Electric Vehicle (EV) And Battery Manufacturing in the Great Lakes Region
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Introduction
As the historical heartland of the US automotive industry, the Great Lakes region[i] is well poised to compete in the emerging electric vehicle (EV) and battery supply chain industries. However, it cannot take this historical advantage for granted. The so-called Battery Belt stretches beyond the Great Lakes and well into the Deep South. Policymakers and economic development organizations (EDOs) alike will need to strategically invest in existing capacities, develop new competitive advantages, and avoid engaging in a race to the bottom that undermines the overall global competitiveness of this critical sector.
To realize the economic, environmental, and social opportunities that come with building a strong EV battery industry in the Great Lakes states, there must be action from federal and state governments. Specifically, there are opportunities for policy to catalyze action along all segments of the EV and battery supply chain as well as policy that will facilitate a competitive environment for the industry to thrive.
Despite the Great Lakes states’ significant potential to be a global leader in the EV supply chain, there are significant holes in their industrial strategies to do so. This brief includes a unique industrial policy gap analysis to help Great Lakes states identify their own weaknesses and offers suggestions for where policymakers could coordinate to develop multistate strategies for industry cluster development. As Figure 1 below illustrates, Michigan is leading on EV supply chain industrial strategy among states in the region even as the federal government is setting the pace. All Great Lakes states aiming to compete in this sector should be looking to complement this federal strategy across all domains of industrial policy.
This industry brief demonstrates why Great Lakes states should look to plug these holes in their industrial strategies. It identifies common barriers to developing a competitive EV supply chain sector, the unique challenges to building up an EV and battery supply chain in the Great Lakes, and the significant economic and social opportunities of doing so. Finally, it looks at some of the policy changes needed to chart a path toward a successful regional industry. This brief is by no means a comprehensive assessment but rather an overview of key issues that will require additional research, capacity building, regional coordination, and policy reform.
[i] RMI is defining the Great Lakes region as Illinois, Indiana, Michigan, Minnesota, Ohio, Pennsylvania, and Wisconsin.
EV and Battery Supply Chain 101
The EV battery supply chain is the process by which materials are sourced, processed, and assembled to create batteries for vehicle applications. Broadly, this is broken down into four major steps: upstream, midstream, downstream, and reuse and recycling.
Upstream
The upstream portion of the EV battery supply chain refers to the mining of the raw materials needed to build batteries. Lithium-ion batteries, the type used in most EVs, use five critical minerals as identified by the United States Geological Survey: lithium, cobalt, manganese, nickel, and graphite. The Energy Act of 2020 defines critical minerals as a “non-fuel mineral or mineral material essential to the economic or national security of the US and which has a supply chain vulnerable to disruption.”
Critical minerals are found around the world, but economically viable deposits are concentrated in a few locations. For example, much of the world’s supply of cobalt is in the Democratic Republic of the Congo, and lithium is primarily located in Australia and South America.
Unfortunately, certain elements of the mining industry have a history of human rights abuses. Many overseas critical mineral mines are in regions considered conflict-affected and high risk.ii Lack of third-party tools and data means there is little transparency in how mines treat their workers and what impacts their practices have on the surrounding natural environment. Without transparency and traceability, industry participants and policymakers are not effectively equipped to address abuses.
While not a comprehensive solution, developing an EV supply chain in the United States and allied countries (known as “friendshoring”) can limit human rights abuses within the EV battery supply chain. This would require strategic, active collaboration among these aligned countries to develop the facilities needed to build out the supply chain. Furthermore, diversifying the upstream supply and creating more competition can give downstream entities greater ability to influence the practices of their suppliers.
Given the economic costs and time to open new mines, the United States is likely to continue to be a major importer of these critical minerals for the foreseeable future. Based on existing domestic project announcements and imports, the country will be significantly short of its projected 2030 demand in cobalt, manganese, lithium, and graphite. Although the Great Lakes states of Minnesota and Wisconsin do have areas that might contain mineral systems that commonly have the metals used throughout the EV supply chain, production growth has been sporadic. Today, there is one operating nickel mine in Minnesota and two more planned.
Midstream
The midstream portion of the EV battery supply chain involves refining, processing, and assembling the raw materials into battery cells. Refining and processing remove unneeded materials from the minerals, achieving a purity level that makes the minerals suitable for products such as batteries. Manufacturers then use these materials to create anodes (negative electrodes) and cathodes (positive electrodes), which are placed into battery cells. There is no industry consensus about whether battery cell manufacturing is a midstream or downstream activity; however, RMI considers cell manufacturing part of the midstream process.
The midstream portion of the EV battery supply chain is concentrated in only a few countries, particularly China, South Korea, and Japan. China produces three-quarters of all lithium-ion batteries and 70% of cathodes, and it refines over half of the world’s lithium, cobalt, and graphite. Additionally, China is responsible for 75% of all battery cell manufacturing, 90% of anode and electrolyte production, and 60% of the world’s battery component manufacturing.
The concentration of midstream capacity in these countries also concentrates the expertise in the production processes, providing a significant cost-competitiveness advantage against new entrants. Yet there are also cost advantages to locating processing capacity near resource extraction, suggesting there could be significant new midstream capacity investments in countries like Australia, Canada, and Chile with abundant mineral resources.
Nevertheless, there are 27 operating and planned midstream facilities across the Great Lakes region, 10 of which are in Michigan. The 27 include several lithium-ion battery material manufacturing plants in Battle Creek, Michigan; battery-grade graphite facilities in Sinking Spring, Pennsylvania, and Chicago, Illinois; and a separator manufacturing plant in Terre Haute, Indiana.
Downstream
The downstream portion of the EV battery supply chain entails the assembly of battery cells into modules and then packs before finished batteries are placed into EVs. Battery modules are made by stacking battery cells in series or in parallel in a metal frame. Modules contain several battery cells, which, depending on the cell type and the vehicle range, can number as few as 10 cells or more than several hundred. Battery modules are then placed into battery packs.
China, Japan, and South Korea accounted for nearly 70% of the downstream battery market in 2021. Three companies own over 50% of the market: China’s CATL (33%), South Korea’s LG Energy Solution (22%), and Japan’s Panasonic (15%).
This, of course, is where much of the attention has been focused in recent months as major auto manufacturers have announced highly ambitious plans to launch more EV models and manufacture much more of their own battery capacity. Today, there are five operating downstream facilities in the region, which will grow to over 30 in the next few years as planned investments come on line. Based on project announcements, total EV manufacturing capacity in the region will grow from 300,000 vehicles annually today to over 700,000 in just the next two years. Battery manufacturing capacity will likely grow from 37 gigawatt-hours today to 285 gigawatt-hours per year by 2026.
Reuse and Recycling
Currently, it is frequently cheaper to mine for minerals and produce new batteries than to utilize a system of recycled materials. But recycling has the potential to reduce the demand for raw materials by up to 64% by 2050. Repurposing and recycling EV batteries would reduce the reliance on virgin materials and the potential negative human and environmental impacts associated with their extraction while reducing the risk of supply chain interruptions.
Battery recycling is an important element of the battery supply chain. Currently, announcements of new recycling facilities far exceed the availability of materials to recycle and process (known as feedstock). However, this will improve as more electric vehicles enter the market and their batteries subsequently reach the end of their life cycle, known as end-of-life. Additionally, increased recycling of battery materials can help support and strengthen the EV battery supply chain. Currently, recycled output frequently has to be exported as many US refiners and processors do not have the capacity to use the output to develop new batteries, creating inefficiencies.
The United States must continue to invest in and develop the EV battery supply chain, both domestically and through friendshoring. This should be achieved through both private-sector investment and strategic government investment and coordination. As EV adoption increases, EV battery recycling will be critical for the resilience of the US supply chain, as well as to reduce the reliance on mining and the negative human rights and environmental impacts that mining can entail.
[ii] Conflict-affected and high-risk areas are defined by the Organisation for Economic Cooperation and Development as “identified by the presence of armed conflict, widespread violence, or other risks of harm to people.”
Industry Trends
The sale of EVs is growing both globally and within the United States. Research from Bloomberg New Energy Finance (BNEF) shows that there were 10 million EViii sales globally in 2022, and that is projected to grow 250% in just the next four years. Globally, EVs accounted for 14% of new passenger vehicle sales in 2022; however, 58% of global EV sales were in China and only 9% were in the United States. Figures 2 and 3 show projected trends in global EV sales over time.
While EVs accounted for 6% of passenger vehicle sales in the United States in 2022, their share is projected to grow to 15% in 2024 and nearly half of all sales by 2030. As Figure 4 illustrates, the projected market share of battery electric vehicles (BEVs) is expected to grow fastest, followed by hybrid electric vehicles (HEVs), with the share of internal combustion engine (ICE) passenger vehiclesiv rapidly diminishes through 2040.
Given significant funding for battery manufacturing in the Inflation Reduction Act (IRA) of 2022, a Battery Belt is forming in the United States through Michigan, Indiana, Ohio, Kentucky, Tennessee, Georgia, and the Carolinas. The northern portion of the Battery Belt, made up of the states we are exploring in this brief, is a historic hub of the domestic auto industry and has been focused on battery and EV production for more than a decade. However, the southern part of the belt is attracting increasingly more investments for battery manufacturing and development.
For example, Norwegian company Freyr is developing a second factory south of Atlanta. Freyr plans to make 2.5 gigawatt-hours’ worth of batteries in 2025 and eventually ramp up to 38 gigawatt-hours. Similarly, SK — a South Korean battery corporation — in partnership with Hyundai, is planning to build a $5 billion factory in northern Georgia.
Under the Biden administration, private companies have announced investments totaling $133 billion for EVs and battery manufacturing in the United States. Figure 5 shows the distribution of these private investments across the country, with a concentration in the Battery Belt as described above.
Looking specifically at the Great Lakes region, there are EV and battery supply chain facilities in all of the states in the region, with hubs in major metro areas including Detroit; Columbus, Ohio; Cleveland; and Chicago.
In addition to the IRA, there are other financial mechanisms from the federal government being utilized to support EV battery factory development. For example, Ford recently received a conditional loan of $9.2 billion from the US Department of Energy’s (DOE’s) Loan Programs Office (LPO) to construct three battery factories in the United States. This is the single largest loan in the history of the LPO. These three factories are under construction in Kentucky and Tennessee and are being built through a joint venture called BlueOval SK, which is owned by Ford and South Korean battery company SK On Co. These new factories will help Ford increase its EV output, as they plan to make up to 2 million EVs by 2026, a significant increase from the approximately 132,000 the automaker produced in 2022.
Additionally, through the DOE’s Energy Infrastructure Reinvestment program, the LPO can finance projects that retool, repower, repurpose, or replace energy infrastructure that is no longer operational, or enable infrastructure that will avoid or reduce pollutants and greenhouse gas emissions at concessional rates.v This could provide an additional funding source for EV battery supply chain infrastructure development.
Corresponding to this increased investment in and development of the battery supply chain in the United States, the workforce employed in this field is located in the Battery Belt and also in California, Nevada, and Arizona, as seen in Figure 7.
As a result of these simultaneously expanding industrial clusters, Great Lakes states should position themselves to maintain competitiveness with other regions within the United States by capitalizing on federal programs and improving state legislation to facilitate a growing industry in the region.
[iii] BNEF data considers EVs to be both battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs)
[iv] BNEF defines passenger vehicles as shared vehicles (digital-hailing, taxis, car-sharing and autonomous vehicles operated in a shared fleet), and private vehicles (privately owned vehicles).
[v] Department of Energy, Energy Infrastructure Reinvestment: Title 17 Clean Energy Financing – Energy Infrastructure Reinvestment, https://www.energy.gov/lpo/energy-infrastructure-reinvestment
Economic Impacts in the Great Lakes
Jobs
Today, there are more than 10 million ICE jobs across the country, and over 3,000 counties have a business in the auto supply chain. According to one study, as much as 5.2% of all jobs in the country depend on the auto industry. Meanwhile, there are less than 2.5 million jobs related to EVs, including many that supply both EV and ICE supply chains. However, battery manufacturing jobs have grown by around 20% over the past five years and 13% in EV manufacturing industries more broadly.
A common concern with the transition to EV manufacturing is that the manufacturing process is less labor-intensive than that of ICE vehicles; however, recent studies do not seem to bear this concern out. This is because an ICE powertrain will often have more than 1,000 components, whereas an EV one may have only a few hundred. Yet there is a range of power electronics equipment required to run an EV that do not exist in pure ICEs. As a result, Boston Consulting Group estimates that while EVs require fewer labor hours for component and motor manufacturing, that is offset by the additional hours required for battery cell manufacturing, as well as module and pack assembly.
These auto manufacturing jobs, regardless of powertrain, are seen as particularly important to economic development because of their outsize effect on indirect job creation, as well as racial and educational equity. It is estimated that for every 100 jobs created in motor vehicle manufacturing, an average 1,428 indirect jobs are created in supplier firms and through induced job creation — this is the highest multiplier effect of any major manufacturing industry. What is more, auto manufacturing has historically been disproportionately beneficial for Black workers, and it continues to employ a much higher share (16.6%) than the national average (12.5%). Importantly, workers without a four-year degree account for 75% of workers in the auto sector, compared with 62.2% in all industries, and these workers earn 15% more, on average, in auto manufacturing than in the rest of the economy.
Another major factor in the trajectory of auto manufacturing employment is whether the United States, and Great Lakes states in particular, can capture global market share within the EV supply chain. In a domestically manufactured ICE powertrain, around 75% of components are produced domestically today, compared with just 45% of what goes into a domestically produced EV. According to one estimate, total auto sector manufacturing jobs could increase by 150,000 if the US manufacturing share of EV components reaches the same level as ICE components, whereas jobs could fall by 75,000 if shares remain at today’s levels.
Importantly, the IRA has several provisions to help catalyze domestic manufacturing and critical minerals production. These domestic content provisions are particularly stringent for consumer vehicles, which will likely represent 50% to 60% of total vehicle and battery demand. Original equipment manufacturers (OEMs) appear to be on track to reach the necessary domestic capacity growth to meet IRA qualifications. However, there are some importers like Hyundai and Toyota that are falling behind. In battery component manufacturing, consultancy Bain & Co. estimates that IRA incentives will be sufficient for enough domestic capacity to be built in cathode, battery cell, and battery pack manufacturing. Materials processing and extraction, on the other hand, are going to have to lean on friendshoring efforts to meet these provisions.
Yet even if total employment in EV manufacturing is similar to or greater than ICE manufacturing, the geographic distribution of these jobs will depend on the competitiveness of state and local clusters, which are areas of industry colocation that share pools of resources like workers, infrastructure, and institutions. In a recent study of potential changes in EV manufacturing jobs in Michigan, for example, the authors forecast a net difference of 50,000 jobs in the sector depending on whether the state becomes more or less competitive in the industry.
Some indication of future job distribution among US states can be inferred by recent project announcements. Since 2021, new EV supply chain projects have announced more than 137,000 jobs, which, at the average multiplier for the industry, could create a further 2 million jobs throughout the economy.
It is particularly noticeable from these announcements how much of the new job creation in EV and battery manufacturing projects is likely to happen in the Southeast and in the Great Lakes. Of the 137,000 planned new jobs, 32% are in Southeast states and 21% in the Great Lakes. To date, Georgia has seen the most job announcements at 25,134, followed by Texas at 20,000 and Michigan at 14,412. Interestingly, as a share of the total labor force, Delaware has seen the largest new job growth, followed by Georgia, Kentucky, and Tennessee.
Supply Chain Specialization and Place-Based Risks
The other side of the coin to the EV transition is the effects on the economy built around ICEs. In particular, the many “powertrain communities” that have developed deep expertise in manufacturing highly specialized components in ICEs are at a heightened risk of disruption due to the differing manufacturing requirements of EVs. Since most ICE powertrain components are not needed in an EV, states and communities with high concentrations of parts manufacturers are especially vulnerable.
Looking at specialization across the three major phases of the ICE supply chain — OEMs, parts manufacturers, and midstream suppliers — some of this varied exposure to the EV transition becomes apparent. Figure 8 shows how specialization varies significantly by state and supply chain segment. Interestingly, Iowa has the highest specialization in OEMs at around 11 times the national average employment share due to a large presence in farm and construction machinery manufacturing — a related OEM, if not directly producing vehicles. Michigan is the second most specialized state at around five times the national average and is home to 16% of all OEM jobs in the country. The state is also the most specialized parts manufacturing and midstream supplier state at nearly 12 times and three times the national average, respectively.vi Overall, the Great Lakes states are the most exposed to both parts and midstream supplier manufacturing and the second-most exposed to OEMs.
