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Chinese companies benefit from US tax credits |

Today’s newsletter looks at how Chinese companies are taking advantage of Inflation Reduction Act tax credits — and creating jobs in the US Rust Belt. You can read and share a full version of this story. For unlimited access to climate and energy news, please subscribe

A solar story

Nestled among the corn fields of Pataskala, Ohio, Illuminate USA’s sprawling new solar factory is buzzing. Hundreds of freshly hired local employees are hoisting pallets, soldering equipment and inspecting their work as sheets of glass are transformed into state-of-the-art photovoltaic panels. They’re collecting hourly wages that start at double the state minimum. The factory has also delivered contracts to area electricians and suppliers.

From the outside, these are the hallmarks of the 21st century clean energy manufacturing boom promised by the Biden administration, the result of sweeping incentives designed to restore national prowess in a market dominated by China.

In reality, what looks like a domestic triumph is also a win for America’s primary industrial and geopolitical rival. Invenergy, America’s biggest private renewable power developer, owns 51% of the plant. Longi Green Energy Technology Co., the Chinese solar giant, owns the other 49%, and it’s Longi’s panel-making expertise, technology and supply chain that are churning out tariff-free equipment for the US market.

People work at the Illuminate USA plant in Pataskala. Photographer: Maddie McGarvey/Bloomberg

The joint venture benefits from millions in economic development incentives and federal tax credits for domestic clean energy manufacturing. For its part, Longi avoids anti-China tariffs and deepens its foothold in one of the world’s fastest-growing solar markets.

Companies based in or linked to China are replicating the strategy across the US. They are building or planning to build at least a dozen plants with 30 gigawatts of module-making capacity, according to a Bloomberg review of public statements, filings and other documentation. 

American manufacturers are crying foul, saying these factories undermine their quest to build a domestic solar supply chain. Although other countries have taken advantage of the IRA’s subsidies, political objections have focused on Chinese investment. Bipartisan momentum is building in Congress to block China-backed firms from claiming tax credits for manufacturing anything central to the energy transition—a category that extends beyond solar panels to electric vehicles and batteries.

In Ohio, retired middle-school science teacher Eileen DeRolf has become an outspoken critic of Illuminate and the policies that brought it to Pataskala. She points to a 15-year tax abatement from the city and $4 million in incentives from a state economic development agency, to say nothing of the $350 million in potential annual tax subsidies from the Inflation Reduction Act.

“I happen to not particularly want our geopolitical No. 1 enemy to benefit off our economic system,” DeRolf said.

Illuminate and its American and Chinese parent companies see it differently. They point to an influx of well-paying jobs and to a resurrection of manufacturing in a fast-growing sector of the economy.

“We’re a majority-owned American company,” said John Duer, Illuminate’s chief legal officer. “We have a minority partner based in China. We’re not a Chinese company trying to do business in the US.”

Read the full story, including how the fight over Chinese clean tech companies is also playing out from Texas to Virginia. Subscribe for even more geopolitical energy news.

The sunny side of tax credits

25%
Solar ingot and wafer manufacturing projects in the US will qualify for a 25% tax credit under a new rule that could unlock investment in domestic production of the equipment used to make panels.

Wanting in on a 'horrible business'?

"Solar manufacturing is a horrible business. I don't know why governments want to have it in their countries, when they could just buy really cheap modules on the global markets."
Jenny Chase
Solar analyst, BloombergNEF
The "continual grind" to cut costs and improve panels makes solar manufacturing a very challenging business, according to Chase.

More from Green

Nike executives made a startling discovery in the early 1990s.

The gas pumped into the soles of the Nike Air series of athletic shoes created an exceptionally resilient cushion. But the large, tightly-linked molecules of sulfur hexafluoride also make it the planet’s most powerful greenhouse gas — 24,300-times more potent than carbon dioxide. Air Jordans and Nike Inc.’s other popular shoes, it turns out, were overheating the planet as much as half the cars in its home state of Oregon.

Photographer: 731; Photos: Getty (1), Alamy (1)

The sneaker giant spent tens of millions of dollars over the next 14 years to find a replacement, eventually declaring in 2006 that it had eliminated all heat-trapping gases from its shoes. Instead of fading into the annals of climate history, however, Nike’s decades-old environmental problem has suddenly become relevant again — and it’s exposing a key weakness in today’s carbon market.

That’s because Nike, as it finished its gas substitution work two decades ago, decided to turn its sulfur hexafluoride reductions into a carbon-offset project. The project gained little traction at the time; and nobody has used any of these credits in nearly a decade. But the project re-emerged earlier this year, with more than 1.2 million Nike credits surfacing, just as the market for carbon offsets attempts to fix the chronic flaws that have sent it into a spiral.

  • Kamala Harris is getting plenty of climate advice. Environmentalists and former advisers have outlined their prescriptions for ways a victorious Harris could build on Biden-era climate initiatives.
  • JP Morgan warns of AI’s water toll. US water resources, already overstretched, are being further stressed by the boom in artificial intelligence, according to a new report from the bank and sustainability consultancy ERM.
  • Germany has a plan to deal with solar power oversupply. The country will narrow the pool of solar producers that are eligible for subsidies as wholesale power prices frequently turn negative during hours when supply exceeds demand.

Worth a listen

As Republican and Democratic canvassers make their final push to get out the US vote, the famed tech investor Vinod Khosla has been making the case for Vice President Kamala Harris with a very specific audience in mind: Elon Musk. On the social media platform owned by his fellow billionaire, Khosla has pressed the case in a series of X posts that former President Donald Trump is the wrong candidate for the future of the planet. Although Khosla is a former Republican, he says in an interview that he will be voting for Harris. But he doesn’t expect tech investors to see much fallout no matter who wins. “I don't think there'll be any difference in policy between the two when it comes to tech.”

Listen now, and subscribe on Apple,  Spotify, or YouTube to get new episodes of Zero every Thursday. 

Vinod Khosla, founder of Khosla Ventures, joins the Zero podcast to discuss his online spat with Elon Musk over climate, the economy, and Donald Trump.

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