What role will vanadium play in energy transition?
It isn’t just vanadium’s role in battery energy storage systems that will see it play a leading role in energy transition. Its role in steel will also be important to the decarbonisation agenda. While steelmaking is a highly carbon-intensive industry, the use of vanadium in steel improves steel’s tensile strength so that between 20% and 40% less vanadium-containing steel needs to be used compared with standard carbon steel for the equivalent function (by mass). Thus, vanadium enables a significant reduction in the carbon footprint of steel structures, and it also helps reduce the environmental impacts of fabrication and transport of steel.
Naturally, however, it is the potential of vanadium redox flow batteries (VRFBs) which excites people most with regard to its role in energy transition. VRFBs have only seen commercial deployment since 2010, and since then, there have been several installations globally, of varying sizes, resulting in irregular bouts of vanadium consumption. VRFBs have large and scalable capacity, can withstand being discharged for long periods, are safe and have a long cycle life. However, capital costs and most centrally the high cost of vanadium as an electrolyte have prevented significant market penetration.
The chart below highlights the variance in demand for vanadium in VRFBs over time. The large spike in 2017 is a result of the development of the Dalian-UET/Rongke Power VRFB system, a 200MW energy storage project in Liaoning, China. The rated storage capacity of the project is 800MWh. Project Blue estimates that this installation alone required around 1,800t of vanadium.
The past two years have seen some significant increase in vanadium consumption coming from the VRFB sector with several new installations taking place in China. In 2022, total vanadium demand is estimated at 5.1kt V, compared with 2.9kt V in 2022 equivalent to 4.4% of total vanadium consumption, a percentage exceeding 6% for China.
Historical and forecast vanadium demand in VRFBs (t V)
Project Blue believes the future of VRFB commercialisation to be a binary story: it will happen, or it won’t. In our low case, competing technologies force the VRFB market share to fall back over the 2020s. Key barriers include high costs and perhaps reduced global focus on ESS solutions in the near term. In our base case, VRFBs maintain a 1% market share of battery energy storage systems (BESS) to 2033. As a result, vanadium demand in VRFB reaches over 25kt by the end of the forecast period.
In our high case, VRFB market share of BESS increases over the 2020s to 2%. This scenario would see demand exceed 55kt by 2033. However, under this scenario, Project Blue believes supply would struggle to keep pace and prices would rise steeply. Such price rises would have the unintended impact of making VRFBs uneconomic.
In summary, vanadium is set to play a key role in energy transition, not just because of its potential for energy storage, but also because of its role in steel. This is set to underpin a sustained period of market growth, although supply could serve to keep this somewhat in check over the medium term.
By Jack Bedder
