This is an extract from a recent report “Supply Chain Progress Report”. This extract focuses on progress made by the Department of Energy (DOE) ) in building and securing supply chains to support the American energy sector industrial base.
Addressing supply chain issues for clean energy technologies
Clean energy technologies are supported by a complex and interconnected network of supply chains. Recent trends have exposed and exacerbated vulnerabilities in parts of this network. For example, the COVID pandemic had a significant impact on the global market for goods and services across various sectors, including the energy sector, and these changes have been amplified by instabilities from climate crises, geopolitics, and domestic resource constraints. The opportunity to accelerate the transition to affordable, dependable, secure, and clean energy sources is pivotal to national security. Over the past two years, the U.S. Government has taken bold actions to build strong and diverse energy supply chains.
The Executive Order 14017, “America’s Supply Chains,” issued by President Biden on February 24, 2021, aims to secure and strengthen the resilience of America’s supply chains and preceded several actions from the executive branch and Congress including the following:
• American Supply Chain Strategy: In February 2022, the Department of Energy (DOE) released America’s Strategy to Secure the Supply Chain for a Robust Clean Energy Transition. This strategy presents a roadmap for the United States to strengthen clean energy supply chains and ensure secure and reliable energy for American families and businesses.
• Defense Production Act Determinations: In June 2022, President Biden issued the presidential determinations that provided DOE with the authority to utilise the Defense Production Act (DPA) to accelerate domestic production in five key energy technology areas: 1) solar photovoltaics; 2) transformers and electric grid components; 3) heat pumps; 4) insulation; and 5) electrolyzers, fuel cells, and platinum group metals.
• Legislative Actions: Building on the momentum and historic investments enacted by the Bipartisan Infrastructure Law (BIL) in 2021, the U.S. Congress and the Biden Administration enacted two additional major laws in 2022. These laws strengthen the American innovation ecosystem and provide the U.S. Government with policy tools and funding to transform American innovations into market products at the scale and speed needed to meet U.S. net zero climate and economic goals, which will include strengthening domestic energy supply chains.
• Inflation Reduction Act (IRA): Enacted in August 2022, this historic investment in clean energy included nearly $370 billion in energy security and climate change programs over the next ten years and the tools to revitalise American manufacturing. Examples of funded programs administered by DOE include 48C (short for 26 U.S.C. § 48C) – Advanced Energy Project Credit (up to $10 billion) and IRA Sec. 50143 – Domestic Manufacturing Conversion Grants ($2 billion).
• Chips and Science Act (CHIPS): Also enacted in August 2022, CHIPS invests in research and development (R&D), manufacturing, and supply chains. CHIPS authorised $67 billion in funding, including $50 billion for DOE’s Office of Science to enable advanced scientific research into materials, computing, manufacturing, and more to enhance U.S. competitiveness.
As the global economy shifts towards clean energy and technology continues to advance, securing access to essential materials, components, and clean energy technology equipment is increasingly important. DOE is investing in manufacturing across the research-to-deployment spectrum to secure the Nation’s supply chains.
Engaging and Investing in Strategic Opportunities
The Department of Energy’s strategy to secure energy supply chains published in 2022 highlighted potential risks and vulnerabilities associated with the clean energy transition. The strategy also presented opportunities for the United States to build out the domestic supply chains of less mature technologies, such as fuel cells and electrolyzers, and strengthen supply chains of more mature technologies, such as nuclear fuel and solar photovoltaics (PV). These opportunities advance American innovation, revitalise American manufacturing, boost U.S. competitiveness, ensure energy security, create quality jobs to attract, invest in, and retain a highly skilled workforce, and advance energy equity and environmental justice.
Securing Critical Materials
Securing materials critical to a variety of energy technologies (e.g., advanced nuclear technologies, energy storage, fuel cells and electrolyzers, solar photovoltaics, and wind) continues to be crucial. Through increased domestic production, recycling, development of alternatives, and friendshoring among U.S. allies and partners, there is a clear path to resilient supply chains for many of these materials and the technologies that currently rely on them.
