This city in the Arctic Circle is anticipating a green energy boom. Then came Biden’s economics.

In Mo i Rana, a small Norwegian industrial town on the cusp of the Arctic Circle, a cavernous gray factory stands empty and unfinished in the snowy twilight – a monument to unfulfilled economic hope.

Electric battery company Freyr was at some point building this massive facility when the Biden administration’s sweeping climate bill passed in 2022. The inflation-reducing bill, perhaps the most important climate legislation in history, promised an estimated $369 billion in Tax credits and grants for clean energy technology. over the next decade. Its incentives for battery production within the United States were so generous that they eventually… Help prod Freyr is temporarily shutting down its facility in Norway and focusing on setting up shop in Georgia.

The startup is still raising money to build the factory as it tries to prove the feasibility of its key technology, but it has already changed its positioning Business registration To the United States.

Its axis was a symbol of the larger global tug of war as countries compete for companies and technologies that will shape the energy future. The world has turned away from decades of focus on private competition and plunged into a new era of competitive industrial policy – ​​one in which countries are introducing a mosaic of favorable regulations and public subsidies to try to attract green industries such as electric vehicles, storage and solar energy. And hydrogen.

Not behind us Provides a stark example of the ongoing competition. The industrial city is trying to establish itself as Norway’s green energy capital, so Freer’s decision to invest elsewhere came as a blow. Local authorities originally hoped the plant could attract thousands of new employees and residents to their city of about 20,000 people – a tempting promise for a region suffering from an aging population. Instead, Freer employs only about 110 people locally at its testing plant, which focuses on technology development.

“The inflation control law changed everything,” said Ingvild Skogvold, managing director of Ranarijönen Naringsforning, a chamber of commerce group in Mo i Rana. The national government’s response was wrong.

“When the world changes, you have to adapt, and we have not been effective enough in our response to the IRA,” she said.

The ruins extend far beyond Mo i Rana. There is a growing feeling that both the EU and Norway, which is not an official member but follows many EU policies, could fall behind in the clean energy race.

Batteries, essential for green energy grids and electric cars, provide an important case study. China owns 80 percent of the world’s battery production capacity. That has left countries with “an increasing sense of vulnerability about supply concentration,” said Antoine Vagnor-Jones, head of trade and supply chains at Bloomberg New Energy Finance.

Timing is crucial. Countries and companies that build capabilities first can seize critical minerals and talent, and move ahead to such an extent that it is difficult to catch up.

Companies had been steadily adding battery capacity to the pipeline in Europe before the inflation control law was announced in August 2022. Track company announcements By standard mineral intelligence offerings. But after the law was announced, European capacity had largely stabilized, and American capacity was expected to rise and eventually be surpassed.

“We are starting to see these effects very quickly,” said Frederik Persson, president of BusinessEurope, the continent’s largest business group.

He said the companies were driven by a variety of factors, including higher energy prices, more red tape in Europe, and increased certainty in the United States about the future of the clean energy market.

For countries like Norway, falling behind could mean remaining economically dependent on the oil and gas sector, which appears to be heading for decline as the world shifts toward clean energy.

“We see on the horizon that oil and gas prices will fall,” said Ole Kolstad, managing director at Rana Utvikling, a business development office in Moi Rana. “We have to be part of this transformation.”

Mo e Rana is no stranger to shifts in global industrial development – ​​the oscillations between state aid and free market principles have been central to her story.

The city’s industrial legacy began in earnest in the early twentieth century, when a company… His relationship with American inventor Thomas Edison They built infrastructure and created a railway line to what was then a small mining settlement.

After World War II, the Norwegian government – seeking to secure domestic supplies of steel – It built large state-run ironworks In Mo i Rana, it brought with it employment and population explosion.

But the era of state-subsidized industry collapsed in the 1970s, when a production glut led to a collapse in steel prices. by Late eightiesThe Norwegian government decided to privatize production in the city of the Arctic Circle.

Norway carefully managed the transition. A national library was established, creating public sector employment (it uses the mountains bordering the local fjord to store naturally climate-controlled books). The government helped re-educate steelworkers for new roles.

However, the local population only peaked in the 1970s. As local development authorities try to attract and retain young people and secure future growth, they see sustainable energy as crucial.

“We want to become the green energy capital of Norway,” said Geir Waag, the city’s mayor, during an interview in his office.

