When it comes to energy, the coronavirus doesn’t discriminate.
Restrictions imposed on travel and working hours as the virus has expanded are now expected to make deep dents in Chinese oil demand this year, redrawing the supply-demand balance and likely undoing the bullish influence of OPEC cuts and major supply disruptions in markets such as Libya.
But due to China’s position as both a manufacturing and consumption powerhouse—not just for oil but for renewable energy—the virus’s fallout will extend far beyond fossil fuels.
Supply chain disruptions are now expected to back up an already tight supply chain for manufacturing wind turbines, and potentially put the brakes on the rapid growth of battery storage.
Wind turbines
Production delays to manufacturing as a result of the outbreak could cause installations of wind turbines in China to drop by as much as 50% this year, according to energy consultancy Wood Mackenzie.
“Due to an already tight supply of key components such as turbine blades and main bearings before the Covid-19 outbreak, first-quarter production delays have already reduced annual output of those components by about 10%,” in China, said Wood Mackenzie senior consultant Xiaoyang Li.
China has the largest wind power capacity in the world, according to the Global Wind Energy Council. In 2018, China and North America together made up about 50% of total installed capacity worldwide, the Council says.
If the outbreak comes under control in the next few months, those wind power elements without supply bottlenecks—generators, for instance—should be able to bounce back, says Li. But if the virus continues to wreck havoc into the middle of the year, she forecasts that the estimated new capacity for this year could drop by as much as half.
The impact won’t only be felt domestically. Installations of wind turbines in the U.S. could also be stalled, with the fallout from the virus expected to strain supply chains for key parts produced in China that were already bottlenecked before the outbreak—putting at risk 6 Gigawatts of wind power capacity scheduled to be installed this year, Wood Mackenzie says.
Battery storage
It’s not just wind turbines, either. Last week, the consultancy warned that the virus had already cut into the production of battery storage by 10% so far in 2020, compared to the pre-virus production forecast.
Manufacturing in Hubei province—where the virus originated—and surrounding provinces are responsible for manufacturing more than 60% of the country’s total battery cell production, according to the consultancy.
That means the outage could also snarl the incredible growth in battery production and the rise of the electric vehicle, delaying development not just in China—the world’s largest market—but in North America and the U.K. too.
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