The U.S. Government continues to collaborate with industry to take concrete actions that address key upstream critical material vulnerabilities through investments from BIL, IRA, and CHIPS. Additionally, DOE recently released a Request for Information (RFI) for its critical material assessment, to gather input on the methodology and conclusions before a final assessment is published.
Increasing domestic materials accessibility
The United States can reduce import reliance by increasing domestic production of critical materials. To address the severe upstream vulnerabilities, several authorities from BIL focus on stimulating domestic production of raw materials. The U.S. Government has already taken several steps, including:
• RD&D support: DOE has granted funds across the national lab system to develop the technology to detect and quantify rare-earth elements and critical minerals in unconventional and secondary sources, including five operational small scale pilots to recover and upgrade to high purity mixed rare earth oxides. In addition, $32 million will be awarded to support front-end engineering design to produce critical materials and rare earth elements from conventional coal-based resources, while $140 million will go to funding a first-of-a-kind demonstration facility utilising unconventional sources to extract, separate, and refine critical minerals.
• Regional efforts: FECM’s Carbon Ore, Rare Earths, and Critical Minerals (CORE-CM) Initiative involves 13 basin-centred coalitions involving industry, academia, state and local governments, Tribal organisations, non-governmental organisations, and others. These coalitions are focused on identifying secondary and unconventional feedstocks within their region, as well as assessing regional resources (e.g., mineral, workforce, transportation, infrastructure) that are available to help stand up domestic supply chains for REE and other critical minerals. From this work will come the first national prospectus for recovery of critical minerals from unconventional and secondary sources.
• Processing and refining: In 2022, through IRA, Congress established the Advanced Manufacturing Production Credit (45X26) and expanded the Advanced Energy Project Credit (48C) to include facilities processing, refining, or recycling of several critical materials. The design of these programs is underway. For example, several materials such as polysilicon, REEs, and battery materials are eligible for these tax credits.
• Alternative materials/technologies: For over a decade, the Critical Materials Institutes led by DOE in partnership with industry, national labs, and universities has invested in finding alternative materials to critical materials as well as alternative technologies that do not use critical materials to strengthen the U.S. clean energy independence and security. With funding from BIL, DOE is well positioned to commercialize and scale alternative materials or technologies. For example, DOE has invested in scaling up manufacturing of alternatives to battery critical materials, including a $117 million grant to build a synthetic graphite production plant in Alabama and multiple investments in scaling up manufacturing of next-generation silicon-based battery anodes totaling $250 million.
• Domestic mining reform: In February 2022, the Biden-Harris Administration released fundamental principles for domestic mining reform, which include consideration for expanding domestic production of critical materials key to the clean energy transition. Consistent with these fundamental principles, the Department of Interior launched an Interagency Working Group on mining reform to review existing mining laws, regulations, and permitting processes.
Reducing material intensity, extending life of equipment, promoting reuse of components and equipment, and increasing recycling of end-of-life energy equipment are strategic opportunities to reduce raw material use and build out supply chain resilience, while reducing end-of-life waste. Successful end-of-life strategies may also increase the domestic availability of critical materials for clean energy technology production and reduce the U.S. manufacturing sector’s reliance on critical material imports. Recycling of clean energy technologies is still a niche area with several clean energy technologies currently approaching large-scale end of life installations.
While there are several efforts to increase domestic production of many needed critical materials, there are some materials for which the U.S. does not have economically viable deposits, sometimes requiring sourcing from unreliable countries. Efforts to increase domestic production of critical materials are ongoing. However, not all materials can be economically extracted or processed in the United States. The U.S. Government continues to secure these critical materials through by engaging allied nations via international development activities and direct investment:
• International Development Financial Corporation (DFC) invested $30 million to help support nickel and cobalt mining in Brazil and the State Department has launched a Minerals Security Partnership (MSP) to collaborate with partner countries and MSP members are in the process of evaluating a dozen mines and projects to invest in globally.
• The United States Trade Representative (USTR) has signed a critical minerals agreement with Japan to facilitate trade, promote fair competition, and enhance cooperation in securing critical mineral supply chains.
