As the energy industry continues to shift towards renewables, 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, increasing competition from alternate technologies such as the global growth of electric vehicles, 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. Lithium-ion batteries remain the dominant technology, and supply chain constraints are putting immense pressure on the industry. Currently, there is a limited number of lithium-ion battery manufacturing facilities 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.
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.
The Rise of Domestic Manufacturing
As domestic content manufacturing gains momentum, largely driven by the Inflation Reduction Act (IRA) and relations with foreign suppliers, many utilities are already securing spots with domestic manufacturers. This trend is about more than just cost. Relationships with foreign companies and content are top of mind, particularly in light of ethical concerns in foreign 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 ensures a steady and reliable supply of critical components.
However, the limited number of lithium-ion battery suppliers remains a significant challenge to capacity and growth.
“As demand for domestic content increases, so too will the lead times and costs associated with these products,” states TruGrid Senior Vice President of Supply Chain Tom Gallagher. “To address these challenges, TruGrid has developed a comprehensive approach to supplier management, ensuring that we not only meet current demands but also prepare for future growth.”
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 four core principles:
- 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 in our supply chain. By diversifying our supplier base across key regions such as Thailand, India, Vietnam, Indonesia, 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.
- Rigorous Supplier Qualification and KPI Analysis
Selecting the right suppliers is crucial to our customers’ and our success. We employ a rigorous qualifications 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 their supply chain content all the way through raw material. When we understand traceability and where they buy raw materials, we can understand in advance if we’ll have quality concerns or product success.”
Strategic suppliers are not transactional merchants to TruGrid; they are key partners for our success. By measuring supplier performance through KPIs, TruGrid has seen productivity gains of 3-5%, while companies that do not implement such measures risk losing 2-3% in savings.
- 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, 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, schedule, and quality.
- Quality Assurance Reduces Field Challenges
The checks and balances of proactive quality assurance measures bring monumental benefits. With rigorous audits of quality systems, in-process inspections, and a proactive front-end focus, we can minimize or eliminate risk for construction, commissioning, and integration.
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 for manufacturing and/or construction, 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 qualifications 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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