Over the last four years, the U.S. clean energy manufacturing sector saw a historic boom. Factory construction doubled, foreign firms opened production in dozens of states, and federal policy spurred over $150 billion in manufacturing plans.
But a swirl of conflicting policies — from chaotic tariff threats to complex foreign sourcing rules — is freezing planned investments, spooking some manufacturers, and prompting some firms to halt growth plans.
Core incentives like the 45X manufacturing tax credit remain intact. But new sourcing regulations are complicating those incentives.
In this episode of Open Circuit, MJ Shiao, VP of supply chain and manufacturing at the American Clean Power Association, breaks down the recalibration now underway for companies making equipment in the U.S.
We explore the rise and stall of the manufacturing boom, dig into ACP’s latest data on where facilities are being built, and unpack the cascading uncertainty created by new FEOC rules and tariffs.
We also ask whether the U.S. can rebalance its industrial strategy to move beyond final assembly and build a more resilient, upstream supply chain.
Credits: Co-hosted by Stephen Lacey, Jigar Shah, and Katherine Hamilton. Produced and edited by Stephen Lacey. Original music and engineering by Sean Marquand.
Open Circuit is brought to you by Natural Power. Natural Power specializes in renewable energy consulting and engineering, supporting wind, solar, and battery storage projects from concept through financing. Discover how we’re creating a world powered by renewable energy at naturalpower.com.
Open Circuit is brought to you by Sungrow, the trusted provider of PV inverters and battery storage. With over 605 GW installed worldwide and a BloombergNEF ranking of “most bankable” in power conversion and energy storage, Sungrow provides solar tech you can count on. Learn more at sungrowpower.com.
Transcript
Stephen Lacey: MJ, what would be your dream factory job?
MJ Shiao: This is kind of esoteric, but when you pull silicon ingots, you have to load polysilicon into these crucibles and there’s apparently a way to load them that makes it more efficient. And when you pull them and operate the machines, the way that it’s explained to me feels very artisanal and almost like craft work. And again, not to romanticize things, but I think about if I had to work in a factory, I would want to be the best ingot puller this side of the Pacific.
Stephen Lacey: I would want to work in testing. Have you ever seen them shoot those solar panels with hail guns and flamethrowers? I want to do that.
Jigar Shah: I don’t think testing the failure modes of solar panels is actually working in a factory.
Stephen Lacey: You work in a field outside the factory.
Katherine Hamilton: I would love to do quality control, but I would be very nervous that I would do something that would actually do the opposite of quality control.
Stephen Lacey: From Latitude Media, this is Open Circuit. For more than a decade, the U.S. had a clear strategy in clean energy. Invent technologies, let others make them cheaply at scale, and then deploy them back here. It made a certain kind of sense when the goal was to just drive down costs as quickly as possible. But then came a string of wake-up calls. China’s dominance of critical supply chains, COVID-era shocks, and a growing political movement on both the left and the right to bring industrial capacity back home. That resulted in a string of Biden-era policies that put advanced energy manufacturing at the center.
And in the last two years, factory construction has doubled, but today in the face of confusing tariffs, new sourcing rules, shifting tax guidance, the policies have never been more confusing or contradictory, even if the politics of reshoring have never been stronger. This week, the state of America’s clean energy manufacturing, what is stalling, what’s still moving forward and what is at stake? Welcome to the show. I’m Stephen Lacey. I’m the executive editor at Latitude Media and one of your three co-hosts. My other two co-hosts are Jigar Shah and Katherine Hamilton. Jigar is the co-founder of Multiplier. He’s the former director of DOE’s Loan Programs office, and he is joining us at 6:00 A.M. Australia time, 14 hours ahead. Thanks for being here. What’s got you in Australia?
Jigar Shah: Well, I mean I think as you know, when the IRA passed, I mean it really inspired people around the world to figure out whether this was really a new approach to diversifying supply chains and on-shoring and reshoring capacity. So they have a big program here in Australia around made in Australia and figuring out how we actually get a lot of the supply chain to be manufactured here. And so just going through best practices with them around what worked and what hasn’t worked. So I’ve been swimming in these types of conversations the last couple of days.
Stephen Lacey: So is it fair to say in the coming months or years we’ll see more American companies popping up in Australia making things there?
Jigar Shah: Well, there’s certainly a tremendous number of venture-backed companies who I think feel less love right now in the United States around their first-of-a-kind deployments. And so I think they’re all fierce competitors and they’re going to try to find another way to bring their technology to market.
Stephen Lacey: Katherine Hamilton is the co-founder and chair of 38 North Solutions. She is in a cabin in the woods in the Adirondacks. How are you?
Katherine Hamilton: I’m fine. It’s a little steamy right now. I’m in the place with no AC. People have asked me about this before. “Are you in the place with AC or without AC?” There’s no AC here. So we have fans going everywhere, which means all my papers are fluttering.
Stephen Lacey: That means we’re going to have to put some good mixing on this episode when we hear the whir behind you.
Katherine Hamilton: That’s right.
Stephen Lacey: Yeah. That’s why we don’t do a YouTube show because I’m in here with no AC too and you’re going to start to see the sweat drip down my face and down my shirt and so yeah, better to keep it audio.
Jigar Shah: They love it authentic. They love it authentic.
Stephen Lacey: Yeah, that’s right.
Jigar Shah: You’re working hard for us, Stephen.
Stephen Lacey: So before we get rolling, a quick note that we’re going to be off for a few weeks after this episode. We’re going to have some summer break content for you rolling into the feed, so stay tuned for that. And then we’re going to be back at the end of the month. And joining us this week, that voice you heard was MJ Shiao. He is vice president of supply chain and manufacturing at the American Clean Power Association. MJ, how’s it going?
