The Chinese government has continued to implement travel bans and forced shutdowns of production facilities, which include many in the battery production supply chain to minimize transmission between humans and prevent further spreading of the coronavirus.
China is home to the majority of lithium-ion battery capacity globally. Reports by Bloomberg NEF estimated that 2019 global lithium-ion capacity was around 316 gigawatt-hours, 73% of which resided in China. Of note, the US came in second with 12%. Due to the forced travel and production bans, Wood Mackenzie analysts estimated that the battery storage production in China could be reduced by up to 10%, or 26-gigawatt hours, of the predicted pre-coronavirus forecasts. In addition to the batteries, much of the downstream supply chain raw materials are also exclusively produced in China. Electrode materials made with cobalt, manganese, and nickel are almost all manufactured in China.
Why it matters:
Lithium-ion batteries are used in small format applications such as consumer electronics and laptop computer and in larger format for energy storage and electric vehicles.
The reduction of battery supply will impact energy storage projects and electric vehicle production. Several large scale energy storage deployments, supplied by Chinese battery manufacturers, may also be delayed in the US, Australia, and the UK as battery supply will be impacted. Tesla has also reported potential adverse impacts to production, after a forced 1 ½ week government shutdown, at the Shanghai Gigafactory, due to “health epidemics” in the annual filing.
What is next:
The true impact of this supply crunch may not be known for a while. One potential impact may be the battery pricing. It has been reported that lithium-ion battery prices continue to decline, making electric vehicle markets more attractive. Unexpected disruption and the decline in both batteries and raw materials may upset the economics. Battery demand may become greater than the supply, which could raise battery pricing.
Additionally, aggressive CO2 reduction targets, many dependent on energy storage, and electric vehicles may be delayed until the battery supply from China can be replenished.
Lastly, other countries actively engaged in lithium ion manufacturing, including the US and Germany, may be impacted by the reduction of both raw materials and other components made in China.
This article was contributed by Maggie Teliska. Teliska leads the stationary sales initiatives for Northeast Battery & Alternator, the largest independent battery distribution company in the Northeast. Before this role, she served as a consultants well as CTO of Regent Power, LLC, a Smart City host integrator. She sits on the board of the Women’s Energy Network Boston Chapter. Maggie has a Ph.D. in Physical Chemistry from the George Washington University and a BS in Chemistry from Boston College. She lives in Tewskbury, MA with her husband.