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What began as a dispute over world-leading computer chips is now rocking the auto and clean energy industries.
America and China’s increasingly acrimonious rivalry over national security is now spilling over into clean energy.
On Friday, China imposed export restrictions on three high-purity forms of graphite, a mineral that is essential to making semiconductors, electronics, and — most importantly — electric vehicle batteries. Under the new rules, Chinese companies cannot export any of these especially valuable types of graphite without getting a waiver from the government.
For now, these new restrictions exist in a curious quantum state: They could be a big deal, permanently reshaping the global clean-energy economy, or they could quickly fizzle into a bureaucratic wrinkle.
Yet the potential importance of these new rules to the EV industry is difficult to overstate. Graphite makes up about 20% of the mass of an EV battery, and at least two-thirds of the world’s graphite comes from China.
What’s most ominous might be the fact that the rules exist at all. The new restrictions show that America and China’s growing trade battle over “dual-use technologies” — tools and materials that can be used by both civilians and the military — is proving difficult to contain. What began as a dispute over world-leading computer chips is now rocking the auto and clean energy industries.
As far as critical minerals go, graphite is relatively simple: It is just a crystal of carbon atoms. It can be mined from the Earth or produced synthetically by processing fossil fuels. Humanity goes through hundreds of tons of low-grade graphite every year — it is in pencils and chemicals, for instance — but high-grade graphite is crucial for two uses. First, it is used in the equipment needed to make semiconductors, including those used for AI and other uses. Second, it makes up the anodes — or the negative electrodes — of lithium-ion batteries, the type of batteries that power smartphones, laptops, and electric vehicles.
Right now, China makes most of the world’s graphite. It also processes much of that graphite, grinding it into flakes 1/10th the size of a human hair and rounding them into tiny spheres. Graphite then must be processed to incredible purity — 99.5% or higher — to be used in batteries or semiconductors; only exceptionally pure graphite has the chemical properties needed for these technologies. It is the export of these very pure forms of graphite that China has now restricted.
The new rules follow restrictions on the export of gallium and germanium, which are crucial for electronics and EVs, that China imposed in June.
“In the wider critical minerals space, the talking point is that China dominates. Which is true. But it’s especially true for graphite,” Morgan Bazilian, the director of the Payne Institute for Public Policy at the Colorado School of Mines, told me.
Graphite makes up about 20% of the mass of a lithium-ion battery. There is, in all likelihood, several grams of graphite in the device you are using right now. The odds are high that it originated in a Chinese factory.
The new limits came in the context of a widening United States-China trade war. A few days earlier, the United States had closed loopholes and tightened its restrictions on the kind of semiconductors that can be exported to China. Those American restrictions were first imposed last year; they aimed to preserve America’s technological supremacy by blocking China’s ability to produce the most advanced forms of semiconductors domestically. The restrictions limited what kinds of technology and intellectual property could be shared with China; they also blocked U.S. citizens or green-card holders from working on technology that could be shared with the Chinese.
There is some disagreement about whether these rules are working; China has announced production of a 7-nanometer chip, which puts it close to the state of the art. But in any case, China’s new limits on graphite export don’t seem to be an in-kind response to the American semiconductor restrictions, and it’s unclear whether the graphite restrictions will matter as much for the rest of the world. The restrictions could temporarily spike short-term prices, according to Alex Turnbull, an investor who has proposed, along with the think tank Employ America, that the U.S. maintain a strategic lithium reserve. But in the long-term, graphite producers in the West should be able to increase production and fill the gap.
Bazilian said that these new restrictions have hit at a lucky time. Graphite prices have fallen this year due to an excess of Chinese capacity and softer demand for electric vehicles than expected.
The good news is that unlike with other minerals, a number of American, Indian, and Japanese firms have already begun manufacturing graphite. Many of these firms saw their share prices rise on Monday.
In a way, the restrictions were a blessing for non-Chinese graphite suppliers, Turnbull said. Many companies would have struggled to scale up in the same market as the Chinese firms, which regularly produce more graphite than they need. (It also helps that — unlike semiconductors — graphite does not rely on proprietary or especially advanced technology; its risks are primarily financial, rather than technical.)
That said, there are still reasons why a rapid scale up might not happen, Bazilian said. “This is really a place where China dominates, and the other parties that have, like, 10% market share are places like Mozambique,” he said.
And Mozambique’s mines have suffered from what are sometimes euphemistically referred to as “security issues.” Last year, the Balama mine in the country’s Cabo Delgado was attacked by Islamist terrorists, who beheaded two security guards. The Islamic State has claimed responsibility for the attack.
America’s efforts to develop a rival graphite supply chain depend on that mine. Last year, the Department of Energy issued a $102 million loan to Syrah Vidalia, a new Louisiana facility that will process graphite from the Mozambique mine and manufacture battery anodes.
“The critical minerals discussion is not a homogenous discussion. Each of these supply chains is different — it’s not easy to make big analogies to the oil market or something,” Bazilian said. “People love to say, Rare earths aren’t rare, but that’s not nearly as profound as people think. All of these minerals are abundant on Earth, but it’s not easy to find economically viable deposits of these ores.”
As long as the global graphite market remained constrained, he added, then Chinese firms would continue to have the easiest, cheapest access to it — which means that they will likely continue their dominance of producing anodes, a crucial midstream part of the EV battery supply chain.
Climate advocates have long pointed out that the technologies needed to fight climate change — batteries, renewables, electric vehicles, and more — have profound national-security implications. They are, like semiconductors, the industries of the future. It’s little surprise that battles over the former have been dragged into fights over the latter.
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A conversation with Mike Hall of Anza.
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!
How much do we know about developers’ reactions to the anti-IRA bill that was passed out of the House last week?
