Storing up potential

By Davide Ghilotti
Published: Thursday, 23 February 2017

Falling prices of renewable energy, increased interest in energy storage and demand for versatile off-grid applications spell good news for the expanding vanadium battery market, Davide Ghilotti, Chief Reporter, finds.

After years spent on the edges of the energy market, renewable energy production has boldly stepped into the limelight. 

Solar photovoltaic (PV) has especially become increasingly widespread and common in many developed markets, for both residential and commercial usage. Wind is following closly: tall wind farms rotating away have become an increasingly common sight outside cities, in rural areas or, in some instances, offshore.

As the market share of renewable energy expands, availability of ways to store this energy – through energy storage systems, or ESS – has become key.

"Energy storage becomes particularly appealing in conjunction with energy generation through PV and in other ways," Matt Roberts, CEO at US industry group the Energy Storage Association (ESA), told IM.

The US has been at the forefront of development in energy storage globally, whether it be in residential, non-residential or utility applications.

Keeping up the pace of expansion of renewables, the US energy storage/ESS market is expected to grow sevenfold between 2016 and 2021, reaching a worth of $2.8bn, according to forecasts collated by GTM Research and the ESA. It is estimated that cumulative storage market revenues in the 2016-2021 period will be almost $9bn.

Investment in energy storage across the US hit $660m in the third quarter of 2016 alone, setting an all-time record. 

"Energy storage markets are growing, investment is coming in. Venture capital is increasingly looking into ESS. There are thousands of local utilities in the US, and all are allowed to own energy storage systems," Roberts said.

The short-term outlook is even more bullish for capacity increase: GTM expects the ESS market in the country to grow 35-fold, increasing from 167 MWh in 2015 to 5.9 GWh in 2021.

"The residential space will be the fastest-growing segment over the next five years, increasing in size by over 200 times, from 7 MWh in 2015 to 1.6 GWh by 2021," it stated.

Utility applications are expected to account for the single largest component of the expected market size in 2021, both in revenue and capacity. Residential and non-residential applications will experience strong traction, too.

This broad tendency has a direct effect on the market of large-scale ESS providers.

"A large proportion of the stationary energy storage market will be the coupling of solar with storage and in order to do this, it requires a storage technology that can be used heavily every day which will last over 25 years," Scott McGregor, CEO of UK LSE-listed vanadium battery producer redT Energy Plc, told IM. "Vanadium redox flow machines are an energy storage asset, ideal for this task."

VRBs are "an energy storage asset", according to redT’s Scott McGregor. (Source: redT)

Cheaper energy

Increasingly so, energy storage is following renewables on a parallel trajectory.

At the heart of the uptrend, Roberts explained, are a number of factors that cooperate to create the right conditions for the expansion, including cost of energy and, as a result, a shift in demand from users.

Arguably, the leading factor to consider is the increased affordability of renewable energy.
The price gap between conventional energy sources, such as coal, and renewables is shrinking at a rapid pace.

According to data from the US Department of Energy (DOE), the cost of a KWh of solar photovoltaic (PV) energy at plant in 2015 was at $0.125, while coal ranged at a low end of $0.095 and a high end $0.15/Kwh.

In a handful of years, solar and coal have reached almost price parity. Notably, this happened without taking into account contributions from state subsidies. In other words, this remarkable decrease in cost was primarily market-driven rather than supported by external help in the form of, say, tax breaks.

The DOE is expecting to see a continuation of the narrowing of the gap going forward, which in turn will lead to increased output of solar.

At the same time, such an expansion needs adequate ESS capacity in place.

"In grid connected markets, renewables are currently 'stuck’ because existing grid infrastructure simply cannot handle the additional generation," McGregor told IM.

"To utilise this resource [solar and renewables] more effectively, we need to remove the inherent issue of intermittency and create 'firm’ power through the use of long duration industrial scale energy storage infrastructure, such as vanadium redox flow [batteries]."

VRBs are mainly suitable for large-scale applications, such as industrial or grid.
(Source: PNNL)

Vanadium: old and new

The vanadium redox flow battery (VRB) technology has been around for decades, but only recently has it started to demonstrate its suitability to viable economic development on a commercial scale.

