Energy Storage Market Already Feeling Effects of Coronavirus Pandemic: Part 1

The novel coronavirus COVID-19 is wreaking havoc on industries around the world; renewable energy and energy storage industries are no exception. While delays in product deliveries and project development have been reported, uncertainty around the length of these disruptions is the most concerning for the industry’s future as countries race to reduce greenhouse gas emissions and transition to a post-fossil fuel future.

It remains too early to truly gauge the magnitude of change to market forecasts. However, we are beginning to gain clarity on how these effects may play out in terms of delayed projects and an overall slowdown in the market. 

This blog is the first in a two-part series detailing the current and potential future effects of COVID-19 on the energy storage market. This post focuses on the supply side of the industry, including delays to battery shipments and the availability of labor to build new projects. The second post in this series will explore changes in demand for energy storage driven by the post-COVID-19 economic reality. 

Early Disruptions to Supply Chains

The energy storage market and the renewable energy markets it is closely tied to are highly dependent on a still-developing supply chain of hardware components, with many vendors based in China. Disruptions were quickly seen following the first COVID-19 travel restrictions and social distancing measures in China this January. 

While there have recently been positive reports of factories in China reopening, the damage has been done. There has been a significant effect on the supply of batteries and other products. Energy storage systems integrators in the US and other countries are seeing delivery delays. System integrator Powin Energy has reported experiencing 5-6 weeks delays in deliveries from Chinese suppliers. 

Expected Effects on North American Projects

Delays in battery deliveries are rippling through the energy storage market in North America. According to a recent survey from the Energy Storage Association, 62% of respondents are already experiencing delays in project development, while 66% expect to incur delays soon. Looking further at these survey results, 32% of respondents expect a delay of only around 1 month, 23% expect 6-month delays, and 14% report indefinite delays to projects. 

The project development slowdown has likely resulted from delays in battery and other component deliveries however, labor shortages are also becoming an issue around the world. As schools and childcare facilities are closed and increasingly restrictive social distancing measures are put in place, many workers are forced to miss time building new projects, delaying project planning and construction schedules.

Despite the widely reported delays, there has been some positive news. Solar developer Lightsource recently announced it is moving forward with construction of a 260 MW solar PV plant in Texas. The company has implemented social distancing and other measures with its employees spread across a 1,500-acre project site. These new measures are likely to be replicated by other developers and may provide a blueprint for continued project development during general quarantines. Many large-scale energy storage projects currently under development have already signed offtake agreements, arraigned financing, and secured necessary permits. Projects at this stage of development are likely to only see delays in development of several months; however, earlier stage projects face greater uncertainty. 

Based on the already reported delays, Guidehouse Insights estimates seeing a 10%-20% reduction in 2020 energy storage capacity deployments relative to pre-pandemic forecasts, with much of this capacity pushing into 2021 and 2022 forecasts. This estimate is based on observed supply chain delays and labor shortages/work restrictions and continues to be refined as the situation evolves over the coming months. 

As COVID-19 continues to spread around the world, concern is expanding from supply chain disruptions to broader uncertainty around the health of the global economy and its effects on the demand for renewable energy and energy storage. Part 2 of this blog post dives into changes in demand for energy storage across the global market.