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'This is going to be a very big deal'
Coronavirus poised to disrupt
the storage sector

Adapted from an article by ​Kavya Balaraman
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​​Measures to control the spread of coronavirus in China could significantly affect the country's storage sectors, but the impact on the United States' power sector is mixed. The overall effect on storage could be significant. Eight provinces in China announced work stoppages because of the coronavirus, including the Jiangsu province, which houses several manufacturing campuses, which could lead to possible shortages that could cause ecosystem pricing to go up in the near term. Meanwhile, the country's battery storage production capacity could drop by 10% —​ or 26 GWh —​ of earlier forecasts for 2020. The impacts of the virus on China's power sector depend on how long the outbreak continues and how far it spreads. If it continues for more than a few weeks or spreads to more of China, it could have a significant impact on Chinese economic output across the board. But a major disruption in the U.S. power sector isn't likely, since electricity generation comes from either domestic or non-Chinese sources, like coal, nuclear, natural gas and renewable energy.
As for storage, a 10% reduction in battery capacity is unlikely to lead to a major disruption unless the virus spreads and causes serious outbreaks in other countries. According to Josiah Neeley, senior fellow of energy policy at the R Street Institute, "Right now, there are various ways [that reduction] could be made up: either sourcing from other countries… or later, after the outbreak is over, ramping up production —​ or just eating the delays." Thus, a 10% reduction in China's forecast lithium-ion battery storage production capacity would bring its expected 2020 output to 237 GWh,. However, that figure could drop if delays persist.

Further, restrictions on labor movement will impact auto manufacturing in the Hubei province and heavy manufacturing industries in the Shandong, Jiangsu, Zhejiang, Fujian, Anhui and Guangdong provinces —​ regions that were collectively expected to require 162 GWh of battery cells this year. Moreover, the government has canceled domestic flights, trains and public transportation to affected areas, and coupled with the extension of the Chinese New Year holiday, heavy manufacturing industries that depend on laborers moving from one area to the other —​ like batteries —​ could be impacted.
Daniel Finn-Foley, head of energy storage at Wood Mackenzie, had a much simpler way to sum up the impact on storage+solar:  "This is going to be a very big deal," he said.
This is going to be a very big deal
The reduction in capacity comes at a interesting time for the U.S. In 2018, much of the supply of batteries from South Korean original equipment manufacturers was directed into the South Korean market due to incentives there, which led to U.S. developers turning to Chinese vendors and "getting more comfortable with them" in 2019. According to Finn-Foley, "Now we're coming from a supply constraint in South Korea to a supply constraint in China," and a significant supply shortage could affect prices, and that will trickle down to the market.

The timing of the constraint is also significant, given the U.S. Department of Energy's recent Energy Storage Grand Challenge, which focuses in part on building out a domestic supply chain for storage technologies. As the international supply chain begins to look riskier, "that could be an opportunity for a non-lithium ion technology provider to further make their case that their technologies are worth investing in from a domestic economic standpoint, and also from a supply chain exposure standpoint."

On the solar front, the industry will likely experience supply chain disruption and constraints of glass, aluminum frames and metallurgical-grade silicon, but these will be relieved in the near term. This is likely why solar stocks with China exposure continued to work on the expectation that work stoppages would not be extended. But no one it seems is convinced the disruption is even close to being over. Indeed, the sector could be impacted at every step from manufacturing to workforce, suppliers and logistics, and shipping. Delays in factories reopening would push back actual production and even after workers come back, they either go through a quarantine program or are kept in constant observation, which could impact operations and shipping.
But the U.S. isn't the market that would see the most impact, since its reliance on Chinese modules has dropped considerably since the introduction of tariffs. A lot of the modules used in U.S. projects come from Chinese vendors in South East Asian countries, many of which rely on raw materials from China, so there could be a ripple effects —​ but at least in terms of immediate impact, because of the tariffs the US might be slightly protected from any sort of immediate and long-term impacts.
Picture
If the outbreak were to be sufficiently contained by the middle of March —​ the best-case scenario —​ prices of solar cells and modules would not drop in the first half of 2020, according to analysis from Xiaojing Sun, senior research analyst, solar systems and technologies, with Wood Mackenzie. But in the worst-case scenario, where the outbreak continues for months, U.S. module prices are projected to rise by 5% in the first half of the year and remain high in the third quarter of 2020 as well. 


