September 19, 2022
Since President Biden took office, companies have invested nearly $85 billion in manufacturing electric vehicles (EVs), EV batteries and chargers in the United States. That’s triple the investment in domestic EV manufacturing in 2020 and more than 28 times the investment in batteries two years ago, and U.S. EV sales have tripled over the past year. of the same period. The Biden-Harris administration is credit increasing EV development and adoption toward an aggressive and holistic funding strategy led by the White House.
Morgan Lewis attorneys detail some of the key regulatory and business concerns that have emerged as a result of this federal push.
- Evolution of U.S. Federal Funding: The Biden-Harris administration laid out an ambitious plan to support the electric vehicle market early in the administration’s leadership with the Build Back Better Act, which ultimately failed to pass Congress. The administration pivoted to introduce funding for a nationwide network of 500,000 electric vehicle charging stations into the Infrastructure Investment and Jobs Acts. Additionally, the CHIPS Act provided $52.7 billion for US semiconductor research, development, and workforce development, an important part of the entire EV program. The Cut Inflation Act provides $369 billion for energy security and climate change initiatives, with incentives for the purchase of electric vehicles. All of 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 entire EV industry and designed every piece to help push for more EV development and deployment.
- Requirements to access funds: Each program will have different requirements for accessing federal funds; some ERI funds will be awarded to contractors through government grants and supply contracts. More details on implementation requirements should be published by federal and state agencies authorized to use infrastructure funds, but here are some important requirements to note: government intellectual property licenses (the contractor will typically own of the patent if developed with federal funding), financial liability using government requirements, cost sharing by participants, and certification requirements that could lead to False Claims Act liability (regulations may be extreme, so companies should consider having a compliance infrastructure when receiving federal funds to avoid this).
- Tax credits: Extended tax credits provide additional credits to businesses paying prevailing wages. The prevailing minimum hourly wage is set by the government based on position and geographic location, and it also includes a required benefits package. Having someone within a company who knows the going wage is key to ensuring these requirements are met if you are 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 goods incorporated into the project in the United States.
- Key Business Considerations. The Infrastructure Act, which dedicated $7.5 billion to make chargers more accessible to the public, could start rolling out that money as early as October, as the Federal Highway Administration (FHWA) is required to approve eligible plans. for funds by September 30. is responsible for these electric vehicle charging stations is a matter that is resolved on a state-by-state basis and is fundamentally about whether utilities or non-utility entities are allowed to own a charging station . Often, the owner of the charging station and the owner of the property where this station is located are two different entities. As we see these 500,000 federally funded charging stations grow, there will be an increasing need for airtight commercial agreements between landowner and charging station owner.
For more information on regulatory and commercial issues in the electric vehicle space, implications of the Cut Inflation Act of 2022, and grant contracts and federal funding for electric vehicles, please see the full webinar All Things EV—Regulatory and Commercial Considerations, part of the Morgan Lewis Automotive Hour webinar series.
If you have any questions or would like more information about the issues discussed in this overview, please contact one of the following Morgan Lewis attorneys: