Latest news with #AnzaRenewables
Yahoo
02-05-2025
- Business
- Yahoo
Will tariffs help or hurt the US energy storage industry? It's complicated, experts say
This story was originally published on Utility Dive. To receive daily news and insights, subscribe to our free daily Utility Dive newsletter. President Donald Trump's combative, chaotic trade policy is already causing problems for the United States' booming energy storage industry as stock analysts sour on import-reliant OEMs and project developers defer investment decisions. Absent more clarity on longer-term import duties, analysts and corporate insiders say the sector's challenges could deepen this year and next before global supply chains rebalance. 'We are in a totally different world than last month,' said Ravi Manghani, senior director of strategic sourcing at Anza Renewables. The most visible effect of the 'Liberation Day' tariffs, which Trump has since dialed back for most countries while keeping triple-digit levies on imports from China, could be a dramatic reduction in merchant energy storage development in key markets like Texas, Manghani said. Though project developers with committed offtake agreements have the option to renegotiate pricing with their customers, merchant developers looking to break ground in 2025 may simply wait until next year — and hope for a resolution in the meantime. Anecdotally, that's already happening, he said. But despite the near-term turmoil and a global supply chain that requires even most U.S.-based manufacturers to source inputs from abroad, storage insiders tell Utility Dive that they remain bullish on the sector's prospects. Some expect protectionist policies to boost U.S. battery manufacturing in the long run and — maybe — provide an opening for lithium-ion alternatives. The average U.S. tariff on Chinese imports is now 124.1%, six times higher than at the start of Trump's second term, according to the Peterson Institute of International Economics. That's enough to push the U.S. deployment cost of a four-hour lithium-ion battery energy storage system above 2023 levels, said Isshu Kikuma, energy storage analyst for Bloomberg NEF. 'We haven't updated our installation forecasts, but we expect annual additions to plummet in the near term, especially after 2025, due to higher-than-expected costs and looming policy uncertainties,' Kikuma said. While some stationary storage developers were already rushing to complete construction in 2025 ahead of a scheduled 17.5% increase in the preexisting Section 301 tariff next year, 'many projects in the pipeline will be severely affected,' sending developers with longer time horizons into 'wait-and-see' mode, he added. Battery supply chain companies' past willingness to absorb import duties is effectively gone, forcing their buyers to make a difficult decision, Manghani said: eat the cost themselves, delay delivery until — hopefully — prices come down, or try to renegotiate offtake agreements to reflect higher BESS costs. Whether offtakers play ball is another question. Both parties might prefer to delay projects by a few months rather than renegotiate terms in a rapidly-changing environment, Manghani said. Developers and customers have some historical precedent for this in the pandemic-induced supply chain crunch that increased prices and stretched lead times for electrical equipment earlier this decade, but the magnitude of the tariff shock is something new, he added. 'We are watching this movie for the first time,' Manghani said. Stationary storage deployments typically take 12 to 18 months to plan, so projects that already have firm supply contracts for delivery in 2025 likely negotiated them last year and thus may not see dramatic bottom-line impacts, said FlexGen CEO Kelcy Pegler. But that will change if the current uncertainty persists. 'It's hard to contract into a 100-percent-plus tariff environment,' said Pegler, whose 'OEM-agnostic' energy management system provider is already working with customers on alternative sourcing. For merchant developers with tight development timelines and no offtake contracts to renegotiate, project economics 'could be completely submerged,' potentially freezing activity in a cohort that accounts for 25% to 30% of the U.S. stationary storage market, Manghani said. This would disproportionately impact the merchant-heavy Electric Reliability Council of Texas territory, he added. An ERCOT storage freeze could exacerbate the possible impacts of a slate of pro-fossil, anti-renewables bills moving through the Texas Legislature this spring. S.B. 388, for example, would require 1 MW of new 'dispatchable' generation — excluding batteries — for every megawatt of wind or solar capacity added to the ERCOT grid. Trump says tariffs are key to revitalizing American manufacturing, though experts expect businesses across a range of industries to hold off on big-ticket reshoring plans amid ongoing uncertainty. The Inflation Reduction Act's generous 45X manufacturing credit has already spurred billions in U.S. battery supply chain investments, particularly for downstream processes like cell and module assembly. But with construction timelines for U.S. lithium-ion battery cell plants stretching up to three years, according to Bloomberg NEF senior energy analyst Evelina Stoikou, head of battery technologies and supply chains at Bloomberg NEF, much of the capacity announced in the wake of the IRA's passage in August 2022 has yet to come online. And the U.S. has very little production capacity for inputs like anode and cathode active materials, which Stoikou said are among the most expensive battery cell components. So while durable protectionist policies will likely push U.S. energy storage buyers to seek U.S.-assembled batteries, tariffs on key inputs mean those locally-produced alternatives will cost more too, Stoikou said. The United States does have an abundance of raw materials used in lithium-ion batteries, including a vast lithium deposit in inland Southern California and what could be an even richer formation under the south-central U.S. that Exxon Mobil plans to exploit later this decade. Canada also has vast mineral reserves that set it up particularly well as a future 'upstream force,' Manghani said. But because minerals mining and processing operations are complicated, capital-intensive undertakings with decades-long payback periods, they require a degree of longer-term certainty that simply doesn't exist right now, he added. The upshot: The latest tariffs are unlikely to spur mining investments that weren't already in the works. That raises the question of whether tariffs could boost existing U.S. mining operations, another of the administration's stated objectives. Active mines in Wyoming, for example, produce tens of millions of tons each year of soda ash, a critical precursor for the sodium-ion batteries that advocates hope will eventually outcompete lithium-ion on cost. The U.S. also produces ample amounts of the iron and phosphorus inputs needed for both lithium-iron-phosphate, or LFP, batteries — the preferred chemistry for stationary storage — and their sodium-based equivalents. 'You can fully supply the sodium-ion industry domestically without permitting a new mine,' said Cam Dales, cofounder of U.S.-based sodium-ion battery startup Peak Energy. The bottleneck, for now, lies further down the supply chain. 'While we have all the minerals, we don't have any of the midstream processing or component manufacturing, which means we rely entirely on imports for the time being,' Dales said. A coherent U.S. energy security policy would acknowledge the reality of China's lithium-ion dominance and use tariffs to kindle a homegrown sodium-ion supply chain, which Dales said could get off the ground by 2030. 'The tariff scheme would be perfect for American battery companies if there was a temporary bridge with lower rates on materials and components that escalates over a few years as American sources develop,' he said. Unless and until that happens, Kikuma said U.S. energy storage buyers will look to reduce Chinese exposure and buy more from producers in South Korea, Japan and Southeast Asian countries like Vietnam, which reportedly offered to zero out its own tariffs on U.S. imports shortly after Trump's April 2 announcement. Indonesia could eventually emerge as an upstream supplier for U.S. battery manufacturers and buyers, given its rich precursor reserves and processing capacity, along with resource-rich Middle Eastern and Latin American countries, Manghani added. In the U.S., the biggest trade war beneficiaries may be existing manufacturers with production capacity to spare. That includes smaller producers like Buffalo, New York-based Viridi, which makes modular, 'fail-safe' battery systems that it says are far less likely to experience thermal runaway. 'We have capacity to scale to nearly a gigawatt of annual output and we are not close to that number in current commitments, so we can deliver as demand increases,' CEO Jon M. Williams said. In April, Viridi announced it had acquired a Northern California production facility from Moxion, a lithium-ion battery supplier that declared bankruptcy last August. 'Tariffs are not all bad, and depending on the outcome, could actually lean the American economy into renewable manufacturing … [but] I don't think anyone who really is being honest can predict the outcome of these policies over the next six, 12 or 18 months,' he added. Recommended Reading Policy uncertainty could trigger 'recession' for renewables, analyst says Sign in to access your portfolio
Yahoo
21-04-2025
- Business
- Yahoo
As Trump targets clean energy, will utilities embrace DERs and VPPs?
