Allison Bailey/NurPhoto via AP
President Joe Biden is seen delivering remarks on environmental conservation on May 11, 2023.
The green energy transition is the most monumental long-term logistical operation most people alive today have ever contemplated. At the most elemental level, it demands an unprecedented quantity of stuff: giant gobs of materials to produce and install renewable energy, transmission lines, zero-carbon buildings and modes of transportation, charging networks, and much more.
This imperative sits uncomfortably with today’s supply chains. Some of the materials needed are currently used for other purposes, or have never been demanded in these amounts. Automakers are becoming mining companies, in a frantic search for enough metals used in electric vehicle batteries. Utility firms are already seeing supply constraints, and wind energy is expected to be hampered by bottlenecks, both for key components and the ships that install turbines offshore.
Through several industrial policy initiatives, the Biden administration has supplied funding to power the transition, some of which, like for minerals production, is intended to break those supply barriers. Solar investment is due to outpace oil investment this year for the first time, and manufacturing construction has soared, including in sectors the U.S. had abandoned in decades past. That should remedy some of the logistical hurdles.
But the administration can do more than offer dollars. It can use its authority to mobilize the nation, prioritize the energy transformation, and adjust where to target support over time.
A new report from Evergreen Action, a close adviser to Democrats on the Inflation Reduction Act, highlights one tool that could be leveraged for this purpose: the Korean War-era Defense Production Act. This obscure law got renewed attention during the pandemic, when it was employed over 100 times to ensure the production of personal protective equipment and vaccines to fight COVID-19. Evergreen shows how the DPA can also be used for the green mobilization, mostly without additional congressional action.
“This would lay the foundation for the long view of the clean energy transition, we’re talking about today to 2050 and beyond,” said Trevor Dolan, Evergreen Action’s policy lead for industry and workforce, who authored the paper.
A year ago this month, the Biden administration invoked the DPA to accelerate production of several technologies: solar photovoltaic cells, electric grid components, heat pumps, building insulation, electrolyzers that make green hydrogen, fuel cells for electricity, and platinum group metals used in energy. A prior invocation involved large-capacity batteries. However, these declarations were limited in scope, primarily using the DPA as a direct investment vehicle. Moreover, it only provided modest funding (around $250 million in the IRA) for heat pumps, with nothing for the other categories.
The Evergreen paper, which is loaded with prior precedents and examples reinforcing presidential authority, expands the landscape of potential action. “This is worlds away from a grant program,” Dolan said. “We’d be using it for a nationwide industrial mobilization.”
The DPA was informed by FDR’s preparations for World War II, in which goods factories were hurriedly retooled into suppliers of the munitions, planes and tanks necessary to defeat the Nazis. As hostilities broke out on the Korean peninsula in 1950, the DPA was introduced to make that process more formal and less ad hoc. It was initially far more expansive, giving the president powers to seize private property, fix wages and prices, ration goods, and end labor disputes. Those titles were repealed, but the DPA retains significant power, reinforced by numerous legislative reauthorizations.
Under the DPA, the president can issue priority-rated contracts that private businesses must honor before their other orders.
What comes through in the paper is how commonly federal agencies employ the DPA. On average the Pentagon issues roughly 300,000 DPA orders per year in relation to procurement. But as we saw with COVID, the DPA’s mission to facilitate production “necessary for national security” is not confined to the military. It was used to respond to the pandemic, and last year’s baby formula crisis. And clean energy is well within its ambit.
Text added to the DPA statute in the 1970s expanded national defense preparedness to include “the availability of domestic energy supplies,” and in 2009 it was further embellished to say that “domestic energy supplies should be augmented through reliance on renewable energy sources… more efficient energy storage and distribution technologies, and energy conservation measures.”
In early 2001, President Clinton invoked the DPA to require natural gas companies to supply Pacific Gas & Electric, which was facing cutoffs from suppliers due to creditworthiness challenges. This was done to protect the energy needs of millions of Californians. (George W. Bush overturned this, leading to rolling blackouts and the PG&E’s bankruptcy.) Clinton’s rare use of this power to require private industry to produce and sell critical supplies offers a road map for the Biden administration.
Under the DPA, the president can issue priority-rated contracts that private businesses must honor before their other orders. These contracts must be fulfilled on regular terms. The government can even oblige one private firm to supply another, as Clinton did in the PG&E case. And through the concept of “extendibility,” those priority contracts can move up the supply chain. If the president makes a priority order of heat pumps, for example, all suppliers to heat pumps would have to prioritize that production too, accelerating the acquisition of materials.
