Newsletter: Dude, where’s my battery?

Supply and demand are out of whack in the surging energy storage industry.

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We’re building more grid batteries than ever before, which is good news for the effort to make the grid more efficient and integrate renewables.

But the very success of this fast-growing industry has created a problem: There’s a shortage of high-quality battery cells that’s forcing developers to scramble to get their hands on them, as I reported yesterday.

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I’ve spent the last few weeks chatting with people who install batteries large and small, and this is on everyone’s minds. 

  • You have to buy in huge volumes to secure the attention of the manufacturers. That’s doable for the largest developers, but it’s not really possible for companies building at smaller scales.
  • Otherwise, companies had to lean on supplier relationships forged over the last few years. Some have been stockpiling batteries, which costs more than just-in-time delivery, but pays off when deliveries are less reliable.
  • Supply is locked up for the year, and 2022 is looking to be tight as well.

Battery demand is only going up as both the electric vehicle industry and the energy storage industry expand. The only way out of the current supply/​demand imbalance is to build more factory capacity.

But that gets to a battery-specific challenge: The people who buy and finance storage projects gravitate toward Tier 1” suppliers. That moniker sounds like there’s a quantitative measurement involved, but the metric is basically whatever clean energy financiers consider trustworthy.

We’re not seeing a shortage of supply industrywide; we’re really just seeing a shortage with Tier 1 vendors,” said Danny Lu, senior vice president of Powin Energy, which buys battery cells and integrates them into power plant units. There are a lot of Tier 2 vendors or fringe-Tier 1 that have unsold capacity.”

Picking a less thoroughly vetted battery supplier can be explosively risky (although Tier 1 batteries have been known to catch fire in rare circumstances too). But one path forward is to rigorously scrutinize up-and-coming manufacturers and induct them into the hallowed grounds of the top tier. 

The other option is for the best manufacturers to build out more factory lines, which is already happening. 

This feels like short-term business cycle anomalies,” said Jason Burwen, interim CEO of industry group U.S. Energy Storage Association, describing the current scarcity. I have no reason to believe this is secular and longer-term. You have so much new capacity committed to coming online.”

That factory build-out takes time and billions of dollars of investment. It lagged demand just when demand was spiking, and there’s a lot of work to do to catch up. 

  • That dynamic is worth extra scrutiny if federal policy does push for massive nationwide investment in grid battery projects, which would cause demand to skyrocket.

California is already attempting a massive build-out of grid batteries as its preferred source of on-demand evening power. Regulators there recently disclosed that new capacity that was supposed to come online to help the grid survive summer heat waves is running behind schedule.

It’s not clear how much the battery shortage was to blame there — commodities like steel and computer chips are harder to obtain due to Covid-19. But when you’re trying to move fast to build the grid of the future, global scarcity of a key ingredient certainly doesn’t help.

Speaking of building for the future…

Climate change is dominating the headlines as disaster after disaster strikes different regions. The infrastructure package working through Washington, D.C. needs to grapple with that, argues Mahesh Ramanujam, president and CEO of the U.S. Green Building Council.

Congress and the Biden administration must urgently begin building more sustainable and resilient communities that are better equipped to handle disasters and also sharply reduce emissions to slow climate change and ultimately lessen the magnitude and frequency of these disasters.

Mahesh points out bills to watch that would inject more federal investment into buildings and homes to cut emissions and future-proof that form of infrastructure.

(Lead photo: Michael Marais)

Julian Spector is an editor at Canary Media and reports on the rise of clean energy. He worked at Greentech Media for nearly five years, and before that he reported for CityLab at The Atlantic.