By Avi Salzman

Uncertain federal policy and a wavering economy are hitting investments in clean-energy manufacturing.

In the first quarter, investments in new plants to make clean-energy products fell from the final three months of 2024, according to a new report from the Massachusetts Institute of Technology and the Rhodium Group, a research firm. It was the first decline since the Inflation Reduction Act was signed in 2022.

In addition, six clean-energy manufacturing projects representing $6.9 billion worth of investments were canceled, the highest quarterly value on record. Another $2.1 billion worth of early-stage projects were also shelved, the report says. Among the companies that changed their plans were T1 Energy, formerly known as Freyr Battery; Kore Power; and the electric-vehicle start-ups Nikola and Canoo.

There have been lots of challenges. Clean-energy investments have been hurt in the past two years by high interest rates, which make the projects hard to finance. And President Joe Biden's Inflation Reduction Act appears to be on the brink of being amended or even repealed by a Republican-controlled Congress.

The IRA gave tax credits of 30% or more to companies that manufacture energy products in the U.S. Since that act was signed into law in August 2022, companies have announced 380 clean-technology manufacturing facilities, with almost half of them in operation now, according to the report. Investments in new factories total about $115 billion.

President Donald Trump's tariffs add uncertainty that may be delaying investments. Some new tariffs on imported solar panels may help accelerate U.S. manufacturing of those items, but tariffs on items like foreign battery components are making it harder to assemble batteries in the U.S., some companies say.

It isn't all bad news for manufacturers of clean-energy goods like solar panels, EVs, and batteries. While actual investments in clean-energy manufacturing plants fell in the first quarter, the value of the projects announced during the quarter increased. If those plans come to fruition, it could keep the industry's momentum going.

One bright spot recently emerged. This month, the EV maker Lucid Motors bought a Nikola factory in Arizona in a bankruptcy auction and said it would rehire some of Nikola's workers.

Write to Avi Salzman at avi.salzman@barrons.com

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April 25, 2025 16:00 ET (20:00 GMT)

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