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How Republicans and Democrats came together to seed new industries in specific places

The Biden administration announced on Friday that it would spend up to $7 billion to create seven new “hydrogen hubs” across the country. These hubs will house large-scale industrial facilities specializing in producing, moving, and using hydrogen, a potent gas that could play a range of roles in a climate-friendly economy. Hydrogen, which does not emit carbon pollution when burned, could decarbonize long-distance trucking, energy storage, chemical making, and heavy industry.
These hubs will, as my colleague Emily Pontecorvo writes, become important public-private laboratories for the use of clean hydrogen. They will complement tens of billions of dollars in tax credits that could soon support a clean hydrogen industry.
Although these hubs are a key part of the president’s climate strategy, they are not created by his signature climate law, the Inflation Reduction Act. They were funded, instead, by the bipartisan infrastructure law, which passed in December 2021.
That same legislation also spent $3.5 billion to create new direct air capture hubs, big regional facilities that will deploy technology capable of sucking carbon dioxide from the ambient air. In August, the Energy Department awarded the first of those hubs to Texas and Louisiana.
It matters that these two “hub”-based programs command some measure of bipartisan support. It signals, first, that these programs are likely to endure even if the GOP takes the White House next year. It shows, too, that Republicans in Congress — and especially in the Senate, where 19 Republicans voted for the infrastructure law — can back climate policy under some conditions. (Even if those conditions might involve having to negotiate with a Democratic president.)
It certainly helps, too, that hydrogen and direct air capture are two potentially climate-friendly industries where the fossil fuel industry could play the largest role. The chief executive of Occidental Petroleum, a fossil-fuel company that is building one of the first air-capture hubs, has even argued that carbon removal technology could allow the oil and gas industry to operate for decades to come.
But the bipartisan support for these programs reveal something else, too — a deeper change in how America’s leaders think about governing and growing the economy. Most coverage of the hubs has elided the fact that they’re called “hubs,” almost treating the word “hub” as a synonym for “big new economic thing.” But the hubs are called “hubs” for a reason; don’t snub the hubness of the hubs. The hubs are meant to do more than create new experimental industrial facilities at taxpayer expense. They are meant to seed specific industries in specific places, creating new centers of gravity that will allow new regional economies to form.
The idea behind the hubs goes back more than a decade. In 2010, a team of researchers at the Massachusetts Institute of Technology looked around the U.S. economy and realized something strange: Although many of the world’s most innovative and profitable companies did their R&D, design, and distribution in America, very few of them made their products here. Think of Apple, for instance, whose iPhones then bore the inscription: “Designed in California. Assembled in China.”
Why was that?, the team asked. That arrangement distorted the economy, depriving working-class people of the benefits of new industries. It also seemed unsustainable. “Without production capabilities in the U.S., can we generate new growth and jobs?” asked Suzanne Berger, a political science professor who led the project. “Can we even sustain innovation without manufacturing capabilities in the U.S.?”
The U.S. could not go on like this forever, they concluded, because innovation in design was inseparable from innovation in production. Many industries — including biotech, material science, and clean energy — required engineers to constantly flit back and forth from the factory floor to the lab, bringing problems encountered by assembly technicians back to the design engineers.
But this tight circuit of design, production, and design again didn’t just happen within influential companies, like Ford, AT&T, and 3M. One takeaway from their report, Making in America, is that innovation emerges from skilled communities of practice located in specific places. When a big company opens a factory or R&D lab somewhere, an ecosystem grows up around it. Small- and medium-sized manufacturers with their own expertise cluster around that big firm, because they can make a living by selling their own goods and services to that firm (or its competitors).
Speaking to a Senate committee in 2013, Berger described what happened when her team visited the laboratory of Tonio Buonassisi, a mechanical engineer then building a new type of solar cell. Buonassisi’s lab in Cambridge, Massachusetts, was full of cutting-edge equipment that had been made by an instrument company located only a couple hours away.
