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FERC, CFTC, and State Energy Law Developments

President Joe Biden signed an executive order on February 24 to address possible vulnerabilities in the supply chains of critical national economic sectors, including the energy sector. The executive order directs various executive departments and agencies to complete, in coordination with private stakeholders, a series of assessments to evaluate the resiliency of supply chains in those key sectors. In his prepared remarks, President Biden explained that the order was prompted partly by concerns surrounding shortages in semiconductors, which are vital components of electronic devices used in everything from mobile phones to motor vehicles.

The executive order has two main components. First, it orders executive agencies to complete a 100-day review of supply chain risks impacting four key product categories: (1) semiconductors; (2) critical minerals, like rare earth elements; (3) pharmaceuticals; and (4) “high capacity” batteries, including electric vehicle batteries. The US secretary of energy, in consultation with the heads of other agencies, is assigned the responsibility to complete the report addressing battery supply chain risks.

Second, the executive order initiates a long-term review of a broader set of supply chains focused on six sectors: (1) the defense industrial base; (2) the public health and biological preparedness industrial base; (3) the information and communications technology (ICT) industrial base; (4) supply chains for agricultural commodities and food production; (5) the transportation industrial base; and (6) the energy sector industrial base. The secretary of energy will determine the scope of the supply chain review for the energy sector industrial base.

The executive order marks the latest step by the federal government aimed at protecting key industrial sectors from supply chain shocks and vulnerabilities, including sectors implicated in the administration’s focus on combatting climate change. Battery energy storage may be viewed by the administration as an important tool in the effort to reduce carbon emissions because it can be used to store energy produced by non-dispatchable renewable resources (such as wind and solar) and thereby enable them to act as dispatchable resources that can be called upon when needed. Moreover, electric vehicle energy storage can be used to displace internal combustion engine transportation, which remains a major source of greenhouse gas emissions.

The order’s focus on electric vehicle batteries and energy industrial components reflects a continued concern over the United States’ reliance on foreign components. Indeed, increasingly lower costs for foreign-sourced lithium-ion batteries have enabled the rapid growth of battery adoption by vehicle manufacturers and energy storage developers alike. However, the executive order seeks to mitigate the risk of potential overreliance on foreign suppliers by encouraging domestic production as an alternative supply chain for those components. In a separate statement, the Biden administration suggested that the United States could better leverage its “sizeable lithium reserves and manufacturing know-how” to expand domestic battery production.