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China and the world take on the coronavirus


Dimitrios Pappas, analyst at new energy consultancy Delta-EE, considers the impact the novel coronavirus (COVID-19) could have on the energy transition, particularly for batteries used in EVs and ESS, while editor Andy Colthorpe adds his own take. 

In the era of economic globalisation an extended downtime of the Chinese industry, the world’s manufacturing locomotive, can have profound negative effects on global economic growth.

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In fact, factories remain closed or cannot reach full production capacity as the Chinese government takes measures to control the coronavirus (COVID-19) spread. The initial results of those actions reflect negatively on stock markets around the world. Relative to the developments of the coronavirus outbreak, risks continue grow.

Manufacturers are exposed to risk due to stock shortages, which could result in temporary production halts. Any extended downtimes in the production lines can result in the customer base becoming vulnerable to price fluctuations. From the customers’ perspective, this introduced uncertainty can lead to a further demand decrease, eventually impacting sales.

The growing Chinese market

The immense and growing production that China-based manufacturers can achieve has been a main driver for sustaining economic growth and for driving technology prices down. In particular, components that EV automakers and the solar industry use, including battery elements, solar cells and PV frames.

Over the last 20 years, China has emerged as one of the world’s major manufacturers for the renewables sector and is increasingly growing within the storage space. Critical components of the green economy are manufactured in Chinese industrial hubs, either by indigenous or other Asian and western manufacturers, which chose China as their industrial output base.

Impact on mining

Chinese industries have been systematically securing access to raw materials by using a foreign direct investment approach (FDI). Chinese companies downstream cobalt and nickel from their mining operations in other countries (e.g. African countries such as Congo) to be imported and used in battery production. Associated risks and possible travel restrictions posed to Chinese workers and managerial staff active in those mining operations, further feeds market uncertainty. Already some of the largest Chinese cobalt mining companies have seen their stock prices plunging during the past weeks.

Impact on energy storage

Lithium-ion battery pack prices have fallen by approximately 85% in the last 10 years, and this decreasing trend is anticipated to continue and accelerate in the coming decade. With China so dominant in lithium battery manufacturing (accounting for over 60% of the total global manufacturing capacity), what risk does the coronavirus pose?

The answer is the risk is significant. To put it into context, the USA, the 2nd largest manufacturer of capacity, is six times smaller than the Chinese capacity, and while the trajectory shows it is catching up to its eastern rival, it couldn’t meet any supply chain gap.

Impact on EVs

Furthermore, relationships are already set and established, with Chinese suppliers chosen by US, European and Japanese storage and EV manufacturers. Even big brands like Tesla, who have been using Panasonic battery cells to satisfy demand have confirmed that CATL, the Chinese battery manufacturer, and LG Chem will be supplying additional battery volumes for the Shanghai Gigafactory to cover demand.

The coronavirus can lead to price increases for end-users.

Supply shortages, if they occur, will likely slow the decreasing price trends. Any increased downtime of the Chinese manufacturing hubs can even halt or reverse those trends. In the case of extreme downtime events, resulting shortages could even drive prices upwards. It is troubling that the most successful business models for renewables often rely on the impressive and continued reduction in prices over the years as European customers demand it. Failure in containing the new coronavirus spread, can act as a hurdle in the ongoing energy transition.

By Dimitrios Pappas, Analyst, Delta-EE analysis

As the coronavirus situation rolls on for what looks to be another week of headlines, both good and bad (the return to full recovery of many sufferers versus the discovery of new cases in new territories), it seems almost impossible to assess what the overall impact might be.

On first reading of Dimitrious Pappas’ blog, above, I was a little surprised that unlike other analysis I have read, there is no real attempt to put predicted numbers, dates and so on into his take. However, as I read it again, more closely, I began to appreciate that Dimitrious focused on trends and the bigger picture rather than trying to quantify what is mostly at present unknowable.

We have heard that carmaker Jaguar’s i-Pace electric car has hit production snags and PV Tech has reported of what are hopefully only to be short-term impacts on production in the solar industry in regions including South Korea, India and Taiwan in mid-February

PV Tech also reported just before the end of 2019 that private banking group Roth Capital had predicted delays in production until the 8th of February – the last day of the Chinese New Year holidays – which came and went.

Meanwhile analysis firm Wood Mackenzie predicted that lithium battery energy storage and in particular lithium iron phosphate batteries could hit major supply shortages and supply chain bottlenecks as a result.

Within the changing and complex nature of the situation, China’s leader Xi Jinping was reported by the Xinhua News agency to have this morning described the Covid-19 viral spread and its containment as “both a crisis and a big test” for the country. 

With so many unknown variables, and the effects of the illness now being felt far and wide beyond China, it is now a global problem. The fatality rates appear mercifully low at around 2% of infected sufferers but the viral pneumonia that Covid-19 can cause in some people, as well as how contagious it appears to be, is leading to the understandable worry and sometimes extreme containment measures authorities and businesses are taking to prevent a full-scale epidemic.

Only a global effort of cooperation and compassion is likely to be able to counteract this difficult set of conditions. It now seems increasingly short-sighted to only look at China’s problems in isolation from the rest of the world.

By Andy Colthorpe, Editor,

Ginlong hails ‘Grid warriors’

Indeed, all anyone can do, is to do what they can.

Ginlong Technologies, one of China’s leading PV inverter exporters, publicised efforts its staff have made to support and bring hope to the people of the Xiangshan Peninsula, which has a population of 550,000.

The company posted a news update that on the 12 February and 14 February, its employees sent “concerned greetings and life-saving materials” to prevention and control staff working around the clock in Xiangshan. Ginlong employees themselves also made visits to neighbouring villages, as well as donating essential supplies including milk and food.

The company described the epidemic prevention teams as ‘Grid Warriors’, and sent its best wishes, while also noting that it was keen to “pay tribute to medical staff, public security, sanitation workers and other positions working on the front lines of the Novel Coronavirus battle.”

All of us here at and Solar Media would like to extend also our warmest, sincere wishes and hopes for positive outcomes as soon as possible.

Cover Image: Ginlong Technologies' employees show their support for prevention and control teams in Xiangshan, China. Credit: Ginlong. 

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