A flow battery is charged and discharged by a reversible reduction-oxidation reaction between the two liquid vanadium electrolytes of the battery. Unlike conventional batteries, electrolytes are stored in separated storage tanks, not in the power cell of the battery. During operation, these electrolytes are pumped through a stack of power cells, or membrane, where an electrochemical reaction takes place and electricity is produced.

Unlike the other leading battery technology, lithium-ion (Li-ion), VRBs are not suitable for portable, small-scale, light applications. Their low energy density requires large space for installation to reach the desired capacity, and the electrolyte must be stored in bulky, heavy tanks.

Among its main characteristics are a longer lifetime than other battery types (20+ years), better resistance to heavy usage, lower rate of degradation, easy scalability and higher number of cycles, making VRBs particularly suitable for large applications that rely on daily usage, such as industrial or grid.
"The opportunities are related to potential economies of scale. Of the six or eight flow battery technologies being explored, vanadium is one of the most scalable," ESA’s Roberts said.
These are all good news for VRBs, which have been making headlines as of late.

A 1.68MWh VRB system is being commissioned in the Isle of Gigha, off the western coast of Scotland, with a view to support power generation via the four wind turbines on the island, which currently feed the local grid.

In Japan, Sumitomo Electric Industries is setting up a VRB system in Hokkaido with a capacity of up to 60MWh, aiming to increase Hokkaido Electric’s capacity for wind and solar by about 40MWh.
With every new system that is installed, VRBs gather mounting evidence to support their economic viability. 
redT is currently working on several projects in the UK and Europe as well as Africa, ranging from islands and off-grid telecoms sites to large commercial and industrial premises in urban and suburban areas. 

The broad geographical span of the company’s current projects points also to another characteristic that will underpin VRBs’ future market penetration: their adaptability to off-grid applications and secluded areas. 

In off-grid markets, energy security is a key driver for demand, McGregor told IM: "Large parts of sub-Saharan Africa struggle with grid access and, when a connection is available, the grid can often be unreliable, weak and prone to outages." 

A similar scenario can apply to industrial and commercial off-grid applications such as mining, which are often located in areas with no available direct connection to energy supplies. In these cases, the traditional solution is to run diesel generators, but this requires fuel to be transported to site mainly on trucks, generating a high although necessary expense. 

"Vanadium redox flow machines, implemented alongside sufficient solar generation, can reduce diesel expenditure by 70% and don’t require frequent maintenance and servicing throughout their 20-25 years of asset life. This approach also allows project owners to fix prices for the future and hedge against price volatility and supply risk," said McGregor.

"As a company, we are bullish about the market," he added.
Vanadium suppliers are equally optimistic in the prospects of the expanding vanadium ESS customer base. 

Canadian developer Largo Resources Ltd, which first brought online the Maracás Menchen vanadium mine in Brazil in 2014, has gradually ramped up its production of vanadium pentoxide (V2O5) from the operation, reaching current nameplate capacity of 800 tpm.

According to Mark Smith, Largo’s CEO, the vanadium market will see a sharp shift in the composition of demand primarily on the back of VRBs, which will lead to improved industry conditions for producers, counteracting the low price trend seen in 2015 and part of 2016.

"There has been more vanadium used in redox flow [batteries] in 2016 so far than in all previous years combined," he told IM in October. "We think redox flow will become a dominant use of vanadium [in the near future]."

Vanadium supply

Global vanadium production fell below 80,000 tonnes in 2015, according to USGS data, while for 2016 it was put at an estimated 76,000 tonnes (excluding the US).

Aerospace and chemical end markets take about 8,000 tpa combined, according to industry estimates. Any volumes going into batteries would add to that, with the rest going into steel.

The USGS stated that metallurgical uses (primarily as an alloying agent for iron and steel) accounted for about 94% of the US’ domestic vanadium consumption in 2016.

According to Roskill Information Services, chemicals and non-ferrous alloys take up to 8% of the global vanadium end-use market, while over 90% goes into the steel sector.

All in, actual volumes of vanadium going into batteries are below 1% of global production.