Using vanadium for battery electrolytes could be twice as profitable as supplying it for steel production, which is currently the major industrial use for the abundant metal, vanadium producer Largo Resources has said.
Largo Resources has decided that the market for long-duration energy storage will be a high value opportunity and held a ‘Battery Day’ this week to highlight its strategies for entering the global vanadium redox flow battery (VRFB) energy storage business.
At the end of last year, the company launched a subsidiary, Largo Clean Energy, which will enable it to take vanadium from the parent company’s mining operations in Brazil and use it for VCHARGE±, the VRFB product which it has developed since acquiring technology, IP and personnel from defunct US VRFB company VIONX.
With the ongoing trend of variable renewable energy’s share of the energy mix increasing and fossil fuels in decline, the company believes it could capture around 3% of the global market for long-duration energy storage. VRFBs can store energy for 4 - 12 hours, much longer than the typical 1 - 4 hour applications lithium-ion batteries are economically viable at doing today, Largo’s in-house analysis forecasted the total addressable market to be around 49,000MWh by 2025.
It expects to make 40MWh of deployments in 2022 and then scale up production to 180MW / 1,400MWh annual capacity by 2025 to meet that market share target. At Wednesday’s online presentation event, VP of operations Salvatore Minopoli said that Largo Clean Energy is based out of Massachusetts, US, with manufacturing in Massachusetts and New Hampshire, and with sales offices in Washington DC.
According to Minopoli and other company executives, Largo’s advantages include having a proven, commercially available technology, access to vanadium and in-house manufacturing capabilities. Ian Robertson, a director at the company, said that so much demand is expected from the battery market that the major factors that could limit Largo from achieving its targets would be manufacturing capacity and how much vanadium it can produce.
Long-term value in facilitating renewable energy
Currently, as a producer of vanadium, it has sold the commodity vanadium pentoxide (V2O5) as an additive for steel manufacturing at an average price of US$7.75 per pound. It believes that in the energy storage business that same V2O5 would be worth US$12.39.
Rival vanadium battery company Invinity Energy Systems has launched a business model where the vanadium electrolyte in a flow battery system is rented to the end user, lowering the upfront capital cost. Unlike the electrolyte in a lithium-ion battery, the vanadium does not degrade even after decades of use and retains its value.
Largo said on Battery Day that it too will offer a leasing model, again to lower capital cost of storage for the customer but also to increase the long-term revenue stream available — unlike in steel production where the vanadium is simply sold for one time revenues and earnings. In the meantime it will build up an asset portfolio of vanadium electrolyte, while it will also sell VRFB systems directly to customers.
The company revealed that from mining and selling vanadium which costs it about US$3.50 per lb, it makes a US$4.25 margin for that US$7.75 sale. Under its energy storage business model however, the company expects to be able to command US$5.05 upfront revenue, plus US$4.97 per lb net present value from leasing, while the pound of vanadium retains a net present value of US$2.36 to Largo. Added together, that gives the US$12.39 figure, which minus the same US$3.50 cost of vanadium is a US$8.89 margin.
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