Covid-19: IHS Markit expects demand for storage and solar to fall significantly

A slump in demand would weigh more heavily on the storage industry than a temporary production shutdown and IHS Markit analysts say that is where the risk lies, rather than with a temporary shortage of battery cells. A similar prediction has been made for the PV market.

From pv magazine Germany.

With the Covid-19 pandemic already affecting global economies, a leading analyst has predicted the eurozone will enter recession this year. With energy among the sectors in the crosshairs, Julian Jansen, a leading analyst at business intelligence firm IHS Markit, cited falling demand, supply chain squeezes and regulatory challenges as potential worries which could affect the solar and energy storage industries.

Although automotive and residential storage customers may experience knock-on effects from delays in the supply of battery cells from China, which hosts more than 70% of global production capacity, manufacturing is reportedly already restarting in the storage heartland.

It is an anticipated decline in demand which poses the bigger threat to the storage industry and is likely to kick in as early as three months’ time, according to IHS Markit. “The slowdown in demand for EVs [electric vehicles] caused by the sudden halt in world trade will inevitably affect global demand for batteries,” said Jansen. “The future development of the Covid-19 pandemic in Europe and North America, as well as its global spread, creates further uncertainty and the impact on battery suppliers’ business will likely become more severe in the second quarter of 2020 as there will be a lack of new orders.”

Cheaper cells?

That could, however, drive down the price of battery cells for stationary storage if manufacturers need to reduce inventory.

With domestic finances in turmoil for many quarantined citizens, IHS Markit said a strong start to the year for residential solar-plus-storage installations was likely to be derailed by the coronavirus outbreak, even if some markets have reportedly experienced an orders boom. “Residential customers are facing quarantines and income uncertainty,” said Jansen. “With some of the largest global markets – Germany, Italy, the United States and the United Kingdom – particularly affected, IHS Markit expects residential storage installations in the second quarter of 2020 to reduce.”

IHS Markit quantified that prediction as an expected 10-15% decline in the number of new home solar-plus-storage systems installed this year compared to last year, in a segment which has not suffered Covid-19-related supply bottlenecks to date.

Belt tightening will also take place among businesses as the economic fallout of the pandemic becomes clear, with Jansen predicting commercial and industrial energy storage investment is also likely to suffer.

The business intelligence firm expects grid scale storage projects to proceed though, albeit with delays of up to three months currently anticipated. If the battle to control the spread of Covid-19 takes longer than expected though, even front-of-meter projects could fall away.

Demand stalls

In the solar industry, as with energy storage, falling demand is likely to exact a heavier long term cost than supply problems. Production levels for modules and inverters are likely to be lower than anticipated in 2020, thanks to Covid-19 disruption in the first half of the year. However, it is falling demand which is following the virus into Europe, the U.S. and India which is causing greater concern.

“While manufacturing has gradually returned, international demand has stalled alarmingly,” said IHS Markit. The industry will fervently hope that is down to the practical constraints caused by logistics problems and a lack of labor, rather than manifesting into a longer term pattern.

Covid-19

Read pv magazine’s coverage of Covid-19; and tell us how it is affecting your solar and energy storage operations. Email editors@pv-magazine.com to share your experiences.

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