MJ Shiao: It’s great. Happy to be back on this.
Stephen Lacey: I realized it’s almost been 10 years since you and I recorded an episode together on April 1st, convincing listeners that Amazon had developed a solar drone installation service. Do you remember that?
MJ Shiao: That was one of my favorite podcasts we ever did.
Stephen Lacey: That was good. We convinced people. Peak of my podcasting career.
MJ Shiao: We convinced a moderator at one of our conferences that he thought it was a real thing.
Stephen Lacey: People were a little upset, but I think generally it was well received. So I want to start this conversation with two numbers: 33 billion and 30 billion. The 33 billion is how much annual spending clean energy manufacturers contribute across the U.S. Economy annually. That’s according to a new analysis from MJ’s team at ACP. The second, 33 billion, is the amount of investment canceled by producers along the EV supply chain since Trump took office, according to researchers at Wellesley College. After inheriting a genuine boom where factory expansion doubled in a couple of years and foreign companies were relocating more production in the country, we’ve seen a surge in cancellations and freezes.
With ACP now out with this report on the state of the market, it offers the perfect opportunity to dig in to what is working, the status of the market and where some of the risks are today. So MJ, let’s start with just overall framing. Your report offers a pretty optimistic picture of the manufacturing landscape in the U.S. Right now. Two other reports that came out in the last week offer a bleaker view, cataloging tens of billions of lost investment in recent months. Reconcile those two perspectives for me.
MJ Shiao: Absolutely. So first, just a little bit of housekeeping in the sense that those other reports, as you mentioned, cover the electric vehicle space, which I know some people like to categorize clean power with electrical vehicles as all one umbrella, but there are very different demand drivers for both of those. And the other, and I think even more critical part of this is that this report we put together was released in May and it shows you just how much has changed within the policy environment in just two months. And when we put this together in May, we were pretty clear that the optimism around manufacturing was predicated on a number of different policy priorities and actually quite reasonable policy priorities in terms of, one, just preserving the tax credits as they existed, not just for manufacturers in the form of 45X, but also deployment tax credits and domestic content bonus credits that were helping to drive that demand for domestic manufacturing.
And the second was that there would be a more certain trade environments so that there would be more visibility into tariffs and costs and what folks needed to price in for their inputs for manufacturing. Of course, now that it’s towards the end of July, neither of those things have emerged and we’ve actually seen a reversal. And so certainly we’ve seen a lot of the manufacturers that were about to open their doors anyway, they’ll continue along that path but also have been hearing a lot about investments freezing and pausing as they try to wrap around their heads around what’s changed in terms of the statute that was recently passed and also the continuing complexity of the tariff environment.
Stephen Lacey: Before we walk through the specific findings and dig into specific sectors, I want to rewind a little bit and talk about how we got to where we are. I hinted at this in my opening narrative. There’s been this long debate in the industry about whether America should even try to compete in making clean technologies. There was a general attitude for a while that we should just make the tech where it’s cheapest, deploy the hell out of it here in the country. And then that really started to shift in the last, certainly it has evolved over the decade, but in the last five years it really came into focus. Katherine, when did this focus on domestic manufacturing start to shift? How would you frame out how this conversation changed?
Katherine Hamilton: Yeah, so before 2020, you would say manufacturing had modest growth. There was a lot of offshoring because of cost, and there were also a bunch of strategic vulnerabilities because of our reliance on countries like China. And I would just say for solar, less than 10% of solar manufacturing was done in the U.S. China absolutely dominated 95% of wafers, 75% of cells, 70% of modules. Batteries, there was basically no battery manufacturing under 10%. 70% of the capacity was in China. Certainly the Tesla Gigafactory was one of the outliers, but again, they relied on Panasonic cells. So that was an unusual situation. For wind, it was better because we did have tower blade, nacelle assembly, GE, Siemens, Gomez and Vestas were all here building, but the gearboxes, the electronics, those were all imported. And certainly for the grid there really was limited capacity for transformers, smart meters, sensors, heat pumps, all of those pieces.
Once we had the Inflation Reduction Act, the Bipartisan Infrastructure Law and the CHIPS and Science Act, all of that shifted and it has made an enormous difference in the way we are moving forward on manufacturing, the way we think about manufacturing and what that has done for jobs and economic growth in this country.
Stephen Lacey: Now, Jigar, if you had asked Stephen Lacey in, I don’t know, 2010, 2011, do you think that it really matters that we produce a lot of this stuff here? I would’ve said, “I don’t care where you produce it, just produce it at the lowest cost possible and deploy the heck out of it as I basically set up in my narrative.” And that really started to shift dramatically in recent years. So what’s your perspective on how the conversation abruptly turned?
Jigar Shah: Well, remember we did have this conversation in 2012 around the Obama tariffs on Chinese solar modules, and Obama never had a plan that I could tell of actually on-shoring manufacturing capacity. It was sort of like, we’re going to tax Chinese solar module manufacturing, but we’re not going to help people build magic manufacturing here in the United States. And so at the time, it was just viewed as a tax on the industry. It was like, well, what gives? Right? We’re not even getting any module manufacturing for it. And then remember we doubled down on it in 2015 and put even more tariffs on Chinese modules. So I think that what occurred over time was a recognition that our technology and the technology of Martin Green at University of New South Wales just kept going to China. I remember talking to the solar energy technologies office and they would say, “Yeah, we have another breakthrough out of Boston,” but there’s no place for them to sell their breakthrough except for China.