“Much of [that] machinery had been made in close collaboration between the lab and the instrument companies as they handed ideas and components and prototypes back and forth,” Berger said. “Used for the first time in the lab, these tools were now being marketed to commercial solar companies.”
At the time, the domestic solar industry was collapsing, and it worried Buonassisi. If American solar-cell makers went out of business, then it would put his specialty toolmaker out of business, too — and slow down or possibly end his own research agenda. “Even in a fragmented global economy with instant connection over the Internet to anywhere in the world,” Berger said, the close geographic ties “that connect research in its earliest stages to production in its final phases remain vital.”
When you start looking, you see endless evidence of these ecologies of production, these skilled communities of practice, everywhere. Silicon Valley once earned its name because it housed a booming semiconductor manufacturing industry nurtured by the Defense Department. A chip conductor at Intel could access a specialty lens maker, or metallurgist, or chemicals maker only a short drive away; even outside of work, these people met at bars and socialized in the same places. Soon, that semiconductor ecosystem gave rise to other adjacent businesses: a software industry that could write code for those semiconductors, and a personal computing industry that could make semiconductors useful to mass-market consumers; those industries gave rise to today’s tech industry.
Nor was that region’s power solely rooted in its technicians. The banks near Silicon Valley grew so familiar with the hardware and software industries that they could finance companies there more easily and cheaply than other financial institutions. One of those institutions even named itself after Silicon Valley.
Today, America has relatively few of these innovative clusters left. The point of the hub-based strategy is to build them back. The idea of the hubs isn’t only that America will get seven new large-scale facilities that produce or process hydrogen, or four new facilities that suck carbon out of the air. The object is that these big facilities will anchor new skilled communities of practice, the same way that, say, a deep-sea volcanic vent gives rise to an entire colorful food chain. President Biden might be announcing a new Philadelphia-based hydrogen hub today, but we won’t know if that hub will be a success until it’s scuttling with metallurgists and chemists and financiers and specialty electricians in 10 years.
The hydrogen and direct air capture facilities, in other words, are meant to grow into true hubs — hubs of engineering, hubs of finance, hubs of innovation. The government, having recognized that new industries and industrial centers will not form naturally, is now trying to seed them intentionally.
That is far from the laissez faire approach to innovation once embraced by policymakers. And it matters that Democrats and Republicans alike have embraced it in the infrastructure law: It reveals the growing belief that free markets alone will not keep America at the top of the global economy. Today’s announcement might be the first time you hear about a new federally supported “hub.” It probably won’t be the last.
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The president has paid $4 billion to kill projects that were already dying or dead.
At a certain level, it defies belief: The Trump administration is spending nearly $4 billion … for nothing.
It’s paid something for nothing at least five times now. Last week, the administration reached a $1.2 billion deal with the German energy company RWE to not build three wind farms, including a large installation off the coast of New Jersey. The Chicago-based developer Invenergy signed a separate deal in June. It’s not clear these deals are legal, yet they keep happening.
These agreements mark the formal end of the first American offshore wind boom, which began in the late 2010s and stepped up during the Biden administration. This buildout, alas, never quite found its sea legs. As recently as February 2022, you could squint at the horizon and imagine that 14 gigawatts of turbines might soon spin along the East Coast. Now, we’ll be lucky to get more than six gigawatts by the end of the decade.
That’s a lot of lost generation capacity — and as I’ve repeatedly written, its absence is going to be a problem for the northeastern United States. The Mid-Atlantic and New England, which were set to receive some of the largest offshore facilities, will still need a lot more new electricity in the years to come, especially during winters. (New York City, for instance, now avoids blackouts by relying on two aging barge-mounted power plants parked in the East River.) And while many of the developers who received President Trump’s payouts pointed to fossil fuel investments in their press releases — as if to imply that those other projects were “replacing” the lost wind farms — relatively few of the power plants mentioned will be built in the Northeast.