Even within the Great Lakes region there is a high degree of variability in exposure to parts manufacturing, the highest-risk segment of the ICE value chain. The Detroit-Warren-Flint area in Michigan is the most exposed, with nearly 70,000 people employed in the sector, which represents around 3% of all jobs, a share that is 13 times higher than the national average. In fact, 10 of the 15 economic areas in the region are more than twice as specialized in parts manufacturing than the country as a whole.
These risks can be hedged by adding EV manufacturing capacity as fast as ICE capacity is being lost. However, new EV supply chain facilities do not always choose to locate where there are existing ICE jobs. EV facilities are less likely to colocate in communities with OEM and parts manufacturing facilities and more likely to colocate with midstream supplier facilities — around a third of all battery supply chain facilities are in the same areas as existing midstream supplier facilities. This would suggest that communities that specialize in midstream supplier manufacturing are less at risk of economic disruption due to the EV transition, since many of these same refined and processed materials are inputs into both EVs and ICEs.
Another possible concern for many communities with existing OEM factories is whether the additional factory infrastructure required for EV manufacturing — mostly to handle the added weight of the batteries — will make it cost-prohibitive to convert brownfield sites into EV assembly facilities. This concern does not appear to be warranted, however. Although there will certainly be new greenfield investments in EV component manufacturing and assembly, analysis from Bain finds that a significant portion of ICE equipment and facilities is transferable or convertible for EV use. Bain estimates that converting existing capacity will cost half as much as greenfield investment — approximately $5 million to $10 million per 1,000 EV units, compared with $10 million to $20 million for greenfield expansion.
In particular, body assembly is substantially the same and can leverage existing facilities and equipment. This can already be seen in recent announcements from major OEMs, including General Motors, which announced it could save $1.5 billion each time it renovates an existing facility, relative to building a new one, while Honda, Ford, and Stellantis have all announced plans to convert existing facilities.
Innovation and Productivity
Finally, at its heart, the transition to EVs is a transition to a set of newer, cheaper, more innovative technologies. Technology transitions are opportunities for “creative destruction” in ideas, business processes, production methods, and supply chain networks. Such creative destruction is fundamental to productivity growth and economic development, especially in the manufacturing sector, which has historically played a disproportionate role in driving research and development (R&D) and productivity growth.
This is particularly true of the motor vehicle manufacturing sector. The industry is the sixth-largest source of company-level R&D in the United States, and at various times in its history, it has been one of the largest contributors to productivity growth. A range of new technologies and processes are poised to continue reshaping the sector, including battery manufacturing, additive manufacturing, flexible manufacturing, autonomous final assembly, and end-of-life vehicle recycling. Figure 10 shows that, among the largest R&D-spending industries, motor vehicle manufacturing spends nearly as much as the scientific R&D services sector.
However, productivity growth in the sector has been stagnant with a lower rate of new entrants over time in a market dominated by large, incumbent firms. Although the transition to EVs is by no means guaranteed to reverse this trajectory, there are some positive signs that the technological disruption is pushing the industry to recapture its spirit of innovation. Figure 11 shows that while the motor vehicles manufacturing industry has been increasing output faster than hours worked (a common measure of productivity), the rate at which it has been doing so is much lower than in other major industrial sectors.
The most obvious example is Tesla, which in 2010 became the first US automotive company to go public since Ford in 1956. Tesla’s historic success has pushed incumbent automakers to not only accelerate their plans to go electric but also to revamp their production processes. Tesla now operates the most productive car factory in the United States and thrived during the height of the COVID-19 pandemic thanks to its “superior command of technology and [owning] its own supply chain.”
Tesla’s Gigafactory in Reno, Nevada, is an interesting case study in the economic development impact of large plant openings on local communities. One of the arguments for public incentives to attract large manufacturing plants, like Tesla’s, is that they are expected to increase productivity and output at existing nearby establishments. According to a 2022 economic impact assessment, the Gigafactory has contributed $17.1 billion in economic output to the region, created over 60,000 “job years,” engaged over 4,000 suppliers, and invested over $6 billion in new capital. While evidence for productivity spillovers is only indicative at this stage, Tesla seems to have encouraged a range of other high-tech industries to set up shop in Reno and is helping to diversify the local economy. The state is further doubling down on an industrial cluster built around the automaker as it plans to be the “lithium capital of North America” and a hub for advanced manufacturing.
While Reno has the advantage of being geographically close to Tesla’s Austin, Texas, headquarters as well as having significant lithium deposits, cities across the Great Lakes have the advantage of not only historic workforce capacity but R&D capacity that can directly translate into local entrepreneurship. The Detroit metro area has invented nearly three times more patents related to electric vehicles than any other city in the country over the past six years and only trails Ann Arbor, Michigan, for the most EV patents per person. Of the 10 cities specializing most in EV patents, six are in the Great Lakes. The Detroit-Warren-Flint area has also received the largest amount in DOE grant funding related to EVs over the last six years, with Syracuse, Chicago, and Milwaukee not too far behind, suggesting significant human and institutional capacity in emerging EV technologies.
[vi] See Appendix for list of included OEM, parts manufacturing, and midstream supplier manufacturing industries.
The Path to an EV Industry in the Great Lakes
To fully realize the economic, environmental, and social opportunities related to a strong EV battery industry in the Great Lakes, the federal and state governments need to enact strategic industrial policies. These policies must directly affect the upstream, midstream, downstream, and end-of-life segments of the EV and battery supply chain and include cross-sectoral strategies that will draw important industry actors to the Great Lakes region.
In terms of direct policies, states should enact programs focused on strategic industry coordination, incentivize both the manufacturing of EV batteries and the deployment of EVs and charging infrastructure, and create coordinated and standardized end-of-life regulations that increase battery circularity. Public–private partnerships, technology roadmaps, buying consortiums, and cohesive industry standards all drive strategic coordination that must occur between regional stakeholders. Beyond coordination, states should enact production incentives to complement and fill gaps from federal incentives within the EV value chain and policies to influence demand-pull mechanisms such as public procurement programs, domestic content requirements, and subsidies.
Further, there are several policies related to land use, workforce development, battery end-of-life, and enabling technologies like cheap, abundant, clean electricity that should be enacted to influence the overall business environment in the region. Land-use planning, former plant remediation, and industrial zoning are all policies that, if done correctly, can safely hasten mining operations in the region and provide locational incentives for manufacturing plants. Further, because of the shifting jobs landscape, retraining, apprenticeships, and educational programs will be needed to ensure a just and equitable transition. The EV industry relies heavily on electricity, taking 47 kilowatt-hours (kWh) of energy to make 1 kWh of battery storage, which means access to clean electricity is important to ensure environmentally safe and healthy growth of the industry in the region. Incentives that increase clean electricity in the region could draw more EV battery manufacturing companies and workers. Finally, to ensure circularity in the industry, policy must focus on battery end-of-life including recycling and reuse standards, incentives, and mandates as well as increased data availability and transparency.
Industrial Policy Landscape
Without appropriate policy guidance and support, the Great Lakes runs the risk of market participants being caught flat-footed, leaving potential jobs and investment opportunities on the table. This research provides a unique policy gap analysis of selective policies focusing on the EV battery industry at the federal level and in the Great Lakes region to better understand what regional policymakers can do to ensure local workers and communities are not left behind. It uses a typology of industrial policies used globally in similar technology transitions, relying especially on a novel framework developed by the Organisation for Economic Co-operation and Development.
Broadly speaking, “industrial policy” refers to any goal-oriented state action whose “purpose is to shape the composition of economic activity,” in this case with specific reference to the EV battery manufacturing supply chain. Although there are a range of policy instruments that can be used to improve strategic or economically important sectors, these policies can be grouped into four primary domains: strategic coordination, production instruments, demand-pull mechanisms, and cross-sectoral interventions. Within each domain, the policy instruments are grouped based on their similarities:
- Strategic coordination: Any effort of policy governance such as coalitions and sectoral competitiveness assessments. Often, policymakers choose to commission industry strategy or technology roadmaps to guide and complement the other categories of industrial policy intervention. These would usually be accompanied by a vision statement and a set of objectives and targets.
- Production instruments: Affect the economics of firm-level production and investment decisions for individual firms within the target sector. This can include a range of financial incentives — such as subsidies, grants, or tax credits — to promote research, development, and demonstration (RD&D) activities or otherwise facilitate additional investment, particularly in novel technologies. Production instruments can also affect firm performance through the provision of key inputs, such as skilled labor, or through addressing supply chain gaps.
- Demand-pull mechanisms: Apply to the consumption of the product(s) produced by the industry. These can include tax breaks and rebates, mandates, public procurement, and certain product standards and definitions.
- Cross-sectoral interventions: Affect the whole industry through regulations governing the allocation of production factors, including land, capital, and labor. These interventions can also include cross-sectoral policies that affect the target industry, such as competition or trade policy; policies that affect supply chain segments that bookend the industry, such as recycling and reuse; and the development of enabling technologies crucial to battery manufacturing.
The policy gap analysis was developed for EV battery-specific policies and key enabling technologies like clean electricity. After conducting the landscape assessment, this study identified regional gaps between federal and state policies and highlighted efforts that states should learn from and follow. Figure 1 presents the landscape assessment for federal and state policies in the Great Lakes region.
Strategic Coordination
Advancing strategic coordination is critical to ensuring that private and public efforts are efficient and effective in supporting and strengthening an EV and battery supply chain in the Great Lakes and the United States more broadly.
Technology-specific roadmaps, for example, can provide a framework and tangible steps to help direct and guide state policies and incentives as well as encourage alignment with private efforts. However, on top of strategic planning, coordinated implementation is needed to scale industry on a regional level. Thus, in addition, states in the Great Lakes region need to develop public–private partnerships and memorandums of understanding (MOUs) to bring to life these roadmaps and provide coordination and accountability for results.
On the federal level, there are several examples of strategic coordination concerning the build-out of the US EV battery supply chain. The most prominent example is the formation of the Li-Bridge initiative, which was formed after the DOE asked US industry experts to convene and provide policy recommendations to create a robust and more independent supply chain. In their first report from February 2023, initiative authors proposed that the initiative become its own public–private partnership to execute its policy recommendations, further strengthening its coordination function. The federal government has also released technology roadmaps related to lithium-ion batteries that help coordinate disparate public and private actors across the industry.
In the Great Lakes region, there are a few examples of strategic coordination such as two recent MOUs between key states, including REV Midwest and the Lake Michigan Electric Vehicle Circuit Tour. Although both showcase collaboration across the region, the MOUs focus on increasing and meeting demand for EVs and EV charging infrastructure in the region rather than strategically building out regional supply chains. There is a need for coordination on the build-out of a regional EV battery manufacturing cluster.
One of the few examples of a supply-side technology strategy in the Great Lakes is A Roadmap for Michigan's Electric Vehicle Future. The report outlines steps that Michigan must take to bolster manufacturing competitiveness, invest in infrastructure, develop the workforce, and attract corporate headquarters, all of which ensures Michigan’s economy and communities benefit from the EV transition. It is an example of a technology-specific strategy that provides tangible steps in how battery manufacturing’s development influences the competitiveness of the state, especially the number of jobs created. However, the roadmap was developed by a third-party organization, the World Resources Institute, not a Michigan state agency or EDO, and therefore includes no new governance arrangements to guide or encourage parties to meet its recommendations. State agencies use reports such as this one to guide their own policy roadmaps and goals, but there is little transparency or accountability in this process.
Production Instruments
Research, Development, and Demonstration
RD&D in EV batteries plays a crucial role in the country’s and states’ competitiveness and in how the local industry can capture economic value. The federal government has been the major player in providing funding for research. New federal funding from the Infrastructure Investment and Jobs Act (IIJA) of 2021, the CHIPS and Science Act of 2022, and the IRA represents a historic level of support for research and development to strengthen EV battery supply chains, including more than $8.5 billion for critical minerals activities.
But states in the Great Lakes must double down on technological innovation and invest heavily in new technologies, pilots, and demonstration projects to commercialize these innovations. Some states in the region have established support for research in EV battery technologies. Wisconsin has a 10% tax credit for corporate research expenses, the Illinois Science and Energy Innovation Trust provides financial support for research on EVs and their smart grid functions, and the Electric Vehicle Product Commission in Indiana is assessing opportunities for research and development.
Investment Attraction
EV battery manufacturers need to invest in new technologies and facilities to keep up with the rapidly growing demand for EVs. These investments are capital intensive, and manufacturers require federal and state support in building out the needed infrastructure for EV battery deployment.
The IIJA provides $3.1 billion in funding to help companies build new factories and retrofit existing ones to make EV batteries and related parts. CHIPS includes $39 billion in semiconductor incentives in the form of grants, cooperative agreements, loans, and loan guarantees to attract large-scale investments and incentivize the expansion of semiconductor manufacturing.
In the Great Lakes, Illinois provides tax credits to eligible EV, EV parts, and EV charging station manufacturers that invest a minimum of $20 million and create at least 50 new jobs in the state within four years. Michigan created the Strategic Outreach and Attraction Reserve (SOAR) Fund, which is a $1 billion fund to attract investment in the state. The state has already spent $375 million of it to attract billions in EV battery investments.
Production Efficiency
Incentives and support should also address the production of EV battery manufacturing to improve the attractiveness of investments in the United States.
The IRA’s tax credits are specifically designed to incentivize local production by adding domestic content requirements for crucial elements and EV parts. The IRA’s Section 45X advanced manufacturing production tax credit covers 10% of the cost to produce active electrode materials, such as aluminum, nickel, cobalt, and lithium, and provides $35 per kWh for each battery cell and $10 per kWh for each battery module manufactured domestically.
Minnesota offers tax credits for the mining industry through the Taconite Economic Development Fund. The fund provides iron ore producers a tax rebate of $0.251 per ton of iron concentrate produced annually.
Demand-Pull Mechanisms
Demand incentives are essential to reduce the perception of uncertainty in the US battery market. However, it is crucial to develop demand mechanisms across all segments, from upstream to downstream, and ensure enduring demand for US‑produced products.
The IRA also has domestic content requirements for manufactured products. For consumers, the IRA includes a $7,500 consumer tax credit for EV purchases and sets three requirements for EV models to qualify. The final assembly of the EV models must occur in North America; 50% of battery components must be manufactured in North America; and 40% of critical minerals must be extracted and processed or recycled domestically or in a country with a free trade agreement with the United States.
There are several examples within the Great Lakes of rebates and subsidies related to charging infrastructure and EVs. Illinois has EV and EV charging rebates under the Climate and Equitable Jobs Act (CEJA) of 2021. Pennsylvania offers the Alternative Fuel Vehicle rebate, setting aside extra money for those who qualify as low income. In fact, all states in the region have some form of rebate relevant to EVs and/or charging infrastructure. However, some rebate programs are run through utility companies, so they do not apply to everyone in the state.
Cross-Sectoral Interventions
Enabling Technologies — Clean Electricity
The production of batteries is energy intensive, and EV battery producers are looking to access reliable and cost-competitive electricity. The emissions intensity of the electricity supply is also a key factor because battery producers are facing scrutiny and pressure from downstream customers, such as automakers, to reduce embodied carbon. However, a range of factors continue to inhibit growth in reliable and abundant clean energy in the region, including a lack of transmission and congested grid interconnection queues. These bottlenecks can be a decisive factor in factories' construction location.
Establishing renewable energy goals is an important step in proving the framework needed to support the development and deployment of clean electricity. At the federal level, the White House set a target of 100% carbon-free electricity by 2035.
In the Great Lakes, Minnesota set a goal for 100% clean energy by 2040, and Wisconsin, Illinois, and Michigan by 2050. In addition, all states in the Great Lakes except Indiana, which has renewable portfolio goals, have enacted renewable portfolio standards. Yet there is still a lack of renewable energy generation (hydro, wind, and solar) penetration in the region, with only Wisconsin (26%), Illinois (11%), and Indiana (10%) at or above 10%, mainly through wind power. There is a need for bold renewable energy and power sector decarbonization policies across the Great Lakes.
