Insight: How a battery shortage is hampering the U.S. switch to wind, solar power

Fluence

09/06/2022 12:00

(Repeats with no changes)
    By Nichola Groom
    June 9 (Reuters) - U.S. renewable energy developers have
delayed or scrapped several big battery projects meant to store
electrical power on the grid in recent months, scuttling plans
to replace fossil fuels with wind and solar energy. 
    At least a dozen storage projects meant to support growing
renewable energy supplies have been postponed, canceled or
renegotiated as labor and transport bottlenecks, soaring
minerals prices, and competition from the electric vehicle
industry crimp supply.
    One previously unreported dispute over a delayed California
storage project has even wound up in court. 
    The slowdown in utility-scale battery installations
threatens the pace of the U.S. transition away from fossil fuels
as the Biden administration seeks to decarbonize the grid by
2035. The delays could pose a threat to power reliability in
states that already depend heavily on renewable energy like
California.
    Storing power is considered vital to the expansion of solar
and wind energy because it allows electricity generated when the
sun is shining or wind is blowing to be used at the end of the
day when consumers need it most.
    The delays span states including California, Hawaii and
Georgia, with battery providers including Tesla  TSLA.O  and
Fluence  FLC.AX  warning of disruptions to supply, according to
a review of regulatory documents, corporate statements and
interviews with project developers and power providers.
    The delays, some of which have not been previously reported,
range from several months to a year, according to the Reuters
reporting. 
    "I have not seen a nascent industry challenged on so many
fronts," said Jamal Burki, president of IHI Terrasun Solutions,
the U.S. energy storage arm of Japanese heavy equipment maker
IHI Corp  7013.T .
    European energy storage projects are also facing delays, but
that region lags the United States in the development of
grid-scale storage, making the issue less pronounced.
    Ben Guest, fund manager at Gresham House Energy Storage Fund
 GRID.L , which invests in battery projects in Britain, said he
has seen two- to three-month delays in projects primarily due to
component shortages and shipping challenges.
    Energy storage makes up about 3% of U.S. operating clean
energy capacity and has been growing rapidly. Installations
soared 170% in the first quarter to 758 megawatts, according to
the American Clean Power Association, roughly enough capacity to
power 144,000 homes.
    But the pace is dipping below forecasts. Energy research
firm Wood Mackenzie told Reuters it may revise down its current
outlook for U.S. storage installations of 5.9 GW this year
because of the rising evidence of market disruptions, after 2021
installations came in at about two-thirds of what it initially
expected.
    Prices for lithium-ion batteries, three-quarters of which
are produced in China, have soared as much as 20% since last
year as lithium and nickel costs rise, COVID-19 lockdowns
disrupt manufacturing, and transport constraints slow shipments.
    Robust demand from EV producers for batteries has also been
a headwind, industry players told Reuters. Battery manufacturers
are favoring the EV market because their orders are more
predictable compared to the lumpy, project-based orders from
power storage developers.
    "When the pullback happens, it's felt worse by the storage
industry than it is by the electric vehicle industry," said Andy
Tang, vice president of energy storage and optimization at
storage developer Wartsila  WRT1V.HE . "We're a difficult
customer."
    Recent turmoil in the solar industry, caused by uncertainty
over potential tariffs on Asian imports, has also impacted
storage development. Constructing storage alongside solar allows
facilities to claim a federal tax credit that does not exist for
standalone batteries. The Biden administration this week
announced it would waive tariffs for two years on panels from
countries impacted by a Commerce Department investigation, an
attempt to revitalize solar installations.  urn:newsml:reuters.com:*:nL1N2XT05B
 
    SUMMER CRUNCH
    These obstacles have raised questions about the fate of some
14.7 gigawatts of U.S. battery storage in development, some of
which state authorities had hoped would be in place to prevent
blackouts as early as this summer.
    Among recent delays is 535-MW of storage Ameresco Inc
 AMRC.N  is developing for Southern California Edison, one of
the state's biggest utilities. It expects just a portion of the
project -- about 300 MW -- to be online by its August target.
    Ameresco did not respond to a request for comment.
    Central Coast Community Energy (CCCE), which purchases power
on behalf of 430,000 customers in five California counties, is
also facing delays of six clean energy projects, including 122
MW of storage, needed to meet state-mandated clean energy
requirements, according to spokesperson Catherine Stedman.
    The developers of the projects, originally meant to come
online this year and next, have warned of delays between six and
12 months, Stedman said.
    CCCE and Silicon Valley Clean Energy Authority, its partner
in several projects, meanwhile, have sued developer EDF
Renewables  EDF.PA  over its termination of contracts for the
Big Beau solar and storage project that started generating power
last year.
    EDF in March had asked to increase the price for the
project's still unfinished energy storage component by $76.8
million -- a 233% increase, according to the complaint filed May
9 in California state court in Santa Clara County.
    EDF did not respond to a request for comment.
    The disruptions have concerned state officials, already
dealing with perennial power shortages during peak summer
demand. Governor Gavin Newsom said in April that the state had
been counting on new battery storage projects, many of which
were procured following rolling blackouts in August 2020, to
shore up summer reliability.
    "Delays in the online dates of these projects are a very
real concern," California Public Utilities Commission
spokesperson Terrie Prosper said in a statement.
 
    OPEN-ENDED PROBLEM
    Energy research firm Rystad said that given the large
appetite for batteries from a surging EV market, global supplies
for utility storage projects are not expected to be able to meet
demand in the medium-term.
    That's a problem, the International Energy Agency says.
Battery storage needs to reach 585 GW by 2030 to decarbonize the
global power sector, a 35-fold increase from 2020.
    "If you can't get the batteries manufactured and reliably
delivered at a price point that is coming down... you're going
to slow the ability of batteries to accelerate the transition,"
said Jim Kapsis, founder of climate technology advisory firm the
Ad Hoc Group.
    In Hawaii, utility Hawaiian Electric  HE.N  is seeing delays
in solar and storage projects it contracted to help replace the
state's only coal-fired power plant, set to retire in September.
The developer of four projects, Canada's Innergex Renewable
Energy  INE.TO , revealed on a conference call last month that
it was seeking to renegotiate the terms of the deals – including
price and timing - after receiving force majeure notices from
its battery supplier, Tesla. 
    Hawaiian Electric spokesperson Sharon Higa said the utility
expected just 39 MW of the 378.5 MW of solar and storage it
procured to be in service prior to the AES coal plant retiring.
    Innergex and Tesla did not respond to requests for comment.
    Tesla Chief Executive Elon Musk acknowledged earlier this
year in a conference call that the company had prioritized EV
battery supplies over stationary storage.
    Fluence, meanwhile, said in a conference call last month
that it has issued force majeure notices on three contracts
because its battery suppliers in China were not able to fulfill
their obligations. It said it had also raised prices on new
contracts by 15% to 25% and would price future contracts based
on raw material indices to guard against volatility.

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EXCLUSIVE-Biden to waive tariffs for 24 mths on solar panels hit
by probe -sources     urn:newsml:reuters.com:*:nL1N2XT05B
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 (Reporting by Nichola Groom in Los Angeles; Additional
reporting by Susanna Twidale in London; Editing by Richard
Valdmanis and Lisa Shumaker)
 ((nichola.groom@thomsonreuters.com;))