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Vanadium flow batteries could increase demand for vanadium by 10 to 15 percent of current demand in coming years. With most vanadium coming out of China, Russia, and South Africa, there are concerns that new western sources of supply are needed.
Vanadium flow batteries, which use vanadium ions in different oxidation states to store potential energy, could have a significant impact on future vanadium demand, said Tim Hennessy, president of Prudent Energy, which makes the Vanadium Redox Battery (VRB).
In a recent interview, Hennessy said, “[t]he potential demand that we see could be at least 10-15% of the current world demand for vanadium.”
Vanadium flow batteries, which employ vanadium pentoxide, are basically large liquid-filled tanks that are used to store energy for the power grid. The idea behind the technology is to create a lower-cost battery option than, say, lithium-ion batteries. Flow batteries could provide cost-effective solutions for power companies and utilities facing a growing need to manage the supply of wind and solar electricity as the batteries can be used to store green energy and release it when demand peaks.
The US Geological Survey estimated 2011 world vanadium production at 60,000 tons, led by China, Russia, and South Africa, which account for nearly all vanadium production. Currently most of the vanadium produced is used to strengthen steel, and demand for the mineral is rising in China, India, and other emerging markets. However, there are concerns that there will not be enough supply to meet that demand if vanadium’s use in flow batteries significantly impacts demand.
Quantum leap in battery applications
Hallgarten & Co. metals analyst Christopher Ecclestone said recently that new uses of vanadium, especially in batteries, are what could lead to a surge in demand. “While aerospace has been growing organically and increasing its share of the usage of the metal, the area with the best potential for a quantum leap is in battery applications,” Ecclestone commented.
Without factoring in new applications, demand for vanadium is expected to more than double by 2025 to 123,000 tons. Chris Berry, founder of House Mountain Partners, said, “[a]s another avenue of demand, renewable energy will continue to be a minority of the energy produced globally, but, again, even if a fraction of the vanadium produced had to be diverted to energy storage, you are looking at a potentially significant supply-demand imbalance.”
Bill Radvak, CEO of American Vanadium (TSXV:AVC,OTCQX:AVCVF), said he sees the price of vanadium going up strongly in the next three to eight years. While vanadium pentoxide is currently a small market, it is seeing growing interest from battery applications, and supply will not be enough to satisfy demand.
Gibellini to start production
American Vanadium is currently working through the permitting phase of its Gibellini open-pit vanadium project in the US and expects to bring the project online roughly 14 months after receiving final permitting. The project, which will provide the only domestic supply of vanadium in the US, has a lifespan of six to seven years, with the possibility of a maximum of ten to 15 years as more resources are identified.
Radvak said in a recent press release, “[i]n its March 2012 forecast, Lux Research, Inc., estimates grid storage demand will be $113 billion by 2017 at which time Vanadium Flow Batteries are expected to become the battery leader with a 33% market share. This highlights the growing value of having the only significant in-ground supply of vanadium in the US.”
Australia’s Atlantic (ASX:ATI) acquired 100 percent of the Windimurra vanadium project in Western Australia in 2010 and started production in January of this year. It plans to reach 6,300 tonnes per annum of vanadium in the first quarter of 2013 and expects to meet about 7 percent of world demand.
Set your hair on fire
Ron MacDonald, chairman of American Vanadium, said at a conference this month that China’s latest five-year plan, which requires 15 percent of electricity to come from renewable sources by 2020, will exponentially increase demand for vanadium flow batteries as well as other materials.
“If you thought you had lit your hair on fire over rare earths, you are going to set your hair on fire over all the elements that are needed to support smart grids and micro grids and to support the economic development of green energy,” MacDonald said, according to Metal-Pages. He added that according to China’s estimates, the country’s new rule that only vanadium-containing reinforced steel bars can be used for infrastructure and other construction projects will increase world demand for vanadium by 40 percent by 2020.
Securities Disclosure: I, Karan Kumar, hold no direct investment interest in any company mentioned in this article.