Yet there’s another weird aspect of these offshore deals that I haven’t focused on as much: Why are they happening in the first place? That’s the subject of a helpful new article published today by James Sallee, an economics professor at UC Berkeley. He observes that many of the offshore wind projects that the Trump administration has now paid to “cancel” were struggling financially long before January 20, 2025. Few of the farms, if any, would have been built under any administration. So why, exactly, is Trump paying off their developers?
Let’s roll the tape. More than four years ago, the Biden administration held the country’s largest offshore auction ever for a set of promising offshore-wind sites along the Atlantic coast. That brought in more than $4 billion; as part of it, a German company named RWE placed a record-shattering bid for a particularly promising area off New Jersey’s coast. The date? February 25, 2022.
As it turned out, that auction was not the most important thing that happened that week in global energy markets — or world history. A day earlier, Russian troops began their full-scale invasion of Ukraine, igniting a geopolitical firestorm that ultimately ushered in an era of tighter energy supplies, rampant inflation, and higher interest rates. Although the offshore developers could not have known it then, those three trends would reshape the economics of their projects. That’s because offshore wind farms — far more than solar, battery, or gas plants — require titanic upfront investment, as Sallee writes:
Offshore wind is extremely capital intensive: enormous costs come up front, while revenue arrives over decades. Inflation raised the cost of steel, turbines, vessels, and labor. Higher interest rates reduced the present value of future revenue and raised financing costs. Where developers signed fixed-price contracts, developers were left holding the capital cost risk when conditions changed.
Unit economics started to deteriorate, and costs ballooned. Projects started to fail as early as October 2023, when Orsted canceled its Ocean Wind 1 and 2 projects slated for the New Jersey coast. I remember talking to an energy expert at the time who mused that for the same per-megawatt cost as an offshore wind farm, the state might as well just build a new Westinghouse nuclear reactor. (Its governor Mikie Sherrill is now exploring doing just that.)
By the time President Trump took office, in other words, many offshore wind projects were already on financial life support, if not deceased. Given the real underlying shift in project economics, that should have decreased the value of developers’ offshore leases — which are, as Sallee writes, more of an option than a permit, because they give a developer the right to study an area but do not authorize construction per se.
Yet over the past year, the Trump administration has reimbursed five developers largely in full, and it hasn’t gotten much in return. Perhaps that’s what the administration needed to do in order to fully kill these projects without risk of future legal sanction. Yet it is … strange. “The deals relate to development rights that look uneconomic today, even before the buyouts,” Sallee says. “The buyouts may limit how quickly offshore wind could rebound in a future economic and policy environment, but as of today it seems as though the government just spent $3.9 billion of taxpayer dollars spent to shoot a corpse.”
I wonder if that description undersells it. In a certain light, the government isn’t really shooting the corpse so much as handing it big wads of cash. Since the first of these deals were announced, I’ve struggled with what to call them — buyouts? payouts? — but Sallee’s post (which you should go read in full) made me wonder if bailout is the best option. After all, imagine if a hypothetical President Kamala Harris had reimbursed this same set of companies for the full value of their failed offshore wind bets — and used the Justice Department’s permanent and technically unlimited Judgement Fund to do it. What would journalists say then? How would Republicans respond?
Or to make the analogy truly work, I suppose, imagine that a President Harris had bailed out oil companies for some overly exuberant bet made during an earlier Republican administration, then claimed (with dubious evidence) that they would use the refunds to build renewables. That would still be an enormous waste of public money, but it would scramble the politics somewhat, perhaps evoking astonished embarrassment from her allies and delighted confusion from her opponents. Which might — to return to our world — mirror some of the response we’re seeing to Trump’s wind payouts.
As electricity prices rise, the stakes for the leaders of states like Virginia, Pennsylvania, and Indiana are only getting higher.
