July 08, 2022

President Biden OKs Use of DPA to Amp Up Scale of Domestic Renewables

As part of dogged efforts to implement his proposed sustainability agenda, President Biden recently announced that he authorized the Department of Energy to use the Defense Production Act (DPA) to expand the domestic manufacturing of solar panel parts, building insulation, heat pumps, transformers and grid components, electrolyzers, fuel cells and platinum group metals, all of which are integral to increasing the United States’ renewable energy generation capabilities. If successful, the DPA may help realize at least some of the Biden administration’s lofty renewable energy goals.

The DPA is a source of presidential authority used to increase the domestic supply of materials and services to promote national defense. The executive branch traditionally uses the DPA to direct industries through executive orders to help achieve those ends. For example, former President Trump and President Biden most notably used the DPA to respond to the COVID-19 pandemic by procuring protective equipment and increasing the domestic manufacturing of health supplies. These responses to the national emergency strengthened the USA’s national defense by enabling the USA to increase domestic production of healthcare supplies and thus be less likely to be affected by the supply chain issues that were the result of the global pandemic. Biden’s latest use of the DPA, which is a departure from past uses of the DPA to fulfill defense contracts and respond to disasters, seeks to direct companies to build clean energy facilities and manufacture and install clean energy technologies.

This application of the DPA is no coincidence. The USA’s demand for clean energy technologies has increased, and the global demand is expected to increase 400-600% over the coming decades. President Biden’s proposed actions seek to bolster the domestic supply of solar materials by gradually reducing the United States’ reliance on other countries for clean energy technologies. Consequently, Biden’s executive action has several potential industry implications:

  • Solar — Though this may increase the labor and manufacturing costs for domestic businesses, Biden’s goal of securing a domestic solar supply chain may strengthen national security, energy independence, and lower energy costs. Increasing the domestic manufacturing of clean energy technologies may reduce the U.S.’s reliance on importing such technologies and thus prevent potential supply chain issues.
  • Transformers and Grid Components — Increasing the domestic production of transformer and grid components may strengthen the consistency and capacity of the U.S.’s grid and create more accessible sources of renewable energy.
  • Heat Pumps — U.S. buildings account for over 40% of the nation’s energy consumption, and some of the oil and gas that this energy is derived from comes from other countries. Biden’s goal to increase the domestic manufacturing of heat pumps, devices that can heat and cool buildings and are energy-efficient alternatives to some of the U.S.’s use of oil and gas energy sources in buildings, may reduce the U.S.’s reliance on other countries’ reserves.
  • Electrolyzers, Fuel Cells and Platinum Metals — Electrolyzers, fuel cells and platinum group metals are used in the production and utilization of clean hydrogen. Increasing the domestic production of these components could enable the U.S. to rely less on imported fossil fuels and could stabilize the price of clean hydrogen.
  • Insulation — Increasing domestic manufacturing of insulation will enable the U.S. to insulate older buildings which can preserve up to 50% of energy use.

President Biden’s executive action also included the implementation of two tools, Master Supply Agreements and “Super Preferences,” to spur clean energy procurement and a 24-month bridge, a temporary mechanism that may help alleviate the shockwaves initiated earlier this year by the U.S Commerce Department’s trade probe, to temporarily facilitate the importation of certain solar modules and cells from Cambodia, Malaysia, Thailand and Vietnam free of certain duties. Master Supply Agreements will be used to increase the efficiency in which domestic electricity providers can sell their products to the federal government. “Super Preferences” will be used to help increase demand for solar by placing conditions on funds appropriated or otherwise made available by Congress. For example, to be purchased with appropriated monies, certain solar technologies would need to be produced or manufactured in the United States for the federal procurement of solar systems.

These tools may stimulate the demand for up to a gigawatt of domestically produced solar modules and up to 10 gigawatts over the next decade from the U.S. government. The Biden administration predicted that the expansions of solar manufacturing will increase the current base capacity of 7.5 gigawatts by 15 gigawatts totaling 22.5 gigawatts by the end of Biden’s term — thereby enabling over 3.3 million homes to use solar energy annually. 

In addition to these actions, the renewable energy industry team is watching Congress closely to monitor the status of clean energy tax extenders, which could further bolster the industry. For additional questions, please contact Faegre Drinker’s Energy, Manufacturing and Technology team.

Faegre Drinker Summer Associate Elijah Conley contributed to this article.

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