SAFE Report: Electricity Shortfalls Impede IRA’s Materials Production Goals

(May 10, 2023) – Today, the SAFE Center for Strategic Industrial Materials (C-SIM) released a report examining how recent domestic policies designed to promote the energy transition and reduce carbon emissions are increasing demand for aluminum used in many of the needed technologies but without addressing supply-side challenges, specifically the affordable electricity generation and distribution required to sustain domestic aluminum production.

Recent legislative incentives to produce more solar panels, EVs, electrical charging infrastructure, and other clean energy transition products will require more domestic primary aluminum. However, the series of bills do not address the main obstacle to producing primary aluminum: access to ample supplies of affordable energy.

“Aluminum embodies many of the opportunities and challenges facing America’s broader energy transition and reindustrialization efforts,” said SAFE Founder and CEO Robbie Diamond. “Recent landmark legislation provides a good start but, as this report makes clear, we face the unfinished business of generating and distributing more clean and affordable electricity to power these additional vehicles, factories, industrial facilities, and supporting infrastructure.”

The SAFE “Legislative Analysis for the U.S. Aluminum Industry” report examines the details of the 2022 Inflation Reduction Act, the 2021 Infrastructure Investment and Jobs Act, the Defense Production Act, and the 2022 CHIPs Act. These new laws will cumulatively increase demand for aluminum in significant ways:
• The IRA incentivizes more production of solar, batteries, and electric vehicles, the latter requiring hundreds of pounds more aluminum (per automobile) compared to traditional internal combustion engine vehicles.
• The IIJA funds $73B for aluminum-heavy electric infrastructure and $5B for a nationwide network of EV charging stations.
• DPA supports the domestic production of strategic materials, including aluminum, used in large-capacity batteries used in EVs and military systems.
• CHIPS Act sets aside $39 billion in direct federal assistance to produce semiconductors in the US, which is the fastest growing demand share of high purity aluminum discs.

These laws do offer some supply-side support, specifically the vitally important manufacturing production tax credit (45X) and investment tax credit (48c). Unfortunately, the demand-side drives for aluminum outpace these few supply-side investments. For comparison, the IRA contained sourcing provisions to incentive critical minerals production within the U.S. and among reliable trading partners to address the added demand for advanced batteries. The IRA did not contain comparably scaled support for strategic industrial materials, including domestic aluminum production.

“With billions allocated to transition the U.S. economy away from fossil fuels, U.S. industry will inevitably fill demand for aluminum from somewhere,” said Joe Quinn, Director of the Center for Strategic Industrial Materials. “Whether demand is met domestically or in allied countries or from foreign entities of concern remains up to U.S. policymakers.”

In the coming months, C-SIM will release additional reports examining trade policy options and global best practices for primary aluminum production. This series of policy papers on issues impacting domestic primary aluminum production are designed to advance the security and diversity of strategic material supply chains in North America.