Regarding permitting and grid connection, PJM and MISO, the two main electricity operators in the Great Lakes, have 3,042 and 1,734 active projects in interconnection queues, respectively. Most of these projects are solar and wind generation and storage. PJM stated that it has a two-year backup in its grid connection queue and had to pause review of new requests until at least 2025.
Policymakers in the region need to monitor the interconnection queue issue and find ways to streamline the process and unlock clean energy capacity already in the permitting process. All states in the Great Lakes have statewide interconnection policies, providing a process customers can follow and avoid arbitrary delays. However, only Minnesota and Illinois have adopted procedures that align with the Federal Energy Regulatory Commission model rules.
Workforce
Creating workforce development programs that are specific to the clean energy and EV transitions is vital to take advantage of the economic opportunity these transitions bring and to ensure communities are not left behind by a quickly shifting job market. Relevant policies include retraining programs, pre-apprenticeship and apprenticeship opportunities, and widespread community development funds.
Through the Registered Apprenticeships and Electric Vehicle Infrastructure Training Program, the federal government has created a workforce policy that will support auto workers looking to transition and create new jobs in the field. Specific to batteries, the DOE offers funding through the Battery Workforce Challenge to universities that train the domestic EV and battery workforce.
Certain states in the Great Lakes region have led the charge in creating these workforce development programs, especially Illinois and Michigan. In Illinois, the passage of CEJA has led to the widespread implementation of programs that create new jobs, provide retraining and apprenticeship opportunities, and support communities in their transition, including the Climate Works Pre-Apprenticeship Program and the Clean Jobs Workforce Hubs. Furthermore, Michigan began the Michigander EV Scholars program to prepare students for jobs in the EV sector and continues its work through the Michigan Academy for Green Mobility Alliance, which has been supporting workforce training for vehicle electrification since 2009. As the World Resources Institute’s Roadmap for Michigan’s Electric Vehicle Future points out, there will be some job losses in certain segments of the automotive supply chain and some gains in others, so it is important to prioritize workforce policy in this transition.
Land
To draw EV battery manufacturers to the region, states can enact land policies that incentivize physically locating in the state. These policies include designating geographic zones for EV battery manufacturing, which might include tax breaks or other incentives, funding former automotive plant remediation, and enacting property tax exemptions for manufacturers.
On the federal level, the Lawrence Livermore National Lab administers the High Performance Computing for Energy Innovation (HPC4EI) Program, which funds domestic manufacturers innovating in the energy space while encouraging them to collaborate with nonprofits and universities in designated opportunity zones. Multiple vehicle manufacturing projects have been funded through this program, including awards to General Motors and Ford. Furthermore, the Biden administration’s Buy American program incentivizes domestic manufacturing, which encourages the placement of manufacturing sites on land in the United States.
In the Great Lakes region, Indiana and Michigan have leading land policies in place. Indiana’s Certified Technology Park Designation was designed to attract and grow investments from high-tech industry actors, including those related to EV batteries, through the local recapturing of tax revenue, which can then be reinvested in the park. Furthermore, Michigan has three policies in place that incentivize locating in the state: Renewable Energy Renaissance Zones, the SOAR Fund, and a property tax exemption for alternative fuels development.
End-of-Life
End-of-Life Incentives
In the past few years, the federal government has enacted several incentives pertaining to battery end-of-life, including the Electric Drive Vehicle Battery Recycling and 2nd Life Applications Program, which funds research into EV battery end-of-life uses, and the Lithium-Ion Battery Recycling Prize competition. Existing federal incentives can be applied to both R&D and also to commercial-level recycling systems.
However, in the Great Lakes states, there are no incentives related to EV battery recycling or reuse.
End-of-Life Standards
The federal government, in May 2023, released the National Standards Strategy for Critical and Emerging Technologies, including those related to critical minerals supply chains. Although the US government has clear standards regarding the disposal of batteries there are no mandates related to their reuse or recycling. There is ongoing research being conducted to support recycling and reuse, including data sharing, safety and liability considerations, technological innovations, and battery state of health. There continues to be substantial support for the recycling industry, and a similar ecosystem for second-life applications can bring economic benefits, as well as increased resilience and climate benefits.
The Resource Conservation and Recovery Act (RCRA) is a U.S. federal law that primarily focuses on the management and disposal of hazardous waste including generation, transportation, treatment, storage and disposal of hazardous waste. Most lithium-ion batteries are likely to meet the definition of hazardous waste under the RCRA, and would be considered ignitable and reactive hazardous waste when discarded.
Currently, all standards related to battery end-of-life in any of the Great Lakes states focus solely on proper waste disposal; any recycling standards apply to other batteries such as the lead-acid recycling requirement in Illinois.
End-of-Life Mandates
On top of incentives and standards, states should consider implementing mandates that require companies to recycle portions of their products and to seek out recycled and second-life inputs.
Despite investing RD&D funding into battery recycling programs and beginning to develop standards for reuse and recycling, the federal government has no mandates in place that would require either of these actions from companies.
Furthermore, in line with the lack of incentives and standards found in Great Lakes states, none of the states have mandates requiring EV battery supply chain companies to recycle or reuse.
Data
Access to supply chain data is important so decisions can be made regarding where more policies need to be developed and where further investment should be focused. The Li-Bridge initiative calls for a critical minerals database that includes supply chain, permit, and existing mining operations. The National Renewable Energy Laboratory released the NATTBatt Lithium-Ion Battery Supply Chain Database in 2021, which aims to increase data transparency about the US battery supply chain.
Data is also essential for traceability and the development of recycling systems. This could be achieved through a framework such as a battery passport, which would provide increased transparency through a battery’s life cycle. For example, the EU Battery Regulation requires digital battery passports that include details on the following: general battery and manufacturer information, compliance and certifications, carbon footprint, supply chain and due diligence, battery materials and composition, circularity and resource efficiency, and performance and durability.vii Battery passports can increase transparency, which is needed to increase sustainable battery supply chain practices and to develop circular business models.viii
No databases like the one the Li-Bridge initiative calls for exists in the Great Lakes–, which is understandable given that the need for data applies to the whole country; however, it would be useful to regulate the data transparency of a battery’s production by ensuring that companies contribute to databases. This does not currently exist in the Great Lakes states.
[vii] World Economic Forum, Digital Battery Passports: An Enabler for Sustainable and Circular Battery Management, June 2023, https://www3.weforum.org/docs/WEF_Digital_Battery_Passport_2023.pdf
[viii] World Economic Forum, Digital Battery Passports: An Enabler for Sustainable and Circular Battery Management, June 2023, https://www3.weforum.org/docs/WEF_Digital_Battery_Passport_2023.pdf
Conclusion
The Great Lakes is uniquely poised to reap the economic, social, and environmental benefits of a burgeoning EV and EV battery industry. The region’s history as an automotive manufacturing powerhouse and its advantages in workforce specialization and leadership in innovation give it a clear competitive edge. However, the growth and strengthening of a regional industrial cluster is dependent on the actions of stakeholders within the Great Lakes, including state policymakers and EDOs.
Each state in the region has the opportunity to build on its current policies. This includes everything from targeting public procurement to strengthening workforce policy, from passing end-of-life standards to forming public–private partnerships. While not a comprehensive assessment, the goal of this brief was to outline the most pressing actions that policy decision makers and influencers can take in creating a robust regional EV and battery supply chain, contributing to a growing national supply chain. Trends have shown that the automotive industry is changing rapidly in the United States and beyond; however, it is up to state policymakers, EDOs, and other industry actors to ensure the Great Lakes is not only keeping up with this change but actively taking advantage of federal and state resources to lead it.
Appendix
As the historical heartland of the US automotive industry, the Great Lakes region[i] is well poised to compete in the emerging electric vehicle (EV) and battery supply chain industries. However, it cannot take this historical advantage for granted. The so-called Battery Belt stretches beyond the Great Lakes and well into the Deep South. Policymakers and economic development organizations (EDOs) alike will need to strategically invest in existing capacities, develop new competitive advantages, and avoid engaging in a race to the bottom that undermines the overall global competitiveness of this critical sector.
To realize the economic, environmental, and social opportunities that come with building a strong EV battery industry in the Great Lakes states, there must be action from federal and state governments. Specifically, there are opportunities for policy to catalyze action along all segments of the EV and battery supply chain as well as policy that will facilitate a competitive environment for the industry to thrive.
Despite the Great Lakes states’ significant potential to be a global leader in the EV supply chain, there are significant holes in their industrial strategies to do so. This brief includes a unique industrial policy gap analysis to help Great Lakes states identify their own weaknesses and offers suggestions for where policymakers could coordinate to develop multistate strategies for industry cluster development. As Figure 1 below illustrates, Michigan is leading on EV supply chain industrial strategy among states in the region even as the federal government is setting the pace. All Great Lakes states aiming to compete in this sector should be looking to complement this federal strategy across all domains of industrial policy.
This industry brief demonstrates why Great Lakes states should look to plug these holes in their industrial strategies. It identifies common barriers to developing a competitive EV supply chain sector, the unique challenges to building up an EV and battery supply chain in the Great Lakes, and the significant economic and social opportunities of doing so. Finally, it looks at some of the policy changes needed to chart a path toward a successful regional industry. This brief is by no means a comprehensive assessment but rather an overview of key issues that will require additional research, capacity building, regional coordination, and policy reform.
[i] RMI is defining the Great Lakes region as Illinois, Indiana, Michigan, Minnesota, Ohio, Pennsylvania, and Wisconsin.
The EV battery supply chain is the process by which materials are sourced, processed, and assembled to create batteries for vehicle applications. Broadly, this is broken down into four major steps: upstream, midstream, downstream, and reuse and recycling.
Upstream
The upstream portion of the EV battery supply chain refers to the mining of the raw materials needed to build batteries. Lithium-ion batteries, the type used in most EVs, use five critical minerals as identified by the United States Geological Survey: lithium, cobalt, manganese, nickel, and graphite. The Energy Act of 2020 defines critical minerals as a “non-fuel mineral or mineral material essential to the economic or national security of the US and which has a supply chain vulnerable to disruption.”
Critical minerals are found around the world, but economically viable deposits are concentrated in a few locations. For example, much of the world’s supply of cobalt is in the Democratic Republic of the Congo, and lithium is primarily located in Australia and South America.
Unfortunately, certain elements of the mining industry have a history of human rights abuses. Many overseas critical mineral mines are in regions considered conflict-affected and high risk.ii Lack of third-party tools and data means there is little transparency in how mines treat their workers and what impacts their practices have on the surrounding natural environment. Without transparency and traceability, industry participants and policymakers are not effectively equipped to address abuses.
While not a comprehensive solution, developing an EV supply chain in the United States and allied countries (known as “friendshoring”) can limit human rights abuses within the EV battery supply chain. This would require strategic, active collaboration among these aligned countries to develop the facilities needed to build out the supply chain. Furthermore, diversifying the upstream supply and creating more competition can give downstream entities greater ability to influence the practices of their suppliers.
Given the economic costs and time to open new mines, the United States is likely to continue to be a major importer of these critical minerals for the foreseeable future. Based on existing domestic project announcements and imports, the country will be significantly short of its projected 2030 demand in cobalt, manganese, lithium, and graphite. Although the Great Lakes states of Minnesota and Wisconsin do have areas that might contain mineral systems that commonly have the metals used throughout the EV supply chain, production growth has been sporadic. Today, there is one operating nickel mine in Minnesota and two more planned.
Midstream
The midstream portion of the EV battery supply chain involves refining, processing, and assembling the raw materials into battery cells. Refining and processing remove unneeded materials from the minerals, achieving a purity level that makes the minerals suitable for products such as batteries. Manufacturers then use these materials to create anodes (negative electrodes) and cathodes (positive electrodes), which are placed into battery cells. There is no industry consensus about whether battery cell manufacturing is a midstream or downstream activity; however, RMI considers cell manufacturing part of the midstream process.
The midstream portion of the EV battery supply chain is concentrated in only a few countries, particularly China, South Korea, and Japan. China produces three-quarters of all lithium-ion batteries and 70% of cathodes, and it refines over half of the world’s lithium, cobalt, and graphite. Additionally, China is responsible for 75% of all battery cell manufacturing, 90% of anode and electrolyte production, and 60% of the world’s battery component manufacturing.
The concentration of midstream capacity in these countries also concentrates the expertise in the production processes, providing a significant cost-competitiveness advantage against new entrants. Yet there are also cost advantages to locating processing capacity near resource extraction, suggesting there could be significant new midstream capacity investments in countries like Australia, Canada, and Chile with abundant mineral resources.
Nevertheless, there are 27 operating and planned midstream facilities across the Great Lakes region, 10 of which are in Michigan. The 27 include several lithium-ion battery material manufacturing plants in Battle Creek, Michigan; battery-grade graphite facilities in Sinking Spring, Pennsylvania, and Chicago, Illinois; and a separator manufacturing plant in Terre Haute, Indiana.
Downstream
The downstream portion of the EV battery supply chain entails the assembly of battery cells into modules and then packs before finished batteries are placed into EVs. Battery modules are made by stacking battery cells in series or in parallel in a metal frame. Modules contain several battery cells, which, depending on the cell type and the vehicle range, can number as few as 10 cells or more than several hundred. Battery modules are then placed into battery packs.
China, Japan, and South Korea accounted for nearly 70% of the downstream battery market in 2021. Three companies own over 50% of the market: China’s CATL (33%), South Korea’s LG Energy Solution (22%), and Japan’s Panasonic (15%).
This, of course, is where much of the attention has been focused in recent months as major auto manufacturers have announced highly ambitious plans to launch more EV models and manufacture much more of their own battery capacity. Today, there are five operating downstream facilities in the region, which will grow to over 30 in the next few years as planned investments come on line. Based on project announcements, total EV manufacturing capacity in the region will grow from 300,000 vehicles annually today to over 700,000 in just the next two years. Battery manufacturing capacity will likely grow from 37 gigawatt-hours today to 285 gigawatt-hours per year by 2026.
Reuse and Recycling
Currently, it is frequently cheaper to mine for minerals and produce new batteries than to utilize a system of recycled materials. But recycling has the potential to reduce the demand for raw materials by up to 64% by 2050. Repurposing and recycling EV batteries would reduce the reliance on virgin materials and the potential negative human and environmental impacts associated with their extraction while reducing the risk of supply chain interruptions.
Battery recycling is an important element of the battery supply chain. Currently, announcements of new recycling facilities far exceed the availability of materials to recycle and process (known as feedstock). However, this will improve as more electric vehicles enter the market and their batteries subsequently reach the end of their life cycle, known as end-of-life. Additionally, increased recycling of battery materials can help support and strengthen the EV battery supply chain. Currently, recycled output frequently has to be exported as many US refiners and processors do not have the capacity to use the output to develop new batteries, creating inefficiencies.
The United States must continue to invest in and develop the EV battery supply chain, both domestically and through friendshoring. This should be achieved through both private-sector investment and strategic government investment and coordination. As EV adoption increases, EV battery recycling will be critical for the resilience of the US supply chain, as well as to reduce the reliance on mining and the negative human rights and environmental impacts that mining can entail.
[ii] Conflict-affected and high-risk areas are defined by the Organisation for Economic Cooperation and Development as “identified by the presence of armed conflict, widespread violence, or other risks of harm to people.”
Industry Trends
The sale of EVs is growing both globally and within the United States. Research from Bloomberg New Energy Finance (BNEF) shows that there were 10 million EViii sales globally in 2022, and that is projected to grow 250% in just the next four years. Globally, EVs accounted for 14% of new passenger vehicle sales in 2022; however, 58% of global EV sales were in China and only 9% were in the United States. Figures 2 and 3 show projected trends in global EV sales over time.
While EVs accounted for 6% of passenger vehicle sales in the United States in 2022, their share is projected to grow to 15% in 2024 and nearly half of all sales by 2030. As Figure 4 illustrates, the projected market share of battery electric vehicles (BEVs) is expected to grow fastest, followed by hybrid electric vehicles (HEVs), with the share of internal combustion engine (ICE) passenger vehiclesiv rapidly diminishes through 2040.
Given significant funding for battery manufacturing in the Inflation Reduction Act (IRA) of 2022, a Battery Belt is forming in the United States through Michigan, Indiana, Ohio, Kentucky, Tennessee, Georgia, and the Carolinas. The northern portion of the Battery Belt, made up of the states we are exploring in this brief, is a historic hub of the domestic auto industry and has been focused on battery and EV production for more than a decade. However, the southern part of the belt is attracting increasingly more investments for battery manufacturing and development.