So they had to license their technology in China to be able to get any revenue for all this work that they did. And so it really was the Inflation Reduction Act and the domestic content requirements and all that stuff that really got people moving. But even then, I would say the Biden administration failed pretty miserably. When you think about just how reticent the industry was to sign offtake agreements, they just weren’t having it. So you had over 30 new module manufacturing and sell in wafer manufacturing facilities that were proposed in the United States. And when they went to the big members of ACP and others, they were like, “I don’t know. I think we’re going to cheap out on this and see if we can just do it through modules. We don’t really want to sign a long-term contract.”
And as a result, all of those projects failed. The only one that moved forward was Qcells Hanwha’s facility in Dalton, Georgia, and then of course all the sort of cheap module manufacturing facilities that Trina or JA or others are doing. But the vast majority of deals that would onshore sell in wafer manufacturing are still waiting for offtake agreements from the industry.
MJ Shiao: I think what’s tough to judge is we’re looking at two years in the grand scheme of supply chains that take a decade or longer to evolve. If we think about trying to build upstream manufacturing in the form of even polysilicon or wafers for solar electroactive materials for batteries, these are multi-year construction timelines. And then you have a decade or longer investment. And I agree with Jigar, right? The economic signals were never clear enough to give downstream customers the sort of signal that federal policy that this country is going to want and encourage and support that through the timelines that would be needed to make these investments and to also assign those anchor offtakes. There’s obviously a lot of commercial complexity with that, but if you just look at the whiplash of federal policy through multiple administrations, not even just the past two, I think it’s hard for folks to really have that clarity to say, “Yes, we’re willing to make these decade-long bets.”
And so that’s the challenge. I think if we want to continue to build upstream and build the supply chain so that it is more robust so that we are capturing wafer manufacturing and cathode-active materials, anode-active materials, we do have to have a more focused long-term federal policy that is strategic in that direction and is also permanent in some sense.
Stephen Lacey: Well, something’s working. We got a 45% increase in the development of primary manufacturing plants. So we saw a pretty extraordinary growth in the last couple of years. What is working and where did we see that plant expansion?
MJ Shiao: So I think Katherine and Jigar have hit the nail on the head in the sense that you have the Bipartisan Infrastructure Law, the CHIPS and Science Act, the Inflation Reduction Act, all with different components that started to build that trust with the industry and the manufacturers that the support was going to be there and that there was the economic incentive that did bridge the cost difference between building the U.S. versus building outside of the U.S. So as typically happens when you’re building out any kind of new supply chain, you start with the end product.
So we have primarily seen solar module manufacturers, we have seen battery module manufacturers, wind cells, and then as those facilities get established, and I think this is where basically we hit the big pause is you start to see that build out of further steps upstream. So we saw the first two crystalline silicon solar cell manufacturers set up online late last year. We’re starting to see battery cell manufacturers for grid storage ramp up as well. But if we want to continue that, right, of course the federal policy environment has to support that. And that’s both in terms of what our trade policy looks like and certainly what the tax policy looks like as well.
Katherine Hamilton: Yeah, I would just note that those bills did incentivize 380 manufacturing facilities were announced and half of them were operational by this march. So there was a lot that was done. The 48 C bought down by 30%, the CapEx on manufacturing there was a 45X that remains in place like a production tax credit for manufacturing facilities. And then there are all these bonus credits for domestic content, for energy communities, for wage and apprenticeship and focused on underserved communities as well. And then with the infrastructure law, you had all these grip grants and other grants that’s like 1.2 trillion over 10 years. And what that did was really forced utilities, it didn’t force them, but it incentivized utilities to come to the table and deploy really innovative technologies that would make the grid better and more resilient, stronger, more cost-effective, and help communities that they wouldn’t have done before. So that was a huge investment, $1.2 trillion.
Not all of it was deployed, but a bunch of it was. And then CHIPS and Science Act is 52.7 billion for R&D and D and manufacturing. That’s made a huge difference, as MJ said, in CHIPS as well. So I think all of those have been super important and the crucial issue of course is are they staying in place? To what end? And then how many of these manufacturers and these plants that have been announced will actually come to fruition.
Economic impact and manufacturing success stories
Jigar Shah: Yeah, I agree with that. I mean frankly, we’ve just had a huge manufacturing renaissance. I think the amount of capital that has gone into manufacturing is at least twice the average investment from the last 30 years. And so it’s really been an enormous success. The reason I couch it the way I do is, to Stephen’s point, I do think that the mind share between all of the players and the marketplace continues to be elusive. I do think that there are some people who just say, “We’re never going to manufacture solar panels. We should just buy them from China,” or some of these other sort of areas. And I do think that as we move to a world where 80% of all new capacity in the entire world is coming from solar and battery storage, the robustness of our supply chains and making sure that there’s a diversification out of China is going to be critical.
And I think if you ask the average CEO who is a member of ACP or any other trade association, they do not have consensus around how they want to deal with this problem over the next 20 years, right? I mean, do you just want a friend shore with Mexico and India? Do you want to make sure that the manufacturing is here in the United States? Do you want the component parts that can be done profitably here? Because as MJ is suggesting, if we want to be successful in the long term, it’s a 10 to 20 year project. These things are not things that happen quickly. And so what signals are we sending American innovators and entrepreneurs who’ve gone through the R and D phase, gone through all these other phases and are now ready to scale up their technology? Are we going to back them for 10 to 20 years to be able to get through that period of learning so that we can be a world-class manufacturer of these products again? And the jury’s out, I think.
