Three reasons why vanadium redox flow battery technology has NOT hit the mainstream… yet
Vanadium redox flow batteries have shown plenty of promise over the past few years and delivered very little, however, big developments in China plus a perceived shortage of battery metals may be the spark this battery technology needs to lift off.
Stockhead took that question to vanadium expert David Gillam, the principal and CEO of financial consultancy Mastermines, who reckons while a lithium or Elon-Musk-style moment will come for vanadium redox flow batteries (VRFB) in the next two years, there are several reasons why this battery technology hasn’t taken off yet.
For a quick summary, vanadium redox flow batteries (VRFB) are used in large scale, battery storage systems that store excess power from the grid for use during peak demand periods.
Whether in combination with solar PV, biogas generators, wind power, or in parallel operation, the bulk storage capacity of these batteries allows consumption to be shifted completely to off-peak hours with cheaper electricity.
As the name suggests, VRFBs use vanadium-ions in the electrolyte solutions and are considered safer, more scalable, and longer lasting than their lithium counterparts with a lifespan of more than 20 years.
Other battery types like lithium-ion or leach-acid are subject to a charging cycle but VRFBs come with vanadium electrolyte storage tanks, which can be replenished even when the system is supplying power.
According to Gillam, investors are sitting back watching vanadium stocks wondering why market penetration has taken so long, but the situation is “very complex,” he says.
“Vanadium is quite unique as far as a battery metal goes and investors don’t really understand the basis of the problem.”
The initial investment for vanadium batteries is considerably more expensive compared to lithium, Gillam says, and while the price of lithium is increasing, VRFBs face a bigger issue.
Vanadium is an expensive metal and significantly drives up the cost of a VRFB system compared with other battery types.
If the uptake of VRFBs increases dramatically, so does the price of vanadium pentoxide (V205) – the material used in the electrolyte solutions.
“We believe anything under $10/lb is viable but let’s say there is a huge uptake in vanadium batteries – what happens when the price goes to $20?” Gillam asks.
“It has happened before, and it happens very quickly.
“You’ve got this very volatile price of the major component, so you can imagine battery companies would be worried about the cost because it could add 30% overnight to the batteries.
“At the same time, the financiers and miners would also be worried about the volatility of V205 – it’s great when it’s going up but what happens when a major starts up and there’s 10% additional capacity?” he explains.
The International Renewable Energy Agency (IRENA) reports installation costs for both vanadium redox flow and zinc bromine flow in 2016 ranged between US$315 and US$1680 per kWh as compared with lithium iron phosphate at US$200 to US$840 per kWh.
By 2030, IRENA says the installation cost for VRFBs is expected drop to between US$108 and US$576/kWh.
“Although they presently indicate high upfront investment costs compared to other technologies, these batteries often exceed 10,000 full cycles, enabling them to make up for the high initial cost through very high lifetime energy throughputs,” IRENA points out.
“Their long-term electrolyte stability, however, is key to this longevity and is the focus of an important avenue of research effort.”
In 2019, China was the world’s top vanadium producing country with output totalling 40,000Mt followed by Russia at 18,000Mt and South Africa at 8,000Mt where major players include LSE listed Bushveld Minerals and Glencore.
China is also a large spot market, which makes everything more difficult for ASX vanadium stocks, Gillam says.
“While off-take agreements will not be difficult, getting the funding from China to move towards mining is another matter that would take considerable effort.
“All investors want to see is new mine development outside China, but the problems are many.”
Around 90% of vanadium production is used to strengthen steel, making it economically vulnerable owing to its sensitivity to market demand by developing countries.
As Geoscience Australia notes, the vanadium price surged from US$5.70 in 2004 to US$16.89 in 2005 due to the growth of global steel production that caused an increase in vanadium consumption and a commensurate depletion of stockpiles.
Over the years, Australia’s reserves and resources of vanadium have also fluctuated in response to the volatile nature of the vanadium market but of the few main contenders in the space, Gillam believes we are beginning to see real effort from management.
“Investors will need to be patient and hope for a massive uptake that forces a market development outside China that can attract finance,” he says.
The question of whether flow batteries based on vanadium electrolyte are the main event is even more complex.
As it stands, China is leading the charge in the vanadium redox flow battery space where a hot bed of activity is taking place.
Last month, Shanghai Electric – a Chinese multinational power general and electrical equipment company – held the ‘Energy Integration, Smart Future’ Enterprise Summit where Yang Linlin, vice chairman of Shanghai Electric Energy Storage Technology Co revealed up to now, the company had 3GWh of orders for vanadium batteries.
In a LinkedIn post, Bushveld Energy CEO Mikhail Nikomarov said Shanghai Electric also announced the delivery of more than 50 vanadium battery energy storage projects and a cumulative installed capacity exceeding 50MWh.
#BMN VRFB’s starting to take-off as predicted.
3GWh of vanadium battery orders is huge. pic.twitter.com/5DmXzbnWNH
— AimWarrenBuffet (@AimWarrenBuffet) September 28, 2022
But Gillam says we need to be cautious of wild claims by Chinese entities as there can be confusion between what they wish for and reality.
“That being said, there is no doubt we are seeing a substantial increase in real projects utilising vanadium in 2022 along with many new entrants.
“There is also competition emerging from iron flow batteries and we are watching how that plays out carefully,” he says.
“From conversations we know the Chinese are also watching but probably lack the technology so will continue to favour vanadium flow batteries within China in the short to medium term.
“We can see this competition emerging rapidly and just last month the start of construction for a $70M factory to produce ESS IFBs in Queensland – how serious that competition is, remains to be seen.”
There is also a distinct possibility that no single winner will emerge due to a dramatic uptake in demand.
“We may just need everything we can produce on a number of fronts – I don’t se this a mere market shift, rather as a new energy revolution that will drive markets for years to come,” Gillam adds.
“A combination of better scale and lower manufacturing costs for flow batteries as well as higher prices for lithium will push the market towards flow batteries and iron flow batteries, if they are successful, will be a real threat if they don’t have that high electrolyte cost and we all know how cheap iron ore is.”
One of the biggest players on the ASX is AVL whose subsidiary, VSUN Energy, develops renewable energy storage solutions using VRFB technology.
At the end of 2021, AVL signed an an agreement with VSUN Energy for a project utilising a stand-alone power system (SPS) based on VRFB energy storage tech at its Nova Nickel Operation.
The VRFB will be initially free issued, with ownership or rental options after a period of 12 months.
AVL marketing manager Sam McGahan says this will be the first standalone power system in Australia using the vanadium flow battery.
“Over east there are a few vanadium flow batteries installed at different universities, all up I’d say there is around eight vanadium flow batteries in Australia,” she says.
“It is important to have the right solution for the right setting but with the huge demand for lithium in electric vehicles, the market is beginning 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 – the way we see it, there isn’t a winner and a loser.”
AVL is also developing the Australian Vanadium Project in WA’s Murchison project, where a bankable feasibility study (BFS) released in April confirmed the project as a potentially globally significant primary producer.
TMT’s subsidiary, vLYTE, was formed to add value to the high-quality feedstock from the Murchison Technology Metals Project (MTMP) in Western Australia – right next door to AVL – on downstream processing opportunities such as vanadium electrolyte production.
vLYTE is working with global battery manufacturers and renewable energy suppliers as it progresses its downstream processing strategy.
Recently, TMT revealed it will collaborate with the Government backed Future Battery Industries Cooperative Research Centre (FBICRC) to enhance the performance of vanadium redox flow batteries, with product from the Murchison project to be utilised as feedstock for vanadium electrolyte research.