For example, Norwegian company Freyr is developing a second factory south of Atlanta. Freyr plans to make 2.5 gigawatt-hours’ worth of batteries in 2025 and eventually ramp up to 38 gigawatt-hours. Similarly, SK — a South Korean battery corporation — in partnership with Hyundai, is planning to build a $5 billion factory in northern Georgia.
Under the Biden administration, private companies have announced investments totaling $133 billion for EVs and battery manufacturing in the United States. Figure 5 shows the distribution of these private investments across the country, with a concentration in the Battery Belt as described above.
Looking specifically at the Great Lakes region, there are EV and battery supply chain facilities in all of the states in the region, with hubs in major metro areas including Detroit; Columbus, Ohio; Cleveland; and Chicago.
In addition to the IRA, there are other financial mechanisms from the federal government being utilized to support EV battery factory development. For example, Ford recently received a conditional loan of $9.2 billion from the US Department of Energy’s (DOE’s) Loan Programs Office (LPO) to construct three battery factories in the United States. This is the single largest loan in the history of the LPO. These three factories are under construction in Kentucky and Tennessee and are being built through a joint venture called BlueOval SK, which is owned by Ford and South Korean battery company SK On Co. These new factories will help Ford increase its EV output, as they plan to make up to 2 million EVs by 2026, a significant increase from the approximately 132,000 the automaker produced in 2022.
Additionally, through the DOE’s Energy Infrastructure Reinvestment program, the LPO can finance projects that retool, repower, repurpose, or replace energy infrastructure that is no longer operational, or enable infrastructure that will avoid or reduce pollutants and greenhouse gas emissions at concessional rates.v This could provide an additional funding source for EV battery supply chain infrastructure development.
Corresponding to this increased investment in and development of the battery supply chain in the United States, the workforce employed in this field is located in the Battery Belt and also in California, Nevada, and Arizona, as seen in Figure 7.
As a result of these simultaneously expanding industrial clusters, Great Lakes states should position themselves to maintain competitiveness with other regions within the United States by capitalizing on federal programs and improving state legislation to facilitate a growing industry in the region.
[iii] BNEF data considers EVs to be both battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs)
[iv] BNEF defines passenger vehicles as shared vehicles (digital-hailing, taxis, car-sharing and autonomous vehicles operated in a shared fleet), and private vehicles (privately owned vehicles).
[v] Department of Energy, Energy Infrastructure Reinvestment: Title 17 Clean Energy Financing – Energy Infrastructure Reinvestment, https://www.energy.gov/lpo/energy-infrastructure-reinvestment
Economic Impacts in the Great Lakes
Jobs
Today, there are more than 10 million ICE jobs across the country, and over 3,000 counties have a business in the auto supply chain. According to one study, as much as 5.2% of all jobs in the country depend on the auto industry. Meanwhile, there are less than 2.5 million jobs related to EVs, including many that supply both EV and ICE supply chains. However, battery manufacturing jobs have grown by around 20% over the past five years and 13% in EV manufacturing industries more broadly.
A common concern with the transition to EV manufacturing is that the manufacturing process is less labor-intensive than that of ICE vehicles; however, recent studies do not seem to bear this concern out. This is because an ICE powertrain will often have more than 1,000 components, whereas an EV one may have only a few hundred. Yet there is a range of power electronics equipment required to run an EV that do not exist in pure ICEs. As a result, Boston Consulting Group estimates that while EVs require fewer labor hours for component and motor manufacturing, that is offset by the additional hours required for battery cell manufacturing, as well as module and pack assembly.
These auto manufacturing jobs, regardless of powertrain, are seen as particularly important to economic development because of their outsize effect on indirect job creation, as well as racial and educational equity. It is estimated that for every 100 jobs created in motor vehicle manufacturing, an average 1,428 indirect jobs are created in supplier firms and through induced job creation — this is the highest multiplier effect of any major manufacturing industry. What is more, auto manufacturing has historically been disproportionately beneficial for Black workers, and it continues to employ a much higher share (16.6%) than the national average (12.5%). Importantly, workers without a four-year degree account for 75% of workers in the auto sector, compared with 62.2% in all industries, and these workers earn 15% more, on average, in auto manufacturing than in the rest of the economy.
Another major factor in the trajectory of auto manufacturing employment is whether the United States, and Great Lakes states in particular, can capture global market share within the EV supply chain. In a domestically manufactured ICE powertrain, around 75% of components are produced domestically today, compared with just 45% of what goes into a domestically produced EV. According to one estimate, total auto sector manufacturing jobs could increase by 150,000 if the US manufacturing share of EV components reaches the same level as ICE components, whereas jobs could fall by 75,000 if shares remain at today’s levels.
Importantly, the IRA has several provisions to help catalyze domestic manufacturing and critical minerals production. These domestic content provisions are particularly stringent for consumer vehicles, which will likely represent 50% to 60% of total vehicle and battery demand. Original equipment manufacturers (OEMs) appear to be on track to reach the necessary domestic capacity growth to meet IRA qualifications. However, there are some importers like Hyundai and Toyota that are falling behind. In battery component manufacturing, consultancy Bain & Co. estimates that IRA incentives will be sufficient for enough domestic capacity to be built in cathode, battery cell, and battery pack manufacturing. Materials processing and extraction, on the other hand, are going to have to lean on friendshoring efforts to meet these provisions.
Yet even if total employment in EV manufacturing is similar to or greater than ICE manufacturing, the geographic distribution of these jobs will depend on the competitiveness of state and local clusters, which are areas of industry colocation that share pools of resources like workers, infrastructure, and institutions. In a recent study of potential changes in EV manufacturing jobs in Michigan, for example, the authors forecast a net difference of 50,000 jobs in the sector depending on whether the state becomes more or less competitive in the industry.
Some indication of future job distribution among US states can be inferred by recent project announcements. Since 2021, new EV supply chain projects have announced more than 137,000 jobs, which, at the average multiplier for the industry, could create a further 2 million jobs throughout the economy.
It is particularly noticeable from these announcements how much of the new job creation in EV and battery manufacturing projects is likely to happen in the Southeast and in the Great Lakes. Of the 137,000 planned new jobs, 32% are in Southeast states and 21% in the Great Lakes. To date, Georgia has seen the most job announcements at 25,134, followed by Texas at 20,000 and Michigan at 14,412. Interestingly, as a share of the total labor force, Delaware has seen the largest new job growth, followed by Georgia, Kentucky, and Tennessee.
Supply Chain Specialization and Place-Based Risks
The other side of the coin to the EV transition is the effects on the economy built around ICEs. In particular, the many “powertrain communities” that have developed deep expertise in manufacturing highly specialized components in ICEs are at a heightened risk of disruption due to the differing manufacturing requirements of EVs. Since most ICE powertrain components are not needed in an EV, states and communities with high concentrations of parts manufacturers are especially vulnerable.
Looking at specialization across the three major phases of the ICE supply chain — OEMs, parts manufacturers, and midstream suppliers — some of this varied exposure to the EV transition becomes apparent. Figure 8 shows how specialization varies significantly by state and supply chain segment. Interestingly, Iowa has the highest specialization in OEMs at around 11 times the national average employment share due to a large presence in farm and construction machinery manufacturing — a related OEM, if not directly producing vehicles. Michigan is the second most specialized state at around five times the national average and is home to 16% of all OEM jobs in the country. The state is also the most specialized parts manufacturing and midstream supplier state at nearly 12 times and three times the national average, respectively.vi Overall, the Great Lakes states are the most exposed to both parts and midstream supplier manufacturing and the second-most exposed to OEMs.
Even within the Great Lakes region there is a high degree of variability in exposure to parts manufacturing, the highest-risk segment of the ICE value chain. The Detroit-Warren-Flint area in Michigan is the most exposed, with nearly 70,000 people employed in the sector, which represents around 3% of all jobs, a share that is 13 times higher than the national average. In fact, 10 of the 15 economic areas in the region are more than twice as specialized in parts manufacturing than the country as a whole.
These risks can be hedged by adding EV manufacturing capacity as fast as ICE capacity is being lost. However, new EV supply chain facilities do not always choose to locate where there are existing ICE jobs. EV facilities are less likely to colocate in communities with OEM and parts manufacturing facilities and more likely to colocate with midstream supplier facilities — around a third of all battery supply chain facilities are in the same areas as existing midstream supplier facilities. This would suggest that communities that specialize in midstream supplier manufacturing are less at risk of economic disruption due to the EV transition, since many of these same refined and processed materials are inputs into both EVs and ICEs.
Another possible concern for many communities with existing OEM factories is whether the additional factory infrastructure required for EV manufacturing — mostly to handle the added weight of the batteries — will make it cost-prohibitive to convert brownfield sites into EV assembly facilities. This concern does not appear to be warranted, however. Although there will certainly be new greenfield investments in EV component manufacturing and assembly, analysis from Bain finds that a significant portion of ICE equipment and facilities is transferable or convertible for EV use. Bain estimates that converting existing capacity will cost half as much as greenfield investment — approximately $5 million to $10 million per 1,000 EV units, compared with $10 million to $20 million for greenfield expansion.
In particular, body assembly is substantially the same and can leverage existing facilities and equipment. This can already be seen in recent announcements from major OEMs, including General Motors, which announced it could save $1.5 billion each time it renovates an existing facility, relative to building a new one, while Honda, Ford, and Stellantis have all announced plans to convert existing facilities.
Innovation and Productivity
Finally, at its heart, the transition to EVs is a transition to a set of newer, cheaper, more innovative technologies. Technology transitions are opportunities for “creative destruction” in ideas, business processes, production methods, and supply chain networks. Such creative destruction is fundamental to productivity growth and economic development, especially in the manufacturing sector, which has historically played a disproportionate role in driving research and development (R&D) and productivity growth.
This is particularly true of the motor vehicle manufacturing sector. The industry is the sixth-largest source of company-level R&D in the United States, and at various times in its history, it has been one of the largest contributors to productivity growth. A range of new technologies and processes are poised to continue reshaping the sector, including battery manufacturing, additive manufacturing, flexible manufacturing, autonomous final assembly, and end-of-life vehicle recycling. Figure 10 shows that, among the largest R&D-spending industries, motor vehicle manufacturing spends nearly as much as the scientific R&D services sector.
However, productivity growth in the sector has been stagnant with a lower rate of new entrants over time in a market dominated by large, incumbent firms. Although the transition to EVs is by no means guaranteed to reverse this trajectory, there are some positive signs that the technological disruption is pushing the industry to recapture its spirit of innovation. Figure 11 shows that while the motor vehicles manufacturing industry has been increasing output faster than hours worked (a common measure of productivity), the rate at which it has been doing so is much lower than in other major industrial sectors.
The most obvious example is Tesla, which in 2010 became the first US automotive company to go public since Ford in 1956. Tesla’s historic success has pushed incumbent automakers to not only accelerate their plans to go electric but also to revamp their production processes. Tesla now operates the most productive car factory in the United States and thrived during the height of the COVID-19 pandemic thanks to its “superior command of technology and [owning] its own supply chain.”
Tesla’s Gigafactory in Reno, Nevada, is an interesting case study in the economic development impact of large plant openings on local communities. One of the arguments for public incentives to attract large manufacturing plants, like Tesla’s, is that they are expected to increase productivity and output at existing nearby establishments. According to a 2022 economic impact assessment, the Gigafactory has contributed $17.1 billion in economic output to the region, created over 60,000 “job years,” engaged over 4,000 suppliers, and invested over $6 billion in new capital. While evidence for productivity spillovers is only indicative at this stage, Tesla seems to have encouraged a range of other high-tech industries to set up shop in Reno and is helping to diversify the local economy. The state is further doubling down on an industrial cluster built around the automaker as it plans to be the “lithium capital of North America” and a hub for advanced manufacturing.
While Reno has the advantage of being geographically close to Tesla’s Austin, Texas, headquarters as well as having significant lithium deposits, cities across the Great Lakes have the advantage of not only historic workforce capacity but R&D capacity that can directly translate into local entrepreneurship. The Detroit metro area has invented nearly three times more patents related to electric vehicles than any other city in the country over the past six years and only trails Ann Arbor, Michigan, for the most EV patents per person. Of the 10 cities specializing most in EV patents, six are in the Great Lakes. The Detroit-Warren-Flint area has also received the largest amount in DOE grant funding related to EVs over the last six years, with Syracuse, Chicago, and Milwaukee not too far behind, suggesting significant human and institutional capacity in emerging EV technologies.
[vi] See Appendix for list of included OEM, parts manufacturing, and midstream supplier manufacturing industries.
The Path to an EV Industry in the Great Lakes
To fully realize the economic, environmental, and social opportunities related to a strong EV battery industry in the Great Lakes, the federal and state governments need to enact strategic industrial policies. These policies must directly affect the upstream, midstream, downstream, and end-of-life segments of the EV and battery supply chain and include cross-sectoral strategies that will draw important industry actors to the Great Lakes region.
In terms of direct policies, states should enact programs focused on strategic industry coordination, incentivize both the manufacturing of EV batteries and the deployment of EVs and charging infrastructure, and create coordinated and standardized end-of-life regulations that increase battery circularity. Public–private partnerships, technology roadmaps, buying consortiums, and cohesive industry standards all drive strategic coordination that must occur between regional stakeholders. Beyond coordination, states should enact production incentives to complement and fill gaps from federal incentives within the EV value chain and policies to influence demand-pull mechanisms such as public procurement programs, domestic content requirements, and subsidies.
Further, there are several policies related to land use, workforce development, battery end-of-life, and enabling technologies like cheap, abundant, clean electricity that should be enacted to influence the overall business environment in the region. Land-use planning, former plant remediation, and industrial zoning are all policies that, if done correctly, can safely hasten mining operations in the region and provide locational incentives for manufacturing plants. Further, because of the shifting jobs landscape, retraining, apprenticeships, and educational programs will be needed to ensure a just and equitable transition. The EV industry relies heavily on electricity, taking 47 kilowatt-hours (kWh) of energy to make 1 kWh of battery storage, which means access to clean electricity is important to ensure environmentally safe and healthy growth of the industry in the region. Incentives that increase clean electricity in the region could draw more EV battery manufacturing companies and workers. Finally, to ensure circularity in the industry, policy must focus on battery end-of-life including recycling and reuse standards, incentives, and mandates as well as increased data availability and transparency.
Industrial Policy Landscape
Without appropriate policy guidance and support, the Great Lakes runs the risk of market participants being caught flat-footed, leaving potential jobs and investment opportunities on the table. This research provides a unique policy gap analysis of selective policies focusing on the EV battery industry at the federal level and in the Great Lakes region to better understand what regional policymakers can do to ensure local workers and communities are not left behind. It uses a typology of industrial policies used globally in similar technology transitions, relying especially on a novel framework developed by the Organisation for Economic Co-operation and Development.
Broadly speaking, “industrial policy” refers to any goal-oriented state action whose “purpose is to shape the composition of economic activity,” in this case with specific reference to the EV battery manufacturing supply chain. Although there are a range of policy instruments that can be used to improve strategic or economically important sectors, these policies can be grouped into four primary domains: strategic coordination, production instruments, demand-pull mechanisms, and cross-sectoral interventions. Within each domain, the policy instruments are grouped based on their similarities:
- Strategic coordination: Any effort of policy governance such as coalitions and sectoral competitiveness assessments. Often, policymakers choose to commission industry strategy or technology roadmaps to guide and complement the other categories of industrial policy intervention. These would usually be accompanied by a vision statement and a set of objectives and targets.
- Production instruments: Affect the economics of firm-level production and investment decisions for individual firms within the target sector. This can include a range of financial incentives — such as subsidies, grants, or tax credits — to promote research, development, and demonstration (RD&D) activities or otherwise facilitate additional investment, particularly in novel technologies. Production instruments can also affect firm performance through the provision of key inputs, such as skilled labor, or through addressing supply chain gaps.
- Demand-pull mechanisms: Apply to the consumption of the product(s) produced by the industry. These can include tax breaks and rebates, mandates, public procurement, and certain product standards and definitions.
- Cross-sectoral interventions: Affect the whole industry through regulations governing the allocation of production factors, including land, capital, and labor. These interventions can also include cross-sectoral policies that affect the target industry, such as competition or trade policy; policies that affect supply chain segments that bookend the industry, such as recycling and reuse; and the development of enabling technologies crucial to battery manufacturing.