This story was originally published on Utility Dive. To receive daily news and insights, subscribe to our free daily Utility Dive newsletter. Amid stiff headwinds for utility-scale renewables and gas, electricity system experts say utilities, industrial companies and other heavy power consumers may find some relief in a cheaper, faster and increasingly scalable solution: distributed generation and flexible loads, known as distributed energy resources, or DERs, that can be batched into virtual power plants or multi-megawatt demand response programs and deployed faster than utility-scale assets. 'There is an awareness that, oftentimes, distributed solar and distributed storage can come online much more quickly than larger resources … and a recognition of the role [they] can play in providing energy and in some cases capacity resources,' said Sean Gallagher, senior vice president of policy for the Solar Energy Industries Association. Then again, nothing in the energy world is easy these days. Earlier this month, President Donald Trump announced sweeping tariffs on imports from most U.S. trading partners. The targeted countries included major suppliers of solar panels, batteries and high-voltage electrical components, such as Vietnam (46%) and China (145% or more). Trump later announced a 90-day reduction to 10% for most countries other than China. Distributed generation and storage assets may stand to benefit as developers look to sidestep bulk grid constraints, but they are not immune to supply chain challenges, particularly for larger projects, said Ravi Manghani, senior director of strategic sourcing at Anza Renewables, an energy data provider. Trump's 'Liberation Day' announcement was just the latest setback for the clean energy industry, which has been under siege since Jan. 20 despite providing 93% of new generating capacity in 2024. In a series of executive orders on his first day in office, Trump halted federal onshore and offshore wind permitting, withdrew all federal waters from offshore wind leasing, and declared an 'energy emergency' that appeared to favor thermal and other high capacity-factor generating resources over wind, solar and batteries. A subsequent federal funding freeze, later partially rescinded, threw previously-authorized support for clean energy projects into limbo. Meanwhile, anti-renewables bills are proliferating in Texas, Oklahoma and other Republican-controlled states. With the fate of Inflation Reduction Act tax credits up in the air as the U.S. Congress looks to offset an estimated $4.2 trillion in tax cuts this year, the clean energy sector could be in for more pain. Fully repealing the IRA's technology-neutral Section 45Y investment and Section 48E production tax credits this year would reduce wind and solar deployments by about 50% over the next decade, The Brattle Group and ConservAmerica said in February. That sort of pullback could jeopardize U.S. industrial growth, which is a driving factor in an expected 50% increase in electricity demand by 2035, ConservAmerica said. With new gas turbine costs rising fast and production capacity tied up until 2030, according to NextEra CEO John Ketchum, it may not be feasible to make up the shortfall with new fossil generation. Because the U.S. already has tens of gigawatts of DERs that could be aggregated into VPPs within months, rather than years, some electricity system experts see smaller-scale resources as a potential stopgap should utility-scale renewables and storage development falter. 'DER' is a catch-all term for a broad range of generation resources, from residential solar arrays of a few kilowatts to grid-connected or behind-the-meter installations of 10 MW or more, and potentially flexible loads such as thermostats, water heaters and electric vehicles. The U.S. has well over 100 GW of DERs that technically could be aggregated into VPPs and traditional demand response programs, but over 80% of that capacity is not, Wood Mackenzie said last year. Still, the firm identified 1,459 VPP deployments operating across 321 monetized market, utility and energy retailer programs. Earlier this year, the Department of Energy pegged current U.S. VPP capacity at about 30 GW and said that figure could scale to 80 GW to 160 GW by 2030. Utilities and state policymakers increasingly see the value in VPPs and DER aggregations, according to a February report from the NC Clean Energy Technology Center and the Smart Electric Power Alliance that catalogued more than 100 policy actions last year in 38 states and the District of Columbia. Many of those actions aim to harness the United States' rapidly-growing distributed battery capacity or deploy sophisticated VPPs that use multiple categories of DERs, NCCETC Managing Director of Policy and Markets Autumn Proudlove said earlier this year. In a flipbook released last year, RMI called out particularly innovative, multi-resource VPPs like those run by Puget Sound Energy in Washington (smart thermostats, behavioral load shaping, electric vehicles, water heaters and interruptible loads), Portland General Electric in Oregon (batteries, water heaters, behavioral load shaping and interruptible loads) and National Grid in New England (smart thermostats, batteries and technology-agnostic demand response). Clean-energy groups are actively pushing supportive state policy and developing standardized templates for simpler, more efficient VPP programs, both key recommendations from last year's Wood Mackenzie report. 