MJ Shiao: So I absolutely agree with Jigar there, and I do think that that is a very active conversation, certainly within the ACP membership, but just more broadly in the industry. And I think there are kind of broad points of alignment that we need an increasingly secure, and part of that is being a much more domestic supply chain to ensure that we have a secure supply chain that comports with national security priorities, and that also just is more robust and resilient to just the day-to-day logistics instructions of dealing with a global economy. I think the challenge then is where does that balance and how do you actually do that? What is within the realm of possibility for the industry to take on and where do we need help from various policymakers? And I think that’s an really active and complex discussion, but I do think one of the things that we have learned, especially over the past few years, is that we have the ability to build manufacturing here and to do it successfully.
And I think when I hear folks that are saying, “Well, why are we building here? China’s already won on the technology, we should just let them do it and buy from there,” I just feel a lot like that is so defeatist and it’s a little bit like when I watch football with my nine-year-old and in the first quarter the opposing team kicks a field goal and he is like, “Turn it off, the game’s over, we’re going to lose,” which we watch a lot of Browns and commanders, so it’s not an unfair feeling that he has in that sense, but I still think we’re still very much in the early part of this game.
We’re going to build, as Jigar said, 80% of new capacity is clean globally. We’re going to build terawatts of this stuff. There is so much technology evolution that we haven’t even thought about that is still folks that are in diapers that are going to dream up that if we give up now, yes, we are absolutely going to lose the race because we are not even going to show up. And that, I think, is a big missed opportunity.
Katherine Hamilton: I also think the headlines are very much about the bad stuff that’s happening, and there was the Big Green Machine, which is out of Wellesley College, it’s Professor Jay Turner who does environmental studies there. He and some students have been tracking manufacturing projects on clean energy in the U.S., and the big headline was 34 projects have been paused, canceled, or reduced in size since Trump came into office. That’s 31 billion of investment, 28,000 expected to lose their jobs. But on the other hand, what has progressed since that time? 68 projects, that’s double what’s been slowed, 24 billion of investment and 34,000 jobs expected. And then there are a bunch of projects, 489 projects that have no change at all, and that’s like 240 billion of investment and upwards of 350,000 jobs. So there are the headlines show that there’s some bad news and there are of course for every job that’s lost, that’s bad news, but there’s also so much that’s still going on that we need to look toward.
Stephen Lacey: So we talked about the national security value of on-shoring or reshoring. What is the economic value? MJ, can you walk us through the numbers of how this expansion in factories is starting to impact regions around the country?
MJ Shiao: Yeah, absolutely. So as you’ve already laid out, one of the things that we set out to do with our latest manufacturing report is to really capture the economic impact of clean energy manufacturing besides just the CapEx for setting up the facility or just the number of jobs inside the factory walls. I think one of the exciting things and the massive opportunity with manufacturing is just how permanent it becomes in the community. Of course, clean energy deployment is incredibly important. It drives a lot of local community investment in the form of taxes and payments to landowners, but kind of living in a rural community myself, some of that is invisible, right? You don’t really see that transaction day-to-day, whereas where you have these large manufacturing facilities that serve sort of like an anchor of some of these communities and you have friends and family that work out of there or work for service providers, suppliers to that facility, you have hotels, restaurants that sprout out because of that, it becomes this force multiplier.
And so what we’ve found is these 200 plus primary clean energy manufacturing facilities across the country are spurring about $33 billion in annual domestic economic spending. And that for every one job that is sited within the actual manufacturing facility, it’s creating four jobs around the country as well. And in some cases, like land-based wind manufacturing, 5X multipliers on the job front. So as a result, just even today, the active existing facilities are supporting nearly 122,000 jobs across the country. And then finally, those jobs are really good paying jobs too. On average, our industries are paying in terms of wages and benefits $42,000 more than the average American job. Then when you add on to the fact that, one, these are jobs in rural communities which tend to have lower salaries on average, that’s an even bigger impact.
And then secondarily, again, thinking about this living in the rural community that I’m in is how do you keep bright young folks interested in staying and reinvesting in the community that they grew up with? You do that by bringing them economic opportunity. I think there’s a lot that’s always said about manufacturing is so automated, how many jobs are you actually bringing? There’s kind of a fair discussion around that. But when we think about automation, that is also technology jobs, that’s also these pathways to careers for, again, young folks in the community that they may not have without these manufacturing facilities in place.
Katherine Hamilton: Oh, one of the things I was really keen to learn about was offshore wind vessels and the increase in production of those. That’s just been such a big hang-up because of the Jones Act, this Merchant Marine Act of 1920, which means you have to, any vessel has to have a U.S. flag, and the fact that we’re building more of those is really important. Unfortunately, the Trump administration seems to hate wind more than almost anything else in the world, but I still think it’s really important for us to have that capacity, and I was really happy to see that those have increased significantly.
MJ Shiao: This is what drives me nuts about what’s happening, is that it’s so baffling. The industry is doing the things that the administration, the president campaigned on in terms of wanting to bring back shipbuilding. So what’s a way to do that? Why not help the offshore wind industry create more demand for American flagged vessels? That’s something we bring to the table. And that just gets repeated throughout all these examples across the supply chain. So I don’t want to be the person that is always kind of being negative here because I agree there are a lot of manufacturers that have stood up that are, I think, especially trying to make things work, especially in a very increasingly complex and uncertain environment, and there is a lot of innovation happening there. We should be excited about that and that actually is my favorite part of this role, is to go and visit those facilities and see folks build stuff. But it just is, again, this baffling thing where the industry brings to the table these things that the administration has campaigned on, has said they want, and yet it is not being supported.