The policy gap analysis was developed for EV battery-specific policies and key enabling technologies like clean electricity. After conducting the landscape assessment, this study identified regional gaps between federal and state policies and highlighted efforts that states should learn from and follow. Figure 1 presents the landscape assessment for federal and state policies in the Great Lakes region.
Strategic Coordination
Advancing strategic coordination is critical to ensuring that private and public efforts are efficient and effective in supporting and strengthening an EV and battery supply chain in the Great Lakes and the United States more broadly.
Technology-specific roadmaps, for example, can provide a framework and tangible steps to help direct and guide state policies and incentives as well as encourage alignment with private efforts. However, on top of strategic planning, coordinated implementation is needed to scale industry on a regional level. Thus, in addition, states in the Great Lakes region need to develop public–private partnerships and memorandums of understanding (MOUs) to bring to life these roadmaps and provide coordination and accountability for results.
On the federal level, there are several examples of strategic coordination concerning the build-out of the US EV battery supply chain. The most prominent example is the formation of the Li-Bridge initiative, which was formed after the DOE asked US industry experts to convene and provide policy recommendations to create a robust and more independent supply chain. In their first report from February 2023, initiative authors proposed that the initiative become its own public–private partnership to execute its policy recommendations, further strengthening its coordination function. The federal government has also released technology roadmaps related to lithium-ion batteries that help coordinate disparate public and private actors across the industry.
In the Great Lakes region, there are a few examples of strategic coordination such as two recent MOUs between key states, including REV Midwest and the Lake Michigan Electric Vehicle Circuit Tour. Although both showcase collaboration across the region, the MOUs focus on increasing and meeting demand for EVs and EV charging infrastructure in the region rather than strategically building out regional supply chains. There is a need for coordination on the build-out of a regional EV battery manufacturing cluster.
One of the few examples of a supply-side technology strategy in the Great Lakes is A Roadmap for Michigan's Electric Vehicle Future. The report outlines steps that Michigan must take to bolster manufacturing competitiveness, invest in infrastructure, develop the workforce, and attract corporate headquarters, all of which ensures Michigan’s economy and communities benefit from the EV transition. It is an example of a technology-specific strategy that provides tangible steps in how battery manufacturing’s development influences the competitiveness of the state, especially the number of jobs created. However, the roadmap was developed by a third-party organization, the World Resources Institute, not a Michigan state agency or EDO, and therefore includes no new governance arrangements to guide or encourage parties to meet its recommendations. State agencies use reports such as this one to guide their own policy roadmaps and goals, but there is little transparency or accountability in this process.
Production Instruments
Research, Development, and Demonstration
RD&D in EV batteries plays a crucial role in the country’s and states’ competitiveness and in how the local industry can capture economic value. The federal government has been the major player in providing funding for research. New federal funding from the Infrastructure Investment and Jobs Act (IIJA) of 2021, the CHIPS and Science Act of 2022, and the IRA represents a historic level of support for research and development to strengthen EV battery supply chains, including more than $8.5 billion for critical minerals activities.
But states in the Great Lakes must double down on technological innovation and invest heavily in new technologies, pilots, and demonstration projects to commercialize these innovations. Some states in the region have established support for research in EV battery technologies. Wisconsin has a 10% tax credit for corporate research expenses, the Illinois Science and Energy Innovation Trust provides financial support for research on EVs and their smart grid functions, and the Electric Vehicle Product Commission in Indiana is assessing opportunities for research and development.
Investment Attraction
EV battery manufacturers need to invest in new technologies and facilities to keep up with the rapidly growing demand for EVs. These investments are capital intensive, and manufacturers require federal and state support in building out the needed infrastructure for EV battery deployment.
The IIJA provides $3.1 billion in funding to help companies build new factories and retrofit existing ones to make EV batteries and related parts. CHIPS includes $39 billion in semiconductor incentives in the form of grants, cooperative agreements, loans, and loan guarantees to attract large-scale investments and incentivize the expansion of semiconductor manufacturing.
In the Great Lakes, Illinois provides tax credits to eligible EV, EV parts, and EV charging station manufacturers that invest a minimum of $20 million and create at least 50 new jobs in the state within four years. Michigan created the Strategic Outreach and Attraction Reserve (SOAR) Fund, which is a $1 billion fund to attract investment in the state. The state has already spent $375 million of it to attract billions in EV battery investments.
Production Efficiency
Incentives and support should also address the production of EV battery manufacturing to improve the attractiveness of investments in the United States.
The IRA’s tax credits are specifically designed to incentivize local production by adding domestic content requirements for crucial elements and EV parts. The IRA’s Section 45X advanced manufacturing production tax credit covers 10% of the cost to produce active electrode materials, such as aluminum, nickel, cobalt, and lithium, and provides $35 per kWh for each battery cell and $10 per kWh for each battery module manufactured domestically.
Minnesota offers tax credits for the mining industry through the Taconite Economic Development Fund. The fund provides iron ore producers a tax rebate of $0.251 per ton of iron concentrate produced annually.
Demand-Pull Mechanisms
Demand incentives are essential to reduce the perception of uncertainty in the US battery market. However, it is crucial to develop demand mechanisms across all segments, from upstream to downstream, and ensure enduring demand for US‑produced products.
The IRA also has domestic content requirements for manufactured products. For consumers, the IRA includes a $7,500 consumer tax credit for EV purchases and sets three requirements for EV models to qualify. The final assembly of the EV models must occur in North America; 50% of battery components must be manufactured in North America; and 40% of critical minerals must be extracted and processed or recycled domestically or in a country with a free trade agreement with the United States.
There are several examples within the Great Lakes of rebates and subsidies related to charging infrastructure and EVs. Illinois has EV and EV charging rebates under the Climate and Equitable Jobs Act (CEJA) of 2021. Pennsylvania offers the Alternative Fuel Vehicle rebate, setting aside extra money for those who qualify as low income. In fact, all states in the region have some form of rebate relevant to EVs and/or charging infrastructure. However, some rebate programs are run through utility companies, so they do not apply to everyone in the state.
Cross-Sectoral Interventions
Enabling Technologies — Clean Electricity
The production of batteries is energy intensive, and EV battery producers are looking to access reliable and cost-competitive electricity. The emissions intensity of the electricity supply is also a key factor because battery producers are facing scrutiny and pressure from downstream customers, such as automakers, to reduce embodied carbon. However, a range of factors continue to inhibit growth in reliable and abundant clean energy in the region, including a lack of transmission and congested grid interconnection queues. These bottlenecks can be a decisive factor in factories' construction location.
Establishing renewable energy goals is an important step in proving the framework needed to support the development and deployment of clean electricity. At the federal level, the White House set a target of 100% carbon-free electricity by 2035.
In the Great Lakes, Minnesota set a goal for 100% clean energy by 2040, and Wisconsin, Illinois, and Michigan by 2050. In addition, all states in the Great Lakes except Indiana, which has renewable portfolio goals, have enacted renewable portfolio standards. Yet there is still a lack of renewable energy generation (hydro, wind, and solar) penetration in the region, with only Wisconsin (26%), Illinois (11%), and Indiana (10%) at or above 10%, mainly through wind power. There is a need for bold renewable energy and power sector decarbonization policies across the Great Lakes.
Regarding permitting and grid connection, PJM and MISO, the two main electricity operators in the Great Lakes, have 3,042 and 1,734 active projects in interconnection queues, respectively. Most of these projects are solar and wind generation and storage. PJM stated that it has a two-year backup in its grid connection queue and had to pause review of new requests until at least 2025.
Policymakers in the region need to monitor the interconnection queue issue and find ways to streamline the process and unlock clean energy capacity already in the permitting process. All states in the Great Lakes have statewide interconnection policies, providing a process customers can follow and avoid arbitrary delays. However, only Minnesota and Illinois have adopted procedures that align with the Federal Energy Regulatory Commission model rules.
Workforce
Creating workforce development programs that are specific to the clean energy and EV transitions is vital to take advantage of the economic opportunity these transitions bring and to ensure communities are not left behind by a quickly shifting job market. Relevant policies include retraining programs, pre-apprenticeship and apprenticeship opportunities, and widespread community development funds.
Through the Registered Apprenticeships and Electric Vehicle Infrastructure Training Program, the federal government has created a workforce policy that will support auto workers looking to transition and create new jobs in the field. Specific to batteries, the DOE offers funding through the Battery Workforce Challenge to universities that train the domestic EV and battery workforce.
Certain states in the Great Lakes region have led the charge in creating these workforce development programs, especially Illinois and Michigan. In Illinois, the passage of CEJA has led to the widespread implementation of programs that create new jobs, provide retraining and apprenticeship opportunities, and support communities in their transition, including the Climate Works Pre-Apprenticeship Program and the Clean Jobs Workforce Hubs. Furthermore, Michigan began the Michigander EV Scholars program to prepare students for jobs in the EV sector and continues its work through the Michigan Academy for Green Mobility Alliance, which has been supporting workforce training for vehicle electrification since 2009. As the World Resources Institute’s Roadmap for Michigan’s Electric Vehicle Future points out, there will be some job losses in certain segments of the automotive supply chain and some gains in others, so it is important to prioritize workforce policy in this transition.
Land
To draw EV battery manufacturers to the region, states can enact land policies that incentivize physically locating in the state. These policies include designating geographic zones for EV battery manufacturing, which might include tax breaks or other incentives, funding former automotive plant remediation, and enacting property tax exemptions for manufacturers.
On the federal level, the Lawrence Livermore National Lab administers the High Performance Computing for Energy Innovation (HPC4EI) Program, which funds domestic manufacturers innovating in the energy space while encouraging them to collaborate with nonprofits and universities in designated opportunity zones. Multiple vehicle manufacturing projects have been funded through this program, including awards to General Motors and Ford. Furthermore, the Biden administration’s Buy American program incentivizes domestic manufacturing, which encourages the placement of manufacturing sites on land in the United States.
In the Great Lakes region, Indiana and Michigan have leading land policies in place. Indiana’s Certified Technology Park Designation was designed to attract and grow investments from high-tech industry actors, including those related to EV batteries, through the local recapturing of tax revenue, which can then be reinvested in the park. Furthermore, Michigan has three policies in place that incentivize locating in the state: Renewable Energy Renaissance Zones, the SOAR Fund, and a property tax exemption for alternative fuels development.
End-of-Life
End-of-Life Incentives
In the past few years, the federal government has enacted several incentives pertaining to battery end-of-life, including the Electric Drive Vehicle Battery Recycling and 2nd Life Applications Program, which funds research into EV battery end-of-life uses, and the Lithium-Ion Battery Recycling Prize competition. Existing federal incentives can be applied to both R&D and also to commercial-level recycling systems.
However, in the Great Lakes states, there are no incentives related to EV battery recycling or reuse.
End-of-Life Standards
The federal government, in May 2023, released the National Standards Strategy for Critical and Emerging Technologies, including those related to critical minerals supply chains. Although the US government has clear standards regarding the disposal of batteries there are no mandates related to their reuse or recycling. There is ongoing research being conducted to support recycling and reuse, including data sharing, safety and liability considerations, technological innovations, and battery state of health. There continues to be substantial support for the recycling industry, and a similar ecosystem for second-life applications can bring economic benefits, as well as increased resilience and climate benefits.
The Resource Conservation and Recovery Act (RCRA) is a U.S. federal law that primarily focuses on the management and disposal of hazardous waste including generation, transportation, treatment, storage and disposal of hazardous waste. Most lithium-ion batteries are likely to meet the definition of hazardous waste under the RCRA, and would be considered ignitable and reactive hazardous waste when discarded.
Currently, all standards related to battery end-of-life in any of the Great Lakes states focus solely on proper waste disposal; any recycling standards apply to other batteries such as the lead-acid recycling requirement in Illinois.
End-of-Life Mandates
On top of incentives and standards, states should consider implementing mandates that require companies to recycle portions of their products and to seek out recycled and second-life inputs.
Despite investing RD&D funding into battery recycling programs and beginning to develop standards for reuse and recycling, the federal government has no mandates in place that would require either of these actions from companies.
Furthermore, in line with the lack of incentives and standards found in Great Lakes states, none of the states have mandates requiring EV battery supply chain companies to recycle or reuse.
Data
Access to supply chain data is important so decisions can be made regarding where more policies need to be developed and where further investment should be focused. The Li-Bridge initiative calls for a critical minerals database that includes supply chain, permit, and existing mining operations. The National Renewable Energy Laboratory released the NATTBatt Lithium-Ion Battery Supply Chain Database in 2021, which aims to increase data transparency about the US battery supply chain.
Data is also essential for traceability and the development of recycling systems. This could be achieved through a framework such as a battery passport, which would provide increased transparency through a battery’s life cycle. For example, the EU Battery Regulation requires digital battery passports that include details on the following: general battery and manufacturer information, compliance and certifications, carbon footprint, supply chain and due diligence, battery materials and composition, circularity and resource efficiency, and performance and durability.vii Battery passports can increase transparency, which is needed to increase sustainable battery supply chain practices and to develop circular business models.viii
No databases like the one the Li-Bridge initiative calls for exists in the Great Lakes–, which is understandable given that the need for data applies to the whole country; however, it would be useful to regulate the data transparency of a battery’s production by ensuring that companies contribute to databases. This does not currently exist in the Great Lakes states.
[vii] World Economic Forum, Digital Battery Passports: An Enabler for Sustainable and Circular Battery Management, June 2023, https://www3.weforum.org/docs/WEF_Digital_Battery_Passport_2023.pdf
[viii] World Economic Forum, Digital Battery Passports: An Enabler for Sustainable and Circular Battery Management, June 2023, https://www3.weforum.org/docs/WEF_Digital_Battery_Passport_2023.pdf
Conclusion
The Great Lakes is uniquely poised to reap the economic, social, and environmental benefits of a burgeoning EV and EV battery industry. The region’s history as an automotive manufacturing powerhouse and its advantages in workforce specialization and leadership in innovation give it a clear competitive edge. However, the growth and strengthening of a regional industrial cluster is dependent on the actions of stakeholders within the Great Lakes, including state policymakers and EDOs.
Each state in the region has the opportunity to build on its current policies. This includes everything from targeting public procurement to strengthening workforce policy, from passing end-of-life standards to forming public–private partnerships. While not a comprehensive assessment, the goal of this brief was to outline the most pressing actions that policy decision makers and influencers can take in creating a robust regional EV and battery supply chain, contributing to a growing national supply chain. Trends have shown that the automotive industry is changing rapidly in the United States and beyond; however, it is up to state policymakers, EDOs, and other industry actors to ensure the Great Lakes is not only keeping up with this change but actively taking advantage of federal and state resources to lead it.
Appendix
The sale of EVs is growing both globally and within the United States. Research from Bloomberg New Energy Finance (BNEF) shows that there were 10 million EViii sales globally in 2022, and that is projected to grow 250% in just the next four years. Globally, EVs accounted for 14% of new passenger vehicle sales in 2022; however, 58% of global EV sales were in China and only 9% were in the United States. Figures 2 and 3 show projected trends in global EV sales over time.
While EVs accounted for 6% of passenger vehicle sales in the United States in 2022, their share is projected to grow to 15% in 2024 and nearly half of all sales by 2030. As Figure 4 illustrates, the projected market share of battery electric vehicles (BEVs) is expected to grow fastest, followed by hybrid electric vehicles (HEVs), with the share of internal combustion engine (ICE) passenger vehiclesiv rapidly diminishes through 2040.
Given significant funding for battery manufacturing in the Inflation Reduction Act (IRA) of 2022, a Battery Belt is forming in the United States through Michigan, Indiana, Ohio, Kentucky, Tennessee, Georgia, and the Carolinas. The northern portion of the Battery Belt, made up of the states we are exploring in this brief, is a historic hub of the domestic auto industry and has been focused on battery and EV production for more than a decade. However, the southern part of the belt is attracting increasingly more investments for battery manufacturing and development.
For example, Norwegian company Freyr is developing a second factory south of Atlanta. Freyr plans to make 2.5 gigawatt-hours’ worth of batteries in 2025 and eventually ramp up to 38 gigawatt-hours. Similarly, SK — a South Korean battery corporation — in partnership with Hyundai, is planning to build a $5 billion factory in northern Georgia.