Governors are increasingly throwing their weight around in the technocratic and often obscure utility ratemaking process. The latest example is Virginia Governor Abigail Spanberger, who last week published a Washington Post op-ed announcing that she would intervene in the attempted acquisition of the state’s dominant utility, Dominion, by Florida utility and energy development company NextEra Energy.
Spanberger is “deeply skeptical about whether selling our primary state-regulated utility to an out-of-state company is good for the commonwealth,” she wrote. While she didn’t go so far as to oppose the merger, she did insist that NextEra maintain jobs in the state, comply with Virginia’s clean energy goals, and come up with cost savings for Virginians. And while the state’s utility regulators will make the ultimate decision themselves, she said, she wanted to use her leverage as the state’s highest ranking and most visible elected official “to make sure Virginians have a voice in the process.”
It’s not unheard of for a governor to try to influence utility regulators by picking members of state utility commissions — or simply by haranguing them. But as electricity bills rise to their highest level ever, according to Heatmap and MIT’s Electricity Price Hub, governors in particular have started responding to pressure from voters to do something — anything — about it.
In New Jersey, Governor Mikie Sherrill won office in part by promising to freeze electricity rates — then used her influence over the utility regulators to make it happen.
In Indiana, Governor Mike Braun replaced the head of the state utility regulator after his predecessor agreed to a rate increase from the utility AES Indiana.
In North Carolina, Governor Josh Stein publicly called on the state’s dominant utility, Duke Energy, to reduce a rate increase request.
And the whole PJM Interconnection market, which includes Indiana, Virginia, and New Jersey, exists under a capacity price cap worked out in litigation initiated by Pennsylvania Governor Josh Shapiro, who has also led an effort alongside the White House to procure more generation and pressured the utility PECO to withdraw a rate case.
“Governor Shapiro is maybe the pioneer of this,” Eric Miller, the interim vice president of the states program at Evergreen Action and a former climate and energy official under former New Jersey Governor Phil Murphy, told me. “Legislators, they hear from their constituents about utility issues, whether it’s shut-offs or high prices. They go to their elected officials, and those elected officials engage with the governor’s office,” he said.
Utility regulation and ratemaking exists in a netherworld between public policy and private business. Most customers in the U.S. are served by investor-owned electric utilities, but the prices they pay are set by boards whose members are typically appointed by governors after a long, quasi-judicial process.
The process by which rates are set is wonky by design, with thousands of pages of filings and analysis explaining what costs need to be recovered at what rate paid by ratepayers. “Intervening” in a public service commission decision typically involves quietly slipping a document into a large docket, to be seen solely by utility regulators and lawyers (plus a few enterprising reporters.) To the extent the public or elected officials get to weigh in, it’s often through non-governmental advocacy groups or state officials designated as advocates for the public.
That governors are now openly taking responsibility for such a painfully bureaucratic process is “an indication of just how central utility rates are to overall energy affordability concerns that governors are hearing,” Jeff Dennis, executive director of the Electricity Customer Alliance and a former Department of Energy and Federal Energy Regulatory Commission official, told me.
With prices as high as they are, “the stakes are higher, and so the governors feel like in order to fulfill their campaign promises or their job as the top elected official in the state, that they’ve got to be directly heard,” he said. In Virginia, for example, typical bills have grown over 45% in the past five years, and by almost 12% in the past year alone.
When it comes to assigning responsibility for high electricity prices, Americans are most likely to blame their state government and their utility (and, increasingly, data centers), according to Heatmap polling.
Governors, who have a direct mandate from the public, can exert a unique countervailing force in a process that many critics argue is weighted towards utility interests. “Despite a lot of fences to prevent regulatory capture and rent seeking, it happens,” Miller said, “and having an executive weigh in directly can shake that up.”
There are risks, however, to governors getting more directly involved in the ratemaking process. One is that it could encourage short-term thinking, leading to measures that hold down prices at the expense of potentially necessary investments to maintain reliability or building out the infrastructure necessary to bring on new sources of power like wind and solar.