Jigar Shah: I think to be clear, MJ, I think it is a good news story. So I think we should be crystal clear that what has occurred over the last few years is definitively a good news story. I think my comment is more around what is the trajectory that we are all agreeing to over the next 10 years, right? Because I think that regardless of who the next president is, regardless of who the next Congress is, my sense is these trends continue and it’s not actually a U.S. thing. I mean, speaking from Australia today, the Australians love to buy the cheapest possible stuff, and I’ve had this conversation with them around their made in Australia efforts, which is that you have to be intentional about what you want to make here. You have to be intentional about the friend-shoring efforts that you want to make, and that friend-shoring might be a few pennies a watt more expensive.
But the point of it is that as our industry continues to dominate all new stuff that gets added to the grid, then I just think that the electorate is very complex in the way in which it thinks about these issues. I think your report highlights that, and I think it’s just important for us to be sending the right signals so that investors understand where people sit.
Stephen Lacey: Can you give us an overview, MJ, of where America’s current greatest strengths are in manufacturing? What’s dominating? Where have we made the most progress?
MJ Shiao: So I’m not going to be able to say much about the broader manufacturing economy, which there are a lot more. There are many sectors that are far ahead of where the clean energy sector is in terms of on-shoring. I would say in terms of clean energy manufacturing, we have made a ton of inroads into certainly bringing solar module manufacturing back to the U.S. We have done a great job of increasing the amount of grid storage cells, battery cells, lithium ion in particular to the U.S. I think we’ve done a good job in terms of, and to Katherine’s very early point, we’ve always had a very robust wind manufacturing space in the U.S. I think some of the things that have been exciting to see too is a lot of the programs that have supported upstream extraction and critical mineral processing that are going to be important for especially battery supply chains and other energy technologies.
We have sometimes even technologies like cadmium telluride solar that are unique almost to the U.S. in a lot of ways in terms of production and use and provide an alternative to just kind of a single supply stream. So I think the innovation front in general is something that I think, again, Jigar has touched on. This is something where we should as Americans, and I think it is part of the American identity of being innovative and being a technology leader is something that we should be doing a better job of supporting. I mean certainly both in terms of federal policy going forward, but I think importantly as an industry that cares about its own future too.
Jigar Shah: Well, I mean one thing I would say is definitively a good news story is the battery supply chain. I think when you think about where we were in 2021, we had the Panasonic facility and almost nothing else. You had a couple of other facilities like SK in Georgia, but we are now on track to 270 gigawatt hours this year of battery manufacturing capacity. I think that number will be 400 gigawatt hours in a few years, and we’re on track to being an exporter of lithium from the United States by the early 2030s. So there’s some other critical minerals work that has to get done, the graphite and some of these other pieces, but those I think are continuing to move forward within the current administration. And so I think you’re going to increasingly see a lot of the battery separators and insulation and all the other pieces come together.
Then I think we also have really done a great job of the diversification of battery chemistries, whether it’s LFP batteries that are now under construction here in the United States, or whether it’s the zinc halide batteries that we funded with Eos and the eight to 12 hour battery storage range. You’ve got the form energy facility in West Virginia. You’ve got some of these other technologies that are only for data centers in the nickel zinc space that are being manufactured here. And so my sense is that on that side there is definitive movement and I think with the 10-year extension within OBBB, I think you’re going to see so much more domestic content in the battery space.
The one space that I continue to watch for is the grid space. So for years we really never made a lot of wire in a lot of the transmission equipment here. I think you see the TS conductor facility that they’re building in South Carolina. You see a couple of other wires facilities that are being onshored here in the United States. And so we have this great technology around advanced conductors, around dynamic line ratings, around some of that other stuff. And I think you’re starting to see those folks manufacture here, which gives me great joy, but I think again, that’s going to require a concerted effort by the industry, which includes electric utilities, to say, “You know what? We’re going to make, we’re going to buy equipment that’s made here, even if it’s 10% more expensive than getting it from another country.”
MJ Shiao: Yeah, I think Jigar touches on a great point with the grid technologies too. It talks to transformers and advanced transformers and switchgear and different types of high voltage switchgear that’s developed. There are huge supply chain bottlenecks in that space right now that is impacting not just the clean energy build out, but just energy build out of all generation types and the data center build out, and I think you’re starting to see that investment open up into domestic manufacturing of transformers and grid equipment that is also going to bring more innovative products to the market too.
Katherine Hamilton: So I spoke with Evan Gillespie, who is a partner at Industrious Labs, and it’s a nonprofit that works on a whole bunch of sectors. These are all the upstream sectors that provide the inputs to everything that clean energy needs, aluminum, steel, cement, chemicals, plastics, all of those pieces. I don’t know if you all know, but in 1980, the United States supplied one third of the aluminum in the entire world, and now we supply 1% of it. And steel is so important to everything else that we build and in order to bring steel back to the U.S., and to be clear, we have been shutting down steel mills. Michigan has no steel mills at the moment for the auto industry, and that’s crucial to the auto industry. In order to bring back more steel mills, and there was a big story today about Century Aluminum and Emirates Global Aluminum who are looking for sites to build their steel plants, their aluminum plants.
And the issue is where are they getting their electricity? And the best electricity they can get is clean energy. It’s cheaper and it’s quicker for them to get, but this is a bottleneck. So this is this whole circular bottleneck where you need electricity, massive amounts. As Evan said, “Eye watering amounts of electricity are needed to run these plants,” and I know that there were three steel mills that were slotted in Indiana to be fed with hydrogen that was like 10 gigawatts of electricity they needed. I mean, that’s just phenomenal. Maybe you could use thermal batteries instead. I’m a big proponent of them, but 40% of the cost of aluminum is energy, is electricity, and if you can get that from clean energy sources, which of course then we need to manufacture which need steel to be manufactured.
