The lucrative government aid is the latest major climate incentive the administration is rolling out through the Inflation Reduction Act, a historic spending program designed to give the United States a head start in the energy transition and help the country to significantly reduce greenhouse gas emissions.
The climate law was a major victory for President Biden when he passed. But that leaves his administration finding itself in perilous territory as it rushes to implement dozens of new government programs as an election year approaches.
Incentives fund projects that are risky by design, with the goal of rapidly scaling up the production of new innovations.
Some of the companies receiving funding are doomed to failure. The program functions as a start-up incubator, funding a wide 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 intended to suck emissions from the sky, aviation fuels made from cooking grease and corn ethanol, giant wind turbines, upgrades of the electricity network based on artificial intelligence and a massive increase in national production. battery-powered vehicles.
In the case of hydrogen, some of the world’s largest energy companies are seeking subsidies, but the question of whether the “electrolyzer” machines used to produce clean hydrogen can scale quickly enough and at a cost that makes competitive fuel compared to other energy sources, is an open question.
“We are working to implement the Inflation Reduction Act as quickly as possible and provide clear guidance to the industry so it can continue to make historic investments and tackle the climate crisis by using every tool at our disposal,” said John Podesta, the president’s chief executive officer. advisor for clean energy innovation and implementation, during a call with journalists on green hydrogen on Thursday.
Before the plan was even shared with the public, it came under attack. Senate Energy and Natural Resources Committee Chairman 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 be eligible for subsidies. He warned that prosecutions would be forthcoming. Republicans have held hearings and launched investigations aimed at portraying the entire climate package as a slush fund for donors and friends of the White House.
Energy companies and industry groups are deeply divided over the White House’s approach, which administration officials say is still a work in progress and could change before the rules are final. Praise for companies that could benefit from the administration’s tough rules 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 to leave. ‘stranger.
The green hydrogen projects come after Energy Department Inspector General Teri Donaldson warned Congress in October that the administration was expanding energy subsidy programs at an unprecedented rate, making oversight difficult.
“The current situation poses enormous risks for taxpayers,” Donaldson said. “There is no precedent in the department for this level and pace of funding. …Furthermore, many of these programs are designed to promote innovation by financing projects that would not otherwise be acceptable to private equity investors – projects that markets do not view as acceptable.
The deep disagreement in Washington over how the money should be deployed, as well as a lack of public awareness How these technologies work and why they are chosen poses a familiar challenge for the White House. It’s the same dynamic that turned massive investments in clean energy under the Obama administration into an albatross for Democrats, when a politically connected solar company called Solyndra went bankrupt after obtaining a $500 million loan guarantee from the administration.
“There’s been a lot of success with this loan guarantee program, but when you have a failure like Solyndra, that’s 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 this bankrupt company. »
Republican lawmakers have invoked Solyndra’s name often lately, including when they launched an investigation into a loan guarantee of up to $3 billion for solar company Sunnova, which lawmakers accuse of mistreating customers and to exploit their ties to a high-ranking energy ministry. official.
“Solyndra is going to look like chump change compared to the amount of taxpayer money that will be wasted this time,” said Sen. John Barrasso (R-Wy.), who helps lead the Republican Party’s spending oversight .
Administration officials say Republicans are misrepresenting how the program works and the extent to which taxpayers are exposed to losses. They note that the same loan guarantee program that was called wasteful under the Obama administration actually proved to be a financial success, resulting in no losses for taxpayers while helping to generate tens of thousands of new jobs. The Energy Ministry official accused of self-dealing sent a detailed letter to Barrasso explaining that he does not make final decisions on which projects will be funded.
Sunnova, which declined an interview request, said in a statement that while the government loan guarantee is intended to reassure investors that they will be made whole, the company would be responsible for absorbing any losses in using its own funds before taxpayers’ money is at risk. . “Unfortunately, we have become a political football in an environment where the renewable energy sector is increasingly caught in the crosshairs,” Sunnova Chief Executive William J. Berger said in the release.
On a call with reporters, senior White House advisers revealed statistics that highlight the hundreds of thousands of jobs they say the climate package will create, the projects that have already been launched thanks to subsidies and the impact of the law on climate. on China’s withdrawal of clean energy investments.
Podesta said some of the Republicans who attack the incentives also show up at the projects’ inaugurations to claim credit for the factories and infrastructure they fund.
“Sometimes we have to remind my friends on the other side of the aisle that we can continue to talk about Solyndra, but there is also the success of companies like Tesla who have benefited from this program,” did he declare. “One of the things we need to do is just get out there and tell the story of both the level and the quality of the investment. »
But even some White House allies worry about the challenges of controlling discourse on a program so expensive, controversial and confusing to the average voter. Paul Bledsoe, who worked on climate issues in the Clinton White House, said he was concerned that even with existing technologies such as electric vehicles, the administration’s plans would not be in step with the concerns of the consumers regarding the lack of charging stations and high costs. He urges the administration to provide more support for transition technologies such as plug-in hybrids, even if it means overall car emissions are not reduced as quickly.
“Discussions around the Inflation Reduction Act often focus on technologies that are still years away from commercialization,” Bledsoe said. “They risk leaving the consumer behind. »