'There's a lot of enthusiasm around VPPs,' SEIA's Gallagher said. 'We are trying to templatize them so that they're not as bespoke [and] are more straightforward to explain to utilities and customers.' Though utility interest is 'uneven' across the country, with some embracing DERs and others more resistant, eye-catching recent load growth forecasts help make the case, Gallagher said. In January, SEIA released a roadmap for 10 million distributed energy storage installations and 700 GWh of total deployed storage capacity by 2030. Utilities, too, are showing more ambition on DERs with plans for bigger, more sophisticated distributed resource aggregations. In a February deal touted by Utah Gov. Spencer Cox, R, Rocky Mountain Power and distributed energy solutions provider Torus said they would collaborate on a commercial-and-industrial VPP that could provide up to 70 MW of flexible, behind-the-meter capacity by the middle of 2026. 'It's no longer in question whether [this] is a path forward,' Torus CEO Nate Walkingshaw said in February. '[VPPs] can be seen at the same size, scale, quality and reliability as monolithic grid-tied architecture and are 100% viable today.' In a regulatory filing in August, Xcel Energy's Minnesota subsidiary proposed deploying and aggregating 440 MW of distributed solar and 400 MW of distributed storage to create what would likely be one of the United States' largest VPPs. 'Xcel Energy believes distributed capacity can complement our existing plans for additional utility-scale renewable and firm dispatchable generation … [with] benefits including continued reliability, economic growth and providing our customers more options to adopt clean energy technologies,' Xcel spokesperson Josiah Mayo said in an email. Meanwhile, utilities across the U.S. are working with developers to install larger-scale distributed energy resources with an eye to improving local and regional resilience. In California, San Diego Gas & Electric partnered with EES and Mitsubishi Power Americas joint venture Prevalon to deploy multiple community microgrids totaling 180 MWh, and the company is now pursuing 'half a dozen' similar opportunities right now, Prevalon President and CEO Tom Cornell said. 'We've seen a lot more utility inquiries in the past six to 12 months,' he said. The value proposition for distributed batteries and firm generation is especially strong in regions where the grid is less reliable due to infrastructure challenges or weather-related risk, such as western North Carolina — hit hard by two hurricanes in 2024 — and other swaths of vertically-integrated utility territories across the Southeast, where developable land is abundant, Cornell said. In those territories, a typical 10-MW, 40- to 60-MWh system might take 12 months to site and permit, with equipment procurement happening in parallel and construction and commissioning taking a matter of months afterward, according to Cornell. The Southeastern utilities 'move especially fast … they understand that they can move quicker on these than any other resource,' he said. Despite clear advantages over larger, less flexible, slower-to-deploy resources, DERs aren't immune from the economic and policy uncertainty roiling the electricity sector, experts say. California's NEM 3.0 net metering tariff, effective for residential solar and storage systems that entered the state's interconnection queue after April 14, 2023, dramatically reduced solar-only installations while boosting battery attachment rates. Until more independent system operators implement rules consistent with FERC Order 2222 and additional states enact policies that capture the full value of distributed generation and storage, the residential segment could see muted growth on a national level, Anza Renewables' Manghani said. State-level policy could also temper growth in the fast-growing community solar segment following a record-breaking 1.7-GW year in 2024, according to Wood Mackenzie data. Cumulative U.S. deployments reached 8.6 GW at the end of 2024, Wood Mackenzie said. But a closer look at the numbers shows disproportionate contributions from a handful of pro-solar states — with Illinois, New York and Maine accounting for 83% of total capacity deployments last year — and policy uncertainty in emerging state markets as more mature markets saturate. 'Emerging markets have been slow to ramp up and program size caps limit the potential for growth in these states to make up for declines in larger markets,' Wood Mackenzie research analyst and lead report author Caitlin Connelly said in February. The upshot is an uncertainty band — as much as 40% to the downside and 37% to the upside — around Wood Mackenzie's base case of 15 GW in cumulative deployments by 2029. Cost is another concern for smaller-scale energy resources, Manghani said. For example, while the cost gap between distributed and utility-scale storage continues to close amid fierce supplier competition, 'utility-scale projects still benefit from superior economies of scale, revenue generation market structures and financing advantages,' he said. And Manghani emphasized that, like their bulk counterparts, distributed generation and storage systems and components are at least somewhat exposed to supply chain challenges. 'Ultimately, price trends will depend on policy shifts, manufacturing capacity expansion and how quickly suppliers adjust to demand,' he said. Recommended Reading Trump administration orders a stop to Empire Wind construction