On top of that, “There’s certainly always a risk that the proceedings get more political,” Dennis told me. But he noted that ultimately, it’s utility commissions making the decisions, and they’re obligated to provide a record of filings and data to support their decisions.
Governors getting involved more formally could also have upsides, Dennis said, by shining a spotlight on the process that ultimately affects every resident and business in the state. “It brings a lot more spotlight to how utilities are making decisions about investments and how customers are impacted by those decisions, and I don’t think that that’s necessarily a bad thing.”
Governors also have a different set of mandates and responsibilities than the utilities do. While utilities have a mandate to provide reliable electric service — and thus spend whatever they can convince their regulators is necessary to do so — Miller argued that governors have to balance reliability and affordability for their constituents.
“The regulatory monopoly that utilities have is a political creation made by the elected officials in that jurisdiction.” Miller told me. “It is well within the authority of those same elected officials to decide to take a very hard look at whether that model is delivering the type of outcome that they want.”
A proposed change in how the agency implements an obscure Cold War-era law would impose onerous reporting requirements on renewables and pipelines.
Democrats in Congress claim that a new Trump administration proposal will have a chilling effect on the energy sector by subjecting renewables and fossil fuel pipelines alike to an obscure, rarely cited Cold War-era law requiring detailed information on foreign farmland ownership be submitted to the Agriculture Department.
In late June, the Agriculture Department released a proposal to change implementation of the Agricultural Foreign Investment Disclosure Act of 1978, which requires companies to provide information to the federal government on foreign investors in farmland holdings, acquisitions, and sales. If finalized, the new rule would expand the definition of “agricultural land” in regulation to include all renewable energy facilities and pipeline corridors by explicitly tying the term to those industries’ formal codes under the North American Industry Classification System.
Top Senate Democrats on Monday argued that taken together with expanded investor reporting thresholds and land boundary mapping requirements, this rule change “may exceed what is necessary” to deal with national security issues around farmland ownership.
One of the letter’s signatories, Pennsylvania’s John Fetterman, has previously joined the GOP in railing against foreign companies purchasing U.S. farmland as a potential national security concern. And indeed, there certainly exists a broader bipartisan anxiety around Chinese influence on essential industries, e.g. mining and critical minerals. That Fetterman is now joining climate hawks Martin Heinrich and Sheldon Whitehouse in opposing the administration’s move is a striking moment of unity, especially as Fetterman bats away beltway rumors that he’ll flip parties.
The letter demands a briefing from the Agriculture Department that includes the proposal’s “anticipated impacts on the energy, infrastructure, and agricultural sectors,” as well as the legal basis for changing its definition of “agricultural land.”
“[W]e are concerned that USDA’s proposed rule may exceed what is necessary to address those objectives, have unintended national security consequences, and may create substantial compliance burdens on agricultural producers, landowners, infrastructure operators, energy developers, and investors that could undermine efforts to address rising energy and food prices without a corresponding national security benefit,” the letter reads.
As I have previously written, the USDA is an increasingly vital organ in the Trump administration’s war on renewable energy projects, and focusing its laser beam at project development on what it calls “prime” farmland. Trump also recently tapped country music star John Rich to be his “special envoy for American landowners,” which directly led to the USDA working with people fighting solar on farmland in upstate New York.
The Trump change goes after pipelines as well as renewable energy, although logic suggests that solar development could be more vulnerable due to the sheer acreage often required for utility-scale project construction and property setbacks.
The Agriculture Department responded to my request for comment with a statement: “As Secretary [Brooke] Rollins has noted before, the regulations governing the Agricultural Foreign Investment Disclosure Act of 1978 are extremely outdated and need to be updated to better reflect today’s conditions. USDA looks forward to considering all public comments before finalizing the rule.”
Editor’s note: This story has been updated to include the statement from USDA.