Vanadium is a metal used in the steel, aerospace and energy storage industries – and as with virtually all commodities – the supply, demand and price outlook for this commodity varies depending on who one speaks with.
The energy and metals markets first collided in the 1970’s and 80’s when oil and gas companies looking to expand their businesses merged with mining companies. For example, Union Oil of California (UNOCAL) acquired rare earth miner Molycorp in 1977 – UNOCAL was subsequently acquired by Chevron in 2005, making Molycorp a fully owned subsidiary of the oil giant.
Today we are seeing the second big confluence of energy and metals, Doug Horn, Analyst at CPM told Breaking Energy. A grid-scale vanadium energy storage system typically falls within the 1 to 2 MW range and the vanadium itself accounts for about 35% of the total cost of a 1 MW system, said Horn.
Cleantech projects can often be expensive ventures that require government incentives, venture capital investment, or both to finance. So paying for vanadium energy storage systems – typically vanadium flow batteries – can be challenging.
But energy storage has become a sought after companion to distributed renewable sources of power like wind and solar, where intermittent breezes and sunshine can be difficult for power grids to handle. The ability to store that energy and feed it into an electric grid as dictated by demand could revolutionize the power generation, transmission and distribution sectors.
And the energy storage play is “going worldwide,” American Vanadium CEO Bill Radvak told the audience at a recent New York Society of Securities Analysts meeting. China is getting involved, recently building 3 MW and 5MW vanadium batteries, while a 600 kW vanadium flow battery was commissioned in California in May of this year, he said.
American Vanadium is developing the only Vanadium mine in the US – located in Nevada – with the expectation that demand for the commodity is set to increase as supply from China decreases and vanadium demand for energy storage applications rises.
Horn, whose company released a Vanadium Market Outlook earlier this year, sees sufficient capacity in the market over the medium term. Chinese building codes for new construction were strengthened to require vanadium alloy steel, which is stronger and has been used in the west for several years. Despite this domestic demand boost, CPM’s research predicts only a slow curtailment of vanadium exports from China.
CPM estimates the current energy storage market at about 126 GW – most of which is pumped hydro – with batteries accounting for 0.4% of the total market and vanadium accounting for about 6% of the battery market share.
The IEA estimates the energy storage market could reach 150 GW by 2020 and 220 GW by 2030, as cited in the CPM research.
“It is too early for a massive vanadium battery storage market, but it’s an exciting space,” said Horn.
Radvak appears to agree and said his company’s revenue breakdown between the mining segment and energy storage segment is 10% to 20% energy storage initially, until the battery market grows. But he is optimistic this growth will come quickly as many stakeholders are convinced storage is necessary.
The battery segment of the market is “more than big enough to have an impact on the global vanadium price,” he said.