This article was reprinted with permission from Utility Dive.
Picture
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  • Members Login >>
    • Energy Today Archive >
      • Leading Change
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      • Floating Wind
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      • Steven Chu
      • Dan Poneman
      • Melanie Kenderdine
      • Chris Gould
      • UNSDSN
      • Data as a Tool
      • Change Through Organizing
      • MK Dorsey
      • Social Impact Start-Ups
      • Social Impact Entrepreneurs
      • A Network for the Heartland
      • Ecosystem Maps
      • Clean Energy By 2035
      • Bioremediation
      • Energy Storage-Video
      • Geothermal Energy
      • Commodity Chemical
      • PM Careers In Cleantech
      • Critical Breakthroughs
      • Losing Our Way
      • The Third Rail
      • Mapping the Seas
      • Low-Carbon Midwest
      • Smart Grid
      • Decarbonization
      • Getting to Zero
      • Climate Risk and Response
      • Our Infrastructure Is Being Built For a Climate That's Already Gone
      • Energy History
      • Battery Recycling
      • Quantum Waves
      • Coal REE
      • Fueling Big Rigs
      • Sandia Initiatives
      • Natural Gas Revolution
      • Duck Chart
      • Carbon Crossroads
      • Electric Cars
      • Energy Jobs Coalition
      • Indispensable Electricity
      • Post-Pandemic Predictions
      • Building Infrastructure
      • De-Prioritizing Cars
      • Vicki Hollub
      • Emily Kirsch
      • Lise Meitner
      • Lets Listen
      • COVID-19 and China Air
      • COVID-19 and Oil
      • COVID-19 and Solar
      • COVID-19 and Storage
      • Immorality of Waste
      • Rethinking "Disposable"
      • Second Life of Wind Turbines
      • Rare Earth Elements
      • Coal: Ashes to REM
      • Platinum and Cobalt
      • Geoengineering the Planet
      • An Atmospheric Industry
      • L.A. Hydrogen Plant
      • Pebbles, Sponges and Fans
      • CO2 Into Fuel
      • Superpower
      • The Fate of Food
      • Power Trip
      • Signs on the Earth
      • The Dreamt Land
      • Double Jeopardy
      • 7 Trends In Mineral Mining
      • The Prize - an excerpt
      • REM From Coal
      • The Deep Sea - The Next Gold Rush
      • Geothermal - Salvation or Earthquakes
      • The Myth of the Sustainabie City
      • The Emerging Circular Economy
      • How Cities Can Become More Resilient
      • Prosperity for One, Disaster for Another
      • The Real Energy Revolution
      • Carbon Loophole
      • Op-Ed: CO2 Reduction Thru Biofuels
      • The Sun Also Accelerates
      • Blowing Past the Zettabyte Era
      • Jack Voltaic: A Cyber Simulation Wargame
      • Managing Risk
      • From Russia, With Love
      • Ukraine: The Cyber-War Test Bed
      • 5G Requires A New Approach
      • Climate Change or Just Weather
      • Gone
      • Surge Flooding - Houston
      • Tug of War: Pollution Masks Impact of Climate Change
      • Climate Change Needs the Humanities
      • Nuclear Power: A Dilemma for Climate Change Philanthropy
      • Did California Trump the Clean Air Rollback
      • A Redundancy Dilemma
      • Double Jeopardy - a bonus excerpt
      • The War of the Currents
      • There Will Be Buyouts
      • Space Research Can Save the Planet
      • California's Oil Hypocrisy
      • Robert Merton
      • Africa: The New O&G Frontier
      • Why Oil Markets Aren't Reacting
      • Capitalism and Climate Change
      • The Frackers
      • Double Jeopardy
      • The Grid
      • Designing Climate Solutions
      • Making Tech Miracles
      • Best In Snow
      • Plastic Do-Over
      • The New Nuclear
      • Global Energy Insecurity
      • Renewable Energy and Geopolitics
      • The Myth of Energy Security
      • Residential Storage Security
      • An Insecure GND
      • Water, Food and Energy Security
      • The Transformation of the O&G Sector
      • Wild Fire
      • Ocean Pollution At High-Tide
      • CC's Fuzzy Math
      • A Climate Casualty of a Different Kind
      • Plants Store CO2 Too
      • 45Q for CarbonTech
      • CC's Potential Pitfalls
      • Klaus’s wacky idea
      • Permitting Geological Sequestration
      • A New Era of Energy Innovation
      • Investment in O&G Set to Soar
      • Old Capital Strategies, New Thinking
      • BofA Builds Green Revolution
      • We'd Rather Quit OPEC...
      • One Belt, One Road, No Plan
      • Coal fight turns ugly
      • As the World Warms
      • Oil Diplomacy
      • George Mitchell
      • Nicole Poindexter
      • Dan Kammen
      • Regina Mayor
      • Jessica Matthews
      • Bonus: Refining Reducing
      • Bonus: Energy Investment Trends
      • Bonus: The US has lost the rare earths
      • Bonus: Fossil-tech survey results
      • Bonus article: The New Age of Electricity
      • Bonus - Plan B: Geoengineering
      • Bonus: EXECUTIVE SUMMARY - Fossil-Tech
      • Bonus: Cyber Attack Timeline
      • Bonus: Employees - Cyber Threats and Assets
      • Bonus: Transportation, Jetson's Style
      • Bonus Article for Members
      • Bonus article - Infrastructure Failure
      • Bonus: Hydrogen Fuel From Coal
      • Bonus: Cities Not Meeting Targets
      • Bonus: Carbon Sequestering Fungi
      • Bonus: The Earthshot Prize
      • Bonus: A Radioactive Discovery