The US Loan Office plans to loan a record amount of $9.2bn to build electric vehicle batteries by Ford and South Korea’s SK On. Washington is pushing to create domestic supply chains to reduce its industrial dependence on China.
The US Department of Energy’s conditional loan is part of an investment drive by the US government to invest in clean energy that has been boosted by the passage of the Act for Reducing Inflation last year.
Ford and Battery Maker SK On will build three new factories in Kentucky and Tennessee to supply its growing line of electric vehicles.
The $9.2bn is the largest loan in the history of the Loan Programs Office. This was a previously obscure division within the Energy Department’s office, which received extra lending authority under the IRA.
The head of the LPO Jigar shah said on Thursday that the effort was in support of President [Joe] Biden’s Investing In America agenda, which aims to bring domestic manufacturing back to the United States for technologies critical to achieving a clean energy future and a transportation future.
According to the DoE, three battery plants will allow for more than 120 gigawatt-hours of US battery production each year. According to the DoE, the energy generated by the batteries will replace more than 455mn gallon of gasoline a year — or roughly 0.3% of US gas demand.
Ford and SK have announced that they will invest $11 billion in the construction of an electric vehicle assembly factory, battery factories and suppliers in Tennessee along with two battery plants located in Kentucky in 2021.
These factories are located in the South, in a region known as the “battery belt”. The IRA has made $369bn available in tax credits to help boost the economy.
Ford announced in February that it would manufacture batteries containing technology from China’sCATL at a new $3.5bn facility in Michigan. This move caused political backlash among some Republican politicians.
The company announced last month that it would reducefuture investment in its China-based businesses, where the marketed share of its business has decreased since 2016.
The LPO issued 31.6bn loans in fiscal 2022 with an estimated loss of $1bn. This is well below the set aside $5bn for losses, and at a rate comparable to commercial institutions.
The LPO announced earlier this year that it had offered a conditional $2bn loan to Redwood Materials to build a battery materials factory; a partial $3bn loan guarantee to Sunnova Energy to finance a solar-powered battery storage project, and an $850mn loan commitment to battery manufacturer Kore Power for the construction of a plant in Arizona.