Bushveld Minerals is looking to take an active role in the downstream value chain for vanadium redox flow batteries due to the "massive opportunity" for vanadium producers in this space, CEO Fortune Mojapelo told S&P Global Commodity insights.
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Bushveld's mining and processing operations supply 4.5%-5% of the global market, and it is looking that to grow to about 8%.
While the majority of vanadium is supplied to the steel industry, Mojapelo said Bushveld wanted to start supplying more into the VRFB space.
"Steelmakers are still the bedrock of vanadium demand -- over 90% -- but it would be good to diversify demand," he said, adding that a more diversified demand base could stabilize current volatile prices.
Vanadium prices averaged $46/kgV in the first quarter, up 49% year on year, according to Bushveld's quarterly report.
"We are quite excited by the energy transition ... there is a confluence of factors that are working together to create the perfect opportunity for VRFBs," Mojapelo said.
Supply, cost hurdles
Two major hurdles facing the VRFB industry were supply and cost, he said, which vanadium producers were best placed to solve.
"Vanadium accounts for 30%-45% of the battery cost depending on the vanadium price," Mojapelo said.
There were forecasts that new stationary storage deployments globally could hit about 100 GWh/year by 2027, while the World Bank had said vanadium was among the top five metals affected by the energy transition, with 189% of current vanadium production needed globally by 2050 to support the energy transition alone.
"If you were going for 100 GWh/year by 2027, if you do 10% of that market, you're almost doubling global production to support that ... Our view is there is enough vanadium in the ground," Mojapelo said.
Vanadium producers with a scalable platform would be able to address the supply and cost questions, as a low-cost producer could take a longer-term view on the market, make a good margin and still support the VRFB industry, he said.
If producers were not involved downstream and could get higher prices elsewhere, there was not incentive for them to sell to battery makers at the lower prices required to make VRFB batteries cost-effective.
"We have taken view that vanadium producers are going to get quite involved in the downstream space -- VRFB manufacturers today are still quite small and that ecosystem needs to grow, unlike lithium-ion where we have big battery makers and OEMs -- we think there is a strong case for downstream integration," Mojapelo said.
S&P Global analysts forecast that stationary storage averaged $320/kWh in 2021 for a four-hour lithium battery, with this expected to fall to about $300/kWh 2022, $250/kWh by 2025 and below $200/kWh by 2030.
Producers could also use VRFBs as a hedging tool if vanadium prices dropped, as this would make VRFBs more competitive, resulting in higher demand and greater uptake.
Catalyst for VRFB industry
"We think going downstream is necessary to be a catalyst for the VRFB industry," Mojapelo said.
The company launched Bushveld Energy in 2016 to develop and promote vanadium in the energy storage market through VFRB applications.
It is building an electrolyte plant with the Industrial Development Corp. of South Africa in the Eastern Cape province, with an initial capacity of 200 MWh that could be scaled up to 800 MWh.
At 200 MWh, the plant is expected to consume about 1,100 mt vanadium, accounting for about 25% of Bushveld's current production levels, Mojapelo said.
Bushveld is looking to provide a low-cost production base supplying vanadium into the battery industry at price points that are sustainable for the upstream business' profit generation.
The company also rents or leases electrolytes to VRFB users, as these sit in tanks and do not degrade, meaning that the vanadium can be reused in another battery, or taken back to Bushveld's operations and converted to ferrovanadium.
Bushveld is also getting involved in creating project development capacity, which Mojapelo said include articulating the enablers required to unlock demand for VRFBs at scale, such as lobbying and interactions with stakeholders and government to sell the case of battery energy storage and VRFBs.
"South Africa is a good example -- in the past couple of years, the government had embarked on a fairly aggressive renewable energy program, which is continuing," Mojapelo said.
The company has built a mini-grid project, which is a small 3.5 MW PV solar project with 4 MWh of VRBs set up as a separate independent power producer entity.
The project will meet less than 10% of Bushveld's needs at one operation, but will showcase how to combine energy storage with PV solar to deploy power on a cost competitive basis with positive project economics, he said.
"The next step is scaling this up, then we can create a prototype for other industry players to follow," he said.
The final piece of Bushveld's model is to work with battery makers that have a product in commercial deployment to help them scale up.
With a consortium, Bushveld previously acquired Austria-based VRFB manufacturer CellCube.
"If we can solve the supply of vanadium and the supply cost element and help create the market downstream, the middle piece becomes de-risked and we think that that is the best conducive environment for a rapid scale up of [VRFB] manufacturing capacity," Mojapelo said.