From Utility Dive:

The impacts of the virus on China’s power sector depend on how long the outbreak continues and how far it spreads, Josiah Neeley, senior fellow of energy policy at the R Street Institute, told Utility Dive. If it continues for more than a few weeks or spreads to more of China, it could have a significant impact on Chinese economic output across the board. But a major disruption in the U.S. power sector isn’t likely, since electricity generation comes from either domestic or non-Chinese sources, like coal, nuclear, natural gas and renewable energy.

A 10% reduction in battery capacity is unlikely to lead to a major disruption unless the virus spreads and causes serious outbreaks in other countries, Neeley said.

“Right now, there are various ways that [that reduction] could be made up: either sourcing from other countries… or later, after the outbreak is over, ramping up production —​ or just eating the delays,” he said.

‘This is going to be a very big deal’

A 10% reduction in China’s forecast lithium-ion battery storage production capacity would bring its expected 2020 output to 237 GWh, according to Wood Mackenzie’s analysis. However, that figure could drop if delays persist.

Restrictions on labor movement will impact auto manufacturing in the Hubei province and heavy manufacturing industries in the Shandong, Jiangsu, Zhejiang, Fujian, Anhui and Guangdong provinces, senior research analyst Le Xu said in a press release —​ regions that were collectively expected to contribute 162 GWh of battery cell production this year. The government has canceled domestic flights, trains and public transportation to affected areas, and coupled with the extension of the Chinese New Year holiday, heavy manufacturing industries that depend on laborers moving from one area to the other —​ like batteries —​ could be impacted, Daniel Finn-Foley, head of energy storage at Wood Mackenzie, told Utility Dive.

“This is going to be a very big deal,” he said.

The reduction in capacity comes at a interesting time for the U.S., according to Finn-Foley. In 2018, much of the supply of batteries from South Korean original equipment manufacturers was directed into the South Korean market due to incentives there, which led to U.S. developers turning to Chinese vendors and “getting more comfortable with them” in 2019, he said.

“So now we’re coming from a supply constraint in South Korea to a supply constraint in China,” and a significant supply shortage could affect prices, and that will trickle down to the market.

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