• The Export-Import Bank (EXIM) has also worked to collaborate and host bilateral discussions with allied nations, including South Korea, Greenland, and Australia, around mining development and financing.
• The Department of Energy, International Affairs (IA) represents DOE’s equities in various international fora and these activities mostly fall under technical facilitation and energy policy leadership. For 2023, multilateral work increased significantly for DOE owing to the increase in global focus on establishing diverse, resilient, and sustainable critical minerals supply chains. Notable accomplishments for 2023 include securing G7 Experts Group on Critical Minerals language in the Leaders Statement, securing expansion of DOE-led Conference on Critical Minerals and Materials (CCMM) to the G7 plus Australia.
Expansion of U.S. Clean Energy Manufacturing
Manufacturing plays a significant and re-emerging role in the U.S economy as demonstrated by its contribution to Gross Domestic Product (GDP) and employment. In 2021, manufacturing contributed about $2.3 trillion to the U.S. GDP, which is about 12% of the total U.S. GDP. While the United States remains a strong manufacturing country, over the decades, it has been experiencing a declining trend, with several manufacturing activities offshored abroad. Global supply chain disruptions due to COVID-19, followed by the Russian war in Ukraine brought to the forefront several underlining U.S. supply chain vulnerabilities associated with foreign dependence of key materials and components.
There is now an opportunity to invest in America and domestic manufacturing to rebuild middle class American jobs, upskill the American workforce, increase technology investment in the U.S. industrial base, unite the American manufacturing ecosystem, and strengthen U.S. supply chains.
The experience of the past three years has also revealed opportunities for the United States to strengthen its supply chains to reduce reliance on unreliable foreign suppliers for critical components and equipment needed for clean energy transition. There are notable trends emerging as American businesses and the U.S. Government ramps up supply chain investments in critical sectors.
Post COVID-19, American businesses have strengthened efforts to onshore their supply chains. For that reason, the U.S. Government through BIL, IRA, and CHIPS, continues to support onshoring of several key manufacturing activities critical to energy transition, such as critical material processing and refining, battery manufacturing, uranium enrichment, and other clean energy technology manufacturing. Evidence of onshoring is seen in clean energy manufacturing investments and build out in the United States over the past two years.
In the near-term, it may not be feasible or economical to onshore all segments of energy supply chains, particularly on the timeframe necessary to meet clean energy and climate. In this case, diversifying U.S. import sources by friendshoring to U.S. allies with a comparative advantage to manufacture the needed critical components or nearshoring to countries near the United States is seen as another option to strengthen supply chain resilience by both industry and government.
Expanding RD&D and accelerating commercialization of American innovation is seen as another solution to not only ensure future supply chains are resilient, but also help meet U.S. climate goals. There are several emerging clean energy technologies such as advanced nuclear and clean hydrogen with strong potential for growth and ability to transform the industrial sector, where the U.S. can establish global competitiveness. But there are also some areas in mature technologies where the United States is still lacking manufacturing capabilities or is not competitive compared to other countries.
In 2022, DOE released the Industrial Decarbonization Roadmap which identifies RD&D opportunities for industry and government to consider that will deliver the technologies needed to dramatically improve industrial processes and reduce emissions. Retaining and supporting existing U.S. industry and industrial facilities, even those in adjacent industries, will be necessary to continue to expand domestic clean energy supply chains. The Commercialization and Competitiveness report released as part of the 1-year supply chain reports in February 2022 outlined a strategy and conceptual framework for building an economically competitive supply chain. Building off this work, in early 2023, DOE released Pathways to Commercial Liftoff which focuses on four clean energy technologies – advanced nuclear, carbon management, clean hydrogen, and long duration energy storage. These pathways provide insights on how and when these technologies could reach full-scale commercial adoption, which is critical in informing investment decisions for both the private sector and government. In addition, BIL, IRA, and CHIPS invest heavily in RD&D and accelerate commercialization of key technologies to support both mature and emerging technologies.
Overall, the U.S. Government in collaboration with industry continues its efforts to revitalise domestic manufacturing capabilities through a range of authorised policy tools provided by BIL, IRA, and CHIPS.
The complete report can be addressed here