For Now, at Least, the World Isn’t Making Enough Batteries

Evidence of the battery-powered era is all around us. Electric vehicles are cruising down our freeways. Household appliances thrum with stored solar energy that was until recently a daytime-only power source. Governments from California to China and South Korea—even Donald Trump’s Washington—have taken steps that will make battery power more ubiquitous.

There’s just one hitch to this battery boom: The world isn’t making nearly enough. All of the new demand from North America, Europe and Asia is constrained at the moment by a market that remains heavily dependent on a few producers. 

Data on the global supply of batteries is hard to come by, but close observers of the industry have noticed evidence of the shortfall. “We’ve never seen such demand,” said Yayoi Sekine, a New York-based analyst at Bloomberg NEF. “But the supply is struggling to keep up.”

Oddly, however, lithium-ion battery-rack prices have continued their annual decline, even in the face of constrained supply and expectations of ever-growing demand.

To get a clear sense of the near future, consider battery-powered cars: Today, there are more than 3 million electric vehicles on the road worldwide; by 2025, Volkswagen AG alone plans to build as many as 3 million electric vehicles per year. Those vehicle batteries—in addition to storage batteries for homes, businesses and utilities—will have to come from somewhere.

Here’s a brief guide to today’s battery shortage and the puzzle of continually falling prices.

The storage batteries made in South Korea might be staying there.

A key part of the bottleneck could be in South Korea.

The country installed more storage capacity last year than any other, driven by government-offered discounts on electricity rates for businesses that adopt battery-storage systems. A BNEF report in September projected a total of 3.7 gigawatt-hours of battery storage in the country by the end of this year. Much of that battery capacity is the product of South Korea’s Samsung SDI and LG Chem, two leading international battery manufacturers that have both shown signs of prioritizing sales in their home country.

And that might be a part of the supply issues facing U.S. buyers, which often rely on Korean-made batteries. Almost 60 percent of the utility-scale batteries deployed in the U.S. last year were made by Samsung SDI and LG Chem, according to BNEF’s Sekine.

“There is definitely some tightness in the global market,” said Larsh Johnson, chief technology officer of Stem Inc., one of the largest U.S. battery companies. “It’s one reason we're looking for new suppliers.”

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