So it’s only been a few days. What I can tell you is there’s a lot of surprise about what came out of the House. Industries mobilized in trying to improve the bill from here and I think a lot of the industry is hopeful because, for many reasons, the bill doesn’t seem to make sense for the country. Not just the renewable energy industry. There’s hope that the voices in Congress — House members and senators — who already understand the impact of this on the economy will in the coming weeks understand how bad this is.
I spoke to a tax attorney last week that her clients had been preparing for a worst case scenario like this and preparing contingency plans of some kind. Have you seen anything so far to indicate people have been preparing for a worst case scenario?
Yeah. There’s a subset of the market that has prepared and already executed plans.
In Q4 [of 2024] and Q1 [of this year] with a number of companies to procure material from projects in order to safe harbor those projects. What that means is, typically if you commence construction by a certain date, the date on which you commence construction is the date you lock in tax credit eligibility, and we worked with companies to help them meet that criteria. It hedged them on a number of fronts. I don’t think most of them thought we’d get what came out of the House but there were a lot of concerns about stepdowns for the credit.
After Trump was elected, there were also companies who wanted to hedge against tariffs so they bought equipment ahead of that, too. We were helping companies do deals the night before Liberation Day. There was a lot of activity.
We saw less after April 2nd because the trade landscape has been changing so quickly that it’s been hard for people to act but now we’re seeing people act again to try and hit that commencement milestone.
It’s not lost on me that there’s an irony here – the attempts to erode these credits might lead to a rush of projects moving faster, actually. Is that your sense?
There’s a slug of projects that would get accelerated and in fact just having this bill come out of the House is already going to accelerate a number of projects. But there’s limits to what you can do there. The bill also has a placed-in-service criteria and really problematic language with regard to the “foreign entity of concern” provisions.
Are you seeing any increase in opposition against solar projects? And is that the biggest hurdle you see to meeting that “placed-in-service” requirement?
What I have here is qualitative, not quantitative, but I was in the development business for 20 years, and what I have seen qualitatively is that it is increasingly harder to develop projects. Local opposition is one of the headwinds. Interconnection is another really big one and that’s the biggest concern I have with regards to the “placed-in-service” requirement. Most of these large projects, even if you overcome the NIMBY issues, and you get your permitting, and you do everything else you need to do, you get your permits and construction… In the end if you’re talking about projects at scale, there is a requirement that utilities do work. And there’s no requirement that utilities do that work on time [to meet that deadline]. This is a risk they need to manage.
And more of the week’s top news in renewable energy conflicts.
1. Columbia County, New York – A Hecate Energy solar project in upstate New York blessed by Governor Kathy Hochul is now getting local blowback.
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.
3. Fayette County, Pennsylvania – A Bollinger Solar project in rural Pennsylvania that was approved last year now faces fresh local opposition.
4. Cleveland County, North Carolina – Brookcliff Solar has settled with a county that was legally challenging the developer over the validity of its permits, reaching what by all appearances is an amicable resolution.
5. Adams County, Illinois – The solar project in Quincy, Illinois, we told you about last week has been rejected by the city’s planning commission.
6. Pierce County, Wisconsin – AES’ Isabelle Creek solar project is facing new issues as the developer seeks to actually talk more to residents on the ground.
7. Austin County, Texas – We have a couple of fresh battery storage wars to report this week, including a danger alert in this rural Texas county west of Houston.
8. Esmeralda County, Nevada – The Trump administration this week approved the final proposed plan for NV Energy’s Greenlink North, a massive transmission line that will help the state expand its renewable energy capacity.
9. Merced County, California – The Moss Landing battery fire is having aftershocks in Merced County as residents seek to undo progress made on Longroad’s Zeta battery project south of Los Banos.
Anti-solar activists in agricultural areas get a powerful new ally.
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.”
“Farmland should be for agricultural production, not solar production,” Cannon wrote – a statement also made in the USDA report.
REAP is a program created in 2008 that exists to help fund renewable energy and sustainability projects at the level of individual farms and has been seen as a potential tool for not only building more solar but also more trust in agriculturally-focused communities. It’s without question that retooling REAP to actively disincentivize awardees from building solar on farmland could have a chilling effect, at least amongst those who receive money from the program or wish to in the future. This comes after Trump officials temporarily froze money promised to farmers, too.
As we’ve previously written in The Fight, agricultural interests can at times present as much a threat to the future of solar energy as any oil-funded dark money group, if not more so. Conflicts over solar production on farmland make up a large portion of the total projects I cover in The Fight every week, and it is one of the most frequently cited reasons for opposition against individual renewables projects. (Agricultural workforces are one of the most important signals for renewable energy opposition in Heatmap Pro’s modeling data as well.) I wrote shortly after Trump’s inauguration that I wondered when – not if – he would adopt this position.
It’s unclear what exactly led USDA to dive headlong into the “No Solar on Farmland” campaign, aside from its growing popularity in conservative political circles, but there is reason to believe farming interests may have played a role. USDA has stated the report was the product of discussions with farming groups and an industry roundtable. In addition, per lobbying disclosures, at least one agricultural group – the Pennsylvania Farm Bureau – advocated earlier this year for “congressional action and/or executive orders” to “balance renewable and conventional sources of energy” through “limit[ing] solar on productive farmland.” (The Pennsylvania Farm Bureau denied this in an email to me earlier this week.)
There’s also reason to believe some key stakeholders were caught off-guard or weren’t looped in on the matter.
American Farmland Trust has been trying to cultivate common ground between farmers, solar companies, and various agencies at all levels of government over the future of development. But when asked about this report, the nonprofit told me it couldn’t speak on the matter because it was still trying to suss out what was going on.
“AFT is meeting with the Trump administration to learn more about what they are planning in terms of policy and programs to implement this concept,” AFT media relations associate Michael Shulman told me.