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Here at The Armchair Trader we think the global transition to clean energy is going to be one of the dominant investment themes of the next decade, on a scale comparable with that of the Internet revolution in the 1990s or the smart phone in the 2010s. But energy storage remains a big issue – even with all those new sources of power, how do you make sure communities receive their electricity when the wind is not blowing, or the sun is not shining?

One solution is the flow battery (sometimes also known as redox flow batteries). They are chemically-based energy cells that can store electicity in electrolytes rather than the electrode materials of conventional batteries. Single liquid flow batteries, that use a rechargeable liquid, can be used for grid storage and rolled out to power everything from hospitals to mines, to eventually cities.

Vanadium: an important role in renewable energy

Flow batteries look set to play an important part in the development of the global renewables market, which itself is expected to reach a size of $1.5 trillion by 2025. According to a report from Markets and Markets, the flow battery market, valued at a mere $187 million in 2017, is projected to reach $946 million by 2023. This represents a CAGR of 32.7% between 2018 and 2023.

Vanadium battery technology looks to be critical in terms of the capital cost of energy storage, due to its high efficiency, superior energy density, and most importantly, lengthy lifespan. Energy companies are seeking infrastructure solutions like this that can help them to build a grid that operates cheaply and reliably, and where batteries using expensive vanadium can be counted on to last for years.

Low cost energy storage is going to be very important in the years to come, and vanadium redox flow batteries are considered to be one of the lowest cost means of storing electricity effectively in a localised fashion. Like mobile phone masts, they may soon become ubiquitous.

A scalable solution for future power

Vanadium flow batteries are already being scaled up for use by utilities – Rongke Power in China, for example, has been involved in the construction of one of the largest batteries of this type, designed to hold 800 MW hours of electricity, which should be enough to power thousands of homes.

One of the challenges facing the vanadium flow battery market is the global volume of production – the world vanadium market is sustained by a limited number of mines, with a small number of others coming online soon. This is going to eventually place a premium on vanadium and vanadium mining companies.

“Vanadium is eminently recyclable,” points out Clive de Larrabeiti, founder of Pineapple Power. “It is possible for vanadium miners to lease the material out to battery users for a lengthy period and then take it back to be recycled. That is one of the key advantages it enjoys over lithium, for example.”

Vanadium enjoys an edge over lithium in its scalability as well: if large projects like mines, or remote settlements, or cities are going to fully enjoy the benefits of clean energy technology, then the vanadium flow battery is more likely to hold the answer.

The vanadium battery market seems to be gathering speed quickly: companies are starting to place their orders now. Invinity Energy Systems (AIM:IES) announced on 15 June that since the start of the year, it has received signed order confirmations for 40 vanadium flow batteries constituting some 1.7MWh of capacity. Orders were received from, among others, a US municipal utility, an Asia-based developer of energy storage projects, and a major global retail chain.

Invinity also noted that it was involved in a trial project with a US utility using 240kWh battery modules. It is interesting that many of these orders were received during the onset of the pandemic, reflecting the urgency that companies and municipalities feel when it comes to sourcing storage capacity.

We are already seeing another upward trend in vanadium prices, even as production costs drop somewhat. Bushveld Minerals (LON:BMN) has been investing in its vanadium processing capabilities and seeking further manufacturing partners, a key part of its future strategy. It wants to become less dependent on a volatile vanadium price, which has seen vanadium trading at around $20/kg in Europe in Q1 (the metal hit $34/kg in 2018).

“We are in a nascent situation right now with the vanadium battery market,” adds Pineapple Power’s de Larrabeiti, “there are very few producers and players in the market, but this technology is going to be needed, and at scale, if large populations are to fully enjoy the benefits of clean energy in the future.”

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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  1. they are too expensive. VRBs only make sense if you have cheap vanadium and with cheap I mean below Bushveld’s of cost of production.

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