Deloitte Insights Electric power supply chains: Achieving security, sustainability, and resilience As supply chain disruptions become the new norm, what strategies is the electric power sector adopting to mitigate their impact? Contents Introduction 2 Multiple disruptors impact the electric power supply chain 3 Demand growth could widen the gap between climate goals and critical material supplies 7 Securing the electric power supply chain is increasingly critical 11 Building sustainability into the electric power supply chain is becoming a priority 14 A circular economy can boost supply chain security, sustainability, and resilience 17 Creating robust electric power supply chains: The road ahead 22 Endnotes 23 Electric power supply chains: Achieving security, sustainability, and resilience Introduction O VER THE PAST two years, multiple increasingly expect it. Some are integrating supply disruptions to supply chains have affected chain management deeper into business planning operations across most industries. And the and involving supply chain managers in the capital electric power sector is no exception. The sector planning process. They are working to develop was grappling with numerous challenges within its more secure and sustainable supply chains, while supply chain networks even before recent managing third-party risk to ensure resilience in disruptions driven by the pandemic and the the face of future disruptions. Russian invasion of Ukraine. 1 To better understand the types of supply chain These disruptions—ranging from logistics disruptors, their impact on the sector’s operations, bottlenecks to shortages of raw materials and and the strategies used to overcome these components and labor shortages—have resulted in disruptions, Deloitte surveyed more than 50 rising costs and a scarcity of essential electric electric power and renewable sector executives in supplies. They have also widened the gap between the United States. The findings were supplemented demand and supplies of electrical equipment and by interviews with executives and leaders in 2 components, slowing the clean energy transition. utilities and other electric power providers. Using As a result, many electric power and renewable these insights, this report takes an in-depth view of energy companies are revisiting supply chain how the electric power sector can improve its strategies and rebooting their approach to supply supply chain security, sustainability, and resilience. chain risk management—and their boards 2 Multiple disruptors impact the electric power supply chain A COMBINATION OF DISRUPTORS is driving We have divided these disruptors into five supply chain gridlock and impacting end- categories—environmental, geographic, to-end operations in the electric power operational, technological, and macroeconomic— sector. Prepandemic supply chain vulnerability, which impacted between 32% and 98% of our due largely to the geographic concentration of survey respondents’ supply chain operations component manufacturing and critical minerals (figure 1). mining, has been compounded by the effects of the pandemic and the Russian invasion of Ukraine. 3 Electric power supply chains: Achieving security, sustainability, and resilience FIGURE 1 Respondents report operational and macroeconomic disruptions as the most significant supply chain challenges Percentage of respondents who identified each disruptor as having significant impact Operational Manufactured component shortages, logistics constraints, divergent product standards and regulations 98% • Limited availability of raw materials and longer lead time for components • Global shipping congestion, rising freight charges, and container shortages are affecting project timelines • Divergent product standards coupled with pent-up demand can hinder electrical equipment procurement Macroeconomic Trade policies, labor shortages 92% • Trade tariffs and quotas can disrupt procurement of materials and components from foreign suppliers, and domestic manufacturers may lack production capabilities to fill gaps • Labor constraints at ports and shortages of skilled laborers are also contributing to the supply imbalance Technology Risk of cyberattacks, chip shortages 44% • Fragmented digital supply chains for electric power companies are contributing to supplier-driven cyber risks • The global shortage of high-end semiconductors