It’s a loop and a cycle that we need to make sure that we prop up and support and incentivize not just the clean energy manufacturing, but also all of those input manufacturers that go into those. And I think that’s something we need to think about because all of those, the data setter demand is just putting additional pressure on electricity needs.
Policy challenges and future outlook
Stephen Lacey: And that relationship is becoming more complicated, that circular relationship because of changes to the tax code, to permitting. MJ, how is that starting to complicate the changes in policy to building new supply, how is that complicating the picture for domestic manufacturers?
MJ Shiao: My perspective is that American manufacturers are being disproportionately impacted and almost punished for having the audacity to even try to build here, and it’s just exactly the things that we’ve been talking about. If you look at one of the core advantages that the U.S. has had versus a lot of other countries, it is that we’ve had relatively cheap energy, cheap electricity over the past couple of decades, and now we’re going to threaten that because of just political ideology, which makes zero sense. It just makes our manufacturers less competitive. We have tariff policy that’s purported to support domestic manufacturers, and yet it makes it way more complex to operate in manufacturing facility. One thing that I’ve heard recently is that there’s almost this perversity where it’s simpler to just buy an end component or a downstream component because you know exactly what tariffs are going to apply.
Versus to buy from a domestic manufacturer because that domestic manufacturer is balancing these imports and these domestic sources from all different sources and all different geographies, and they’re having a really tough time figuring out how they assess their costs and what to charge in terms of price. So they can’t give that certainty to their customers, whereas foreign manufacturers may have at least a simpler time doing that. And even just the tax credits that were adjusted in OBBB in terms of like 45X, some of the prohibitive foreign entity rules are the grayest and the least clear when you apply that to manufacturers. And so they’re going through a ton of diligence through their entire supply chain without really having the clarity they need to continue moving forward. So I think that’s kind of the challenge that I see moving forward with manufacturing cares that we say that we want it, but we’re just making it so difficult for people to do it.
Katherine Hamilton: I was talking to my business partner about this because we work with a lot of startups, we work with a lot of folks who are manufacturing, and there are really a couple of different things. One is that the Inflation Reduction Act really leveled the playing field for deep tech. So whereas we weren’t doing it before, we could start manufacturing deep tech. And so for some of those manufacturers, those that already got started, they’re going to stay, but other ones are saying, “We can’t really support this,” and if they have international investors, they’re going to go elsewhere to build. And the second thing of course that MJ raised up was tariffs because while we’re waiting, and the first piece was about FEOC. Look, if you have FEOC that’s been thrown in there and then you also have tariffs, there’s so much uncertainty that if you have international investors and if you haven’t stockpiled, you might as well go somewhere else to build. And that is exactly the perverse incentive that those are providing.
Jigar Shah: Yeah. And this is the tactics versus strategy conversation that I was having, which is that here in Australia, the conversations or I’ve had these conversations in the EU or the UK, they’re saying, “Look, Jigar, this is exactly opposite of what you guys were telling us in the 1990s.” When Bill Clinton was in power and you had Robert Rubin and Larry Summers and Tim Geithner, we all decimated our industrial strategy chops on purpose because the whole point was to reduce tariffs and to let all of the manufacturing go to wherever it was lowest cost to manufacturer, and we weren’t supposed to have any of these industrial strategy chops, and it was sort of a little bit of a black eye that Canada kept a little bit of theirs and Germany kept a little bit of theirs and they were supposed to not do that. It was an unlevel playing field.
We were all supposed to get rid of all that expertise. So now you’re asking us to build this expertise back up. You’re asking us to get smart around how we use tariffs and how we use production tax credits and how we use our free trade agreements with Japan and all this other stuff, and people are feeling a little bit of whiplash. And so then when you go down to the actual startup companies and their investors and that kind stuff and say, “Hey, this is the real reason why you should invest in these early stage companies,” and take them through the missing middle and do all this stuff, when you then go to the government officials and say, “What do you think we need to do to be able to support this re-industrialization,” right? They’re like, “We’re still in the middle of whiplash. We’re trying to figure out what our policies are.”
And the announcements at the high level are very good, to be clear, whether it’s by America or future main Australia or whatever it is. But then when you get down to the details, there are hundreds of people who have to rewire the programming that they’ve been given for 30 years, and those people don’t get reprogrammed quickly. These are a lot of people that work in treasury. There are a lot of people that work in places that move very slowly. And so the timing mismatch is real.
Stephen Lacey: Let’s dig a little bit deeper into what is certainly going to be Merriam-Webster’s word of the year, which is uncertainty, and I want to hear more about what manufacturers are saying about the decisions behind pausing or canceling factories. What kind of companies are hitting the pause button right now? Can you characterize where we are starting to see the most friction right now?
MJ Shiao: Yeah, I think in terms of just kind of crudely bucketing things, right? This certainly isn’t always going to be true, but in general, if the facility is operating or had imported its manufacturing lines, it’s going to come online. And we saw facilities like Nordex in West Branch, Iowa, LG’s facility in Holland, Michigan, and others that came online even as we’re in the middle of this big negotiation around reconciliation and OBBB, right? So there is a certain point where facilities are going to move forward and they’re going to try to make it work. I think where we do see pause is where there have been folks that have announced new facilities, and especially a lot of facilities that are looking upstream. They might have reached site selection or they’re kind of negotiating with different sites or different states, but they’re early enough in the process where at this point they’re going to just hit pause because they’re going to want to try to understand what this new world looks like before they put those hundreds of millions of dollars or billions of dollars into a venture.
