Local sourcing in energy storage supply chains significantly affects risk profiles by reducing some traditional supply chain vulnerabilities but introducing new challenges, as evidenced by recent industry analyses.
Reduced Risks from Local Sourcing
- Mitigation of geopolitical, regulatory, and trade-related risks: Sourcing components and systems within the U.S. or North America lessens exposure to tariffs, long international shipping routes, and geopolitical tensions that often affect imports from Asia and other regions. For example, EVLO Energy sources 100% of its electronic components from North American suppliers to ensure supply stability and cybersecurity, highlighting the reliability benefits of local sourcing.
- Lower logistical complexity and faster delivery: Localizing supply chains reduces dependence on long ocean freight, which can be unpredictable and subject to disruptions, thereby potentially reducing project delays.
- Improved supplier relationships and availability of spares: Deep local supplier networks improve access to spare parts and allow more responsive supply chain management, supporting consistent performance and safety in battery energy storage systems (BESS).
New Risks and Challenges from Local Sourcing
- Startup and operational risks in new domestic factories: Many local factories are newly established due to incentives such as the US Inflation Reduction Act (IRA) and may face “startup pains” affecting production quality and delivery timelines early on.
- Partial dependence on imported components: Even domestically assembled energy storage systems often incorporate critical raw materials and components from abroad, which means supply chain risks linked to imports (e.g., tariffs, forced labor compliance issues) are not completely eliminated.
- Regulatory compliance complexity: Sourcing locally may involve compliance with U.S. regulations such as the Uyghur Forced Labor Prevention Act (UFLPA), which bans materials linked to forced labor in certain regions like Xinjiang, introducing a new layer of supply chain scrutiny and risk management.
- Market viability and economic dynamics: Despite government incentives, economic forces and market dynamics can impact the viability of new domestic suppliers and factories.
Summary
Local sourcing positively impacts energy storage supply chains by reducing exposure to international trade and logistical risks, improving component availability, and enhancing supply chain reliability. However, it introduces fresh challenges such as startup production risks, partial import dependencies, regulatory compliance burdens, and economic uncertainties around new domestic manufacturing facilities. Stakeholders must carefully balance these risk factors when planning and managing energy storage procurement strategies.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-is-local-sourcing-affecting-the-risks-associated-with-energy-storage-supply-chains/
