Invoking the Defense Production Act could help reshape the economics around building decarbonization
CLIMATEWIRE | Solar panels are getting their moment in the sun after President Joe Biden yesterday invoked the Defense Production Act to jump-start the renewable energy sector.
But just as important — if less flashy — are two other things Biden’s order seeks to boost: heat pumps and insulation.
Those products will be essential for decarbonizing the hard-to-reach building sector. And in the best-case scenario, experts said, Biden’s order could rejuvenate U.S. manufacturing around green technology.
“The importance of this cannot be understated,” said Ari Matusiak, CEO of Rewiring America, a nonprofit that advocates for electrifying the U.S. economy. “It’s a big move by the administration.”
Homes and commercial buildings emitted 13 percent of U.S. climate pollution in 2020, according to EPA. Although that’s smaller than transportation or electricity, buildings pose a unique challenge because the sector is so fragmented.
Advocates hope that Biden’s order could help overcome that challenge.
Buildings are primarily governed by local codes rather than federal regulations, and the fossil fuel industry has strongly opposed efforts by climate activists to persuade cities to ban natural gas in new buildings.
That has left building decarbonization mostly in the hands of market forces. But the high upfront cost of electric appliances, coupled with the slow turnover of U.S. building stock, has slowed the transition. Some experts even forecast an increase in commercial building emissions through 2050.
Biden’s order could change that by reshaping the economics of decarbonizing buildings.
By invoking the Defense Production Act, Biden is guaranteeing to manufacturers that the government will purchase heat pumps and insulation that the market might not support on its own.
The idea is to induce firms to beef up their manufacturing capacity, and that extra supply will help bring down prices, said Todd Tucker, director of industrial policy and trade at the Roosevelt Institute.
He said the government is sending a message to manufacturers: “Go ahead and make those capital expenditures, because we will be the market for that product. Don’t worry that there’s not going to be a market, or that households or firms are going to shift to some other technology — don’t worry about any of that; we’ll worry about that. Just make it.”
Biden has already sought to use the federal government’s purchasing power to steer U.S. manufacturers toward green tech. But this is a step beyond that, Tucker said, because the government can use this authority to buy heat pumps for private uses too.
The administration could distribute the heat pumps it purchases under the Defense Production Act to front-line communities — either for free or at a discount — in order to advance its environmental justice goals, he said.
Industry groups praised Biden’s move, with the conservative National Association of Manufacturers hailing it as a positive step for the sector.
"This is the type of collaborative, long-term leadership manufacturers need to strengthen our energy security," Jay Timmons, president and CEO of NAM, wrote on Twitter.
Biden’s move is aimed at the supply side of the heat pump market. Advocates also want to boost demand through more rebates and tax credits, which were included in Democrats’ stalled reconciliation legislation.
Without more demand, suppliers and contractors aren’t pushing heat pumps into the housing market. And without many heat pumps in the market, few homeowners seek them out — either because of their upfront cost or because they simply don’t know about them.
“There’s kind of a chicken-and-egg dynamic going on,” said Matusiak of Rewiring America, adding that Biden’s order could help break that cycle.
U.S. production of insulation is currently sufficient to supply new buildings, the Energy Department said. But more will be needed to retrofit older buildings.
Some of the heat pumps and insulation could also be sent to Europe, which is facing an even harder energy crunch in the wake of Russia’s invasion of Ukraine.
The administration has framed its use of the Defense Production Act as a countermeasure against Russia’s influence over energy markets.
That idea has been pushed for months by climate activist Bill McKibben, the founder of 350.org.
Three days after Russian President Vladimir Putin began his invasion of Ukraine, McKibben argued that the administration’s moves to boost oil and gas production were wrongheaded — but shipping heat pumps and insulation to Europe would be a way to “peacefully punch Putin in the kidneys.”
Yesterday, McKibben called the move a “breakthrough” from a “heretofore timid administration.”
“This is real and important!” he wrote on Twitter.
Reprinted from E&E News with permission from POLITICO, LLC. Copyright 2022. E&E News provides essential news for energy and environment professionals.
Adam Aton is an E&E News reporter.
John Fialka and E&E News
Anne C. Mulkern and E&E News
David Iaconangelo and E&E News
Sara Schonhardt and E&E News
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