And I think what concerns me there too is that that freeze, that pause is going to have a much bigger impact in the sense that at a certain point, things just, you’re going to hit inertia. Things don’t make sense. The manufacturers around the world aren’t just going to say, “Well, the U.S. is pausing its investment in upstream supply chains. Why don’t we pause as well?” Right? They’re going to continue to invest, they’re going to continue to innovate, and we’re losing that ability to regain, or in some cases maintain our lead, because of that.
Jigar Shah: The other thing I’d say though is I do think that we’re getting really confusing signals. So when you look at the Rare Earth Deal that the Trump administration just did with MP, I think there were even positive comments made by Tom Steyer and a few other folks on that. That is a really bad deal when you think about putting 400 million of equity from DoD into a company that has never made magnets before in its life, then I know of 20 other companies who I thought were far better off, and we did one deal when I was with the loan programs office for a group that continues to move forward on the magnet market. Everything else is radioactive right now. You can’t get another permanent magnet deal done because they’re saying, “What was this deal? Is there an office at DoD that I’m supposed to go to get $400 million worth of equity?”
Oh no, that office doesn’t exist. That’s Stephen Miller in the White House. Am I supposed to go to Apple and get an offtake agreement? Oh no, that was just like Trump was talking to Apple and Apple just sort of did the deal. And so some of this is also just like what signals are we supposed to be sent in this moment around critical minerals processing or rare earths processing? What are the rule sets? I mean, I think some people are like, “Well, maybe there’s just free money, unlimited money from DoD, and then DoD is also going to stockpile all the rare earths and just buy it from us on the other side.” But then when you go to folks and say, “Well, I’d like to replicate that deal, please,” they’re like, “No.” That was a weird custom deal that was done over signal.
Katherine Hamilton: Yeah, I think as MJ said, those that already got started, they’re going to keep going and it’s the ones that are just unsure of what FEOC and the tariffs are going to bring that may be at least pausing. I would say there are a couple of sectors that I’ve been interacting with and working with that I think are interesting. One is geothermal. Of course, a lot of geothermal projects come out of the oil and gas industry. They need data, which oil and gas has in spades. They need drilling and construction. They need people, they need engineering civil contractors. A lot of the equipment comes out of that industry. So I think geothermal has a pretty good path forward. Again, there’s an issue of steel and aluminum, so we need to kind of build that into the equation, but it certainly does learn from oil and gas.
And then the other is hydropower. There’s a company called NewStream that is water to wire. It’s 100% built in the U.S. in Alabama. It’s modular. Those are the kinds of equipment that can get us to clean energy very quickly if we allow them to thrive. And that was bought by Mesa, so they’re in good shape. So I feel like there’s some that are going to continue and do well. And I think that another thing we really need to think about is state policy. So we’ve been talking a lot about what’s happening on the federal side, but states can do a lot to help. They can provide incentives, they can provide training programs, often which are crucial because there are a lot of, as MJ said, if you’re building in a rural area, you need to train a lot of people that are local that may not have worked in this particular industry before.
Local permitting requirements are often the whole bottleneck to a project. So certainly states can help with that. States and locales can help with that. And infrastructure, giving access to infrastructure and all kinds of other energy facilities, whether it’s being able to have access to a substation to be able to interconnect, but also just making sure that from a state level that the policies on clean energy and what a state wants to do on clean energy and what it wants to deploy are aligned with the manufacturing that is occurring there. Because I think having that linked will make both sides stronger. It’ll make both clean energy and manufacturing, whether the manufacturing is clean energy or something else will make both sides stronger.
Jigar Shah: The one area that I’m seeing a lot of weakness in is in the green metal space. So I do think that when you think about the electricity cost assumptions that people had for that, and I think there is a definitive desire for AI to get that access to electricity more than green metals. And so I think you’re seeing a lot of green metals, people reevaluate their projects here in the United States.
MJ Shiao: I want to echo the point that Katherine made about state policy. I hesitate a little bit because state policy can’t always bridge the full gap if federal policy isn’t there, but it is a clear opportunity that I think a lot of the states can lean into more. And just my experience in the past and having to cite facilities and talk to different states, there was definitely a spectrum of states who are really good at knowing these industries and knowing how to attract energy manufacturers to their state and exactly what they needed and other states that honestly could use some help in terms of understanding what the industry needs. Some of that is within those economic development agencies, and a lot of that too is going to be on what the state legislators want to support. And I think a lot of them do want to bring more manufacturing back to the U.S. and specifically back to their their state.
And from that perspective, I think there are a lot of opportunities that don’t necessarily have to be just tax giveaways or grants or things like that, but can be like workforce training or helping companies convert manufacturing from one sector to another. That can be really interesting and can, again, help support the manufacturing that is interested in that area.
Stephen Lacey: All right, so to close this out, we’ve seen this incredible momentum now ramming headfirst into a very chaotic and contradictory policy environment. What are the big storylines that we should be watching headed into 2026? What’s the general sentiment in the manufacturing sector?
Jigar Shah: Well, I mean it’s very obvious that everyone is doing a deep dive of their supply chain now to figure out the FEOC rules and what the implications might be. I think you are seeing a very aggressive stance from countries from around the world to come attract our companies from the United States. I mean, some of whom were their companies who then were lulled over here by the IRA who are now going back to their home countries. And so I think you are seeing a tremendous interest from Canada, the UK, the EU, Australia and others to try to get some of that business and to bring it to other places. I think the other piece of this though that I’m watching for is a real interest in figuring out where the Department of Defense and some of the other players are going to sit, right? Because I mean, they have been very clear that this whole rare earth stuff, critical mineral stuff, battery stuff has been freaking them out and they want to have a more domestic supply chain that really meets their national security needs.