Under the Biden administration, private companies have announced investments totaling $133 billion for EVs and battery manufacturing in the United States. Figure 5 shows the distribution of these private investments across the country, with a concentration in the Battery Belt as described above.
Looking specifically at the Great Lakes region, there are EV and battery supply chain facilities in all of the states in the region, with hubs in major metro areas including Detroit; Columbus, Ohio; Cleveland; and Chicago.
In addition to the IRA, there are other financial mechanisms from the federal government being utilized to support EV battery factory development. For example, Ford recently received a conditional loan of $9.2 billion from the US Department of Energy’s (DOE’s) Loan Programs Office (LPO) to construct three battery factories in the United States. This is the single largest loan in the history of the LPO. These three factories are under construction in Kentucky and Tennessee and are being built through a joint venture called BlueOval SK, which is owned by Ford and South Korean battery company SK On Co. These new factories will help Ford increase its EV output, as they plan to make up to 2 million EVs by 2026, a significant increase from the approximately 132,000 the automaker produced in 2022.
Additionally, through the DOE’s Energy Infrastructure Reinvestment program, the LPO can finance projects that retool, repower, repurpose, or replace energy infrastructure that is no longer operational, or enable infrastructure that will avoid or reduce pollutants and greenhouse gas emissions at concessional rates.v This could provide an additional funding source for EV battery supply chain infrastructure development.
Corresponding to this increased investment in and development of the battery supply chain in the United States, the workforce employed in this field is located in the Battery Belt and also in California, Nevada, and Arizona, as seen in Figure 7.
As a result of these simultaneously expanding industrial clusters, Great Lakes states should position themselves to maintain competitiveness with other regions within the United States by capitalizing on federal programs and improving state legislation to facilitate a growing industry in the region.
[iii] BNEF data considers EVs to be both battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs)
[iv] BNEF defines passenger vehicles as shared vehicles (digital-hailing, taxis, car-sharing and autonomous vehicles operated in a shared fleet), and private vehicles (privately owned vehicles).
[v] Department of Energy, Energy Infrastructure Reinvestment: Title 17 Clean Energy Financing – Energy Infrastructure Reinvestment, https://www.energy.gov/lpo/energy-infrastructure-reinvestment
Jobs
Today, there are more than 10 million ICE jobs across the country, and over 3,000 counties have a business in the auto supply chain. According to one study, as much as 5.2% of all jobs in the country depend on the auto industry. Meanwhile, there are less than 2.5 million jobs related to EVs, including many that supply both EV and ICE supply chains. However, battery manufacturing jobs have grown by around 20% over the past five years and 13% in EV manufacturing industries more broadly.
A common concern with the transition to EV manufacturing is that the manufacturing process is less labor-intensive than that of ICE vehicles; however, recent studies do not seem to bear this concern out. This is because an ICE powertrain will often have more than 1,000 components, whereas an EV one may have only a few hundred. Yet there is a range of power electronics equipment required to run an EV that do not exist in pure ICEs. As a result, Boston Consulting Group estimates that while EVs require fewer labor hours for component and motor manufacturing, that is offset by the additional hours required for battery cell manufacturing, as well as module and pack assembly.
These auto manufacturing jobs, regardless of powertrain, are seen as particularly important to economic development because of their outsize effect on indirect job creation, as well as racial and educational equity. It is estimated that for every 100 jobs created in motor vehicle manufacturing, an average 1,428 indirect jobs are created in supplier firms and through induced job creation — this is the highest multiplier effect of any major manufacturing industry. What is more, auto manufacturing has historically been disproportionately beneficial for Black workers, and it continues to employ a much higher share (16.6%) than the national average (12.5%). Importantly, workers without a four-year degree account for 75% of workers in the auto sector, compared with 62.2% in all industries, and these workers earn 15% more, on average, in auto manufacturing than in the rest of the economy.
Another major factor in the trajectory of auto manufacturing employment is whether the United States, and Great Lakes states in particular, can capture global market share within the EV supply chain. In a domestically manufactured ICE powertrain, around 75% of components are produced domestically today, compared with just 45% of what goes into a domestically produced EV. According to one estimate, total auto sector manufacturing jobs could increase by 150,000 if the US manufacturing share of EV components reaches the same level as ICE components, whereas jobs could fall by 75,000 if shares remain at today’s levels.
Importantly, the IRA has several provisions to help catalyze domestic manufacturing and critical minerals production. These domestic content provisions are particularly stringent for consumer vehicles, which will likely represent 50% to 60% of total vehicle and battery demand. Original equipment manufacturers (OEMs) appear to be on track to reach the necessary domestic capacity growth to meet IRA qualifications. However, there are some importers like Hyundai and Toyota that are falling behind. In battery component manufacturing, consultancy Bain & Co. estimates that IRA incentives will be sufficient for enough domestic capacity to be built in cathode, battery cell, and battery pack manufacturing. Materials processing and extraction, on the other hand, are going to have to lean on friendshoring efforts to meet these provisions.
Yet even if total employment in EV manufacturing is similar to or greater than ICE manufacturing, the geographic distribution of these jobs will depend on the competitiveness of state and local clusters, which are areas of industry colocation that share pools of resources like workers, infrastructure, and institutions. In a recent study of potential changes in EV manufacturing jobs in Michigan, for example, the authors forecast a net difference of 50,000 jobs in the sector depending on whether the state becomes more or less competitive in the industry.
Some indication of future job distribution among US states can be inferred by recent project announcements. Since 2021, new EV supply chain projects have announced more than 137,000 jobs, which, at the average multiplier for the industry, could create a further 2 million jobs throughout the economy.
It is particularly noticeable from these announcements how much of the new job creation in EV and battery manufacturing projects is likely to happen in the Southeast and in the Great Lakes. Of the 137,000 planned new jobs, 32% are in Southeast states and 21% in the Great Lakes. To date, Georgia has seen the most job announcements at 25,134, followed by Texas at 20,000 and Michigan at 14,412. Interestingly, as a share of the total labor force, Delaware has seen the largest new job growth, followed by Georgia, Kentucky, and Tennessee.
Supply Chain Specialization and Place-Based Risks
The other side of the coin to the EV transition is the effects on the economy built around ICEs. In particular, the many “powertrain communities” that have developed deep expertise in manufacturing highly specialized components in ICEs are at a heightened risk of disruption due to the differing manufacturing requirements of EVs. Since most ICE powertrain components are not needed in an EV, states and communities with high concentrations of parts manufacturers are especially vulnerable.
Looking at specialization across the three major phases of the ICE supply chain — OEMs, parts manufacturers, and midstream suppliers — some of this varied exposure to the EV transition becomes apparent. Figure 8 shows how specialization varies significantly by state and supply chain segment. Interestingly, Iowa has the highest specialization in OEMs at around 11 times the national average employment share due to a large presence in farm and construction machinery manufacturing — a related OEM, if not directly producing vehicles. Michigan is the second most specialized state at around five times the national average and is home to 16% of all OEM jobs in the country. The state is also the most specialized parts manufacturing and midstream supplier state at nearly 12 times and three times the national average, respectively.vi Overall, the Great Lakes states are the most exposed to both parts and midstream supplier manufacturing and the second-most exposed to OEMs.
Even within the Great Lakes region there is a high degree of variability in exposure to parts manufacturing, the highest-risk segment of the ICE value chain. The Detroit-Warren-Flint area in Michigan is the most exposed, with nearly 70,000 people employed in the sector, which represents around 3% of all jobs, a share that is 13 times higher than the national average. In fact, 10 of the 15 economic areas in the region are more than twice as specialized in parts manufacturing than the country as a whole.
These risks can be hedged by adding EV manufacturing capacity as fast as ICE capacity is being lost. However, new EV supply chain facilities do not always choose to locate where there are existing ICE jobs. EV facilities are less likely to colocate in communities with OEM and parts manufacturing facilities and more likely to colocate with midstream supplier facilities — around a third of all battery supply chain facilities are in the same areas as existing midstream supplier facilities. This would suggest that communities that specialize in midstream supplier manufacturing are less at risk of economic disruption due to the EV transition, since many of these same refined and processed materials are inputs into both EVs and ICEs.
Another possible concern for many communities with existing OEM factories is whether the additional factory infrastructure required for EV manufacturing — mostly to handle the added weight of the batteries — will make it cost-prohibitive to convert brownfield sites into EV assembly facilities. This concern does not appear to be warranted, however. Although there will certainly be new greenfield investments in EV component manufacturing and assembly, analysis from Bain finds that a significant portion of ICE equipment and facilities is transferable or convertible for EV use. Bain estimates that converting existing capacity will cost half as much as greenfield investment — approximately $5 million to $10 million per 1,000 EV units, compared with $10 million to $20 million for greenfield expansion.
In particular, body assembly is substantially the same and can leverage existing facilities and equipment. This can already be seen in recent announcements from major OEMs, including General Motors, which announced it could save $1.5 billion each time it renovates an existing facility, relative to building a new one, while Honda, Ford, and Stellantis have all announced plans to convert existing facilities.
Innovation and Productivity
Finally, at its heart, the transition to EVs is a transition to a set of newer, cheaper, more innovative technologies. Technology transitions are opportunities for “creative destruction” in ideas, business processes, production methods, and supply chain networks. Such creative destruction is fundamental to productivity growth and economic development, especially in the manufacturing sector, which has historically played a disproportionate role in driving research and development (R&D) and productivity growth.
This is particularly true of the motor vehicle manufacturing sector. The industry is the sixth-largest source of company-level R&D in the United States, and at various times in its history, it has been one of the largest contributors to productivity growth. A range of new technologies and processes are poised to continue reshaping the sector, including battery manufacturing, additive manufacturing, flexible manufacturing, autonomous final assembly, and end-of-life vehicle recycling. Figure 10 shows that, among the largest R&D-spending industries, motor vehicle manufacturing spends nearly as much as the scientific R&D services sector.
However, productivity growth in the sector has been stagnant with a lower rate of new entrants over time in a market dominated by large, incumbent firms. Although the transition to EVs is by no means guaranteed to reverse this trajectory, there are some positive signs that the technological disruption is pushing the industry to recapture its spirit of innovation. Figure 11 shows that while the motor vehicles manufacturing industry has been increasing output faster than hours worked (a common measure of productivity), the rate at which it has been doing so is much lower than in other major industrial sectors.
The most obvious example is Tesla, which in 2010 became the first US automotive company to go public since Ford in 1956. Tesla’s historic success has pushed incumbent automakers to not only accelerate their plans to go electric but also to revamp their production processes. Tesla now operates the most productive car factory in the United States and thrived during the height of the COVID-19 pandemic thanks to its “superior command of technology and [owning] its own supply chain.”
Tesla’s Gigafactory in Reno, Nevada, is an interesting case study in the economic development impact of large plant openings on local communities. One of the arguments for public incentives to attract large manufacturing plants, like Tesla’s, is that they are expected to increase productivity and output at existing nearby establishments. According to a 2022 economic impact assessment, the Gigafactory has contributed $17.1 billion in economic output to the region, created over 60,000 “job years,” engaged over 4,000 suppliers, and invested over $6 billion in new capital. While evidence for productivity spillovers is only indicative at this stage, Tesla seems to have encouraged a range of other high-tech industries to set up shop in Reno and is helping to diversify the local economy. The state is further doubling down on an industrial cluster built around the automaker as it plans to be the “lithium capital of North America” and a hub for advanced manufacturing.
While Reno has the advantage of being geographically close to Tesla’s Austin, Texas, headquarters as well as having significant lithium deposits, cities across the Great Lakes have the advantage of not only historic workforce capacity but R&D capacity that can directly translate into local entrepreneurship. The Detroit metro area has invented nearly three times more patents related to electric vehicles than any other city in the country over the past six years and only trails Ann Arbor, Michigan, for the most EV patents per person. Of the 10 cities specializing most in EV patents, six are in the Great Lakes. The Detroit-Warren-Flint area has also received the largest amount in DOE grant funding related to EVs over the last six years, with Syracuse, Chicago, and Milwaukee not too far behind, suggesting significant human and institutional capacity in emerging EV technologies.
[vi] See Appendix for list of included OEM, parts manufacturing, and midstream supplier manufacturing industries.
The Path to an EV Industry in the Great Lakes
To fully realize the economic, environmental, and social opportunities related to a strong EV battery industry in the Great Lakes, the federal and state governments need to enact strategic industrial policies. These policies must directly affect the upstream, midstream, downstream, and end-of-life segments of the EV and battery supply chain and include cross-sectoral strategies that will draw important industry actors to the Great Lakes region.
In terms of direct policies, states should enact programs focused on strategic industry coordination, incentivize both the manufacturing of EV batteries and the deployment of EVs and charging infrastructure, and create coordinated and standardized end-of-life regulations that increase battery circularity. Public–private partnerships, technology roadmaps, buying consortiums, and cohesive industry standards all drive strategic coordination that must occur between regional stakeholders. Beyond coordination, states should enact production incentives to complement and fill gaps from federal incentives within the EV value chain and policies to influence demand-pull mechanisms such as public procurement programs, domestic content requirements, and subsidies.
Further, there are several policies related to land use, workforce development, battery end-of-life, and enabling technologies like cheap, abundant, clean electricity that should be enacted to influence the overall business environment in the region. Land-use planning, former plant remediation, and industrial zoning are all policies that, if done correctly, can safely hasten mining operations in the region and provide locational incentives for manufacturing plants. Further, because of the shifting jobs landscape, retraining, apprenticeships, and educational programs will be needed to ensure a just and equitable transition. The EV industry relies heavily on electricity, taking 47 kilowatt-hours (kWh) of energy to make 1 kWh of battery storage, which means access to clean electricity is important to ensure environmentally safe and healthy growth of the industry in the region. Incentives that increase clean electricity in the region could draw more EV battery manufacturing companies and workers. Finally, to ensure circularity in the industry, policy must focus on battery end-of-life including recycling and reuse standards, incentives, and mandates as well as increased data availability and transparency.
Industrial Policy Landscape
Without appropriate policy guidance and support, the Great Lakes runs the risk of market participants being caught flat-footed, leaving potential jobs and investment opportunities on the table. This research provides a unique policy gap analysis of selective policies focusing on the EV battery industry at the federal level and in the Great Lakes region to better understand what regional policymakers can do to ensure local workers and communities are not left behind. It uses a typology of industrial policies used globally in similar technology transitions, relying especially on a novel framework developed by the Organisation for Economic Co-operation and Development.
Broadly speaking, “industrial policy” refers to any goal-oriented state action whose “purpose is to shape the composition of economic activity,” in this case with specific reference to the EV battery manufacturing supply chain. Although there are a range of policy instruments that can be used to improve strategic or economically important sectors, these policies can be grouped into four primary domains: strategic coordination, production instruments, demand-pull mechanisms, and cross-sectoral interventions. Within each domain, the policy instruments are grouped based on their similarities:
- Strategic coordination: Any effort of policy governance such as coalitions and sectoral competitiveness assessments. Often, policymakers choose to commission industry strategy or technology roadmaps to guide and complement the other categories of industrial policy intervention. These would usually be accompanied by a vision statement and a set of objectives and targets.
- Production instruments: Affect the economics of firm-level production and investment decisions for individual firms within the target sector. This can include a range of financial incentives — such as subsidies, grants, or tax credits — to promote research, development, and demonstration (RD&D) activities or otherwise facilitate additional investment, particularly in novel technologies. Production instruments can also affect firm performance through the provision of key inputs, such as skilled labor, or through addressing supply chain gaps.
- Demand-pull mechanisms: Apply to the consumption of the product(s) produced by the industry. These can include tax breaks and rebates, mandates, public procurement, and certain product standards and definitions.
- Cross-sectoral interventions: Affect the whole industry through regulations governing the allocation of production factors, including land, capital, and labor. These interventions can also include cross-sectoral policies that affect the target industry, such as competition or trade policy; policies that affect supply chain segments that bookend the industry, such as recycling and reuse; and the development of enabling technologies crucial to battery manufacturing.
The policy gap analysis was developed for EV battery-specific policies and key enabling technologies like clean electricity. After conducting the landscape assessment, this study identified regional gaps between federal and state policies and highlighted efforts that states should learn from and follow. Figure 1 presents the landscape assessment for federal and state policies in the Great Lakes region.
