In recent years, the price of lithium batteries has been rising. Can vanadium batteries be used as a technical substitute?
Recently, a number of senior specialists believe that vanadium battery energy storage is moving from a demonstration project to a commercialization process.
However, even though the full life cycle cost of vanadium batteries is already lower than that of lithium batteries, the initial construction cost is too high, resulting in weak investment motivation for enterprises. At the same time, with vanadium sources basically forming a closed loop in the iron and steel industry, the concern that the development of vanadium batteries is constrained by vanadium sources is also emerging, which may make vanadium ownership one of the industrial strategies.
Vanadium battery is on the horizon
A related research report from Everbright Securities pointed out that in the first half of 2022, the scale of vanadium batteries in independent energy storage power stations under construction has reached 302MW/1104MWh. In September of this year, CNNC Huineng announced the purchase of a total of 1GWh of vanadium redox flow battery systems, and Shanghai Electric disclosed that the order reserve of vanadium batteries on hand is nearly 3GWh. In terms of scale, the industrialization process of domestic all-vanadium batteries is accelerating.
The full name of vanadium battery is all-vanadium redox flow battery, which is a liquid redox renewable battery with metal vanadium ions as the active material. Different from the lithium battery, the electrolyte of the flow battery is separated from the stack, and its working principle determines that it is one of the safest technical routes in the current electrochemical energy storage technology route.
Fang Yutao, an analyst at Everbright Securities, shared in the forum that the all-vanadium flow battery has the advantages of high safety, strong capacity expansion, long cycle life, and low life-cycle cost, and is currently a relatively mature flow battery for commercialization. This statement has been recognized by Yan Chuanwei, a researcher at the Institute of Metal Research, Chinese Academy of Sciences, who believes that in a sense, an all-vanadium flow battery is equivalent to a flow battery.
Yan Chuanwei’s statement is not unreasonable. According to Fang Yutao’s report, all-vanadium flow batteries have been running for many years in demonstration projects around the world, and the industrialization effect and reliability verification are significantly higher than those of iron-chromium flow batteries and zinc-bromine flow batteries.
According to GuidehouseInsights, by 2031, the annual installed capacity of vanadium batteries in the world will reach 32.8GWh (about 1.6GWh in 2022), with a compound growth rate of 41% from 2022 to 2031.
On June 29, the National Energy Administration issued the Twenty-Five Key Requirements for Preventing Electricity Production Accidents (2022 Edition) (Draft for Comment), which requires that “medium and large energy storage power stations shall not use ternary lithium batteries, sodium-sulfur batteries, etc. “Battery”, which makes vanadium batteries with the advantages of high safety, long cycle life, low cost in the whole life cycle, and completely independent and controllable resources, gradually attracting attention in the capital market.
However, at the same time, compared with pumped hydro storage and lithium battery energy storage, vanadium batteries are in the preliminary stage of commercialization in the field of energy storage. Most of the existing vanadium battery projects are demonstration projects promoted by local governments, and a few are self-constructed projects by enterprises.
Fang Yutao pointed out that firstly, the high cost of initial installation is the biggest disadvantage. At present, the investment cost of vanadium battery projects is concentrated at 3.8-6.0 yuan/Wh, which is more than twice the investment cost of the current lithium battery energy storage power station (about 1.8 yuan/Wh). Secondly, the rapid growth of vanadium batteries may drive the price of vanadium to rise; thirdly, the energy density is low and the energy conversion efficiency is lower than that of lithium batteries.
Breaking the game still needs to reduce costs
Even lithium batteries, which are currently in short supply, have been cultivated by policies in the early stages of development. Similarly, vanadium batteries may be inseparable from the support of policies from demonstration projects to commercialization. The main problem in the commercialization of vanadium batteries today is cost reduction.
Fang Yutao shared that the full life cycle cost of vanadium batteries is already lower than that of lithium batteries, but the initial construction cost is too high, resulting in a weak investment motivation of enterprises. The follow-up may still need to be promoted by the government to formulate an effective price compensation mechanism and Long-term energy storage industry policy.
The cost reduction is mainly reflected in the electrolyte and the stack, two parts with high cost. According to IRENA, the cost of vanadium batteries is mainly divided into three parts: the cost of stack, electrolyte and peripheral equipment. The stack and electrolyte are the main costs, accounting for about 75% in total; among them, the cost of vanadium electrolyte accounts for about 40%, the cost of the stack accounts for about 35%, and the cost of other components accounts for about 25%.
