For quite some time now, the American manufacturing sector has faced serious challenges, grappling with issues like high borrowing costs and a strong dollar that make exports less attractive. However, there’s been a glimmer of hope: a substantial influx of investment into factory construction projects, hinting at a future upturn in both production and jobs.
The surge of investment has largely been fueled by two types of subsidies introduced during the Biden administration. One set of incentives was designed to kickstart the building of large-scale semiconductor manufacturing facilities that are expected to start operations in the near future. Meanwhile, the other set aimed to boost the production of equipment essential for renewable energy deployment.
Yet, the second category faces threats as the Trump administration and Republican-controlled Congress consider scaling back support for low-carbon energy initiatives—including those involving battery-powered vehicles, wind power, and solar projects.
To finance their plans for tax cuts, one approach being discussed involves reducing credits for renewable energy generation.
“If the timeline for these credits is shortened, the incentives to set up an onshore manufacturing facility naturally decrease,” points out Jeffrey Davis, a White & Case lawyer who is well-versed in renewable energy incentives. “Imagine having forecasted sales and revenue for three years instead of eight. Under those circumstances, setting up a manufacturing facility may no longer be viable.”
The Biden administration’s clean energy strategy employed a two-pronged approach: first, through tax breaks, loans, and direct grants to stimulate the supply of clean energy products; second, by boosting demand with rebates for buying electric vehicles, tax credits for generating renewable energy, and subsidies for solar installations on state and individual levels. Companies weighing their manufacturing investments had to consider both these supply-side and demand-side incentives when deciding where to build or expand their operations.
Significant financial stakes have already been made in the realm of clean energy, with $89 billion in private investment funneling into clean energy manufacturing by the close of September, as noted by the Rhodium Group, an economic research firm. Automobile manufacturers have revamped production lines to accommodate electric vehicles and entered partnerships to produce batteries, while facilities for mining and processing the minerals necessary for these technologies are in the pipeline.
Some of these projects have progressed to operational stages or are under construction, but many remain in the planning phases. These companies are now pondering their next moves, particularly in light of evolving policy winds in Washington.
“Are we in the game or not? That’s the fundamental question automakers are grappling with,” remarks Harrison Godfrey, who heads federal investment and manufacturing at Advanced Energy United, an industry association. “Is there substantial demand here to justify ongoing investments?”
Certain segments of the renewable energy supply chain were already on shaky ground economically. Some projects were put on pause prior to the November election, and for others, Trump’s presidency was the tipping point.
“President Trump campaigned on dismantling what he refers to as the Green New Scam, and that’s exactly what’s happening,” comments White House spokesperson Harrison Fields.
Take, for instance, hydrogen, which holds promise as a power source for heavy transport and industrial use. Nel, a Norwegian firm focusing on electrolyzers needed for hydrogen production, envisioned that the Inflation Reduction Act would spur enough demand in North America to warrant an expansion into Michigan.
With federal tax breaks and additional state funding, Nel amassed close to $200 million in public aids to construct the facility, which would employ about 500 individuals. However, delays in the release of regulations for hydrogen production tax credits stymied the receipt of concrete orders.
“It feels like being presented with a cookie jar you’re not allowed to dip into,” describes Hakon Volldal, Nel’s CEO. Concerns over erratic power prices and potential regulatory shifts under the Trump administration led him to shelve plans for the Michigan site.
“It’s not just one issue—it’s an accumulation of uncertainties preventing board and steering committee approvals,” Mr. Volldal elaborates. “Once you decide to invest, that’s a commitment. It’s a long-term, maybe 20-year, investment. What if the financial backing isn’t there in the end?”
Then there’s the electric vehicle (EV) market, which has seen a slowdown beginning late last year. Ford’s CEO, with the company investing billions in battery plants, warned that job cuts might be necessary if EV purchase subsidies were rolled back by the Trump administration. The potential for tariffs on materials like steel, aluminum, and goods from Canada and Mexico is particularly concerning for the auto industry.
These impacts extend throughout the supply chain. For instance, German parts manufacturer ZF was awarded a $157.7 million grant to upgrade a Michigan facility for EV parts production. However, they scrapped the plan in December, stating it wasn’t directly election-related.
“In North America, demand for e-mobility products hasn’t grown as expected when we initially sought the grant,” comments Tony Sapienza, a ZF spokesperson.
The wind energy sector has been dealt tough blows, with onshore and offshore wind project permits effectively stalled by Mr. Trump. Also, an Italian firm called off plans for producing undersea cables in Massachusetts meant for new offshore wind installations.
Several manufacturers are on the edge. Cummins, which received fund grants to augment its Indiana facility with an EV production line and a new battery cell plant in Mississippi, remains non-committal about these plans. “Navigating shifting landscapes is daunting,” acknowledges spokeswoman Melinda Koski. “Nevertheless, we stay dedicated to our long-term objectives and continuously evaluate our investment strategies.”
Many companies that banked on tax credits declined to comment or did not respond.
Part of the supply chain still holds some optimism. This includes sectors focused on mining and processing key minerals for batteries—industries that China largely commands. Recent White House announcements have somewhat bolstered their confidence.
Imposing tariffs, such as the possible 920 percent on graphite by the Commerce Department, could prove beneficial for companies like Syrah Resources, which is advancing a processing plant in Louisiana backed by an Energy Department loan.
President Trump has floated the idea of stockpiling crucial minerals and signaled support for mining projects, suggesting that obtaining permits may become easier. The domestic industry underlines its strategic importance, particularly in situations where China might restrict exports of essential materials like lithium, nickel, and cobalt.
“There’s always the risk of export restrictions similar to those on rare earth materials, which could be catastrophic,” warns Ajay Kochhar, Li-Cycle’s CEO, benefitting from a loan to develop a processing site in New York. “A ban could badly disrupt the supply chain, creating massive upheaval as the U.S. depends heavily on these resources.”
To lower costs, production scale matters. Developing key battery minerals for vehicles and utility-scale storage is crucial to ensuring a stable supply, even if not entirely reliant on military funding.
“It becomes more costly when we depend solely on defense mechanisms,” notes Abigail Hunter, director at SAFE’s Center for Critical Mineral Strategy.
Despite uncertainty, some energy executives find reassurance knowing most renewable energy investments are rooted in conservative states. A minority within the GOP argues that dismantling demand-side incentives might squander previous investments focused on supply.
Even if the Inflation Reduction Act largely withstands, the Trump administration’s maneuvers introduce uncertainties that could stifle renewable energy growth. Hurdles in obtaining solar and wind project permits could lengthen execution timelines, agency staff reductions may bog down tax credit approvals, and easing emission standards on vehicles could sustain the longevity of traditional gas-powered options.
Jigar Shah, former Energy Department Loan Programs Office chief under Biden, maintains an optimistic outlook for the sector. He estimates over half of new facilities supported by his office are already under construction, and most executives continue to believe in their business cases, even sans subsidies.
“There will be those who wait or reconsider,” Mr. Shah remarks. “However, the fact remains—building these 500 facilities surpasses what we accomplished in the past decade. Some projects may falter, but we are well on track to attain the ambitious goals set in 2021. Unquestionably, yes.”
