Two years since the CHIPS and Science Act: Early wins, challenges, and opportunities ahead – Clean Air Task Force

Powering the clean energy transition requires massive investments in supply chains and critical energy technologies to position the US for success in clean energy research, production and deployment. An example is a semiconductor, a material that conducts electricity and manages its flow. As we increase electrification to support US decarbonization goals, semiconductors will play a critical role in managing the grid, requiring additional generation to support energy storage, new energy systems such as solar and wind, and infrastructure. charging for electric vehicles.

To meet the growing demands on the electric grid, the US must invest in innovative technologies that ensure reliable energy supplies, such as advanced nuclear reactors and fission power. The CHIPS and Science Act (CHIPS Act) represents a step in the right direction for these key parts of the energy transition.

What is chip law and science?

The United States has not historically led in semiconductor production, relying heavily on other countries for production. Semiconductor production is also very energy intensive and requires a skilled workforce. In 2022, the US passed the CHIPS Act to advance domestic semiconductor production and reduce our dependence on other countries.

The CHIPS Act provides $52.7 billion for U.S. semiconductor research, development, and manufacturing. Most of that funding — $39 billion — is dedicated to boosting semiconductor manufacturing domestically, including workforce development and supply chains. Notably, the advanced manufacturing tax credit under the CHIPS Act provides a 25% investment tax credit for semiconductor manufacturing and requires compliance with the Davis-Bacon Act for prevailing wages.

In addition to direct funding for semiconductors, the CHIPS Act supports the research and development, innovation, and advancement of clean energy technologies. The CHIPS Act also promotes innovation and clean energy technologies through additional authorizations, particularly to support fusion power and advanced nuclear reactors. Specific provisions include:

• Authorization for fusion energy research and pilot plants, with over $1 billion in funding authorized to support fusion.

• Authorization for research development and demonstration of advanced nuclear reactors, and undergraduate nuclear science and engineering.

• Authorization for research, development and demonstration of isotopes.

• Authorization for the National Oceanic and Atmospheric Administration (NOAA) to conduct low-dose radiation research.

• Authorization for a Foundation for Energy Security and Innovation (FESI) to support innovative technologies.

• Authorization for the Clean Energy Incubator Program.

• Authorization for expanded Department of Energy (DOE) research and development, including decarbonization.

• Authorization to expand the National Institute of Standards and Technology (NIST) greenhouse gas measurement program.

The impact of the CHIPS Act on climate

Semiconductors will play a critical role in clean energy supply chains – from enabling grid management to supporting the deployment of clean energy technologies. The CHIPS Act is spurring the domestic production of semiconductors that will be needed to meet this demand, and the federal government is providing the funding, programs and safeguards to maximize the impact of these investments.

Since the enactment of the CHIPS Act, the US semiconductor industry has invested over $200 billion in manufacturing and over 6,000 new quality jobs. The U.S. is on track to triple its semiconductor manufacturing capacity by 2032. That growth is driving private investment in semiconductor manufacturing across the country, including states like Ohio and New York that are offering additional incentives.

Here are highlights of recent federal activities that are unlocking these investments:

• The Treasury Department issued guidance to effectively use the advanced production tax credit, and the Commerce Department issued a regulation to ensure the flow of benefits domestically and prevent abuse.

• Just this month, the Commerce Department announced the process for selecting the first three research and development facilities funded through the CHIPS Act to accelerate innovation, workforce growth and the semiconductor ecosystem.

• Federal agencies, states and cities are collaborating to launch new workforce centers and semiconductor college programs to help spur workforce growth, regional supply chains and centers of innovation.

• This CHIPS Program Office provided multiple implementation strategies to guide the vision and execution of the resource utilization of the CHIPS Act.

• CHIPS for America released funding opportunities for facilities to increase domestic manufacturing and support workforce development, innovation, and research and development.

While the full climate impacts of these authorizations will not be felt immediately, these are necessary investments for federal agencies to promote the advancement of innovative new technologies that require further research, demonstration and deployment. However, these authorizations demonstrate federal support, a positive signal for developers.

Federal investment is critical to bring the technologies to market, lower costs, and support building the markets necessary for the technologies to succeed. Nuclear and innovative investments are also important to the decarbonisation of the energy sector and will ultimately lead to the development of the sustainable sources of clean energy needed to decarbonise our grid.

What challenges remain?

While many technologies are covered in the CHIPS Act, they are at different stages of development and face different challenges. It will take significant federal investment and public-private partnerships to accelerate the deployment of fusion and advanced nuclear reactors by refining the technologies, reducing costs, and supporting the regulatory processes that enable deployment. More federal funding is needed to continue research and demonstration of these technologies at scale.

While the CHIPS Act is a step in the right direction, more action is needed. The US semiconductor industry will need to address several key challenges, including:

• Energy and resource intensity: Energy requirements for semiconductor manufacturing and other resource requirements such as water use are high. While many CHIPS Act beneficiaries are committed to mitigating these issues, CATF will be following this issue closely.

• Workforce Requirements: Companies will need to invest in a robust workforce to meet CHIPS Act requirements for quality work or project delays at risk.

CATF looks forward to tracking how the CHIPS Act will continue to spur federal investment and action to advance innovative clean technologies, as well as engagement by state and local actors to develop regional supply chains critical to supporting semiconductor manufacturing and creating jobs in communities across the country.