Fang Yutao’s report also pointed out that with the increase of charging and discharging time, the proportion of electrolyte cost of vanadium battery energy storage system increases. The cost of electrolyte in the 4-hour energy storage system accounts for 50%, and the longer the time, the higher the proportion of electrolyte.
In June 2020, the team of Li Xianfeng and Zhang Huamin of the Energy Storage Technology Research Department of the Dalian Institute of Physics and Chemistry successfully developed a new generation of 30 KW low-cost all-vanadium flow battery stacks. The stack adopts the self-developed weldable porous ion-conducting membrane (cost <100 yuan/square). Compared with the traditional battery assembly technology, the area of membrane material is reduced by 30%, and the total cost of the stack is reduced by 40%.
Yan Chuanwei shared the current status of the electrolyte and said that the classic process of the electrolyte in vanadium batteries is to use vanadium-containing raw materials to make intermediate products (leaching solution), and then to vanadium products (such as V2O5) to prepare electrolyte products, which can be prepared in batches.
“The short-flow process has begun to be verified by engineering”, that is, the electrolyte is directly prepared from the leaching solution. Yan Chuanwei said that this process can achieve a cost reduction of 20%-30%. “In fact (with) the advancement of stack technology and the decline in electrolyte costs, the initial investment is still very low, and there is no problem with pumping hydro storage at this point.”
The relevant research report of Everbright Securities also pointed out that considering the cost reduction space of vanadium batteries is still large, the follow-up economy will gradually increase. If the delivery cost of vanadium battery energy storage is reduced by 20% (the unit investment cost of 4-hour energy storage is reduced from 3.8 yuan/Wh to 3 yuan/Wh), the corresponding IRR of 4-hour vanadium battery energy storage is 2.9% (lithium battery IRR2. 5%, assuming constant costs).
Owning vanadium may become one of the industrial strategies
The data on the production and sales scale of vanadium in Yan Chuanwei’s report shows that in 2021, the world produced 210,000 tons and consumed 220,000 tons; of which China produced 130,000 tons and consumed 130,000 tons. The main sources are vanadium slag (vanadium titanomagnetite iron and steel metallurgy), raw ore and solid waste. The domestic (current) vanadium market is characterized by 85% vanadium by-product in steel and 90% vanadium consumption.
This means that vanadium itself forms a closed loop in the iron and steel industry, and from the perspective of production and sales data, the balance of supply and demand is basically achieved. If vanadium batteries start to develop and the development of vanadium sources lags behind, not only will there be an abnormal rise in vanadium prices, but the supply of vanadium may even be unable to support the development of vanadium batteries.
Fang Yutao also reminded in the report that assuming that vanadium batteries account for 20% of new energy storage in 2026, in both conservative and ideal scenarios, the consumption of V2O5 will be about 116,000 tons and 185,000 tons (4-hour energy storage). In 2021, China’s V2O5 output was about 131,000 tons; if the development of vanadium resources is less than expected, the large-scale application of vanadium batteries will drive up vanadium prices and further increase the cost of electrolytes.
The unexpected outbreak of new energy vehicles has led to tight lithium supply, and lithium prices have surged nearly 10 times in just two years. Lessons from the past may make Yan Chuanwei vigilant. He believes that the challenge of the industry chain is that the current vanadium market (supply) is incompatible with the vanadium battery energy storage industry, and it is difficult to effectively support the industry’s initiation and development, which is the weakest or restrictive link in the industry chain.
In response to the challenge, Yan Chuanwei also put forward a strategy to deal with the tight supply and demand of vanadium. Firstly, build a large market for vanadium resources, develop more vanadium sources (especially stone coal vanadium), and build a large market for vanadium resources with a wide range of sources, so as to solve the problem of vanadium market supply. The second is to own vanadium. Vanadium battery developers need to properly master vanadium resources (either own or adopt a strategic cooperation model to control it) to ensure the advancement of the industry.
But perhaps fortunately, vanadium resources are independently controllable. According to USGS statistics, as of the end of 2021, the global reserves of vanadium metal are 63 million tons, of which more than 24 million tons of vanadium metal reserves have been identified as meeting the current mining and production requirements. More than 99% of the world’s vanadium reserves are concentrated in China, Australia, Russia and South Africa; among them, China’s vanadium ore reserves are about 9.5 million tons, accounting for 39% of the world’s vanadium reserves, ranking first in the world.
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