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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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Current conditions: In the Atlantic, the tropical storm that could, as it develops, take the name Jerry is making its way westward toward the U.S. • In the Pacific, Hurricane Priscilla strengthened into a Category 2 storm en route to Arizona and the Southwest • China broke an October temperature record with thermometers surging near 104 degrees Fahrenheit in the southeastern province of Fujian.
The Department of Energy appears poised to revoke awards to two major Direct Air Capture Hubs funded by the Infrastructure Investment and Jobs Act in Louisiana and Texas, Heatmap’s Emily Pontecorvo reported Tuesday. She got her hands on an internal agency project list that designated nearly $24 billion worth of grants as “terminated,” including Occidental Petroleum’s South Texas DAC Hub and Louisiana's Project Cypress, a joint venture between the DAC startups Heirloom and Climeworks. An Energy Department spokesperson told Emily that he was “unable to verify” the list of canceled grants and said that “no further determinations have been made at this time other than those previously announced,”referring to the canceled grants the department announced last week. Christoph Gebald, the CEO of Climeworks, acknowledged “market rumors” in an email, but said that the company is “prepared for all scenarios.” Heirloom’s head of policy, Vikrum Aiyer, said the company wasn’t aware of any decision the Energy Department had yet made.
While the list floated last week showed the Trump administration’s plans to cancel the two regional hydrogen hubs on the West Coast, the new list indicated that the Energy Department planned to rescind grants for all seven hubs, Emily reported. “If the program is dismantled, it could undermine the development of the domestic hydrogen industry,” Rachel Starr, the senior U.S. policy manager for hydrogen and transportation at Clean Air Task Force told her. “The U.S. will risk its leadership position on the global stage, both in terms of exporting a variety of transportation fuels that rely on hydrogen as a feedstock and in terms of technological development as other countries continue to fund and make progress on a variety of hydrogen production pathways and end uses.”
Remember the Tesla announcement I teased in yesterday’s newsletter? The predictions proved half right: The electric automaker did, indeed, release a cheaper version of its midsize SUV, the Model Y, with a starting price just $10 shy of $40,000. Rather than a new Roadster or potential vacuum cleaner, as the cryptic videos the company posted on CEO Elon Musk’s social media site hinted, the second announcement was a cheaper version of the Model 3, already the lower-end sedan offering. Starting at $36,990, InsideEVs called it “one of the most affordable cars Tesla has ever sold, and the cheapest in 2025.” But it’s still a far cry from Musk’s erstwhile promise to roll out a Tesla for less than $30,000.
That may be part of why the company is losing market share. As Heatmap’s Matthew Zeitlin reported, Tesla’s slice of the U.S. electric vehicle sales sank to its lowest-ever level in August despite Americans’ record scramble to use the federal tax credits before the September 30 deadline President Donald Trump’s new tax law set. General Motors, which sold more electric vehicles in the third quarter of this year than in all of 2024, offers the cheapest battery-powered passenger vehicle on the market today, the Chevrolet Equinox, which starts at $35,100.
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Trump’s pledge to revive the United States’ declining coal industry was always a gamble — even though, as Matthew reported in July, global coal demand is rising. Three separate stories published Tuesday show just how stacked the odds are against a major resurgence:
As you may recall from two consecutive newsletters last month, Secretary of Energy Chris Wright said “permitting reform” was “the biggest remaining thing” in the administration’s agenda. Yet Republican leaders in Congress expressed skepticism about tacking energy policy into the next reconciliation bill. This week, however, Utah Senator Mike Lee, the chairman of the Senate Committee on Energy and Natural Resources, called for a legislative overhaul of the National Environmental Policy Act. On Monday, the pro-development social media account Yimbyland — short for Yes In My Back Yard — posted on X: “Reminder that we built the Golden Gate Bridge in 4.5 years. Today, we wouldn’t even be able to finish the environmental review in 4.5 years.” In response, Lee said: “It’s time for NEPA reform. And permitting reform more broadly.”
Last month, a bipartisan permitting reform bill got a hearing in the House of Representatives. But that was before the government shutdown. And sources familiar with Democrats’ thinking have in recent months suggested to me that the administration’s gutting of so many clean energy policies has left Republicans with little to bargain with ahead of next year’s midterm elections.
Soon-to-be Japanese prime minister Sanae Takaichi.Yuichi Yamazaki - Pool/Getty Images
On Saturday, Japan’s long-ruling Liberal Democratic Party elected its former economic minister, Sanae Takaichi, as its new leader, putting her one step away from becoming the country’s first woman prime minister. Under previous administrations, Japan was already on track to restart the reactors idled after the 2011 Fukushima disaster. But Takaichi, a hardline conservative and nationalist who also vowed to re-militarize the nation, has pushed to speed up deployment of new reactors and technologies such as fusion in hopes of making the country 100% self-sufficient on energy.
