roll back support for low-carbon energy, including battery-powered vehicles, wind power, and solar fields. One potential method to finance their proposed tax cuts is by reducing credits for renewable power generation.

“If the timeline for these credits gets shortened, the incentives to develop an onshore manufacturing facility will obviously decrease,” noted Jeffrey Davis, a lawyer at White & Case specializing in renewable energy incentives. “If you’re anticipating sales and revenue over a three-year period instead of an eight-year period, the manufacturing facility may not be financially viable.”

The Biden administration employed a dual strategy to stimulate clean energy production. First, it aimed to increase the supply of clean energy products through tax breaks, loans, and direct grants to manufacturers. Equally crucial was creating demand: rebates for purchasing electric cars, tax credits for renewable power production, and subsidies for states and individuals to install solar panels. Companies considering manufacturing investments factored both aspects into their decisions regarding plant locations and expansions.

In the two years leading up to September, approximately $89 billion in private investment was directed toward clean energy manufacturing, according to the Rhodium Group, an economic research firm. Auto manufacturers have revamped production lines for electric vehicles and formed joint ventures to produce batteries. Meanwhile, mines and processing facilities are being developed to supply the necessary minerals.

While some of these facilities are operational and others are under construction, many remain in the planning stages. Companies are now deliberating whether to proceed with their projects, particularly given the unfavorable political climate in Washington. “Are we going to compete or not? That’s the question automakers are asking themselves,” said Harrison Godfrey, head of federal investment and manufacturing at Advanced Energy United, an industry association. “Is there sufficient demand in the market to justify ongoing investment?”

The economics of several segments within the renewable energy supply chain were already precarious. Some projects were halted prior to the November election, with President Trump’s victory serving as the final tipping point for others.

Take hydrogen, for example, which is being considered as a power source for truck freight and industrial facilities. Nel, a Norwegian company that manufactures electrolyzers required for hydrogen production, anticipated that the Inflation Reduction Act would generate enough demand in North America to justify building a manufacturing facility in Michigan. Along with federal tax incentives and additional state funding, Nel secured nearly $200 million for the project, which would have created approximately 500 jobs. However, the regulations governing the tax credit for hydrogen producers were not finalized until last month, delaying any significant orders.

“It was like having access to a cookie jar and then being told you can’t eat from it,” said Hakon Volldal, CEO of Nel. Coupled with fluctuating energy prices and uncertainty regarding potential changes to regulations under the Trump administration, Volldal decided to postpone the Michigan facility. “It’s not due to one single issue — there’s too much uncertainty, which prevents boards and steering committees from approving business cases,” he explained. “When making investment decisions, you must accept the long-term implications, as it’s a 20-year commitment. What if you don’t receive the funding?”

The electric vehicle market also began to slow down last year. Ford Motor’s CEO, who has invested billions into battery plants, stated that the company might need to reduce its workforce if the Trump administration retracted subsidies for electric vehicle purchases. The auto industry is particularly concerned about the potential for tariffs on steel, aluminum, and all products from Canada and Mexico.

The ramifications extend throughout the supply chain. German parts manufacturer ZF, which had secured a $157.7 million grant to retrofit a factory to produce electric vehicle components in Marysville, Michigan, abandoned its plans in December, although it stated that this decision was not directly related to the election outcome. “In North America, the market for e-mobility products has progressed more slowly than anticipated when ZF applied for this grant,” said Tony Sapienza, a ZF spokesperson.

The wind energy sector has been particularly affected, with Trump halting permits for both onshore and offshore wind development. An Italian company scrapped plans for a plant in Somerset, Massachusetts, intended to supply undersea cables for new offshore wind turbines.

Some manufacturers are on the brink of uncertainty. Cummins, for instance, received a grant to add an electric vehicle production line to its facility in Columbus, Indiana, along with state subsidies for a battery cell manufacturing plant in Mississippi, which is currently under construction. A spokesperson for Cummins declined to comment on the company’s commitment to these investments, stating, “It’s challenging for companies like ours to plan amid shifting possibilities. However, we remain focused on our long-term objectives and are continuously evaluating our investment path forward.”

While several companies relying on tax credits either did not respond to requests for comment or chose not to provide input, some segments of the supply chain remain relatively optimistic, particularly among miners and processors of essential minerals for battery production — an industry sector that is predominantly controlled by China. The White House has made encouraging statements regarding this sector.

For instance, the Commerce Department has indicated the possibility of imposing tariffs of up to 920% on graphite, which bodes well for companies like Syrah Resources, which is advancing with a processing facility in Louisiana backed by an Energy Department loan. Trump has also suggested the idea of stockpiling critical minerals and shown support for mining activities, which may ease the permitting process. This sector also has military applications, emphasizing the significance of domestic production in case China restricts exports of key materials such as lithium, nickel, and cobalt.

“There is a risk that an export ban, similar to what has occurred with rare earth elements, could have dire consequences,” warned Ajay Kochhar, CEO of Li-Cycle, which received an Energy Department loan to establish a processing hub in Rochester, New York. “Such a move would disrupt the entire supply chain and lead to significant dislocation, as the U.S. is a major consumer of these materials compared to its production capabilities.”

However, maintaining volume is crucial for reducing costs. Producing essential minerals for electric vehicle batteries and utility-scale energy storage ensures a reliable supply for U.S. military needs without complete reliance on the Pentagon. “Costs will rise if we depend solely on defense,” stated Abigail Hunter, executive director of the Center for Critical Mineral Strategy at SAFE, an energy security think tank.

Some energy executives find reassurance in the fact that most clean energy manufacturing investments are occurring in conservative states, and a small coalition of Republicans has argued that eliminating demand incentives could result in wasting funds already invested in supporting supply.

Even if the Inflation Reduction Act remains largely intact, the Trump administration is taking actions that introduce additional uncertainty into the renewable energy sector, potentially dampening new orders. Delays in permitting for solar and wind projects could extend timelines, while staff reductions at federal agencies may slow the processing of tax credits. Additionally, rolling back new tailpipe emissions standards allows the auto industry to maintain gas-powered vehicles for a longer period.

Jigar Shah, who previously led the Loan Programs Office at the Energy Department under the Biden administration, offers an optimistic perspective on the industry’s future. He estimates that over half of the new manufacturing facilities his office supported are currently under construction, with most executives expressing confidence in the business case for completion, as the industry’s fundamentals remain robust even without subsidies.

“While some projects may not proceed, the 500 manufacturing facilities in the pipeline surpass the number built in the past decade,” Shah stated. “Will some projects not advance? Yes. But will we achieve the ambitious milestones set in 2021? Undoubtedly, yes.”