ev tax credits

The U.S. Treasury proposed guidance last Friday that would significantly restrict what battery parts and materials can qualify for incentives in the Inflation Reduction Act. The rules label China and several other countries as “foreign entities of concern.” These rules will prevent materials and parts sourced from those countries, starting in the next few years, from counting toward the IRA’s electric vehicle tax credits. The new rules are meant to push battery companies to develop supply chains outside the control of Chinese officials and companies, which control much of the world’s battery industry. They come following a first batch of guidance released this year by the Treasury, which the IRA tasked with developing specific rules for implementing the law. So what does the new guidance mean for battery supply chains? This episode features two conversations with Sam Jaffe, senior director of business development at Addionics. The first is a short update on last week’s proposed rules. The second is a longer conversation Shayle had with Sam in April about the first batch of rules, which focused on which battery ingredients count as “constituent materials” under the IRA. Both discussions are relevant to understanding what’s happening now. In this update they cover topics like: Defining what counts as a material controlled by a foreign entity of concern, such as percentage ownership in a joint venture Key loopholes in law, such as licensing arrangements and small percentages of low-value materials, like cathode binder and electrolyte salts  The parts of the supply chain most significantly affected by the rule, such as Chinese graphite, Indonesian nickel, and Congolese cobalt Upcoming deadlines in 2025 and 2026, and whether onshored or friend-shored facilities can begin supplying materials before then Recommended Resources: Canary: The US EV industry now faces a choice: Tax credits or Chinese batteries Heatmap: It’s Suddenly a Mystery Which EVs Will Qualify for a Tax Credit in 2024 Sign up for Latitude Media’s Frontier Forum on January 31, featuring Crux CEO Alfred Johnson, who will break down the budding market for clean energy tax credits. We’ll dissect current transactions and pricing, compare buyer and seller expectations, and look at where the market is headed in 2024. Catalyst is brought to you by BayWa r.e., a leading global renewable energy developer, service supplier, and distributor. With over 22GW in their project pipeline, BayWa r.e. is rethinking energy every day and at every level. Committed to being a solid partner for the long run, BayWa r.e. wants to work with you to help shape the future of energy. Learn more at bay.wa-re.com. Catalyst is brought to you by Sungrow. Now in more than 150 countries, Sungrow’s solutions include inverters for utility-scale, commercial, and industrial solar, plus energy storage systems. Learn more at us.sungrowpower.com.

In climatetech circles, the Inflation Reduction Act (IRA) was a big deal. The expectation was that, combined with other parts of U.S. industrial policy like the CHIPS and Science Act and Bipartisan Infrastructure Law, the IRA would transform the American economy and ultimately slash U.S. carbon emissions.  We can’t see the impact on carbon emissions yet, but we can measure the initial effects on the economy. So how’s it going so far? In this episode, Shayle talks to Trevor Houser, partner at the Rhodium Group, about the organization’s new Clean Investment Monitor, a database of climatetech investments developed with the MIT Center on Energy and Environmental Policy Research. Trevor highlights three different categories of policy impacts: Sectors where policy accelerated existing trends, like solar deployment and EV sales. Sectors where policy catalyzed new growth that probably would not have happened otherwise, like in manufacturing, hydrogen, carbon management, and sustainable aviation fuels. Sectors that are declining despite policy incentives, like the deployment of wind and heat pumps. They discuss the drivers behind these trends and cover topics like: The regional clustering of manufacturing investment and new geographic hubs, like the Southwest. The surprising growth in hydrogen made from steam methane reforming, also known as blue hydrogen. Recommended Resources: Rhodium Group: Clean Investment Monitor Canary: Made in the USA: Ramping up clean energy manufacturing Canary: US offshore wind pushes ahead despite industry turmoil Sign up for Latitude Media’s Frontier Forum on January 29, featuring Crux CEO Alfred Johnson, who will break down the budding market for clean energy tax credits. We’ll dissect current transactions and pricing, compare buyer and seller expectations, and look at where the market is headed in 2024. Catalyst is brought to you by Sungrow. Now in more than 150 countries, Sungrow’s solutions include inverters for utility-scale, commercial and industrial solar, plus energy storage systems. Learn more at us.sungrowpower.com.

The battery manufacturing announcements have been coming one after another—a VW cathode facility in Canada; a Tesla factory in Mexico; a Ford battery plant in Michigan. These companies hope to take advantage of the Inflation Reduction Act’s lucrative EV tax credits: Up to $3,750 for strategic minerals mined in the U.S. or its many free trade partner countries Up to $3,750 for battery components produced only in the U.S., Mexico, or Canada. But there’s a catch. A whole bunch of intermediate battery products don’t fit neatly into either bucket. For example, lithium gets processed into precursor cathode active material before it becomes cathode active material, the powder that actually makes it onto the factory floor of a battery manufacturer. Battery electrolytes go through multiple processing steps, too. Until last week, suppliers of these products were left wondering: Where should we manufacture to qualify? And for which credit? Congress had left these details up to the Treasury Department, and on Friday regulators released guidance for these intermediate products, or “constituent materials.” The new rules pleased some and angered others. So what do the changes mean for EV supply chains?  In this episode, Shayle talks to Sam Jaffe, our resident EV-supply-chain whisperer. He’s the vice president of Battery Storage Solutions at E Source. He’s come on the show before to talk about the holy grail of batteries and the basics of the IRA’s EV tax credits.  This time, Sam explains the new Treasury guidance.They cover topics like: Incentivizing domestic manufacturing while also giving auto companies the flexibility to qualify for credits Why Joe Manchin and European countries are upset about the new rules Japan’s last-minute free trade agreement before the rules came out How hard it will be for EV manufacturers to get qualifying constituent materials anytime soon, especially as they launch new mass market models What we still don’t know about how the Treasury will implement the IRA, including which countries or companies will qualify as “foreign entities of concern” Recommended Resources: U.S. Treasury: Anticipated Direction of Forthcoming Proposed Guidance on Critical Mineral and Battery Component Value Calculations for the New Clean Vehicle Credit The New York Times: New Rules Will Make Many Electric Cars Ineligible for Tax Credits Politico: Bitter friends: Inside the summit aiming to heal EU-US trade rift Catalyst is a co-production of Post Script Media and Canary Media. Support for Catalyst comes from Climate Positive, a podcast by HASI, that features candid conversations with the leaders, innovators, and changemakers who are at the forefront of the transition to a sustainable economy. Listen and subscribe wherever you get your podcasts. Catalyst is supported by Scale Microgrids, the distributed energy company dedicated to transforming the way modern energy infrastructure is designed, constructed, and financed. Distributed generation can be complex. Scale makes it easy. Learn more: scalemicrogrids.com.