The Biden administration raised the stakes on its politically fraught bet on massive subsidies for nascent clean-energy technologies Friday, rolling out a plan for awarding billions of dollars in tax credits to the makers of ultrapowerful “green” hydrogen fuel.
The lucrative government supports are the latest major climate incentive that the administration is putting into place through the Inflation Reduction Act, the historic spending package designed to give the United States a leg up in the energy transition and help the country dramatically curb greenhouse gas emissions.
The climate law was a major win for President Biden when it passed. But it leaves his administration navigating perilous terrain as it rushes to implement dozens of new government programs heading into an election year.
The incentives are funding projects that are risky by design, with the aim of rapidly scaling production of new innovations.
Some of the companies receiving funding are destined to fail. The program operates like an incubator for start-ups, funding a broad range of innovations in the hope that some will break through and disrupt entire industries.
Other innovations supported by the IRA include giant carbon vacuums meant to suck emissions from the sky, aviation fuels made out of cooking grease and corn ethanol, giant wind turbines, artificial-intelligence-driven power grid updates, and the massive scaling up of domestic production of battery-powered vehicles.
In the case of hydrogen, some of the world’s largest energy firms are angling for the subsidies, but whether the “electrolyzer” machinery used to make clean hydrogen can evolve quickly enough, and at a cost that makes the fuel competitive with other energy sources, is an open question.
“We’re focused on implementing the Inflation Reduction Act as quickly as possible and providing clear guidance to industry so that they can continue making historic investments and tackling the climate crisis using every tool in our tool belt,” said John Podesta, the president’s senior adviser for clean-energy innovation and implementation, on a call with reporters about green hydrogen Thursday.
Before the plan was even shared with the public, it was under attack. Senate Energy and Natural Resources Committee Chair Joe Manchin III (D-W.Va.) earlier in the week called the administration’s approach to green hydrogen “horrible” because too many projects would not qualify for subsidies. He warned that lawsuits are coming. Republicans have been holding hearings and launching investigations aimed at framing the entire climate package as a slush fund for donors and friends of the White House.
Energy firms and industry groups are deeply divided on the White House approach, which administration officials stressed is still a work in progress and could change before the rules are final. Praise from companies that stood to benefit from the strict rules the administration is proposing was offset by warnings from the Fuel Cell and Hydrogen Energy Association and the U.S. Chamber of Commerce that the guidelines would stifle growth and push companies abroad.
The green hydrogen plans come after the inspector general at the Department of Energy, Teri Donaldson, warned Congress in October that the administration is ramping up energy subsidy programs at an unprecedented pace, making oversight a challenge.
“The current situation brings tremendous risk to the taxpayers,” Donaldson said. “There is no precedent in the department for this level and pace of financing. … Further, many of these programs are designed to promote innovation by financing projects not otherwise acceptable by private-equity investors — projects the markets do not view [as] acceptable.”
The deep disagreement in Washington over how the money should be deployed, together with a lack of public awareness of how these technologies work and why they are chosen, creates a familiar challenge for the White House. It is the same dynamic that turned massive clean-energy investment in the Obama administration into an albatross for Democrats, when a politically connected solar company called Solyndra went bankrupt after securing a $500 million loan guarantee from the administration.
“There were a lot of successes with that loan guarantee program, but when you have a failure like Solyndra out of the box, that is what people remember,” said David Hill, who was general counsel for the Department of Energy during the George W. Bush administration. “People still associate the program with that failed company.”
Republican lawmakers have been invoking the name Solyndra often lately, including as they launched an investigation into a loan guarantee of up to $3 billion to the solar firm Sunnova, which the lawmakers accuse of mistreating customers and exploiting its connection to a high-ranking Energy Department official.
“Solyndra is going to look like chump change compared to the amount of taxpayer money that will get wasted this time,” said Sen. John Barrasso (R-Wy.), who is helping lead GOP oversight of the spending.
Administration officials say Republicans are misrepresenting the way the program works and the extent to which taxpayers are exposed to losses. They note that the same loan guarantee program that was attacked during the Obama administration as wasteful was actually a financial success, resulting in no losses for taxpayers while helping generate tens of thousands of new jobs. The Energy Department official accused of self-dealing sent a detailed letter to Barrasso explaining that he does not make the final decisions on which projects get funded.
Sunnova, which declined an interview request, said in a statement that while the government loan guarantee is aimed at reassuring investors that they will be made whole, the company would be responsible for absorbing any losses using its own funds before taxpayer money would be at risk. “Unfortunately, we have become a political football in an environment where the renewable energy industry is increasingly caught in the crosshairs,” Sunnova chief executive William J. Berger said in the statement.
On a call with reporters, senior White House advisers rattled off statistics that highlight the hundreds of thousands of jobs they say the climate package will create, the projects that have already been launched as a result of the subsidies and the impact the climate law is having on drawing clean-energy investment away from China.
Podesta said some of the same Republicans attacking the incentives are also showing up at project ribbon-cuttings to claim credit for the factories and infrastructure they are funding.
“Sometimes we have to remind my friends on the other side of the aisle that you can keep harping on Solyndra, but you also have the success of companies like Tesla that took advantage of that program,” he said. “One of the things we need to do is just get out there and tell the story about both the level of investment and the quality of investment.”
But even some allies of the White House are worried about the challenges of controlling the narrative on a program that is so costly, controversial and confusing to the average voter. Paul Bledsoe, who worked on climate issues in the Clinton White House, said he worries that even with existing technologies like electric vehicles, the administration’s plans may be out of touch with consumer concerns about lack of charging stations and high costs. He is urging the administration to be more supportive of transition technologies such as plug-in hybrids, even if that means overall car emissions aren’t cut as quickly.
“The conversation around the Inflation Reduction Act is often focused on technologies that are years away from commercialization,” Bledsoe said. “They are at risk of leaving the consumer behind.”
