Bushveld Minerals CEO Blog | The impact of China’s recent plan to promote large-scale VRFB projects
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The impact of China’s recent plan to promote large-scale VRFB projects

The vanadium industry tracks Chinese policy with great detail, since China is by far both the largest producer and consumer of vanadium. When China adopted tighter rebar standards in 2003, it massively increased vanadium prices in the short term and ushered in a new era of vanadium market dynamics in the long term (the standards were revised up again earlier this year and expected to push Chinese demand vanadium up another 30%). As a result, when Chinese policy came out in overt support of vanadium redox flow batteries (VRFBs) in its September “Guidance on the Promotion of Energy Storage Technology and Industry Development” (document #1701), the industry asked “What will this mean for vanadium?”

To answer, we first must assess the significance of the mention of VRFBs in this report, which outlined the country’s efforts “to promote the development energy storage technology and industry.” Other technologies were also covered, such as flywheel, lithium battery and a compressed air energy storage system. These technologies, though, were part of a section devoted to testing equipment with industrial potential. VRFBs, and in fact 100MW-grade VRFBs, were in a section covering application and promotion. In other words, the policy is playing favourites and prioritising very large VRFBs.

And it is more than policy, as Ronke Power is currently wrapping up the first half of a 200MW/800MWh project in Dalian and Pu Neng was awarded another multi-phase VRFB that will end up as 100MW/500MWh in Zaoyang. These systems will consume around 7,150 MTV, which is just under 10% of the global vanadium supply for all of 2016. That is just two batteries.

300MW of storage power may sound impressive (Madagascar has only 500MW of installed generating capacity, for comparison), but in China these two systems represent a mere 0.002% of the country’s 1500GW in installed capacity. The upside is large. If China ever wanted to be able to capture even 1% of its electrical power in VRFBs, it would take current vanadium producers 50 years to mine that vanadium. Of course, with lots of vanadium in the Earth’s crust, there is a lot of opportunity for new production.

It is not surprising to see China pushing VRFBs so aggressively. While there is certainly a technological and cost aspect to it, there is also a very strong mineral deposit case. China has the most vanadium production right now but it is not a top-2 producer of any of the other minerals used in energy storage, such as lithium, cobalt or nickel. Chinese firms have done a good job in securing supply of these minerals for its large numbers of electric vehicles (EVs). Focusing these imported minerals solely on EVs will not only allow China to evolve into an EV export powerhouse but also allow it to ensure that the strategically more vital domestic electricity supply is provided through locally obtainable minerals.

Are there any other implications of this policy beyond vanadium and China? It does present an opportunity for other countries that have sizable vanadium resources to capitalise on. The policy will allow China to pay for much of the learning curve on commercialisation of VRFBs (e.g. production capacity for stacks, business cases, credibility), similar to what Germany did for solar photovoltaic generation 10 years ago. At the same time, most Chinese vanadium producers and VRFB companies will be first focused on the immense Chinese market. This leaves an opportunity for a much smaller country like South Africa, endowed with the second-largest vanadium resources in the world, to piggy-back on the cost reductions pushed by Chinese scale, while focusing on supplying much of the rest of the world.

However, the window for this opportunity is not very large. As we have seen with solar panels and steel, once China ramps up production and saturates its domestic market, the floodgates open for international expansion, often accompanied by very competitive pricing. It means a country such as South Africa must act now to build up its own part of the VRFB supply chain in the next few years, ensure costs are low and secure a strong foothold for the long term.

At Bushveld Minerals, we are doing our part to ensure South Africa takes advantage of the situation. On the upstream, it involves increasing the production capacity at Vametco, a process that is already underway. On the midstream, we are working together with the Industrial Development Corporation (IDC) to create a manufacturing base for some critical VRFB value chain activities, such as electrolyte production, VRFB assembly, and development of local skills in the VRFB installation and maintenance. Finally, on the downstream, it means pushing the South African energy storage market forward, as demonstrated by the forthcoming deployment of the 450kWh at Eskom, the South African national power utility. The opportunity is here and the upside is very large indeed.

Fortune Mojapelo
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