The Department of Energy, which Evergreen sees as the primary user of this authority, can make priority purchases through its current procurement needs, regulatory framework, and existing funding. Dolan doesn’t think that specific appropriations would be needed, though he said that requires some further study.
In practice, this could help overcome the risk of an overburdened supply chain for materials to create solar panels, wind turbines, energy storage devices, and grid components. In many of these industries, specific component parts have multiple uses; recycled materials used for fiberglass insulation is also used in bottling of beer and wine, for example. DPA priority purchasing would help ensure that the energy transition gets access to those materials first.
Priority purchasing can also be used after a natural disaster. FEMA routinely uses DPA authority to acquire materials in an emergency, and the Department of Energy also has an emergency response office. These rebuilding projects could be specifically used for cleaner and more resilient energy systems, like with grid-enhancing technologies that more efficiently transport electricity. In this sense, it would reinforce the “build back better” ethos of the administration.
As a procurement power, priority purchasing could also be used to favor companies with better labor or environmental practices. It can also be used to help generate industrial clusters that make production more efficient, while prioritizing downtrodden communities for those investments. And because the DPA isn’t enforceable for overseas suppliers, it necessarily preferences domestic producers. Natural disaster prioritization could similarly be done with an eye to getting the best and most resilient technologies for the most vulnerable communities first.
A second DPA tool known as allocation could be used to procure materials or equipment and then distribute them to support manufacturing expansion or the retooling of facilities. Allocation can also be used to supply facilities and energy producers after natural disasters. However, as Evergreen describes it, allocation depends on Congressional appropriations, so its usage would be limited to areas where funding is already out there.
These short-term powers operationalize the oft-remarked idea of the president declaring a climate emergency. If you believe that climate change is the moral equivalent of war, a wartime mobilization provision is appropriate to prevent future supply crunches and facilitate production and deployment. As Dolan said, “it is an opportunity for Biden to continue moving forward on clean energy goals, and build critical infrastructure for the clean energy economy.”
We will be building out the energy transition for the next three decades, and industry studies offer a method to do that with eyes open, rather than blindly.
Over the longer term, the government faces a different challenge: knowing whether its efforts are working. The Department of Energy in particular has done an enormous amount of work studying this, with thirteen separate supply chain reports and a series of “liftoff” reports for emerging industries. But this long-term planning faces one major obstacle: businesses resist sharing information with competitors and the government.
The DPA can help here too, as it can require information sharing in a couple ways. Through Section 708 power known as voluntary agreements, the government can facilitate collaboration between firms to identify supply bottlenecks, guide where priority purchasing or investment might be needed, coordinate regional development of industrial hubs, and generally maximize output and ensure that clean energy goals can be met.
This authority was used during COVID to assemble personal protective equipment manufacturers to get masks and gloves and other supplies distributed efficiently. Dolan cited a more relevant example: bringing together trucking industry representatives, government officials, and labor groups during the 2021-22 supply chain crisis, to establish over 100 new registered apprenticeships to deal with a labor shortage.
In Evergreen’s conception, voluntary agreements would not merely serve as a cartel of industry executives demanding where government resources get deployed. They would become more like a stakeholder convening, through a process with public meetings and input, ensuring that long-term planning for critical industries keeps worker and community benefits top of mind.
“The opportunity to get labor and environmental justice groups into a room with industry is really powerful,” Dolan said. He added that the Department of Justice and the Federal Trade Commission would typically have oversight over voluntary agreements to prevent abuses of market power.
Another option under Section 705 of the DPA enables the government to perform industry studies, compelling firms to share all information needed to assess the capabilities of a particular industrial base, including through subpoena. This could fill in the gaps in the Department of Energy’s prodigious work, in areas where companies were reluctant to provide full details. “The government needs radically increased visibility into private markets if it is to meaningfully contribute to greater resilience,” Todd Tucker of the Roosevelt Institute noted in a May 2022 issue brief about Energy’s supply chain reports.
Ongoing industry studies would allow the government to map the energy supply chain with granularity, and monitor shifts over time. The IRA is largely tech-neutral and delivered through tax credits, but there is enough discretion over some pockets of funding that agencies could target spending in response to new information. And industry studies that identify issues can inform future policy responses.
This is how most other countries engage in industrial policy, as Robinson Meyer explained recently. We will be building out the energy transition for the next three decades, and industry studies offer a method to do that with eyes open, rather than blindly.
“We have done a fantastic job allocating resources,” Dolan said, “but this is a long-term series of investments. Flooding the zone with money is step one, but knowing where the money goes to adjust policy is next.”
