LONDON (AP) 鈥� Norwegian startup Freyr will first build batteries to power electric vehicles and store clean energy in a remote town near the Arctic Circle. Up next? An Atlanta suburb.
That's because a offers generous tax credits 鈥� up to 40% of costs 鈥� in what is a 鈥渕assive, massive incentive鈥� for producing in America, CEO Tom Einar Jensen said.
Across Europe, companies seeking to boom 鈥� churning out everything from solar panels to windmills and EV batteries 鈥� are making similar calculations, weighing up the U.S. Inflation Reduction Act's $375 billion in against a fragmented response that European leaders have been scrambling to patch together for months.
The law aims to kick-start the U.S. transition away from climate-changing fossil fuels with made in North America.
It blindsided Europe when it became law in August, putting the U.S. on course to eclipse the continent in the global push to reduce carbon emissions and over rules that favor American products, threatening to suck green investment from Europe and spark a subsidy race.
The aimed at ensuring least 40% of clean technology is produced in Europe by 2030 and limiting the amount of strategic raw materials from any single third country 鈥� typically China 鈥� to 65%. It on making Europe-sourced minerals for EV battery manufacturing eligible for U.S. tax credits.
Executives, simply looking for the most money they can get to boost their businesses, are hailing the U.S. program's simplicity. Some complain that the , putting Europe at risk of falling behind in the green energy transition, notably as the .
鈥淲hile the United States are catching up thanks to the Inflation Reduction Act, Europe is more and more lagging behind,鈥� Volkswagen鈥檚 board member overseeing technology, Thomas Schmall, posted on LinkedIn. 鈥淭he conditions of the IRA are so attractive that Europe risks to lose the race for billions of investments that will be decided in the coming months and years.鈥�
Volkswagen said last month that its new PowerCo battery business would build its first gigafactory for EV battery cells outside Europe in St. Thomas, Ontario 鈥� following two others under construction in Germany and Spain. The Canadian plant, set to open in 2027, is expected to benefit from the IRA because of provisions for U.S. neighbors and and Mexico.
Meanwhile, the German auto giant has reportedly put on hold a decision for a battery plant in Eastern Europe while it waits for more information on the EU's plan. Volkswagen didn't respond to a request for comment.
Another Scandinavian battery startup, Sweden鈥檚 Northvolt, was poised to build a third gigafactory, and the first outside its home country, in northern Germany. The U.S. law led it to hit pause, and it's looking over the new EU proposals before deciding next month where to put that facility.
The EU keeps a to avoid distorting competition in the 27-nation bloc's single market, where some countries 鈥� like 鈥� are much larger and richer than others. But to compete with the U.S., the EU relaxed those restrictions for clean industries, marking a fundamental change for Brussels from its long-held view that government should take a hands-off approach to free markets.
European business leaders say the U.S. incentives could upend the global ways of producing technology.
"奥别鈥檙别 but sometimes the engine or other parts come from Europe. The IRA puts this model in question because it requires manufacturing to take place in the U.S.," said Luisa Santos, deputy director general of BusinessEurope, a Brussels-based lobbying group.
鈥淵ou might have more proximity, but the cost will be much higher鈥� if global supply lines disappear, she warned. "Will the consumer be willing to pay?鈥�
Italian energy giant Enel credited the IRA when it announced plans in November to build a massive solar panel factory in the U.S.
Enel's factory initially will be able to churn out 3 gigawatts of , ultimately expanding to 6 gigawatts. The plant is expected to be operating by the end of 2024.
It's not just Europe. Companies in Asia also want a piece of the IRA.
South Korean tech giant LG last month unveiled plans to build a $5.5 billion battery manufacturing , which it called the biggest single investment ever for a standalone battery manufacturing facility in North America.
By , LG 鈥渁ims to respond to the fast-growing needs for locally manufactured batteries on the back of the IRA,鈥� the company said.
The factory is scheduled to start by 2025 and batteries for energy storage systems a year later.
For its part, Freyr is expanding its footprint from its first battery gigafactory being built in Mo i Rana in northern Norway to a second in Coweta County, Georgia, each costing $1.7 billion.
鈥淚t鈥檚 important for us to produce batteries on both sides of the Atlantic because our customers and our supply chain partners want us to be present in both places,鈥� CEO Jensen said at an opening ceremony for a pilot plant in Mo i Rana.
He said in an interview that the IRA provides up to $45 in tax credits toward the typical cost of making a battery, which is $110 to $115 per kilowatt hour.
The for standalone energy storage systems like the ones that Freyr makes 鈥� big banks of batteries that utility companies use to store renewably generated electricity 鈥� that the company moved the U.S. completion date up by a year to 2025, Jensen said.
Freyr is now trying to figure out 鈥渉ow we can fast-track it even further鈥� because 鈥渙ur customers are really screaming for locally produced" batteries, which, Jensen said, allow them to get their own incentives.
鈥淭hat, of course, increases demand for our product,鈥� he said.
Kelvin Chan, The Associated Press
