‘It’s just crazy’: How the U.S.-China energy race imperils the climate fight

Degrees of separation

U.S.-China tensions are producing small temblors on a regular basis.

The Department of Homeland Security last week raided U.S. facilities operated by China’s Jinko Solar Holding Co. Ltd., one of the only Chinese solar panel makers to open a factory on U.S. soil. The agency has not provided a reason for its investigation. In Texas, the state Senate last month voted to ban Chinese nationals from owning land. Lawmakers took a similar measure last year in response to a Chinese tycoon’s purchase of 140,000 acres near Laughlin Air Force Base to build a wind farm.

Even major U.S. companies that plan to build clean energy factories at home are getting caught in the China crossfire.

A prime example is Ford, whose plans to build a $3.5 billion electric vehicle battery plant in Michigan have taken criticism from lawmakers including Sen. Marco Rubio of Florida, the top Republican on the Senate Intelligence Committee, and Senate Energy and Natural Resources Chair Joe Manchin (D-W.Va.). They object to Ford’s decision to license technology from China-based Contemporary Amperex Technology Co. Ltd., the world’s largest producer of electric vehicle batteries.

Virginia’s Republican governor, Glenn Youngkin, had rejected an effort to have Ford place the battery plant in his state, citing the deal with CATL. In an interview with Bloomberg in January, Youngkin called the battery-maker “a front for a company that’s controlled by the Chinese Communist Party.”

Ford’s plant is one of a host of projects that stand to benefit from the subsidies in Biden’s climate law, including federal tax breaks for electric vehicles built in North America.

Earlier this month, Rubio urged the Biden administration to investigate a separate deal in which Ford is collaborating with a Chinese company to build a nickel processing plant in Indonesia. (Nickel is a key mineral for electric vehicle batteries.) That arrangement raises concerns about “Ford Motor Company’s possible complicity in human trafficking and forced labor,” Rubio wrote to the acting head of U.S. Customs and Border Protection.

A Ford spokesperson rejected Rubio’s accusations at the time, saying: “These assertions are obviously absurd and don’t merit response.” The company said it enforces a code of conduct for its suppliers, including on issues like human rights.

GOP lawmakers are also demanding that the Energy Department terminate a $200 million grant proposed under 2021’s bipartisan infrastructure law to Microvast Holdings Inc., a Texas-based battery technology company that has operations in China. Some Democrats have raised questions about the deal, too. The department has said it’s still vetting those grants.

Microvast executives call those fears misplaced, saying their objective is to help the United States compete and maintain global supply chains.

Boosting U.S. clean energy companies is a prime goal of the 2022 climate law’s Buy American provisions. That has angered European governments whose own exports can’t share in the incentives.

The climate law, known as the Inflation Reduction Act, also includes targets for ensuring that the U.S. or its closest trading partners provide the critical minerals for electric vehicles’ batteries. And it bars the use of battery components from “foreign entities of concern” — namely, China.

But realistically, Chinese companies are going to be involved if the U.S. wants to import certain kinds of battery minerals from places like Indonesia.

“The question is really the degree to which we can usefully separate China — the People’s Republic of China — and then Chinese firms,” said Hendrix of the Peterson Institute.

Sen. Angus King (I-Maine) said lawmakers need to take a case-by-case look at the involvement of Chinese investors and businesses in energy projects.

“I am very concerned about the threat of China on a whole lot of fronts — military, cyber, theft of intellectual property — but I don’t like the knee-jerk reaction to every arrangement,” he said. “I know companies in the U.S. that have Chinese ownership that are very responsible. They invest, they create jobs.”

Manchin, who crafted the climate law’s domestic requirements, said he doesn’t object to U.S. and Chinese companies doing business together. But he said the U.S. can’t allow China to control access to certain critical resources.

“They have dominance in so many areas that never should have happened,” Manchin told POLITICO.

Some states are forging ahead with China-linked energy deals despite potential flak from Washington. Ohio recently announced a joint venture between Chinese panel-maker Longi Solar and Invenergy LLC, a Chicago-based solar developer, and Michigan has embraced the Ford deal with CATL.

“We need to get the politics out of this conversation,” said Michigan Gov. Gretchen Whitmer, a Democrat, at a recent investment conference outside Washington.