Since President Biden took office, companies have invested nearly $85 billion in the manufacturing of electric vehicles (EVs), batteries, and EV chargers in the United States. This is triple the investment made in domestic EV manufacturing in 2020 and more the 28 times the investment in batteries from two years ago, and the sale of EVs in the United States has tripled in the same period. The Biden-Harris administration is crediting the increase in the development and adoption of EV to an aggressive and holistic funding strategy driven by the White House.
Morgan Lewis lawyers detail some of the key regulatory and commercial concerns that have emerged on the heels of this federal push.
- US Federal Funding Developments: The Biden-Harris administration introduced an ambitious plan to support the electric vehicles market early on in the administration’s leadership with the Build Back Better Act, which ultimately was not passed by Congress. The administration pivoted to introduce funding for a national network of 500,000 EV charging stations in the Infrastructure Investment and Job Acts. Additionally, the CHIPS Act included $52.7 billion for American semiconductor research, development, and workforce development—an important component to the entire EV program. The Inflation Reduction Act provides $369 billion for energy security and climate change initiatives, with incentives for the purchase of EVs. All these funding initiatives were almost immediately implemented, spurring a surge in private sector activity. The success of these programs depends on each other. The administration took a holistic look at the full EV industry and designed each piece to help push for more EV development and deployment.
- Requirements to Access Funds: Each program will include different requirements to access federal funds; some IRA funds will be awarded to contractors through government grants and procurement contracts. More details around the implementation requirements are expected to be released by the federal and state agencies authorized to utilize the infrastructure funds, but here are a few important requirements to note: government grants that allocate funding for state and federally funded projects utilizing infrastructure funding could include government IP licenses (the contractor will generally own the patent if developed under federal funding), financial accountability utilizing government requirements, cost share by participants, and certification requirements that could lead to False Claims Act liability (the settlements can be extreme so companies should consider having compliance infrastructure when receiving federal funds to avoid this).
- Tax Credits: Expanded tax credits offer bonus credits for companies who pay prevailing wages. The minimum prevailing hourly wage is set by the government based on job position and geographic location, and it also includes a set of required benefits. Having someone within a company who is familiar with prevailing wage is key to ensuring compliance with these requirements if claiming tax credits. The tax credits also include a more confusing provision for domestic content, which requires the production of all steel, iron, and manufactured product incorporated in the project in the United States.
- Key Commercial Considerations. The Infrastructure Act, which dedicated $7.5 billion to make chargers more publicly available, could begin deploying that money as early as October as the Federal Highway Administration (FHWA) is obligated to approve eligible plans for funds by September 30. The issue of who owns and is responsible for these EV charging stations is one that is resolved on a state-by-state basis and, at its core, concerns whether utilities or non-utility entities are permitted to own a charging station. Often, the owner of the charging station and the owner of the real estate where that station sits are two different entities. As we see those 500,000 federally funded charging stations being developed, there will be an increased need to have airtight commercial agreements between the landowner and the charging station owner.
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Contacts
If you have any questions or would like more information on the issues discussed in this Insight, please contact any of the following Morgan Lewis lawyers:
Levi McAllister
Tim Lynch