How Supply Chain Disruptions are Hindering Grid Modernization Efforts
Unless you’ve been living under a rock in recent months, you are painfully aware of the pandemic-driven supply chain disruptions currently plaguing the world (no pun intended). In the short-term, this is accelerating inflation, with the price of some goods and services up nearly 10% year-over-year. Unfortunately, there are likely to be long-term impacts as well, one of which relates to utilities’ ability to modernize their power grids.
The Relationship between Supply Chain Disruptions and Investments in Grid Modernization
The supply chain disruptions are negatively impacting the availability of items and materials that are critical to modernization and decarbonization efforts, including but not limited to steel, semiconductors, storage batteries, electric vehicles, smart grid equipment, and components of clean energy systems.
Not only is the supply of these items lower than in the past, but transporting these items from the manufacturers to the end users has slowed dramatically, and is currently more expensive – in some cases, prices are 10x higher than pre-pandemic levels.
Looking at the big picture, perhaps the most problematic shortage relates to batteries, as these are critical for energy storage and EV technologies. The shortage of batteries has been more pronounced than other items because demand from automobile manufacturers and utilities is soaring.
Batteries are also vulnerable to the concurrent chip shortage (as are smart maters, control systems, EVs and sensors, among other items). In fact, the supply of batteries is basically nil for the remainder of 2021, and is expected to be depleted very quickly in 2022. Also, there is a geographical bottleneck in play that certainly does not help, as China produces up to 65% of global battery components.
Other shortages, including those for steel, aluminum, copper, and lithium aren’t helping. The net effect of all of this is that many projects planned by utilities have been delayed. The good news is that most experts believe that this massive wave of global supply chain disruptions is temporary. That provides a sense of comfort around the “if,” but much uncertainty around the “when.”
