Supply Chain Raw Material Issues and Competition From EV Industry Impedes Progress of Energy Storage construction in US

published: 2022-06-28 9:30 | editor: | category: News

Electric vehicles (EV) can be considered a boost to carbon reduction but the electricity that needs to be used must come from green energy that does not produce carbon emissions. However, as EVs are starting to take off together with and green energy development, new issues have arisen. That is to say, green energy needs the assistance of energy storage to expand and develop but electric vehicles and energy storage will compete for upstream raw materials.

The global COVID pandemic and the subsequent Russian-Ukrainian war have caused chaos in the global supply chain and caused metal prices to soar which have put considerable pressure on the energy storage industry. At this difficult juncture, the vigorous development of the EV industry, which originally assisted the energy storage industry, has now become an embarrassing burden.

In the past, due to the electric vehicle industry, the upstream battery raw material industry required by the energy industry was fully developed. However, when the demand for electric vehicle batteries increased greatly, this completely absorbed upstream raw materials and the energy storage industry began facing a shortage of materials. A number of renewable energy developers in the United States have either postponed energy storage projects that were already in progress or cancelled them altogether. Cancelled and postponed programs are spread across California, Hawaii, and Georgia.

The U.S. energy storage industry, which is growing rapidly and now accounts for only 3 percent of renewable energy, saw installations surge 170 percent to 758 megawatts in the first quarter, according to the American Clean Power Association. However, now installation speed has slowed down significantly because the cost of lithium batteries has risen by 20% since last year with the rise in lithium and nickel prices. To make matters worse, two-thirds of lithium batteries are produced in China, which was affected by logistical disruptions during the Shanghai lockdown.

With the supply and demand situation uncertain, the EV industry is more capable of seizing the supply of lithium batteries than the energy storage industry because their funds are more abundant, their orders more certain, and the production capacity planning of EVs is stable, unlike erratic plans of the energy storage industry. Suppliers give priority to the electric and heavy vehicle industry, so the energy storage industry is more affected by the supply chain than the EV industry.

Tesla itself is an EV manufacturer and also a lithium battery supplier for energy storage but the current supply strategy is to give priority to supplying its own EV needs, which leaves many lithium battery energy storage companies that rely on Tesla’s supply in the dark.

Delay in energy storage development drags down overall green energy development and carbon reduction progress

In the U.S., another problem is that energy storage programs are often combined with solar energy programs to facilitate U.S. solar tax subsidies. However, the Trump-era punitive tariffs on solar panel imports that caused the U.S. to slowdown solar installations has also indirectly affected the development of energy storage. The Biden administration announced a two-year temporary exemption from tariffs related to solar panels for several Asian countries, which is expected to slightly improve the supply of solar panels.

The biggest problem at present is upstream supply and the shortage of materials may affect the size of the U.S. energy storage plan by as much as 14.7 gigawatts. Many energy storage projects, which local governments hope will stabilize energy supply and demand and improve grid reliability, have been delayed, leaving local governments worried about the state of electricity supply in the summer.

Since solar energy and wind energy need to be matched with a certain amount of grid energy storage if their proportions of overall energy is to be expanded, the delay in the development of energy storage will also drag down overall green energy development and carbon reduction progress. In Hawaii, green energy was originally intended to replace its only coal-fired power plant. It planned to use solar energy with energy storage for a total of 378.5 megawatts but, due to supply chain bottlenecks, only 39 megawatts can be completed before the coal-fired power plant is retired, which will seriously affect power dispatching in Hawaii.

For lithium battery factories, energy storage is a troublesome customer with less money, more issues, less order volume, and uncertainty. Therefore, in the past, and the development of a complete industrial chain was only possible as hitchhiker with EVs but now it is faced with priority being given to EVs, so lack of materials can be said to be a success and a failure and we can only wait for the chaos in the global supply chain to slowly pass.


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