Vanadium redox flow batteries have shown great promise over the past few years with few deliveries, however, significant developments in China coupled with a shortage of battery metals could be the spark that this battery technology needs to kick off.
stockhead The question was posed to vanadium expert David Gillam, principal and CEO of financial advisory firm Mastermines, who believes that while the next two years will see a lithium or Elon-Musk-esque moment for vanadium redox flow batteries (VRFBs), But there are several reasons why this battery technology hasn’t taken off.
To briefly summarize, vanadium redox flow batteries (VRFBs) are used in large-scale battery storage systems that store excess electricity from the grid for use during periods of peak demand.
Whether combined with solar photovoltaics, biogas generators, wind power, or running in parallel, the large storage capacity of these batteries can shift consumption entirely to off-peak times when electricity is cheaper.
As the name suggests, VRFB uses vanadium ions in the electrolyte solution, which is considered safer, more scalable and longer-lasting than its lithium counterparts with a lifespan of more than 20 years.
Other types of batteries, such as lithium-ion or leaching acid, require a charge cycle, but the VRFB is equipped with a vanadium electrolyte reservoir that can be replenished even when the system is powered.
Gillam said investors were watching vanadium stocks wondering why it took so long for market penetration, but the situation was “very complicated,” he said.
“Vanadium is very unique in terms of battery metals, and investors don’t really understand the root of the problem.”
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Vanadium cost pushes up VRFB cost
The initial investment in vanadium batteries is much more expensive than lithium batteries, and while the price of lithium is rising, VRFBs face bigger problems, Gillam said.
Vanadium is an expensive metal that significantly increases the cost of VRFB systems compared to other battery types.
If the use of VRFB increases dramatically, so does the price of vanadium pentoxide (V205), a material used in electrolyte solutions.
“We believe anything below $10/lb is feasible, but assuming that vanadium batteries are used a lot — what happens when the price hits $20?” Gillam asked.
“It’s happened before, and it happened very quickly.
“Prices for major components are very volatile, so you can imagine battery companies worrying about cost because it can add 30 percent to a battery overnight.
“At the same time, financiers and miners are also concerned about the volatility of V205 — it’s fine when it goes up, but what happens when a major launches and has 10% extra capacity?” he explained.
The International Renewable Energy Agency (IRENA) reported that installation costs for vanadium redox flow and zinc bromine flow ranged from $315 to $1,680 per kWh in 2016, compared to $200 to $840 per kWh for lithium iron phosphate.
Installation costs for VRFBs are expected to fall to between $108 and $576/kWh by 2030, IRENA said.
IRENA states: “Although they currently show high upfront investment costs compared to other technologies, these cells typically exceed 10,000 full cycles, enabling them to make up for the high initial cost with a very high lifetime energy throughput. .”
“However, their long-term electrolyte stability is key to this longevity and the focus of important research avenues.”
In 2019, China was the world’s largest vanadium producer with a total output of 40,000 tonnes, followed by Russia at 18,000 tonnes and South Africa at 8,000 tonnes, with major players including London Stock Exchange-listed Bushveld Minerals and Glencore.
China is also a large spot market, making ASX vanadium stocks more difficult, Gillam said.
“While off-take agreements are not difficult, getting money from China for mining is another thing that requires considerable effort.
“All investors want to see new mines developed outside of China, but there are a lot of questions.”
About 90% of vanadium production is used to strengthen steel, making it economically vulnerable due to its sensitivity to market demand in developing countries.
As noted by Geoscience Australia, vanadium prices surged from US$5.70 in 2004 to US$16.89 in 2005 as growth in global steel production led to higher vanadium consumption and a corresponding reduction in inventories.
Australia’s vanadium reserves and resources have also fluctuated due to the volatility of the vanadium market over the years, but among the few major contenders in the space, Gillam believes we are starting to see real efforts from management.
“Investors need to be patient and hopefully push markets outside of China to attract capital,” he said.