Strategic Coordination
Advancing strategic coordination is critical to ensuring that private and public efforts are efficient and effective in supporting and strengthening an EV and battery supply chain in the Great Lakes and the United States more broadly.
Technology-specific roadmaps, for example, can provide a framework and tangible steps to help direct and guide state policies and incentives as well as encourage alignment with private efforts. However, on top of strategic planning, coordinated implementation is needed to scale industry on a regional level. Thus, in addition, states in the Great Lakes region need to develop public–private partnerships and memorandums of understanding (MOUs) to bring to life these roadmaps and provide coordination and accountability for results.
On the federal level, there are several examples of strategic coordination concerning the build-out of the US EV battery supply chain. The most prominent example is the formation of the Li-Bridge initiative, which was formed after the DOE asked US industry experts to convene and provide policy recommendations to create a robust and more independent supply chain. In their first report from February 2023, initiative authors proposed that the initiative become its own public–private partnership to execute its policy recommendations, further strengthening its coordination function. The federal government has also released technology roadmaps related to lithium-ion batteries that help coordinate disparate public and private actors across the industry.
In the Great Lakes region, there are a few examples of strategic coordination such as two recent MOUs between key states, including REV Midwest and the Lake Michigan Electric Vehicle Circuit Tour. Although both showcase collaboration across the region, the MOUs focus on increasing and meeting demand for EVs and EV charging infrastructure in the region rather than strategically building out regional supply chains. There is a need for coordination on the build-out of a regional EV battery manufacturing cluster.
One of the few examples of a supply-side technology strategy in the Great Lakes is A Roadmap for Michigan's Electric Vehicle Future. The report outlines steps that Michigan must take to bolster manufacturing competitiveness, invest in infrastructure, develop the workforce, and attract corporate headquarters, all of which ensures Michigan’s economy and communities benefit from the EV transition. It is an example of a technology-specific strategy that provides tangible steps in how battery manufacturing’s development influences the competitiveness of the state, especially the number of jobs created. However, the roadmap was developed by a third-party organization, the World Resources Institute, not a Michigan state agency or EDO, and therefore includes no new governance arrangements to guide or encourage parties to meet its recommendations. State agencies use reports such as this one to guide their own policy roadmaps and goals, but there is little transparency or accountability in this process.
Production Instruments
Research, Development, and Demonstration
RD&D in EV batteries plays a crucial role in the country’s and states’ competitiveness and in how the local industry can capture economic value. The federal government has been the major player in providing funding for research. New federal funding from the Infrastructure Investment and Jobs Act (IIJA) of 2021, the CHIPS and Science Act of 2022, and the IRA represents a historic level of support for research and development to strengthen EV battery supply chains, including more than $8.5 billion for critical minerals activities.
But states in the Great Lakes must double down on technological innovation and invest heavily in new technologies, pilots, and demonstration projects to commercialize these innovations. Some states in the region have established support for research in EV battery technologies. Wisconsin has a 10% tax credit for corporate research expenses, the Illinois Science and Energy Innovation Trust provides financial support for research on EVs and their smart grid functions, and the Electric Vehicle Product Commission in Indiana is assessing opportunities for research and development.
Investment Attraction
EV battery manufacturers need to invest in new technologies and facilities to keep up with the rapidly growing demand for EVs. These investments are capital intensive, and manufacturers require federal and state support in building out the needed infrastructure for EV battery deployment.
The IIJA provides $3.1 billion in funding to help companies build new factories and retrofit existing ones to make EV batteries and related parts. CHIPS includes $39 billion in semiconductor incentives in the form of grants, cooperative agreements, loans, and loan guarantees to attract large-scale investments and incentivize the expansion of semiconductor manufacturing.
In the Great Lakes, Illinois provides tax credits to eligible EV, EV parts, and EV charging station manufacturers that invest a minimum of $20 million and create at least 50 new jobs in the state within four years. Michigan created the Strategic Outreach and Attraction Reserve (SOAR) Fund, which is a $1 billion fund to attract investment in the state. The state has already spent $375 million of it to attract billions in EV battery investments.
Production Efficiency
Incentives and support should also address the production of EV battery manufacturing to improve the attractiveness of investments in the United States.
The IRA’s tax credits are specifically designed to incentivize local production by adding domestic content requirements for crucial elements and EV parts. The IRA’s Section 45X advanced manufacturing production tax credit covers 10% of the cost to produce active electrode materials, such as aluminum, nickel, cobalt, and lithium, and provides $35 per kWh for each battery cell and $10 per kWh for each battery module manufactured domestically.
Minnesota offers tax credits for the mining industry through the Taconite Economic Development Fund. The fund provides iron ore producers a tax rebate of $0.251 per ton of iron concentrate produced annually.
Demand-Pull Mechanisms
Demand incentives are essential to reduce the perception of uncertainty in the US battery market. However, it is crucial to develop demand mechanisms across all segments, from upstream to downstream, and ensure enduring demand for US‑produced products.
The IRA also has domestic content requirements for manufactured products. For consumers, the IRA includes a $7,500 consumer tax credit for EV purchases and sets three requirements for EV models to qualify. The final assembly of the EV models must occur in North America; 50% of battery components must be manufactured in North America; and 40% of critical minerals must be extracted and processed or recycled domestically or in a country with a free trade agreement with the United States.
There are several examples within the Great Lakes of rebates and subsidies related to charging infrastructure and EVs. Illinois has EV and EV charging rebates under the Climate and Equitable Jobs Act (CEJA) of 2021. Pennsylvania offers the Alternative Fuel Vehicle rebate, setting aside extra money for those who qualify as low income. In fact, all states in the region have some form of rebate relevant to EVs and/or charging infrastructure. However, some rebate programs are run through utility companies, so they do not apply to everyone in the state.
Cross-Sectoral Interventions
Enabling Technologies — Clean Electricity
The production of batteries is energy intensive, and EV battery producers are looking to access reliable and cost-competitive electricity. The emissions intensity of the electricity supply is also a key factor because battery producers are facing scrutiny and pressure from downstream customers, such as automakers, to reduce embodied carbon. However, a range of factors continue to inhibit growth in reliable and abundant clean energy in the region, including a lack of transmission and congested grid interconnection queues. These bottlenecks can be a decisive factor in factories' construction location.
Establishing renewable energy goals is an important step in proving the framework needed to support the development and deployment of clean electricity. At the federal level, the White House set a target of 100% carbon-free electricity by 2035.
In the Great Lakes, Minnesota set a goal for 100% clean energy by 2040, and Wisconsin, Illinois, and Michigan by 2050. In addition, all states in the Great Lakes except Indiana, which has renewable portfolio goals, have enacted renewable portfolio standards. Yet there is still a lack of renewable energy generation (hydro, wind, and solar) penetration in the region, with only Wisconsin (26%), Illinois (11%), and Indiana (10%) at or above 10%, mainly through wind power. There is a need for bold renewable energy and power sector decarbonization policies across the Great Lakes.
Regarding permitting and grid connection, PJM and MISO, the two main electricity operators in the Great Lakes, have 3,042 and 1,734 active projects in interconnection queues, respectively. Most of these projects are solar and wind generation and storage. PJM stated that it has a two-year backup in its grid connection queue and had to pause review of new requests until at least 2025.
Policymakers in the region need to monitor the interconnection queue issue and find ways to streamline the process and unlock clean energy capacity already in the permitting process. All states in the Great Lakes have statewide interconnection policies, providing a process customers can follow and avoid arbitrary delays. However, only Minnesota and Illinois have adopted procedures that align with the Federal Energy Regulatory Commission model rules.
Workforce
Creating workforce development programs that are specific to the clean energy and EV transitions is vital to take advantage of the economic opportunity these transitions bring and to ensure communities are not left behind by a quickly shifting job market. Relevant policies include retraining programs, pre-apprenticeship and apprenticeship opportunities, and widespread community development funds.
Through the Registered Apprenticeships and Electric Vehicle Infrastructure Training Program, the federal government has created a workforce policy that will support auto workers looking to transition and create new jobs in the field. Specific to batteries, the DOE offers funding through the Battery Workforce Challenge to universities that train the domestic EV and battery workforce.
Certain states in the Great Lakes region have led the charge in creating these workforce development programs, especially Illinois and Michigan. In Illinois, the passage of CEJA has led to the widespread implementation of programs that create new jobs, provide retraining and apprenticeship opportunities, and support communities in their transition, including the Climate Works Pre-Apprenticeship Program and the Clean Jobs Workforce Hubs. Furthermore, Michigan began the Michigander EV Scholars program to prepare students for jobs in the EV sector and continues its work through the Michigan Academy for Green Mobility Alliance, which has been supporting workforce training for vehicle electrification since 2009. As the World Resources Institute’s Roadmap for Michigan’s Electric Vehicle Future points out, there will be some job losses in certain segments of the automotive supply chain and some gains in others, so it is important to prioritize workforce policy in this transition.
Land
To draw EV battery manufacturers to the region, states can enact land policies that incentivize physically locating in the state. These policies include designating geographic zones for EV battery manufacturing, which might include tax breaks or other incentives, funding former automotive plant remediation, and enacting property tax exemptions for manufacturers.
On the federal level, the Lawrence Livermore National Lab administers the High Performance Computing for Energy Innovation (HPC4EI) Program, which funds domestic manufacturers innovating in the energy space while encouraging them to collaborate with nonprofits and universities in designated opportunity zones. Multiple vehicle manufacturing projects have been funded through this program, including awards to General Motors and Ford. Furthermore, the Biden administration’s Buy American program incentivizes domestic manufacturing, which encourages the placement of manufacturing sites on land in the United States.
In the Great Lakes region, Indiana and Michigan have leading land policies in place. Indiana’s Certified Technology Park Designation was designed to attract and grow investments from high-tech industry actors, including those related to EV batteries, through the local recapturing of tax revenue, which can then be reinvested in the park. Furthermore, Michigan has three policies in place that incentivize locating in the state: Renewable Energy Renaissance Zones, the SOAR Fund, and a property tax exemption for alternative fuels development.
End-of-Life
End-of-Life Incentives
In the past few years, the federal government has enacted several incentives pertaining to battery end-of-life, including the Electric Drive Vehicle Battery Recycling and 2nd Life Applications Program, which funds research into EV battery end-of-life uses, and the Lithium-Ion Battery Recycling Prize competition. Existing federal incentives can be applied to both R&D and also to commercial-level recycling systems.
However, in the Great Lakes states, there are no incentives related to EV battery recycling or reuse.
End-of-Life Standards
The federal government, in May 2023, released the National Standards Strategy for Critical and Emerging Technologies, including those related to critical minerals supply chains. Although the US government has clear standards regarding the disposal of batteries there are no mandates related to their reuse or recycling. There is ongoing research being conducted to support recycling and reuse, including data sharing, safety and liability considerations, technological innovations, and battery state of health. There continues to be substantial support for the recycling industry, and a similar ecosystem for second-life applications can bring economic benefits, as well as increased resilience and climate benefits.
The Resource Conservation and Recovery Act (RCRA) is a U.S. federal law that primarily focuses on the management and disposal of hazardous waste including generation, transportation, treatment, storage and disposal of hazardous waste. Most lithium-ion batteries are likely to meet the definition of hazardous waste under the RCRA, and would be considered ignitable and reactive hazardous waste when discarded.
Currently, all standards related to battery end-of-life in any of the Great Lakes states focus solely on proper waste disposal; any recycling standards apply to other batteries such as the lead-acid recycling requirement in Illinois.
End-of-Life Mandates
On top of incentives and standards, states should consider implementing mandates that require companies to recycle portions of their products and to seek out recycled and second-life inputs.
Despite investing RD&D funding into battery recycling programs and beginning to develop standards for reuse and recycling, the federal government has no mandates in place that would require either of these actions from companies.
Furthermore, in line with the lack of incentives and standards found in Great Lakes states, none of the states have mandates requiring EV battery supply chain companies to recycle or reuse.
Data
Access to supply chain data is important so decisions can be made regarding where more policies need to be developed and where further investment should be focused. The Li-Bridge initiative calls for a critical minerals database that includes supply chain, permit, and existing mining operations. The National Renewable Energy Laboratory released the NATTBatt Lithium-Ion Battery Supply Chain Database in 2021, which aims to increase data transparency about the US battery supply chain.
Data is also essential for traceability and the development of recycling systems. This could be achieved through a framework such as a battery passport, which would provide increased transparency through a battery’s life cycle. For example, the EU Battery Regulation requires digital battery passports that include details on the following: general battery and manufacturer information, compliance and certifications, carbon footprint, supply chain and due diligence, battery materials and composition, circularity and resource efficiency, and performance and durability.vii Battery passports can increase transparency, which is needed to increase sustainable battery supply chain practices and to develop circular business models.viii
No databases like the one the Li-Bridge initiative calls for exists in the Great Lakes–, which is understandable given that the need for data applies to the whole country; however, it would be useful to regulate the data transparency of a battery’s production by ensuring that companies contribute to databases. This does not currently exist in the Great Lakes states.
[vii] World Economic Forum, Digital Battery Passports: An Enabler for Sustainable and Circular Battery Management, June 2023, https://www3.weforum.org/docs/WEF_Digital_Battery_Passport_2023.pdf
[viii] World Economic Forum, Digital Battery Passports: An Enabler for Sustainable and Circular Battery Management, June 2023, https://www3.weforum.org/docs/WEF_Digital_Battery_Passport_2023.pdf
Conclusion
The Great Lakes is uniquely poised to reap the economic, social, and environmental benefits of a burgeoning EV and EV battery industry. The region’s history as an automotive manufacturing powerhouse and its advantages in workforce specialization and leadership in innovation give it a clear competitive edge. However, the growth and strengthening of a regional industrial cluster is dependent on the actions of stakeholders within the Great Lakes, including state policymakers and EDOs.
Each state in the region has the opportunity to build on its current policies. This includes everything from targeting public procurement to strengthening workforce policy, from passing end-of-life standards to forming public–private partnerships. While not a comprehensive assessment, the goal of this brief was to outline the most pressing actions that policy decision makers and influencers can take in creating a robust regional EV and battery supply chain, contributing to a growing national supply chain. Trends have shown that the automotive industry is changing rapidly in the United States and beyond; however, it is up to state policymakers, EDOs, and other industry actors to ensure the Great Lakes is not only keeping up with this change but actively taking advantage of federal and state resources to lead it.
Appendix
To fully realize the economic, environmental, and social opportunities related to a strong EV battery industry in the Great Lakes, the federal and state governments need to enact strategic industrial policies. These policies must directly affect the upstream, midstream, downstream, and end-of-life segments of the EV and battery supply chain and include cross-sectoral strategies that will draw important industry actors to the Great Lakes region.
In terms of direct policies, states should enact programs focused on strategic industry coordination, incentivize both the manufacturing of EV batteries and the deployment of EVs and charging infrastructure, and create coordinated and standardized end-of-life regulations that increase battery circularity. Public–private partnerships, technology roadmaps, buying consortiums, and cohesive industry standards all drive strategic coordination that must occur between regional stakeholders. Beyond coordination, states should enact production incentives to complement and fill gaps from federal incentives within the EV value chain and policies to influence demand-pull mechanisms such as public procurement programs, domestic content requirements, and subsidies.
Further, there are several policies related to land use, workforce development, battery end-of-life, and enabling technologies like cheap, abundant, clean electricity that should be enacted to influence the overall business environment in the region. Land-use planning, former plant remediation, and industrial zoning are all policies that, if done correctly, can safely hasten mining operations in the region and provide locational incentives for manufacturing plants. Further, because of the shifting jobs landscape, retraining, apprenticeships, and educational programs will be needed to ensure a just and equitable transition. The EV industry relies heavily on electricity, taking 47 kilowatt-hours (kWh) of energy to make 1 kWh of battery storage, which means access to clean electricity is important to ensure environmentally safe and healthy growth of the industry in the region. Incentives that increase clean electricity in the region could draw more EV battery manufacturing companies and workers. Finally, to ensure circularity in the industry, policy must focus on battery end-of-life including recycling and reuse standards, incentives, and mandates as well as increased data availability and transparency.
Industrial Policy Landscape
Without appropriate policy guidance and support, the Great Lakes runs the risk of market participants being caught flat-footed, leaving potential jobs and investment opportunities on the table. This research provides a unique policy gap analysis of selective policies focusing on the EV battery industry at the federal level and in the Great Lakes region to better understand what regional policymakers can do to ensure local workers and communities are not left behind. It uses a typology of industrial policies used globally in similar technology transitions, relying especially on a novel framework developed by the Organisation for Economic Co-operation and Development.
