Franklin Home Power Solution
Training Center
In this interview, FranklinWH’s team shares actionable insights installers can take to proactively tackle the challenge of home battery supply chain reliability.
Supply chain shortages and procurement delays are big problems for residential solar installers. In fact, a recent EnergySage Installer survey found that three out of five respondent businesses were harmed by supply chain disruptions in 2021. Supply chain constraints primarily manifested as freight delays, adversely impacting the availability of solar panels and batteries — though it’s important to know that there is a fundamental difference in how solar and lithium battery supply chains work.
What challenges do home batteries face in the lithium energy storage system (ESS) supply chain?
In the industry, the smaller the battery, the bigger the headache. If you are a cell supplier, you’re going to ensure that your largest or most valuable customers are served first. It takes a lot of home batteries to equate to the same number of lithium cells as in a single electric vehicle. So it’s natural for lithium cell suppliers to focus on their EV customers first. As a result, the EV market is typically first in line for Tier 1 lithium cell suppliers, while other products, such as residential batteries, need to compete with other demands for the inventory that’s left.
With the EV market trumping the home battery market for the foreseeable future, it’s important for businesses relying on home battery products to plan their business operations accordingly to mitigate supply chain issues as much as possible.
Do you expect supply to remain tight for home storage batteries?
Yes. Indications are that cell supply for residential products will remain constricted for the near term.
But that doesn’t mean installers should lose confidence in opportunities in the residential solar sector. Quite the contrary. In fact, a recent Wood Mackenzie report indicated that in Q2 of 2022 residential demand rose to over 150 MW for the first time, even with ongoing shortfalls, and solar installers continue to add storage to their product offerings despite ongoing procurement issues.
There are ways installers, distributors, and manufacturers can work together to better manage the battery supply chain to lessen the challenge.
So, there are ways to minimize the supply chain challenge? The 2021 EnergySage Installer Survey found that 35% of surveyed installers pointed to the availability of batteries as a primary barrier to selling storage, a 75% increase from 2020 and a 150% increase from 2019. That sounds dire.
It’s not as dire of a situation as it appears. There are some simple steps installers can take to manage the dynamics of lithium battery supply and demand.
First, they have to realize that distributors order products in volume to minimize shipping costs and that it can take up to four months to manufacture and deliver a home battery to their regional warehouses.
That means installers who plan to include batteries as part of their service offering should forecast six months in advance to avoid long delays between the homeowner sale and installation.
The dynamics of the battery supply chain are substantially different from what installers are accustomed to when ordering solar panels.
That’s interesting. What exactly do installers need to know about the differences between solar panel and battery supply chains?
Solar panels can be kept in a distributor’s inventory for sustained periods without any significant quality degradation. Batteries have a shelf life; therefore, installers need to be aware of the time sensitivity of when the battery warranty goes into effect. Then there is the reality that distributors need to order in bulk to achieve shipping cost efficiencies. Port arrival to the distributor’s warehouse can take weeks, after which the distributor still needs time to unpack the container and arrange to fulfill the customers’ orders. The result is a longer procurement lead time for batteries than for solar panels.
I’ve been telling installers since 2017 that the key to battery supply chain reliability is sales forecasting. They don’t need to wait until the homeowner’s contract is signed and the necessary permits are obtained to place an order with their distributor. By anticipating demand and placing orders earlier, they can leapfrog their competition with greater supply chain reliability and more on-time installations.
Are there also ways installers can work with their distributors to improve home battery storage supply chain reliability?
Great question. Absolutely. The best-case scenario is for distributors to be reaching out to installers to gain visibility into their sales forecasts weekly. That visibility enables distributors to plan better and ensure they have the inventory to meet homeowner demand in a timely manner. Distributors that aren’t working in this manner likely won’t be able to meet the demands of the installer’s solar and storage business in a predictable way.
I can see where more predictable sales forecasting can help to resolve supply chain uncertainty, but won’t manufacturers still prioritize EV market needs over residential battery demand?
Volume is going to be our value in the residential sector. It will take volume to get the attention of more top-tier lithium battery suppliers.
That will be better for our entire industry, including our competitors. Supply will be more dependable, and quality control will be higher.
You’re saying that not all residential batteries today are created the same?
Exactly. I’d advise installers who are evaluating home batteries to take a look under the hood at the components that make up the system. There’s not a lot of innovation in the market today. Some of the most recognized home battery brands are simply system integrators that use white-labeled battery components. That not only elongates the supply chain, but it means less control over the intellectual property (IP) itself and higher markups. Manufacturers that are technology-driven are a better option for installers and homeowners when evaluating home batteries.
I can see where the added transparency makes the end-to-end supply chain work better. In closing, do you have a final takeaway?
Yes, there is one other critical piece of advice I’ll leave with installers to help ensure their success in the solar and storage sector. Reliability is the key to differentiation in this industry. And partnering is the key to reliability. Get to know your distributors and manufacturers and create an ongoing, transparent dialogue with them. The more they know about your business and how you are generating demand, the better able they will be to help you succeed.
About FranklinWH
FranklinWH Energy Storage is a research-driven company focused on next-generation residential energy management and storage solutions. The company manufactures the Franklin Home Power system. Founded in 2019, headquartered in the San Francisco Bay Area, and funded by Sequoia Capital, FranklinWH’s team has decades of experience in energy systems, from design, through manufacturing, to sales and installation. They also have AVL listed with multiple financial institutions.