He pointed to the slideshow he uses to promote the city and its green energy ambitions and explain the city’s characteristics. In addition to its proximity to major minerals and industrial workforces, Mo i Rana also provides cheap, environmentally friendly electricity thanks to hydropower fueled by melting snow, runoff from glaciers and waterfalls cascading through its craggy mountains.

Mr. Waag has trained on the field. Officials in Moi Rana are talking with national authorities to come up with a framework that rivals U.S. policies — part of a larger push happening across Europe and the world as local authorities and businesses scramble to respond to the inflation-reducing law.

But unlike the 1950s or even the 1980s, when state policies swooped in to help bring the Moi Rana economy into a new era, some fear that this time Norway’s national government may not be able to deliver.

Most capitalist countries have spent recent decades trying to level the competitive playing field and tear down barriers to trade, not erect them. But then the Trump administration imposed steep tariffs — including some directed at allies in Europe and elsewhere. The Biden administration increased the risk of the climate bill, giving preference to some American-made products and trying to stimulate domestic production.

The recent shift towards protectionist policies aimed at building national industries poses a particular dilemma for the European Union, which believes that the principles of fair and open trade are extremely important to the European integration project.

European officials have long tried to discourage their member countries from competing with each other for corporate investment and provoking a costly subsidy war. They are also enthusiastic supporters of similar principles in the World Trade Organization, which requires of its members Treating all foreign and domestic goods equally to try to remove hidden barriers to trade.

But the return of targeted subsidies in the United States and elsewhere is a test of adherence to these rules.

The new generous America Production tax credit It is predictable, consistent, and applies across the board, providing companies with attractive stability. Other countries have offered their own generous incentives, including tax breaks in Canada and proposed subsidies for batteries in India.

In Europe, such measures have sparked debate about whether countries need to go beyond traditional early-stage R&D subsidies. Increasingly, this discussion is turning into action.

In response to the inflation reduction law, Europe Its strict restrictions were eased on government aid last year, allowing national governments to provide more support to the clean energy industry. Countries now offer packages on a case-by-case basis: Germany offers the battery product Northvolt About $980 million in government aid.

Even a package like the one Northvolt received from Germany would have difficulty competing with the U.S. tax break, Freer CEO Berger Stein said.

“It won’t be a match, but it will be a very good start,” he said. Freyr kept its half-finished factory operational — heated to 12 degrees Celsius, or about 54 degrees Fahrenheit — to ensure it could put production in Norway in case politics swung its way.

European subsidies still account for only 20 to 40 percent of a company’s investment cost, compared to more than 200 percent in the United States, said Jonas Eraya, a partner at Menon Economics who studies the battery industry. He added that the Norwegian government had specifically rejected requests for more.

“The Norwegian government basically said it was not in the business of supporting industries,” Mr. Iraia said.

There is reason for hesitation. Countries do not want to start a wasteful subsidy war, where they end up subsidizing companies that cannot stand on their own two feet.

“It is the market that decides which projects will succeed,” Anne-Marit Bjørnflaten, Norway’s state secretary to the Minister of Trade and Industry, said in an email. “Our ambition as a government is to mobilize as much private capital as possible.”

Freer himself is not a sure bet. The company is still working to prove that its key energy storage technology is scalable, and its stock price fell in 2023 amid development delays. (He. She It ticked a little Last week after updating operations Suggestion of progress.)

While it will only get U.S. production tax breaks if it succeeds in producing batteries, any preferential loans it wins to enable construction of a plant in Georgia may fail to amount to much if the company ultimately proves unsuccessful. It has already received $17.5 million in public aid to build the Norway plant.

Freier isn’t alone in shopping for the best support on offer. Swiss manufacturer Mayer Berger Technology Initial plans recently announced It decided to close a large solar module factory in Germany, although it hinted that it might change its mind if there were “sufficient measures to create a level playing field in Europe.”

In Mo i Rana, business groups still fear being left behind.

Ms Skogvold, managing director of the Chamber of Commerce Group, hosted an on-stage interview with Jan Christian Vestre, Norway’s Minister of Trade and Industry, at an event focused on green energy in the city on 26 January. This came a year and a half after Mr. Vestri visited the city to make the announcement Battery strategy in Norway during A celebration held at the Freer Research Plant.

The tone was different this time.

Ms Skogvold asked the Minister in Norwegian why the government had not been more aggressive with green incentives.

He said: “We will not re-provide support for production.” But he later added that the world would have a huge demand for battery factories, and he hoped “if we can make it profitable in Norway, and if private capital leads the way, we will be able to succeed in this in Norway.”

Brent Murray Contributed to reports.

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