“She wants energy security over climate ambition, nuclear over renewables, and national industry over global corporations,” Mika Ohbayashi, director at the pro-clean-energy Renewable Energy Institute, told Bloomberg. Shares of nuclear reactor operators surged by nearly 7% on Monday on the Tokyo Stock Exchange, while renewable energy developers’ stock prices dropped by as much as 15%
Researchers at the United Arab Emirates’ University of Sharjah just outlined a new method to transform spent coffee grounds and a commonly used type of plastic used in packaging into a form of activated carbon that can be used for chemical engineering, food processing, and water and air treatments. By repurposing the waste, it avoids carbon emitting from landfills into the atmosphere and reduces the need for new sources of carbon for industrial processes. “What begins with a Starbucks coffee cup and a discarded plastic water bottle can become a powerful tool in the fight against climate change through the production of activated carbon,” Dr. Haif Aljomard, lead inventor of the newly patented technology, said in a press release.
Last week’s Energy Department grant cancellations included funding for a backup energy system at Valley Children’s Hospital in Madera, California
When the Department of Energy canceled more than 321 grants in an act of apparent retribution against Democrats over the government shutdown, Russ Vought, President Trump’s budget czar, declared that the money represented “Green New Scam funding to fuel the Left's climate agenda.”
At least one of the grants zeroed out last week, however, was supposed to help keep the lights on at a children’s hospital.
The $29 million grant was intended to build a 3.3-megawatt long-duration energy storage system at Valley Children’s Hospital, a large pediatric hospital in Madera, California. The system would “power critical hospital operations during outage events,” such as when the California grid shuts down to avoid starting wildfires, according to project documents.
“The U.S. Department of Energy’s cancellation of funding for [the] long-duration energy storage demonstration grant is disappointing,” Zara Arboleda, a spokesperson for the hospital, told me.
Valley Children’s Hospital is a 358-bed hospital that says it serves more than 1.3 million children across California’s Central Valley. It has 116 neonatal intensive care unit beds and nationally ranked specialties in pediatric neurology, orthopedics, and lung surgery, among others.
Energy Secretary Chris Wright has characterized the more than $7.5 billion in grants canceled last week as part of an ongoing review of financial awards made by the Biden administration. But the timing of the cancellations — and Vought’s gleeful tweets about them — suggests a more vindictive purpose. Republican lawmakers and President Trump himself threatened to unleash Vought as a kind of rogue budget cutter before the federal government shut down last week.
“We don’t control what he’s going to do,” Senator John Thune told Politico last week. “I have a meeting today with Russ Vought, he of PROJECT 2025 Fame, to determine which of the many Democrat Agencies, most of which are a political SCAM, he recommends to be cut,” Trump posted on the same day.
Up until this year, canceling funding that is already under contract with a private party would have been thought to be straightforwardly illegal under federal law. But the Supreme Court’s conservative majority has allowed the Trump administration to act with previously unimaginable freedom while it considers ruling on similar cases.
Faraday Microgrids, the contractor that was due to receive the funding, is already building a microgrid for the hospital. The proposed backup power system — which the grant stipulated should be “non-lithium-ion” — was supposed to be funded by the Energy Department’s Office of Clean Energy Demonstrations, with the goal of finding new ways of storing electricity without using lithium-ion batteries, and was meant to work in concert with that new microgrid and snap on in times of high stress.
That microgrid project is still moving forward, Arboleda, the hospital’s spokesperson, told me. “Valley Children’s Hospital continues to build and soon will operate its microgrid announced in 2023 to ensure our facilities have access to reliable and sustainable energy every minute of every day for our patients and our care providers,” she added. That grid will contain some storage, but not the long-term storage system discussed in the official plan.
Faraday Microgrids, formerly known as Charge Bliss, didn’t respond to a request for comment, but its website touts its ability to secure grants and other government funding for energy projects.
In a statement, a spokesman for the Energy Department said that the grant was canceled because the project wasn’t feasible. “Following an in-depth review of the financial award, it was determined, among other reasons, that the viability of the project was not adequate to warrant further disbursements,” Ben Dietderich, a spokesman for the Energy Department, told me.
The children’s hospital, at least, is in good company. On Tuesday, a Trump administration document obtained by Heatmap News suggested the Energy Department is moving to kill bipartisan-backed funding for two direct air capture hubs in Texas and Louisiana. And although California has lost the most grants of any state, the Energy Department has also sought to terminate funding for new factories and industrial facilities across Republican-governed states.
