The rise in opportunities for vanadium supply Excerpts:
11th February 2022
Andrew O’Donnell, Founder of The Market Mindset, details the rise in opportunities for vanadium supply
As we embark on a new year, vanadium supply continues to emerge as one of the most promising yet understated opportunities. Many of us have been flirting with this high-value strategic metal for some time, drawn to the unique characteristics that make it highly practical in the infrastructure and aerospace sectors, not to mention a significant player in the world’s green revolution.
In 2018, vanadium was considered the best performing metal of the year, outperforming cobalt, lithium, and nickel. This resulted from a perceived vanadium shortage in the steel sector due to China strengthening its rebar standards. Amazingly, a mere sprinkling of vanadium fortifies steel, rendering it lighter yet twice as strong.
As China moves forward on its massive Belt and Road Initiative (BRI), it will require and reserve more vanadium, providing a long-term structural increase in demand.
The more exciting component of the vanadium growth story is its starring role in the burgeoning battery market with a renewable energy storage technology known as the vanadium redox flow battery (VRFB), which is starting to take off.
As each large solar or wind project demands a disrupted chunk of the world’s vanadium production in a VRFB application, we believe there will be a significant shift over the next five years where vanadium’s role in the green energy space may surpass that needed in the steel sector. Adding this new demand for vanadium in the green energy battery space translates into higher vanadium prices. Since early 2021, vanadium has been back on a rising metal price trajectory like other green energy battery metals.
The opportunities for vanadium supply
The large energy storage battery market is enormous and accelerating to meet the demands for efficient energy storage, green technology, and renewable solutions in solar, wind, and grid-scale applications. The COP26 coalition, a conglomerate of banks, insurers, critical and investors worth $130tn, recently vowed to put combatting climate change at the centre of their work and gained firmer support for green investing.
Let us put this in perspective: the world economy is around $94tn. That is a lot of money creation explicitly focused on climate change. Regardless of your thoughts on the global economy, I think it is fair to say this narrative will play out as predicted.
The VRFB battery portion of that market is small but now growing. There is considerable blue-sky potential for its market share to grow as it offers superior performance, safety, cost-effectiveness, lifespan and recyclability when compared to lithium-ion in industrial energy storage applications. It has been said that larger-scale deployments over the next five years could result in redox batteries revolutionising modern electricity grids. It is one-third the cost of lithium-ion, is reusable and recyclable, has a longer lifespan of 25+ years, is non-flammable, and is extremely safe. There is even an opportunity to combine lithium with vanadium in electric car batteries for longer charges.
Here’s evidence that vanadium is gaining steam. A rise in China’s vanadium demand alone from the redox battery industry is expected to hit >250% to a minimum of 9,100 t of vanadium pentoxide (V2O5) equivalent in 2022, up from last year’s 3,640 t, on the backs of energy storage projects that started production in the first half of the year.
This, coupled with Biden’s infrastructure bill which earmarks roughly US$7bn for grant awards aimed at expanding US-based battery raw materials, research and development, and supply chain, has investors very excited about vanadium’s future prospects. This US commitment can only accelerate the opportunity and is obviously excellent news for US- based vanadium projects….
The global battery race is on
I predict that we will see the tides change for vanadium over the next decade as the need for high-performance batteries, green energy storage solutions, and renewable technologies continue to skyrocket. Imagine the myriad of projects that will emerge as the world begins to capitalise on the superior qualities of redox batteries that are safer, cheaper, reusable, recyclable, and offer unmatched performance and longevity.
The tides are already beginning to shift. In Japan, Sumitomo Electric is providing redox batteries to electric power companies, renewable energy producers, power retailers, and end consumers. Joint ventures are also shaping up in this arena, including EVERFLOW, a partnership between Schmid and Nusaned, a subsidiary of Saudi Aramco, that will facilitate the construction of a factory and the development of vanadium redox flow battery technology.
In China, redox battery provider VRB Energy recently unveiled a plan to build a gigafactory to produce vanadium redox flow batteries in the Hubei province. The project will include developing a 100 MW solar park linked to a 100 MW/500 MWh vanadium flow battery and constructing a research and development facility.
Another notable player in the redox battery market includes vertically-integrated Rongke Power, which developed a 200 MW/800 MWh vanadium flow battery in China as part of the government’s efforts to spur interest in the technology. Rongke has deployed almost 30 similar projects, some of which are attached to operating wind farms in the Liaoning province of China.
There is also LSE-listed redox flow battery manufacturer Invinity Energy Systems that are looking to supply California with the technology by participating in four separate energy storage projects funded by the California Energy Commission (CEC). In 2020, the CEC released a grant funding opportunity to promote innovative, longer-duration, non-lithium-ion energy storage solutions, and all four Invinity submissions were accepted.
There are three vanadium supply producers outside of China, and two of them, Largo Resources and Bushveld Minerals, have gone vertical in the sense that they are building battery divisions to capture the massive opportunity in long-duration energy storage. By fully integrating, these companies now have dedicated marketing and sales teams to compete with the lithium battery counterpart. With metal sourcing, processing, manufacturing and distribution under one umbrella, these companies can offer competitive pricing to their battery buyers. The more solar and wind projects that adopt vanadium batteries, the more mainstream they will become.
This is hardly an exhaustive list of companies, but it is a starting point to illustrate the global shift that will drive demand for green metals like vanadium. With the US Federal Government and states like California providing grants for redox batteries, we see great things in store for Phenom Resources, a company with the right deposit in the right jurisdiction, unmatched expertise, and the capacity to create a domestic supply chain.
Securities Disclosure: I, Andrew O’Donnell, of The Market Mindset have not been renumerated in any way for this article. The Market Mindset is a newsletter focusing on the foundation of mining to support the clean, green and electric vision of the future.
https://www.innovationnewsnetwork.com/phenom-a-rising-star-in-vanadium-supply/18149/