Broadly speaking, “industrial policy” refers to any goal-oriented state action whose “purpose is to shape the composition of economic activity,” in this case with specific reference to the EV battery manufacturing supply chain. Although there are a range of policy instruments that can be used to improve strategic or economically important sectors, these policies can be grouped into four primary domains: strategic coordination, production instruments, demand-pull mechanisms, and cross-sectoral interventions. Within each domain, the policy instruments are grouped based on their similarities:
- Strategic coordination: Any effort of policy governance such as coalitions and sectoral competitiveness assessments. Often, policymakers choose to commission industry strategy or technology roadmaps to guide and complement the other categories of industrial policy intervention. These would usually be accompanied by a vision statement and a set of objectives and targets.
- Production instruments: Affect the economics of firm-level production and investment decisions for individual firms within the target sector. This can include a range of financial incentives — such as subsidies, grants, or tax credits — to promote research, development, and demonstration (RD&D) activities or otherwise facilitate additional investment, particularly in novel technologies. Production instruments can also affect firm performance through the provision of key inputs, such as skilled labor, or through addressing supply chain gaps.
- Demand-pull mechanisms: Apply to the consumption of the product(s) produced by the industry. These can include tax breaks and rebates, mandates, public procurement, and certain product standards and definitions.
- Cross-sectoral interventions: Affect the whole industry through regulations governing the allocation of production factors, including land, capital, and labor. These interventions can also include cross-sectoral policies that affect the target industry, such as competition or trade policy; policies that affect supply chain segments that bookend the industry, such as recycling and reuse; and the development of enabling technologies crucial to battery manufacturing.
The policy gap analysis was developed for EV battery-specific policies and key enabling technologies like clean electricity. After conducting the landscape assessment, this study identified regional gaps between federal and state policies and highlighted efforts that states should learn from and follow. Figure 1 presents the landscape assessment for federal and state policies in the Great Lakes region.
Strategic Coordination
Advancing strategic coordination is critical to ensuring that private and public efforts are efficient and effective in supporting and strengthening an EV and battery supply chain in the Great Lakes and the United States more broadly.
Technology-specific roadmaps, for example, can provide a framework and tangible steps to help direct and guide state policies and incentives as well as encourage alignment with private efforts. However, on top of strategic planning, coordinated implementation is needed to scale industry on a regional level. Thus, in addition, states in the Great Lakes region need to develop public–private partnerships and memorandums of understanding (MOUs) to bring to life these roadmaps and provide coordination and accountability for results.
On the federal level, there are several examples of strategic coordination concerning the build-out of the US EV battery supply chain. The most prominent example is the formation of the Li-Bridge initiative, which was formed after the DOE asked US industry experts to convene and provide policy recommendations to create a robust and more independent supply chain. In their first report from February 2023, initiative authors proposed that the initiative become its own public–private partnership to execute its policy recommendations, further strengthening its coordination function. The federal government has also released technology roadmaps related to lithium-ion batteries that help coordinate disparate public and private actors across the industry.
In the Great Lakes region, there are a few examples of strategic coordination such as two recent MOUs between key states, including REV Midwest and the Lake Michigan Electric Vehicle Circuit Tour. Although both showcase collaboration across the region, the MOUs focus on increasing and meeting demand for EVs and EV charging infrastructure in the region rather than strategically building out regional supply chains. There is a need for coordination on the build-out of a regional EV battery manufacturing cluster.
One of the few examples of a supply-side technology strategy in the Great Lakes is A Roadmap for Michigan's Electric Vehicle Future. The report outlines steps that Michigan must take to bolster manufacturing competitiveness, invest in infrastructure, develop the workforce, and attract corporate headquarters, all of which ensures Michigan’s economy and communities benefit from the EV transition. It is an example of a technology-specific strategy that provides tangible steps in how battery manufacturing’s development influences the competitiveness of the state, especially the number of jobs created. However, the roadmap was developed by a third-party organization, the World Resources Institute, not a Michigan state agency or EDO, and therefore includes no new governance arrangements to guide or encourage parties to meet its recommendations. State agencies use reports such as this one to guide their own policy roadmaps and goals, but there is little transparency or accountability in this process.
Production Instruments
Research, Development, and Demonstration
RD&D in EV batteries plays a crucial role in the country’s and states’ competitiveness and in how the local industry can capture economic value. The federal government has been the major player in providing funding for research. New federal funding from the Infrastructure Investment and Jobs Act (IIJA) of 2021, the CHIPS and Science Act of 2022, and the IRA represents a historic level of support for research and development to strengthen EV battery supply chains, including more than $8.5 billion for critical minerals activities.
But states in the Great Lakes must double down on technological innovation and invest heavily in new technologies, pilots, and demonstration projects to commercialize these innovations. Some states in the region have established support for research in EV battery technologies. Wisconsin has a 10% tax credit for corporate research expenses, the Illinois Science and Energy Innovation Trust provides financial support for research on EVs and their smart grid functions, and the Electric Vehicle Product Commission in Indiana is assessing opportunities for research and development.
Investment Attraction
EV battery manufacturers need to invest in new technologies and facilities to keep up with the rapidly growing demand for EVs. These investments are capital intensive, and manufacturers require federal and state support in building out the needed infrastructure for EV battery deployment.
The IIJA provides $3.1 billion in funding to help companies build new factories and retrofit existing ones to make EV batteries and related parts. CHIPS includes $39 billion in semiconductor incentives in the form of grants, cooperative agreements, loans, and loan guarantees to attract large-scale investments and incentivize the expansion of semiconductor manufacturing.
In the Great Lakes, Illinois provides tax credits to eligible EV, EV parts, and EV charging station manufacturers that invest a minimum of $20 million and create at least 50 new jobs in the state within four years. Michigan created the Strategic Outreach and Attraction Reserve (SOAR) Fund, which is a $1 billion fund to attract investment in the state. The state has already spent $375 million of it to attract billions in EV battery investments.
Production Efficiency
Incentives and support should also address the production of EV battery manufacturing to improve the attractiveness of investments in the United States.
The IRA’s tax credits are specifically designed to incentivize local production by adding domestic content requirements for crucial elements and EV parts. The IRA’s Section 45X advanced manufacturing production tax credit covers 10% of the cost to produce active electrode materials, such as aluminum, nickel, cobalt, and lithium, and provides $35 per kWh for each battery cell and $10 per kWh for each battery module manufactured domestically.
Minnesota offers tax credits for the mining industry through the Taconite Economic Development Fund. The fund provides iron ore producers a tax rebate of $0.251 per ton of iron concentrate produced annually.
Demand-Pull Mechanisms
Demand incentives are essential to reduce the perception of uncertainty in the US battery market. However, it is crucial to develop demand mechanisms across all segments, from upstream to downstream, and ensure enduring demand for US‑produced products.
The IRA also has domestic content requirements for manufactured products. For consumers, the IRA includes a $7,500 consumer tax credit for EV purchases and sets three requirements for EV models to qualify. The final assembly of the EV models must occur in North America; 50% of battery components must be manufactured in North America; and 40% of critical minerals must be extracted and processed or recycled domestically or in a country with a free trade agreement with the United States.
There are several examples within the Great Lakes of rebates and subsidies related to charging infrastructure and EVs. Illinois has EV and EV charging rebates under the Climate and Equitable Jobs Act (CEJA) of 2021. Pennsylvania offers the Alternative Fuel Vehicle rebate, setting aside extra money for those who qualify as low income. In fact, all states in the region have some form of rebate relevant to EVs and/or charging infrastructure. However, some rebate programs are run through utility companies, so they do not apply to everyone in the state.
Cross-Sectoral Interventions
Enabling Technologies — Clean Electricity
The production of batteries is energy intensive, and EV battery producers are looking to access reliable and cost-competitive electricity. The emissions intensity of the electricity supply is also a key factor because battery producers are facing scrutiny and pressure from downstream customers, such as automakers, to reduce embodied carbon. However, a range of factors continue to inhibit growth in reliable and abundant clean energy in the region, including a lack of transmission and congested grid interconnection queues. These bottlenecks can be a decisive factor in factories' construction location.
Establishing renewable energy goals is an important step in proving the framework needed to support the development and deployment of clean electricity. At the federal level, the White House set a target of 100% carbon-free electricity by 2035.
In the Great Lakes, Minnesota set a goal for 100% clean energy by 2040, and Wisconsin, Illinois, and Michigan by 2050. In addition, all states in the Great Lakes except Indiana, which has renewable portfolio goals, have enacted renewable portfolio standards. Yet there is still a lack of renewable energy generation (hydro, wind, and solar) penetration in the region, with only Wisconsin (26%), Illinois (11%), and Indiana (10%) at or above 10%, mainly through wind power. There is a need for bold renewable energy and power sector decarbonization policies across the Great Lakes.
Regarding permitting and grid connection, PJM and MISO, the two main electricity operators in the Great Lakes, have 3,042 and 1,734 active projects in interconnection queues, respectively. Most of these projects are solar and wind generation and storage. PJM stated that it has a two-year backup in its grid connection queue and had to pause review of new requests until at least 2025.
Policymakers in the region need to monitor the interconnection queue issue and find ways to streamline the process and unlock clean energy capacity already in the permitting process. All states in the Great Lakes have statewide interconnection policies, providing a process customers can follow and avoid arbitrary delays. However, only Minnesota and Illinois have adopted procedures that align with the Federal Energy Regulatory Commission model rules.
Workforce
Creating workforce development programs that are specific to the clean energy and EV transitions is vital to take advantage of the economic opportunity these transitions bring and to ensure communities are not left behind by a quickly shifting job market. Relevant policies include retraining programs, pre-apprenticeship and apprenticeship opportunities, and widespread community development funds.
Through the Registered Apprenticeships and Electric Vehicle Infrastructure Training Program, the federal government has created a workforce policy that will support auto workers looking to transition and create new jobs in the field. Specific to batteries, the DOE offers funding through the Battery Workforce Challenge to universities that train the domestic EV and battery workforce.
Certain states in the Great Lakes region have led the charge in creating these workforce development programs, especially Illinois and Michigan. In Illinois, the passage of CEJA has led to the widespread implementation of programs that create new jobs, provide retraining and apprenticeship opportunities, and support communities in their transition, including the Climate Works Pre-Apprenticeship Program and the Clean Jobs Workforce Hubs. Furthermore, Michigan began the Michigander EV Scholars program to prepare students for jobs in the EV sector and continues its work through the Michigan Academy for Green Mobility Alliance, which has been supporting workforce training for vehicle electrification since 2009. As the World Resources Institute’s Roadmap for Michigan’s Electric Vehicle Future points out, there will be some job losses in certain segments of the automotive supply chain and some gains in others, so it is important to prioritize workforce policy in this transition.
Land
To draw EV battery manufacturers to the region, states can enact land policies that incentivize physically locating in the state. These policies include designating geographic zones for EV battery manufacturing, which might include tax breaks or other incentives, funding former automotive plant remediation, and enacting property tax exemptions for manufacturers.
On the federal level, the Lawrence Livermore National Lab administers the High Performance Computing for Energy Innovation (HPC4EI) Program, which funds domestic manufacturers innovating in the energy space while encouraging them to collaborate with nonprofits and universities in designated opportunity zones. Multiple vehicle manufacturing projects have been funded through this program, including awards to General Motors and Ford. Furthermore, the Biden administration’s Buy American program incentivizes domestic manufacturing, which encourages the placement of manufacturing sites on land in the United States.
In the Great Lakes region, Indiana and Michigan have leading land policies in place. Indiana’s Certified Technology Park Designation was designed to attract and grow investments from high-tech industry actors, including those related to EV batteries, through the local recapturing of tax revenue, which can then be reinvested in the park. Furthermore, Michigan has three policies in place that incentivize locating in the state: Renewable Energy Renaissance Zones, the SOAR Fund, and a property tax exemption for alternative fuels development.
End-of-Life
End-of-Life Incentives
In the past few years, the federal government has enacted several incentives pertaining to battery end-of-life, including the Electric Drive Vehicle Battery Recycling and 2nd Life Applications Program, which funds research into EV battery end-of-life uses, and the Lithium-Ion Battery Recycling Prize competition. Existing federal incentives can be applied to both R&D and also to commercial-level recycling systems.
However, in the Great Lakes states, there are no incentives related to EV battery recycling or reuse.
End-of-Life Standards
The federal government, in May 2023, released the National Standards Strategy for Critical and Emerging Technologies, including those related to critical minerals supply chains. Although the US government has clear standards regarding the disposal of batteries there are no mandates related to their reuse or recycling. There is ongoing research being conducted to support recycling and reuse, including data sharing, safety and liability considerations, technological innovations, and battery state of health. There continues to be substantial support for the recycling industry, and a similar ecosystem for second-life applications can bring economic benefits, as well as increased resilience and climate benefits.
The Resource Conservation and Recovery Act (RCRA) is a U.S. federal law that primarily focuses on the management and disposal of hazardous waste including generation, transportation, treatment, storage and disposal of hazardous waste. Most lithium-ion batteries are likely to meet the definition of hazardous waste under the RCRA, and would be considered ignitable and reactive hazardous waste when discarded.
Currently, all standards related to battery end-of-life in any of the Great Lakes states focus solely on proper waste disposal; any recycling standards apply to other batteries such as the lead-acid recycling requirement in Illinois.
End-of-Life Mandates
On top of incentives and standards, states should consider implementing mandates that require companies to recycle portions of their products and to seek out recycled and second-life inputs.
Despite investing RD&D funding into battery recycling programs and beginning to develop standards for reuse and recycling, the federal government has no mandates in place that would require either of these actions from companies.
Furthermore, in line with the lack of incentives and standards found in Great Lakes states, none of the states have mandates requiring EV battery supply chain companies to recycle or reuse.
Data
Access to supply chain data is important so decisions can be made regarding where more policies need to be developed and where further investment should be focused. The Li-Bridge initiative calls for a critical minerals database that includes supply chain, permit, and existing mining operations. The National Renewable Energy Laboratory released the NATTBatt Lithium-Ion Battery Supply Chain Database in 2021, which aims to increase data transparency about the US battery supply chain.
Data is also essential for traceability and the development of recycling systems. This could be achieved through a framework such as a battery passport, which would provide increased transparency through a battery’s life cycle. For example, the EU Battery Regulation requires digital battery passports that include details on the following: general battery and manufacturer information, compliance and certifications, carbon footprint, supply chain and due diligence, battery materials and composition, circularity and resource efficiency, and performance and durability.vii Battery passports can increase transparency, which is needed to increase sustainable battery supply chain practices and to develop circular business models.viii
No databases like the one the Li-Bridge initiative calls for exists in the Great Lakes–, which is understandable given that the need for data applies to the whole country; however, it would be useful to regulate the data transparency of a battery’s production by ensuring that companies contribute to databases. This does not currently exist in the Great Lakes states.
[vii] World Economic Forum, Digital Battery Passports: An Enabler for Sustainable and Circular Battery Management, June 2023, https://www3.weforum.org/docs/WEF_Digital_Battery_Passport_2023.pdf
[viii] World Economic Forum, Digital Battery Passports: An Enabler for Sustainable and Circular Battery Management, June 2023, https://www3.weforum.org/docs/WEF_Digital_Battery_Passport_2023.pdf
The Great Lakes is uniquely poised to reap the economic, social, and environmental benefits of a burgeoning EV and EV battery industry. The region’s history as an automotive manufacturing powerhouse and its advantages in workforce specialization and leadership in innovation give it a clear competitive edge. However, the growth and strengthening of a regional industrial cluster is dependent on the actions of stakeholders within the Great Lakes, including state policymakers and EDOs.
Each state in the region has the opportunity to build on its current policies. This includes everything from targeting public procurement to strengthening workforce policy, from passing end-of-life standards to forming public–private partnerships. While not a comprehensive assessment, the goal of this brief was to outline the most pressing actions that policy decision makers and influencers can take in creating a robust regional EV and battery supply chain, contributing to a growing national supply chain. Trends have shown that the automotive industry is changing rapidly in the United States and beyond; however, it is up to state policymakers, EDOs, and other industry actors to ensure the Great Lakes is not only keeping up with this change but actively taking advantage of federal and state resources to lead it.