To date, it’s been half-hazard, in my opinion. I don’t quite see the signal from the noise on what’s been said, but I’m hoping that by 2026 there’ll be a real signal around what it is that we should be doing. I’ll give you an example. In the OBBB, there was a bunch of money taken from the loan programs office to the Department of Defense to stand up their loan program, but their loan program doesn’t actually function. So people aren’t sure whether they can get a loan out of that program for critical minerals. And so do you go to the loan programs office for a critical minerals loan? Do you go to the OSC for a critical minerals loan? It’s just not clear where that money is for people who want to do stuff here in the United States. And so my hope is that there’ll be a lot more clarity in 2026 around which office is responsible for which one of the priorities.
And nuclear is the same. We really haven’t talked a lot about nuclear, but the FEOC rules are actually quite disruptive to the existing supply chain for the AP1000. And so if you’re going to build 10 new AP1000s, which has been announced within the executive order, you’re going to have to shift those supply chains to be able to meet the FEOC rules. And part of the challenge with that is also the tariff policy between Canada and the United States.
So I’ll give you an example. When we announced that the trade deal between the United States and Japan, Toyota’s stock went up 10% and the big three automakers went down 10%. Why? Because it is more expensive to import the supply chain from Canada with the tariffs they have now for the big three than it is to buy a car from a Japanese-made auto and just pay a flat 15% tariff. And so there is a lot of cross-currency here and a lot of people are like, “Wait a second, what? Wait, what am I supposed to be doing?” And so there’s a lot of sorting happening right now, and I think 2026 will hopefully bring a lot more clarity.
Stephen Lacey: Katherine?
Katherine Hamilton: I spend a lot of time working on kind of the customer-sided resources on clean energy, and I am going to watch, even starting this fall, what’s going to happen to the economy and consumer prices. Rates, just prices of goods as the tariffs start hitting those, just to see if that changes the dynamic of how we think about the solutions that are going to work and how we think about even the manufacturing and all those jobs that that creates, because we’ve talked so much about the disconnect between the political decisions that are being made and the jobs that are on the ground. And I am wondering if some of the customer consumer impacts are going to also have an impact on the politics. I’ll be watching that this fall and next year.
Stephen Lacey: MJ, round us out.
MJ Shiao: So think I look at something that’s micro and then macro. On the micro side, it’s something that I know I’m going to get thrown into the policy basement for months to figure out all these new foreign entity of concern provisions that are OBBB and what do they mean and what does this and/or in this place need, and how does Treasury actually write rules that make this workable for the type of project deployments and suppliers that we want to see in the U.S.? So that’s going to be a very complicated and very lawyer heavy conversation. And then on the macro side, I just want to see how the environment continues to play out, where we just continue to shoot ourselves in the foot and promote, have policies that are totally antithetical to the things that they’re supposed to promote. Jigar talked about the confusing signals that you get from tariffs and trade deals that are happening.
And also just again, if we want AI dominance, we want data centers built, we want affordable energy for manufacturers in the U.S., we need to build out clean energy. We can’t stop clean energy from being built and deployed around the country. If we want manufacturers to come here and be cited here, we can’t destroy the domestic end market for those products and stop the deployment of those clean energy products too. So that’s something else that’s just like our policymakers, our folks in the White House and Congress going to get out of this campaign mode and snap out of that haze and start to govern to the priorities that they actually have purported.
Stephen Lacey: Well, if you get too dizzy and you’re sick of being in the analyst basement trying to figure this all out, and you want to go and try to get that dream job of being an ingot puller, I will give you a recommendation.
MJ Shiao: Thank you.
Stephen Lacey: MJ Shiao is the vice president of supply chain and manufacturing at American Clean Power. MJ, this was fun. Thank you.
MJ Shiao: It’s always fun and it’s great to see all of you.
Stephen Lacey: And Katherine and Jigar. Katherine is coming to us from vacation. Jigar is coming to us from a blitz of a trip in Australia. Thank you both so much. I know our listeners really appreciate you being on before we take a few week break. Jigar, have a good trip.
Jigar Shah: Thank you. MJ, don’t wait another 10 years to come back on.
MJ Shiao: That’s up to you and Stephen and Katherine. You know?
Stephen Lacey: Katherine, don’t get lost in the mountains there in the Adirondacks. She’s there to get lost.
MJ Shiao: Yeah, maybe save some space for us, Katherine.
Katherine Hamilton: I would like to. Thank you.
Stephen Lacey: If you want to hopefully find your way with us, keep listening to this show. We’ll be back in a few weeks. Open Circuit is produced by Latitude Media. Jigar Shah and Katherine Hamilton are my co-hosts. Sean Marquand is our technical director. He wrote our theme song. The show is produced and edited by me and Latitude Media, supported by Prelude Ventures. And if you want to go over to our website, you can find all sorts of editorial goodies, our newsletters, a lot of articles on all the stuff that we talk on this podcast. You could just hit the subscribe button right there and do us a favor and give us a rating and review. We appreciate all the awesome feedback that we have gotten, and your public support of the show goes a long way to helping others find it as well. And we’ve got transcripts there if you want to cite what we have been talking about. So a lot of people have requested transcripts and we’ve got them there for you at Latitude Media. We’ll catch you soon. Thanks everybody for being here. We’ll talk to you later.
