Coronavirus could reduce China's battery storage production by 10% in 2020

Deadly virus outbreak hammers orange metal. Credit: Health Policy Watch

China's battery storage production capacity could reduce by as much as 10% to 237 gigawatt-hour (GWh) in 2020 compared to the pre-coronavirus 2020 forecast, research firm Wood Mackenzie said in a note on Wednesday.

Based on operational and announced capacity, this represents more than 26 GWh of production for 2020. More capacity could be affected if delays persist, WoodMac said.

With the escalation of the coronavirus outbreak, the Chinese government took several measures to minimise human-to-human transmission, which have affected battery cell production.

Affected provinces were expected to contribute 162 GWh of battery cell production in 2020 prior to the coronavirus outbreak, equivalent to 61% of China cell manufacturing capacity

"The restriction of labour movement will hurt auto manufacturing in Hubei province, and heavy manufacturing industries in provinces such as Shandong, Jiangsu, Zhejiang, Fujian, Anhui and Guangdong," WoodMac's senior research analyst Le Xu said.

"These provinces were expected to contribute 162 GWh of battery cell production in 2020 prior to the coronavirus outbreak, equivalent to 61% of China cell manufacturing capacity, Xu added. "In addition, battery cell factories were also suspended for the past two weeks, including Tesla's Gigafactory in Shanghai, as a result of the extension of the Chinese New Year holidays as announced by the government."

Tight battery cell supply could slow down the cost decline of EV manufacturing and energy storage systems.

Australia and China were expected to grow an additional 1 GW capacity for storage deployments in 2020 pre-coronavirus outbreak. Utility-scale front-of-the-meter storage deployments drive both markets' growth for renewables-plus-storage installations to reduce curtailment and ancillary services participation. Tight battery cell supply could cause delay risks to storage deployments, Woodmac said.

"China's BYD is a key supplier to UK storage markets, so its production loss in Q1 2020 could impact UK developers," Xu added. "Also, Chinese lithium-iron phosphate batteries have received renewed attention in the U.S. market following supply chain tightening in South Korea in 2018. Developers who may have turned to the less-expensive technology may find their supply, unfortunately, affected again."