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Washington Watch: Biden speeding up EV lithium battery funding in response to Russia, supply-chain inflation

The Biden administration will speed up, via grants to the private sector, funding for U.S.-made lithium ion batteries used in electric vehicles as part of a broader push to distance the country from Russian energy and try to speed up a slow supply chain for EVs.

The Department of Energy on Monday announced the disbursement of $3.16 billion to support battery manufacturing, processing and recycling via the grants. Officials said they were working with states and the private sector to direct the grants to U.S. firms — a key aim of Biden’s pro-jobs domestic agenda — and not allow funding to flow to global or multinational firms that are predominant in the space, including Chinese makers. A White House official estimated that up to 30 grants might be approved, based on early demand.

The roughly $3 billion, which features a government-private matching incentive, is part of the more than $7 billion earmarked in last year’s bipartisan infrastructure law.

“What we’re announcing today is really a fully domestic battery supply chain with investments in battery recycling that’s actually going to grow the kind of circular economy we really need,” said Gina McCarthy, the White House’s national climate adviser.

“So these resources are about the battery supply chain, which includes producing recycling critical minerals without new extraction or mining,” she said.

The DOE grant funding is not directed to the mining companies extracting the lithium, cobalt, nickel and graphite used for batteries. Such batteries are also vital to solar and wind
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expansion. Miners have said permits are what’s largely holding up the extra extraction of these key inputs.

As such, lithium prices logged a 77% increase during 2021, and nickel prices have roughly doubled over the past 12 months. Gasoline
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futures prices, meanwhile, are up over 78% from where they stood a year earlier as the Russian-Ukraine conflict and a post-COVID-19 economic recovery roils energy markets.

Other officials emphasized that the timing is linked to redoubled emphasis of tapering dependence on fossil fuels
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as Russia’s attack of Ukraine stretches into a new month.

“I would be remiss if I didn’t put this in the context of the broader challenges of energy security and independence that the war in Ukraine has pointed to,” said Brian Deese, director of Biden’s National Economic Council.

“And we’ve seen even in just recent days, [Russian President Vladimir] Putin trying to use Russia’s energy supply as a weapon against other nations,” he said. “And that underscores why it’s so important that we in the United States… underwrite our own energy security, and building a reliable supply chain for batteries and storage and electric vehicle
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production is among the most important things that we can do…”

Biden in March announced he would authorize the use of Title III of the Korean War-era Defense Production Act (DPA) to rapidly step up U.S. production of minerals for electric vehicle and storage batteries.

Deese said Monday’s DOE announcement should be considered “complementary” to the latitude given the president under the DPA rules.

The officials were asked if this boost to supply could prove inflationary given that high inflation has crept into several parts of the economy.

“The failure of our supply chains in the automotive sector, and semiconductors, over the course the last 18 months has not only hurt the economy, but it is added to price pressures. A third of measured inflation, headline inflation, last year was because of cars and that was because a lack of input components, principally semiconductors, kept automakers from being able to keep up with that demand,” Deese responded.

“And so one of the lessons coming out of this crisis is that we need to build more resilient supply chains. And by doing so, we will actually increase the productive capacity of our economy on the supply side and actually reduce price pressures in our economy over time,” he said.

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