Sign In or Create an Account.

By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy

Economy

The New Ideology Behind the Government’s $10 Billion Bet on ‘Hubs’

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

President Biden.
Heatmap Illustration/Getty Images

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.

You’re out of free articles.

Subscribe today to experience Heatmap’s expert analysis 
of climate change, clean energy, and sustainability.
To continue reading
Create a free account or sign in to unlock more free articles.
or
Please enter an email address
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Q&A

How Are Renewable Energy Developers Reacting to IRA Cuts?

A conversation with Mike Hall of Anza.

The Fight's Q&A subject.
Heatmap Illustration

This week’s conversation is with Mike Hall, CEO of the solar and battery storage data company Anza. I rang him because, in my book, the more insights into the ways renewables companies are responding to the war on the Inflation Reduction Act, the better.

The following chat was lightly edited for clarity. Let’s jump in!

Keep reading...Show less
Yellow
Hotspots

A Solar Flare-Up in New York, Battery Aftershocks in California

And more of the week’s top news in renewable energy conflicts.

The United States.
Heatmap Illustration/Getty Images

1. Columbia County, New York – A Hecate Energy solar project in upstate New York blessed by Governor Kathy Hochul is now getting local blowback.

  • Last week, the Hochul administration granted many solar projects their renewable energy certificates, including Hecate’s Shepherd’s Run solar project in the town of Copake. Shepherd’s Run has struggled for years with its application process and was previously rejected by state land use regulators.
  • This certificate award has now inflamed longstanding local criticism of the project, which has persisted due to its proximity to schools and concerns about fire risk.
  • We’ll find out whether this flare-up will cause more headaches when the state’s Renewable Energy Siting office completes reviewing Hecate’s application in 60 days.

2. Sussex County, Delaware – The battle between a Bethany Beach landowner and a major offshore wind project came to a head earlier this week after Delaware regulators decided to comply with a massive government records request.

Keep reading...Show less
Yellow
Spotlight

Trump Targets Solar on Farmland

Anti-solar activists in agricultural areas get a powerful new ally.

Sheep and solar panels.
Heatmap Illustration/Getty Images

The Trump administration is joining the war against solar projects on farmland, offering anti-solar activists on the ground a powerful ally against developers across the country.

In a report released last week, President Trump’s Agriculture Department took aim at solar and stated competition with “solar development on productive farmland” was creating a “considerable barrier” for farmers trying to acquire land. The USDA also stated it would disincentivize “the use of federal funding” for solar “through prioritization points and regulatory action,” which a spokesperson – Emily Cannon – later clarified in an email to me this week will include reconfiguring the agency’s Rural Energy for America loan and grant program. Cannon declined to give a time-table for the new regulation, stating that the agency “will have more information when the updates are ready to be published.”

Keep reading...Show less
Yellow