Editor’s note: This story initially misstated the number of neonatal intensive care unit beds at Valley Children’s Hospital. It has been corrected.
Rob and Jesse break down China’s electricity generation with UC San Diego’s Michael Davidson.
China announced a new climate commitment under the Paris Agreement at last month’s United Nations General Assembly meeting, pledging to cut its emissions by 7% to 10% by 2035. Many observers were disappointed by the promise, which may not go far enough to forestall 2 degrees Celsius of warming. But the pledge’s conservatism reveals the delicate and shifting politics of China’s grid — and how the country’s central government and its provinces fight over keeping the lights on.
On this week’s episode of Shift Key, Rob and Jesse talk to Michael Davidson, an expert on Chinese electricity and climate policy. He is a professor at the University of California, San Diego, where he holds a joint faculty appointment at the School of Global Policy and Strategy and the Jacobs School of Engineering. He is also a senior associate at the Center for Strategic and International Studies, and he was previously the U.S.-China policy coordinator for the Natural Resources Defense Council.
Shift Key is hosted by Robinson Meyer, the founding executive editor of Heatmap, and Jesse Jenkins, a professor of energy systems engineering at Princeton University.
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Here is an excerpt from our conversation:
Robinson Meyer: Your research and other people’s research has revealed that basically, when China started making capacity payments to coal plants, in some cases, it didn’t have the effect on the bottom line of these plants that was hoped for, and also we didn’t really see coal generation go down or change in the year that it happened. It wasn’t like they were paying these plants to stick around and not run. They were basically paying these plants, it seems like, to do the exact same thing they did the year before, but now they also got paid. And maybe that was needed for their economics, we can talk about it.
Why did coal get those payments and not, say, batteries or other sources of spare capacity, like pumped hydro storage, like nuclear? Why did coal, specifically, get payments for capacity? And does it have to do with spinning reserve? Or does it have to do with the political economy of coal in China?
Michael Davidson: When it came out, we said exactly the same thing. We said, okay, this should be a technology neutral payment scheme, and it should be a market, not a payment, right? But China’s building these things up little by little. Over time we’ve seen, historically, actually, a number of systems internationally started with payments before they move to markets because they realize that you could get a lot more competitive pressure with markets.
The capacity payment scheme for coal is extremely simple, right? It says, okay, for each province, we’re going to say what percentage of our benchmark coal investment costs are we going to subsidize. It’s extremely simple. It does not account for how much you’re using it at a plant by plant level. It does not account for other factors, renewables, etc. It’s a very coarse metric. But I wouldn’t say that it had had some, you know, perverse negative effect on the outcome of what coal generation is. Probably more likely is that these payments were seen, for some, as extra support. But then for some that are really hurting, they’re saying, okay, well then we will maybe put up less obstacles to market reforms.
But then on top of that, you have to put in the hourly energy demand growth story and say, okay, well you have all these renewables, but you don’t have enough storage to shift to evening peaks. You are going to rely on coal to meet that given the current rigid dispatch system. And so you’re dispatching them kind of regardless of whether or not you have the payment schemes.
I will say that I was a skeptic, right? Because when people told me that China should put in place a capacity market, I said, China has overcapacity. So if you have an overcapacity situation, you put in place a market, the prices should be zero. So what’s the point? But actually, when you’re looking out ahead with all of this surplus coal capacity that you’re trying to push down, you’re trying to push those capacity factors of those coal plans from 50%, 60%, down to 20% or even lower, they need to have other revenue schemes if you’re not going to dramatically open up your spot markets, which China is very hesitant to do — very risk averse when it comes to the openness of spot markets, in terms of price gaps. So that’s a necessary part of this transition. But it can be done more efficiently, and it should done technology neutral.
And by the way that is happening in certain places. That’s a national scheme, but we actually see that the implementation — for example, Shaanxi province, we have a technology neutral scheme that would include other resources, not just coal.
Mentioned:
China’s new pledge to cut its emissions by 2035
What an ‘ambitious’ 2035 electricity target looks like for China
China’s Clean Energy Pledge is Clouded by Coal, The Wire China
Jesse’s upshift; Rob’s upshift.
This episode of Shift Key is sponsored by …
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A warmer world is here. Now what? Listen to Shocked, from the University of Chicago’s Institute for Climate and Sustainable Growth, and hear journalist Amy Harder and economist Michael Greenstone share new ways of thinking about climate change and cutting-edge solutions. Find it here.
Music for Shift Key is by Adam Kromelow.