[Global Focus] US Clean Energy Startups Facing Wave of Bankruptcies... Is 'Carbon Neutrality' a Mirage?

Clean Hydrogen Fuel Companies Hit by Stricter Tax Credits
Big Tech's Data Center Boom Delays Carbon Neutrality Goals
Trump vs Harris Energy Policies Diverge Sharply, Uncertainty Rises

Clean energy startups in the United States, which ambitiously pledged to usher in the era of renewable energy, are collapsing. Although the Biden administration poured $110 billion into revitalizing the clean energy industry by introducing the Inflation Reduction Act (IRA) in 2022, 40% of related projects have halted operations due to tightened tax credit criteria restricting investment inflows. During this period, the stock prices of green hydrogen and biofuel startups plummeted by 80-90%. IT giants, who are betting their survival on data centers, are consecutively postponing and revising their existing carbon neutrality goals, becoming 'electricity-guzzling hippos.' With the U.S. presidential election approaching this November, the starkly contrasting energy policies of the two major party candidates are further increasing uncertainty in the industry.

The Collapsing Clean Fuel Ecosystem

Startups aiming to power airplanes, ships, and trucks with clean fuels are facing difficulties even before their full-scale launch. Fulcrum BioEnergy, a sustainable aviation fuel (SAF) company that raised hundreds of millions of dollars from global airlines including United Airlines, is on the brink of bankruptcy. Oil giant Chevron acquired the largest U.S. biodiesel company in 2022 for $3.1 billion and produced 100,000 barrels of biofuel per day, but two of its plants have been shut down. Shell, which aimed to produce 2 million tons of SAF annually by 2025, has also halted construction of Europe’s largest biofuel plant, with estimated losses of up to $1 billion.

SAF is one of the key solutions for decarbonizing the aviation industry, which accounts for 2-3% of global greenhouse gas (GHG) emissions. Although the U.S. and the world have set carbon neutrality as a climate goal, industries such as aviation and shipping cannot meet their power demands solely with wind or solar energy. This led to a boom with both large corporations and startups rushing into the SAF business, but the market downturn and the U.S. government's strict clean hydrogen tax credit regulations have rapidly cooled the enthusiasm. Andy Marsh, CEO of Plug Power, the startup that built the first green hydrogen plant in the U.S., lamented, "The clean energy bubble is bursting." Since 2022, the stock prices of major hydrogen and biofuel startups worldwide, including Plug Power, have dropped by 80-90%.

Stricter Tax Credit Criteria... 40% of IRA Programs 'Stopped'

The IRA’s tax credit regulations have dealt a direct blow to these clean energy companies. The Biden administration enacted the IRA in 2022, pledging to accelerate clean hydrogen production through generous tax credits, but the delay in final guidance on these tax credits has left related projects at a standstill. In December last year, the U.S. Treasury Department issued provisional guidance on clean hydrogen production, stipulating that only 'green hydrogen' produced by electrolyzing water using renewable energy sources such as wind and solar power can receive maximum tax credit benefits. This has caused companies producing hydrogen through traditional natural gas and nuclear power to face financial difficulties.

The investment freeze is not limited to clean hydrogen. Earlier, the Biden administration enacted the IRA and the Chips and Science Act in 2022, offering approximately $400 billion (about 548 trillion won) in tax credits and subsidies to promote clean technology development and semiconductor supply chain establishment. However, currently, 40% (about $84 billion) of projects receiving IRA support have been delayed or suspended. Among these are Enel’s $1 billion solar panel factory and LG Energy Solution’s $2.3 billion battery factory for energy storage systems (ESS). Jason Grumet, CEO of the American Clean Power Association (ACPA), pointed out, "Imposing the most burdensome regulations hastily fails to recognize the market realities for deploying new technologies."

Trump’s Love for Oil vs. Harris’s Green New Deal

With the U.S. presidential election approaching this November, the starkly contrasting climate and energy policies of the two major party candidates are increasing the uncertainty surrounding the future of the clean energy industry. Democratic candidate Vice President Kamala Harris plans to strengthen the Biden administration’s IRA path and expand zero-carbon power generation, including renewable energy. However, she has yet to propose how to address the current drawbacks of the IRA policy. On the other hand, Republican candidate former President Donald Trump summarized his energy policy stance with the three words "drill, baby, drill," aiming to significantly expand oil drilling sites to lower oil prices and curb inflation.

Stewart MacIntosh, an economist and author of Climate Crisis Economics, assessed, "Even if the U.S. makes political decisions to retreat from the 'green transition,' it will not affect the international trend." Shomic Dutta, co-founder of venture capital firm Overture, explained, "Regardless of the November election outcome, some climate technologies are economically rational and are gaining market share. However, eco-friendly steel, cement, and sustainable aviation fuel require government support to be realized, so more assistance is needed."