Shares in vanadium battery maker Invinity Energy Systems (LON:IES) are going to be powered by one big factor: the eventual economic recovery, which will likely see government stimulus packages around the world plough more money into renewables. The share is off recent highs and this could be a good time for bold investors to get in on the act.
Energy storage has a strong investment case
We have already seen in China, which rebooted industrial stimulus as it emerged partially from the Covid-19 pandemic, that green energy remains at the forefront of the economy. And as countries recover from the pandemic and get back to business, we can expect to see more of the same as they push on with reaching renewables targets.
How Invinity fits into this strong investment case is in energy storage: its vanadium batteries provide the solution to the peaks and troughs in production that make renewables – such as solar and wind – unreliable as a chief energy source.
Globally, Invinity estimates that the market for its vanadium batteries will exceed $4.25 billion by 2028 and its goal is to claim a 10% slice of that. The question investors have to consider is to what extent Invinity is positioned to take advantage of this huge market potential.
Does Invinity’s potential outweigh the risks?
The company, created by a merger in 2019 of Avalon Battery and redT, has already weathered the storm of the pandemic fairly well. Since we wrote a bullish case about the stock in October, it has provided a steady flow of positive news and raised additional funds on the market. It’s certainly done nothing to dampen our enthusiasm.
Most notable is a deal announced in November to provide the world’s largest solar-powered vanadium flow battery to a Southern Australian facility which will be the world’s first dispatchable solar plant, harnessing the energy from the sun and storing it in vanadium batteries to provide a smooth power supply during daily peak demand.
Australia’s energy minister said of the deal that vanadium flow batteries could play a “major role” in addressing the emerging need for storage.
New deals in Scotland and California
Invinity has also announced a deal with the European Marine Energy Centre, prompting Scotland’s energy minister to say the technology would be key to energy transition, and a further deal in California where its batteries have been included in four of eight projects selected by the California Energy Commission.
The company, which debuted on the London Stock Exchange in 2019, has yet to post a profit, so this might have more risk averse investors questioning whether they should take a punt and ignore the golden rule to avoid stocks with low or negative P/E ratios. There is little analyst coverage of the stock so far (two), although the rating consensus is ’buy’, so it’s also a dip into relatively uncharted waters.
Nonetheless, the share is trading at 185 pence, a discount of about 22 percent to its 52 week high. Although it’s way up on its 52 week low of 25 pence, it has been hovering in the 200-250 pence range. A continued positive news flow and an economic recovery from the pandemic, which we all hope is around the corner and hopefully at least in 2021, could easily see the share break through this resistance level.