Over a dozen battery storage projects that were meant to support intermittent renewable energy supplies have been postponed, canceled or renegotiated due to labor and transport bottlenecks, soaring minerals prices, and competition from the electric vehicle industry. The delays, ranging from several months to a year, are in a number of states including California, Hawaii and Georgia, with battery providers Tesla and Fluence warning of disruptions to supply. The battery projects are needed to capture excess generation from solar and wind power to be used when there is no generation from these sources, that is when the wind does not blow and the sun is not shining, which occurs every evening. Frequently, electricity demand is highest when the sun goes down and people return home from work. Battery projects are expensive and not included in the cost of solar and wind power when determining what technologies should be built, i.e., in the “levelized cost” projections often used to estimate relative costs of generation sources. As a result, consumers are seeing and will continue to see higher electricity prices.
Battery storage makes up about 3 percent of U.S. clean energy capacity. Installations increased 170 percent in the first quarter of 2022, totaling 758 megawatts. But the pace is slowing below forecasted amounts. According to Energy research firm Wood Mackenzie, its current forecast for battery storage installations of 5.9 gigawatts for 2022 may be revised down because of market disruptions and because 2021 installations came in at about two-thirds of what the company had expected.
Prices for lithium-ion batteries, three-quarters of which are produced in China, have increased as much as 20 percent since last year due to rising lithium and nickel costs, disruptions to manufacturing from COVID lockdowns, and slow shipments from transport constraints. According to Bloomberg, the cost of metal necessary to make batteries increased by 280 percent last year. In the first quarter 2022, the prices of many metals more than doubled. Prices for lithium alone have increased 438 percent this year, according to Fortune. The United States has one active lithium mine in Nevada and it produces less than 2 percent of the global lithium supply. The United States has about 4 percent of the world’s lithium reserves.
New lithium mines in the United States are being held up by the Biden administration or by legal challenges. The Thacker Pass Lithium Mine in Nevada could produce a quarter of today’s global lithium demand but is being held up by a lawsuit. Ioneer Ltd.’s lithium mine also in Nevada could supply 22,000 metric tons of lithium annually (enough for about 400,000 electric cars), but is being held captive by environmentalists, who claim the mine threatens Tiehm’s buckwheat, a rare flowering plant, which the Biden administration has listed as endangered. The company still needs to obtain permits for the mine. In normal circumstances, the process of getting a mine to first production can take 7 to 10 years, but recalcitrant federal bureaucracies can extend that timeline, as has been the case for other mineral mines in the United States under the Biden administration.
Competition from Electric Vehicle Market
Battery manufacturers are favoring the EV market because their orders are more predictable compared to the much larger project-specific orders from power storage developers. Tesla Chief Executive Elon Musk acknowledged earlier this year that the company had prioritized EV battery supplies over stationary storage. Fluence issued force majeure notices on three contracts because its battery suppliers in China were not able to fulfill their obligations. It also raised prices on new contracts by 15 to 25 percent and would price future contracts based on raw material indices to guard against volatility.
Solar Projects Being Built with Associated Storage Projects
Storage projects are being constructed alongside solar farms, allowing the storage facilities to claim a federal tax credit that does not exist for standalone batteries. But, the ongoing investigation by the Commerce Department regarding China using other Southeast Asian countries to avoid tariffs has resulted in fewer solar projects than expected because of the uncertainty over potential tariffs on Asian imports. President Biden recently waived the tariffs for two years on panels from countries impacted by the Commerce Department investigation, which should encourage more solar construction with panels from Asia, and thus more storage facilities.
There are supposedly about 14.7 gigawatts of battery storage in development, some of which state authorities had hoped would be in place to prevent blackouts this summer. According to Governor Gavin Newsom, California had been counting on new battery storage projects, many of which were procured following rolling blackouts in August 2020, to shore up summer reliability. Among recent delays is 535-megawatts of storage Ameresco Inc. is developing for Southern California Edison. The company expects only a portion of the project—about 300 megawatts—to be online by its August target.
Central Coast Community Energy (CCCE), which has 430,000 customers in five California counties, is also facing delays of six projects, including 122 megawatts of storage, needed to meet state-mandated requirements for “clean” energy. The projects, originally meant to come online this year and next, are experiencing delays of between six and 12 months. CCCE and Silicon Valley Clean Energy Authority, its partner in several projects, sued developer EDF Renewables over its termination of contracts for the Big Beau solar and storage project that started generating power last year. EDF in March asked to increase the price for the project’s energy storage component by $76.8 million—a 233 percent increase.
In Hawaii, utility Hawaiian Electric is seeing delays in solar and storage projects that are to replace the state’s only coal-fired power plant, which is supposed to retire in September. The developer of four projects, Canada’s Innergex Renewable Energy, is seeking to renegotiate the terms of the deals – including price and timing – after receiving force majeure notices from its battery supplier, Tesla, which as mentioned above, is concentrating on EV batteries. Hawaiian Electric expects just 39 megawatts of the 378.5 megawatts of solar and storage it procured to be in service prior to the coal plant retiring.
According to the International Energy Agency IEA), battery storage needs to reach 585 gigawatts by 2030 to decarbonize the global power sector—a 35-fold increase from 2020. With supply chains as they are, lockdowns continuing over COVID in China, the huge price increases in critical metals and competition from electric vehicles for batteries, it is unlikely that IEA’s battery storage number will be achieved.
It seems unlikely that President Biden’s decarbonization of the electric sector will happen by 2035 since it is unlikely that the battery storage needed to support wind and solar power can be accomplished by then. With competing priorities, i.e., governments wanting 50 percent of cars sold in 2030 to be electric, it is putting a great deal of strain on available resources, particularly when obstacles are put in front of mine development in the United States. Many forecasters have predicted a metal shortage as companies are pursuing electric vehicles to meet Biden’s goal and the goals of European countries. Battery storage to back-up intermittent solar and wind power seems almost an afterthought, except to places like California where residents are used to rolling blackouts and increasingly high energy prices, so storage batteries are just another cost added to the state’s attempts at reliability combined with their focus on wind and solar.