Supply Chain Challenges in Battery Energy Storage Systems
August 28, 2024
As the energy industry continues to shift toward renewable energy, battery energy storage systems (BESS) are playing an increasingly critical role in ensuring grid stability and efficient energy management. However, the supply chain for these systems is facing significant challenges, driven by skyrocketing demand and geopolitical complexities. For developers and asset owners seeking guidance, TruGrid’s strategic supply chain team offers valuable insights on how to navigate these challenges effectively.
The State of Domestic Content
With the global push toward renewable energy, the demand for BESS has never been higher. While lithium-ion batteries remain the dominant technology, supply chain constraints are putting immense pressure on the industry.
Currently, there is only one sodium-ion battery manufacturing facility in the U.S., according to a recently released report from the American Clean Power Association (ACP). However, the report includes a promising outlook that approximately two dozen battery storage manufacturing facilities are expected to come online in the next few years. Even so, the strain on the supply chain remains a pressing concern.
The Rise of Domestic Manufacturing
As domestic content manufacturing gains momentum, largely driven by the Inflation Reduction Act (IRA) and evolving relationships with foreign suppliers, many major utilities are already securing capacity with domestic manufacturers.
This trend extends beyond cost considerations. Relationships with foreign companies and content are top of mind, particularly in light of ethical concerns within global supply chains.
TruGrid, with its strategic global supply chain team, is well positioned to navigate these complexities. By establishing strong partnerships with leading suppliers around the world, TruGrid helps ensure a steady and reliable supply of critical components.
However, the limited number of lithium-ion battery suppliers remains a significant challenge.
This graphic, credited to the American Clean Power Association, depicts manufacturing facilities in the United States that are currently online or have been announced. The darker green shade shows energy storage manufacturing facilities that are online. The lighter shows energy storage manufacturing facilities that have been announced or are under construction. Yellow is solar, light blue is wind, dark blue is offshore wind, and purple is transmission.
Strategy for Overcoming Supply Chain Challenges
TruGrid’s approach to supply chain management for our engineering, procurement, construction (EPC) and integration clients is grounded in three core principles:
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Supply Chain Continuity and Redundancy
In today’s interconnected world, supply chain disruptions can have far-reaching consequences. TruGrid’s global supply chain team is focused on building continuity and redundancy into our supply chain. By diversifying our supplier base across key regions such as Thailand, India, and China, TruGrid ensures that we can quickly adapt to any disruptions. This strategic approach allows us to maintain a steady flow of critical components, even in the face of global challenges.
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Rigorous Supplier Qualification and KPI Analysis
Selecting the right suppliers is crucial to our customers’ and our success. We employ a rigorous qualification process that emphasizes key performance indicators (KPIs) to measure supplier success. Our KPI analysis includes metrics such as quality, schedule, cost, traceability, safety and more. Regular reviews with our suppliers allow us to discuss innovation and identify opportunities for improvement.
“When it comes to cost, we don’t just look at the price. We look at what’s the best value for the customer and the total cost of ownership,” says Gallagher.
“For this, we look at if we can get longer warranty periods and value adds. We also review a supplier’s ability to trace content all the way through raw materials. When we understand traceability and where they buy raw material, we can understand if we’ll have warranty issues or product success in advance.”
Suppliers are not just vendors to TruGrid; they are key partners for success. By measuring supplier performance through KPIs, TruGrid has seen productivity gains of 3-5% in cost, while companies that do not implement such measures risk losing 2-3% in productivity savings.
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Aligning with Domestic Manufacturing Trends
As the emphasis on domestic content continues to grow, TruGrid remains committed to aligning with U.S.-based manufacturing practices. We thoroughly evaluate our domestic suppliers based on factors such as automation levels, labor availability, and geographic location, as manufacturing costs can vary significantly between regions. By understanding these dynamics, TruGrid is able to make informed decisions that balance cost, efficiency, and quality.
The Importance of Strategic Partnerships
In an industry as dynamic as energy storage, strategic partnerships are key to long-term success. As more battery storage manufacturing facilities come online in the U.S., TruGrid is focused on building and maintaining strong relationships with domestic suppliers. By right-sizing our supply base and helping customers engage with us as their EPC firm early in the project lifecycle, TruGrid is able to leverage valuable insights into project design, risk mitigation, and cost-saving opportunities.
Looking Forward: Path to Success in Energy Storage
The battery energy storage market is at a critical juncture. As the industry continues to grow and new manufacturing facilities come online, supply chain challenges are poised to shape the industry’s future. By taking a proactive approach—focusing on supply chain continuity, rigorous supplier qualification through KPI analysis, and strategic domestic partnerships—asset owners can be positioned to thrive in this rapidly changing environment.
To chat with a clean energy expert about how TruGrid can support your energy storage or solar projects, contact us at sales@trugridpower.com.
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