Reading now – uh, we don’t even have the resources to replace the batteries we’re running now…
Competition and Market Outlook
The question of whether vanadium electrolyte-based flow batteries are the big game is more complicated.
For now, China leads the field in vanadium redox flow batteries, where activity is ongoing.
Last month, Shanghai Electric, a Chinese multinational power general electric equipment company, held the “Energy Integration, Smart Future” enterprise summit. Yang Linlin, vice chairman of Shanghai Electric Energy Storage Technology Co., Ltd., revealed that as of now, the company has 3GWh of vanadium battery orders.
Shanghai Electric has also announced the delivery of more than 50 vanadium battery energy storage projects with a cumulative installed capacity of over 50MWh, Bushveld Energy CEO Mikhail Nikomarov said in a LinkedIn post.
#BMN VRFB started to take off as expected.
3GWh vanadium battery orders are huge. pic.twitter.com/5DmXzbnWNH
— AimWarrenBuffet (@AimWarrenBuffet) September 28, 2022
But Gillam said we need to be cautious about the barbaric claims of Chinese entities because of the potential confusion between their aspirations and reality.
“Having said that, there is no doubt that we will see a substantial increase in actual projects using vanadium in 2022, with many new entrants.
“There’s also competition in iron flow batteries, and we’re carefully watching the outcome of that competition,” he said.
“We know from the conversation that the Chinese are also paying attention, but there may be a lack of technology, so vanadium flow batteries will continue to be favored in China in the short to medium term.
“We can see this competition emerging quickly, and just last month, construction of the $70 million ESS IFB plant in Queensland began – it remains to be seen how serious that competition will be.”
There is also the obvious possibility that there will be no single winner due to the dramatic increase in demand.
“We may just need everything we can produce on multiple fronts – I don’t see this as just a market shift, but a new energy revolution that will drive the market for years to come,” Gillam added.
“The combination of better scale and lower manufacturing costs for flow batteries and higher lithium prices will drive the market towards flow batteries and iron flow batteries, if they are successful, if they are not that high, it will be a real The threat of electrolyte costs, we all know how cheap iron ore is.”
ASX vanadium stocks to watch
One of the largest players on the ASX is AVL, whose subsidiary VSUN Energy uses VRFB technology to develop renewable energy storage solutions.
At the end of 2021, AVL signed an agreement with VSUN Energy for a project to utilize a VRFB energy storage technology-based Standalone Power System (SPS) in its Nova Nickel Operation.
VRFB will initially be released for free, with ownership or lease options after 12 months.
AVL marketing manager Sam McGahan said it would be the first independent power system in Australia to use vanadium flow batteries.
“In the east, different universities have installed some vanadium flow batteries, and I would say there are about eight vanadium flow batteries in Australia,” she said.
“It’s important to have the right solution for the right environment, but with the huge demand for lithium in electric vehicles, the market is starting to look at other materials for stationary storage.
“The world is going to need a lot of energy storage — pumped hydro, iron flow batteries, vanadium, lithium-ion — and in our view, there are no winners and losers.”
AVL is also developing an Australian vanadium project at the Murchison project in Western Australia, which a Bank Feasibility Study (BFS) released in April confirmed as a potentially globally significant primary producer.
TMT’s subsidiary vLYTE was established to add value to quality feedstock from Western Australia’s Murchison Technical Metals Project (MTMP) – just next door to AVL – on downstream processing opportunities such as vanadium electrolyte production.
vLYTE is working with global battery manufacturers and renewable energy suppliers to advance its downstream processing strategy.
Recently, TMT revealed that it will be working with the government-backed Future Battery Industry Cooperative Research Center (FBICRC) to improve the performance of vanadium redox flow batteries and to use products from the Murchison project as feedstocks for vanadium electrolyte research.
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Other major players in the space include TNG (ASX:TNG), Vanadium Resources (ASX:VR8), Critical Minerals Group (ASX:CMG) and Manuka Resources (ASX:MKR).