Why cleantech is booming in GOP-led states
Cipher News
Bringing you the latest news on the technological solutions we need to combat climate change.
BY: AMENA H. SAIYID
Read this article and more of the latest on climate & tech at ciphernews.com .
There is some irony in how the landmark 2022 Inflation Reduction Act is playing out across the country.
No Republicans voted for the law, aimed at boosting clean technology investments in the United States. U.S. House Speaker Michael Johnson (R) has threatened to roll back parts of it if Republicans win control of the U.S. Congress after next week’s elections. And GOP presidential candidate, Donald Trump, has vowed to disband the law’s subsidies for wind farms and electric vehicles.
Yet clean technology developers and manufacturers are flocking to states that voted for Trump in 2020. These states have reaped over half of the $387.8 billion of announced investments in cleantech manufacturing and deployment since the IRA passed, shows a Cipher analysis of data from the Clean Investment Monitor, a joint project analyzing cleantech spending led by research firm Rhodium Group and the Massachusetts Institute of Technology’s Center for Energy and Environmental Policy Research.
Whether it’s storing carbon dioxide, making wind turbines, installing solar panels or producing electric vehicles, Republican-leaning states are outpacing their Democratic counterparts in drawing coveted investment dollars.
You’ve probably seen a lot of headlines making this connection — including here and here at Cipher! — so we set out to dig deeper to determine the “why” behind this trend by interviewing renewable energy developers, lawyers, economists and analysts involved in the U.S. energy transition.
The answer lies in a mix of natural resources and regulatory policies that give these states “the competitive edge,” especially when IRA credits are factored in, said Peter Gardett, head of research at Karbone, a New York-based firm specializing in decarbonization and renewable markets.
In other words, development goes where the economics make sense — even if the politics don’t.
Business-friendly
Republican states like Texas like to boast that they have a ‘business-friendly’ climate. Cleantech benefits from that too (despite political debates suggesting otherwise in 2023).
Mona Dajani, global head of law firm Baker Bott’s energy infrastructure and hydrogen practice, told Cipher that many of her clients prioritize projects in states with the shortest permitting times, most attractive tax packages and the least community pushback. They tend to find that in states like Arizona, Wyoming, Texas and Louisiana to name a few.
Permitting requirements can vary drastically depending on project size and location, but Republican-led states tend to have fewer requirements overall. In Texas, for example, wind and solar projects can get permits without soliciting public comment, which can be a major source of delay.
Another advantage is lower labor costs.
U.S. Labor Department data show prevailing wages in Republican-voting states in the southern U.S., where many cleantech manufacturing facilities are being planned, are broadly lower than in Democratic-leaning coastal states, Gardett said.
Republican states also are mostly right to work states, where workers aren’t legally required to join unions that negotiate for better pay and benefits.
What’s more, Republican states can offer more competitive state and local tax packages compared to more Democrat-led states, said John Szoka, chief executive officer of the Conservative Energy Network, a nonprofit advocacy organization.
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Wyoming and North Dakota, for example, don’t levy corporate taxes and rank as the top business-friendly states compared to New Jersey and New York, which have the highest business tax rates. Many states also offer incentives for businesses investing locally, such as Tesla’s 10-year break on property taxes for the Gigafactory it is building near Austin, Texas, Ian Nieboer, managing director and head of Energy Transition at Enverus Intelligence Research, told Cipher.
Inherent advantage
GOP-leaning states also have other advantages: existing industrial and energy infrastructure, plenty of land and abundant natural resources.
Texas and Louisiana, which already have pipelines to transport hydrogen and CO2 from energy-intensive industries, are attracting clean hydrogen and carbon capture and storage projects.
Similarly, coal mining communities and brownfield industrial sites located mostly in Republican and swing states like West Virginia and Pennsylvania are using IRA tax credits and federal grants to attract cleaner industries, Derrick Flakoll, North America policy associate for BloombergNEF, told Cipher.
Recently, the U.S. Energy Department gave $428 million to 15 coal communities to accelerate domestic clean manufacturing.
On top of all this, many GOP states have ample land for utility-scale wind farms, solar parks and battery factories — and tend to be sunny, windy and boast some critical minerals.
“It just happens that the best resources are also in Republican districts,” Ken Medlock, senior director of the Center for Energy Studies at Rice University, told Cipher in an email.
Houston-based EDP Renewables North America has deployed wind farms, solar parks and energy storage projects in nine red states, seven blue states and four swing states so far.
Oklahoma, where the wind goes sweeping down the plains, has three EDP Renewables wind farms. It also has at least four lithium, cobalt and nickel processing facilities in the works, according to Cipher’s Cleantech Tracker .
The tracker also shows the red agricultural states of South Dakota, North Dakota and Nebraska leading on biofuels .
A rising tide?
Yes, the IRA began on a partisan note: Vice President Kamala Harris cast the tie-breaking vote in the Senate with all Republicans voting no and all Democrats voting yes. But it’s now viewed as a business opportunity.
“The states see it as providing jobs, providing economic development, providing additional land revenue to landowners and community benefits,” Sandhya Ganapathy, chief executive officer of EDP Renewables North America, told Cipher. “The states see no reason to block economic progress.”
As Americans head to the polls next week, data shows the markets across red, blue and purple states — despite political opposition — are responding positively to clean-energy economics.
“Success in one region or one community fuels interest from others, drawing in new businesses, investors and talent,” David Levine, co-founder and president of the American Sustainable Business Network, told Cipher.
“The more momentum we build, the more the industry can grow, lowering costs and accelerating the transition to a clean energy future.”
Columnist @Forbes, U.S. Government Language Specialist | Strategic Communications, Energy and Technology Policy, Executive Advance, Crisis Communications
3 周Another brilliant piece by Cipher News Amena H. Saiyid This is Biden’s legacy Forbes cited a Nov 2023 Treasury memo that Encouraged capital investment for clean energy projects in fossil fuel producing states