The Inflation Reduction Act is Helping Charge the Transition to Electric Vehicles
By: 2022 DC Fellow Leilani Gonzalez
August 16, 2022. A moment when the Inflation Reduction Act (IRA) officially signaled to energy suppliers and producers nationwide that a new wave of domestic manufacturing and renewable energy production was underway.
The Environmental Protection Agency states that the transportation sector is the largest single source of harmful greenhouse gas emissions. As a result of the IRA, individual drivers and businesses can electrify their vehicles more easily than ever before and reduce their carbon emissions. With sleek designs, no toxic tailpipe emissions, and reduced fuel and maintenance costs, electric vehicles (EVs) are becoming more mainstream than ever. Recent federal investments in charging infrastructure and clean energy technology have created a pathway for widespread EV adoption.
However, two major factors will continue to impact the EV industry and must be considered for it to continue to grow — onshoring the critical mineral supply chain and modernizing the electrical grid. Both of these factors are interconnected through the lifecycle of an electric vehicle battery and are partially addressed by the IRA.
Onshoring the Critical Mineral Chain
With the recent enactment of the IRA, the EV market requires an increase in domestic manufacturing to meet the critical mineral requirements within the clean vehicle tax credit. As more American-made vehicles are on the road and automakers are determined to onshore EV battery production, we are likely going to see a rapidly increasing uptick in advanced manufacturing. EV batteries are usually composed of critical minerals, often including lithium, nickel, cobalt, manganese, and graphite. The increased domestic production of EV Lithium-ion (Li-ion) batteries also allows battery recyclers to retain up to 95% of the critical minerals in EV batteries and keep those minerals in the United States for future use.
Through its first use, the EV battery serves as the sole power source of the vehicle. Then, once depleted, the battery can be broken down and have a second life as an energy storage source. The Union of Concerned Scientists estimates that used EV batteries could deliver an additional 5 to 8 years of service in a secondary application like stationary energy storage. Finally, at the end of life, the battery can be recycled and remanufactured into a new EV battery. This approach creates a closed-loop lifecycle of EV batteries that will likely provide greater opportunities for onshore critical materials and second-life storage stations buildout. We can use Li-ion batteries for multiple applications with a closed-loop battery system to improve our transition to a clean energy economy.
Modernizing the Electrical Grid
Utilities and the grid are also integral parts of the EV supply chain. As energy demand continues to rise and more EVs penetrate the automobile market, developing modernized distribution and storage systems will help improve grid stability so that power is consistently accessible. Energy storage and smart charging through EV batteries can also help balance peak energy demand while reducing the load on the power grid.
Extreme weather patterns will result in the need for more short-term storage and grid-scale storage solutions. As a result, the IRA includes tax credits for clean sources of electricity and energy storage and roughly $30 billion in targeted grant and loan programs for states and utilities to accelerate the transition to clean electricity.
One way batteries can help reduce power outages during critical grid drawbacks until stability is restored is energy storage. With the current projections of EV market penetration, the backup storage volume could grow endlessly with the increasing number of used EV batteries that will be available for secondary lives as grid-strengthening storage sources. Battery storage could also be co-located with renewable energy plants, either to smooth out the real-time power supplied by wind or solar output or to shift the power output to other times of the day when the renewable power generation is low.
Conclusion
Through the IRA’s support, clean energy producers, individuals, and companies looking to go electric have the opportunity to invest in electrification efforts by implementing second-life applications of depleted EV batteries. By increasing critical mineral extraction and refinery in the United States, the industry will be well-suited to meet the projected market demand in the coming years. These changes will create further energy storage and recycling opportunities with closed-loop systems.
Federal and state regulatory action must continue to coordinate so that EVs and their batteries can serve as a pathway to improved grid reliability and resiliency. The EV supply chain also needs to swiftly utilize the incentives in the IRA for widespread EV adoption and a more modernized grid.
About the author
Leilani Gonzalez is a former energy and environmental congressional staffer who’s now shifted her focus to any and all federal action related to decarbonizing transportation. Leilani is the Policy Director at the Zero Emission Transportation Association (ZETA), a public interest non-profit whose mission is to reach 100% EV sales by 2030.
