President Biden's lofty climate goals – for a carbon pollution-free U.S. electricity grid by 2035, and a net-zero emissions economy by 2050 – require pretty much everything to go right.
The concern is that manufacturing for solar panels, wind turbines, utility-scale batteries, and other products to generate clean energy will remain centered in places like China.
If the U.S. is “not able to secure a favored, or at least competitive, place in those supply chains, their commercial outlook will be substantially impaired,” the report notes. It “is not inconceivable that the renewable industry could follow the path of semiconductors and consumer electronics, in which engineering and design occurs in the United States, but most production occurs overseas with foreign components.”
Mike Williams, one of the report’s authors, said America “used to have a significant portion” of the semiconductor supply chain before places like Taiwan and South Korea took over, “mainly because they directly invested in it”.
That shift left the U.S. exposed when the global chip shortage cropped up. U.S. manufacturers now have to wait in line to get their orders filled. Trevor Sutton, the report’s other author, added that people were barely aware until the issue cropped up. “It's not an issue until it is,” he said.
In addition to semiconductors holding back the U.S. automotive industry all year, vulnerabilities in health care supply were evident during the heights of the COVID-19 pandemic with medical equipment not arriving in time from manufacturing hubs like China.
And this year, supply chain issues prompted Vice President Kamala Harris to note that “if you want to have Christmas toys for your children, it might now be the time to start buying them, because the delay may be many, many months.”
Amanda Agati, chief investment officer at PNC Financial Services, told Yahoo Finance Live recently (video above) that “the supply chain disruptions are going to continue,” pointing to them as “structural obstacles [that] are going to remain here in the short run.”
Demand ‘will increase exponentially over the next few years’
According to the World Bank, the Paris Climate Accords opened up "nearly $23 trillion in opportunities for climate-smart investments in emerging markets between now and 2030."
As such, according to the report, needed materials to “supply this growth in production will increase exponentially over the next few years,” and the coming decade is crucial “to onshore the manufacturing supply chains of clean technology.”
A recent post from the Alliance for American Manufacturing warned: "The solar industry provides a cautionary tale for America’s clean energy future."
Sutton said a green energy supply chain crunch could be under the radar for years but then arise suddenly depending “on any number of contingencies,” from another pandemic to new U.S.-China tensions. He also said the U.S. could face increasingly difficult choices between keeping supply chains intact and speaking out about human rights “absent a concerted effort to ensure that those supply chains are either domestically robust or at least concentrated in like-minded countries.” (Essential components of solar panels come from China's Xinjiang region, which has links to forced labor, according to reports.)
‘A clear path for manufacturers’
The report by the Center for American Progress, a left-leaning think tank founded by John Podesta, who served as President Bill Clinton's chief of staff, concludes that many things are needed to reach Biden's climate goals – "most crucially, the fate of climate legislation in Congress.”
The multi-trillion-dollar reconciliation package on Capitol Hill currently would provide $273 billion in tax credits toward Biden’s climate goals.
The report argues that Biden’s plan “creates a clear path for manufacturers to take on a large portion of the clean energy supply chain.” But the bill’s path to enactment remains uncertain with moderate Democratic senators demanding that the overall price tag for the proposal – initially set at $3.5 trillion – come way down.
On Monday, Biden said, “I've laid out what I thought [the bill] should be,” but if it passes, “it's not going to be that, it's going to be less.” The discussion among Democrats in the coming weeks will likely center on what to cut, weighing the merits of the climate initiatives alongside other programs like the Child Tax Credit.
Overall, the report warns that if the reconciliation bill fails or has the climate provisions stripped out, the supply chain issues could soon constitute a national security problem.
“Energy security is one of the pillars of our foreign policy,” said Sutton, adding that the national security implications of energy disruptions are usually connected to oil, but “people haven't really started thinking about it in the context of renewables.”
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.