White House and DOE pledge $6 billion to decarbonize heavy industry; new funding opportunity announced

Hogan Lovells
Contact

Hogan Lovells

[co-author: Stephanie Fishman]

On March 8, 2023, the Biden Administration announced approximately $6 billion in funding through a new program within the U.S. Department of Energy (“DOE”) aimed at accelerating decarbonization projects in energy-intensive industries and supporting American manufacturers in the emerging global clean energy economy, and a new funding opportunity announcement.


As we have written about before, industrial emissions account for roughly one-fourth of the nation’s carbon footprint, and the industrial sector is considered one of the most difficult to decarbonize, given the differences in needs for fuel for heat and power, but also from feedstocks and processes that are inherently carbon intensive.

The new program is called the Industrial Demonstrations Program (“IDP”) and will be run by the DOE’s Office of Clean Energy Demonstrations (“OCED”), in collaboration with DOE’s Office of Manufacturing and Energy Supply Chains and the Industrial Efficiency and Decarbonization Office. The IDP funding includes approximately $430 million from the Infrastructure Law and $5.46 billion from the Inflation Reduction Act.

Under the IDP, OCED, issued a funding opportunity announcement (“FOA”)—also on March 8—to fund projects in this space, “Industrial Decarbonization and Emissions Reduction Demonstration-to-Deployment Funding Opportunity Announcement” (FOA No: DE-FOA-0002936). The FOA provides an opportunity for funding up to 50% of the cost of each project, focusing on the highest emitting and hardest to abate industries where decarbonization technologies can have the greatest impact: iron and steel, cement and concrete, chemicals and refining, food and beverage, paper and forest products, aluminum, other energy-intensive manufacturing industries and cross-cutting technologies. Concept papers expressing interest in the grants are due April 21, 2023, with full applications due on August 4, 2023.

For this FOA, DOE seeks first-of-a-kind or early-stage commercial-scale projects and expects to award projects from the highest emitting industries involving cross-cutting technologies that have the greatest potential, directly or indirectly, to achieve significant decarbonization domestically and globally.

As seen recently with the X-energy/Dow announcement, where X-energy will site a nuclear reactor at a Dow chemical plant, nuclear power can play a unique role in decarbonizing the industrial sector due to its ability to provide both reliable carbon free power and process heat.


More about the FOA:

  • Number of awards. DOE expects to award up to 65 projects in high greenhouse gas (“GHG”)-emitting industries and for cross-cutting technologies. See Sec. 1.3 of the FOA.

  • Recipients. DOE anticipates providing awards to teams led by a single, for-profit organization or owner/operator of an eligible facility that encourages applicants to strengthen projects by partnering with experts, universities, labor unions, community-based organizations, non-governmental organizations, or national laboratories. See Sec. 3.0 of the FOA.

  • Prioritization. To maximize the transformative potential for these funds, DOE will prioritize a portfolio of projects that offer:

    • Deep decarbonization, by demonstrating significantly less carbon-intensive industrial production processes leading to materials that can be labeled as having substantially lower levels of embodied greenhouse gas emissions;
    • Timeliness, through rapid technology demonstrations that can address emissions in the near-term, meet funding horizons, and be replicated by fast followers;

    • Market viability, with technological approaches designed to spur follow-on investment for widespread decarbonization as well as partnerships between buyers and sellers of the materials produced, with special consideration given to industries that are focusing on shifting entire ecosystems and enabling new market structures for low-carbon products; and

    • Community benefits, tailored through substantial engagement with local and regional stakeholders, as well as labor unions and Tribal Nations across the project lifecycle, supporting environmental justice and economic opportunity for local communities. See pages 4-5.

When reviewing applications, DOE may choose to prioritize applicants that are focused on, and best prepared to, transition their entire ecosystem to clean products. See Sec. 1.2 of the FOA. Activities funded under this opportunity are expected to create good-paying jobs for American workers, offer opportunities for broadly shared prosperity in communities, and enable a clean, more equitable future for all Americans. See Sec. 1.1 of the FOA.

  • Phased approach. DOE will apply the following four-phase structure for projects selected under this FOA.

    • Phase 1 will encompass initial planning and analysis activities to ensure that the overall concept is technologically and financially viable.
    • Phase 2 will finalize engineering designs and business development, site access, labor agreements, National Environmental Policy Act review, permitting, and offtake agreements.

    • Phase 3 will encompass installation, integration, and construction activities.

    • Phase 4 will ramp-up to full operations including data collection to analyze the plant’s operations, performance, and financial viability.

The FOA solicits plans for all four phases of proposed activities; projects that have completed initial phases will be eligible to undergo accelerated early reviews for due diligence. DOE will work with project performers to tailor their specific approach after selections and anticipates that implementation approaches will vary between projects. All projects selected under this FOA will be eligible to complete all four phases pending successful execution of milestones; DOE is not planning a competitive down-select process among projects after awards. However, to manage risk DOE will regularly review and evaluate projects’ progress on deliverables through Go / No-Go reviews that will occur between or within phases.

Summary of Opportunity at a Glance:

Topic Area (TA)

Description*

Funding Provision

TRL**

Anticipated

# of Awards**

Anticipated Award Duration*

Anticipated Federal Funding per Award***

1. Near-Net-Zero Facility Build Projects

World-leading, first- or early-of-a-kind, full facility builds resulting in significant emissions reductions up to net-zero operations.

BIL Section 41008

7-9

2-5

8-12 years

$100M-250M

2. Facility-level Large Installations and Overhaul Retrofit Demonstrations

Large-scale overhauls for existing facilities, common technologies across multiple facilities, or new builds with accelerated planning, development, permitting, and financing strategies.

IRA Section 50161

7-9

10-30

3-7 years

$75M-500M

3. System Upgrades and Retrofits for Critical
Unit Operations

or Single Process Lines Within Existing Facilities

Upgrades, retrofits, and operational improvements that target decarbonization within a unit operation or process line at an existing facility.

IRA Section 50161

7-9

10-30

3-7 years

$35M-75M

*For more details, see Section 1.3.2.

**Subject to change depending on the number and quality of applications.

***Federal share of funds for all awards is ≤ 50% total project costs. For proposals outside of the technology readiness level (TRL), award duration, or total funding ranges stated, applicants must explain and provide sufficient justification of how the project fits within the applicable Topic Area. Total funding per Topic Area may shift depending on the number of projects awarded by Topic Area.

Program Announcements Documents:

For more information on this funding opportunity, please contact Amy Roma, Partner, or Stephanie Fishman, Associate.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Hogan Lovells | Attorney Advertising

Written by:

Hogan Lovells
Contact
more
less

Hogan Lovells on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide