US Green Energy, Semiconductor Push Could Lead to More FDI, CFIUS Reviews, Official Says

As the Biden administration enacts legislation to bolster the green energy and semiconductor industries, the U.S. likely will see an influx of foreign investment in both sectors, which could lead to more filings with the Committee on Foreign Investment in the U.S., said Michael Considine, a Department of Energy official, speaking during a Vinson & Elkins webinar last week. He also expects some emerging clean-energy technologies to have dual-use capabilities, which also could trigger more CFIUS reviews.

The administration's push toward green energy, and the enactment of the CHIPS and Science Act, is going to “necessarily” draw more foreign investment in the U.S., said Considine, who oversees DOE’s participation in CFIUS. He specifically said the chip industry incentives will “drive a significant amount of new investment” into the semiconductor sector.

He pointed to several specific technologies in the green energy space that could see more foreign investment, including battery and nuclear technologies. But CFIUS also is prioritizing reviews in other sensitive technology areas, including advanced computing, artificial intelligence and machine learning, said Considine, DOE deputy assistant secretary for foreign investment, national security and technology collaboration.

“We want to attract investment in all of those areas,” Considine said. “But we are going to look at it through that national security lens as well to make sure that we're protecting our national security interests.”

He specifically pointed to emerging clean-energy technologies that may also have dual-use capabilities. CFIUS could screen and eventually block foreign investments that may result in transfers of those emerging technologies to a foreign adversary, such as China. Some of those technologies may become “so vital to us meeting our clean energy goals” that they become a national security priority, Considine said. He pointed to batteries, which have purely commercial uses but also may be used to aid foreign militaries.

“That's where it starts going off onto a track that has dual-use for national security and military purposes,” Considine said. “There is a nexus, at some point, where technologies, even though we would say they're green technologies, may cross into the national security space and require some type of intervention.”

But that doesn’t mean that all green energy technologies fall into the national security category, he said, noting DOE doesn’t have a “black list” of technologies that should be captured and blocked by CFIUS.

“We don't have all the answers as to what are going to be the most critical pieces, the most critical components in the green energy security puzzle,” Considine said. “But what we want to do is have the thinking and the mechanisms in place through tools like CFIUS that if we ever reach that point, we know what to do with it."

There is no “general statement that anything that touches the green tech, green energy space, anything we may be working on today, is necessarily in that national security category,” he stressed. “But I think it's something we have to look at, because it could be.”

Considine also said he’s seeing an uptick in transactions being reviewed by CFIUS involving technology critical to the energy sector. But he also stressed that the committee isn’t reviewing only critical technologies, a concept introduced by the Foreign Investment Risk Review Modernization Act (see 2002270049 and 2001140060).

“It would be wrong, in my opinion, for someone to approach the regulations in a very black and white way and think that ‘if I don't meet the definition of a critical technology, the committee couldn't possibly have a problem,’” he said. “That is just a factor of consideration that has been spelled out in the law, and if you look at the regulations, there are lots of other things that can be factors of consideration for national security purposes.”

Considine also said CFIUS is continually learning how to better tailor mitigation agreements, which are terms imposed on certain investment transactions as a condition of CFIUS approval. He said the committee is hoping to put the “least amount of burden on companies” through the agreements, which can sometimes include expensive compliance measures and technology transfer restrictions.

“Mitigation is costly. It's a burden. I admit that,” Considine said. “It becomes a financial burden on companies.” He said companies should think about the possibility of a CFIUS mitigation agreement before they enter into a deal that could be screened by the committee. “I've seen plenty of examples where that wasn't factored in,” he said. “The cost of those plans get very quickly into seven figures.”

He said CFIUS is hoping to work with industry to better balance the committee's national security requirements with reasonable compliance expectations so companies feel the “least” financial impact. “We are legitimately looking for that balance when we go into these negotiating agreements with companies,” Considine said.

He also said the U.S. has been working with European countries over the past “several years” to improve their foreign investment screening tools. The U.S. spends “a lot of time” sharing best practices and lessons learned from previous CFIUS reviews to help European countries stand up effective regimes, Considine said.

But he said the U.S. hasn’t convinced every European partner to implement robust foreign direct investment reviews. Although the EU launched an FDI screening mechanism in 2020 (see 2010090016) and has seen a steady uptick in notified transactions, much of those screening efforts are at the discretion of individual member states (see 2111300055).

“We kind of see a mixed bag of people who are assessing it exactly the same way” as the U.S. government, Considine said. He said the outreach is “an opportunity” to convince European countries to look “at a problem from a different angle, and maybe they see something they didn't see before and they approach a problem in a different way.”