How do Vanadium batteries even compete in the market ?

I have written about the economics before, $4/lb or $9/kg of Chinese Vanadium Pentoxide makes $70/kWh in just the electrolyte cost of the Vanadium Flow batteries, this cost excludes converting the ore into battery grade electrolyte, tanks, pumps, pipes and cell stack (which adds up  quickly by the way), the total cost of the system can sit well above $200/kWh depending on the specs of the battery. Now if you want an LFP battery, its landed cost would be around $120/kWh. That's a 40% discount !!

So the obvious question arises, who buys such an expensive battery ? And how does it make any financial sense to buy a VFB ?

If you consider the upfront cost of VFBs they can never be competitive-

You can say that LFP degrades and VFB doesn't, so over a long period of time, VFB would be cheaper, but VFB takes a lot more space, and that cost has to be accounted for, I have run some financial models but VFBs can never be competitive with LFPs, let alone much cheaper Sodium Ion batteries about to hit the market.

What if you rent the battery ?

The industry calls it OpEx model or Energy Storage as a Service (ESaaS), it basically means you don't own the battery you just pay for the energy it stores and pay for it over the years, it is GREAT for the customer because their pockets are not immediately drained. But the manufacturer or the integrator company owns the asset, for that you need to be rich (💰🤑). A startup can't do this until its profit making. 

Also,

If LFPs are cheaper, their payback period would be sooner than VFBs, that means every bank, or investor or financier would choose to sell energy from LFP than from a VFB.

So how do you try to make a VFB cheaper ?

By renting out the electrolyte separately than the battery.

This is called the electrolyte leasing model, let me explain-
Because Vanadium is so prohibitively expensive, people start considering as an asset, since Vanadium is very limited on earth, it will be expensive in the future also, and when the customer is done using the battery, the same Vanadium can be used again in another VFB system, because Vanadium doesn't really degrade, Lithium does. 
So the investor/bank owns the ASSET (Vanadium), and the customer pays a small leasing fee to the bank to use that ASSET to store and use energy. Elegant right ?

No, I honestly feel that this system is a bit flawed and complex, 

Here are my arguments against it-

  1. It assumes that the vanadium in the electrolyte is infinitely cyclable, never degrades, except that it does and that adds cost.
  2. It assumes you can extract the Vanadium from the electrolyte, sounds good on paper, but it is a complex chemical process, that I don't think is a common chemical knowledge, I haven't even seen anybody do that yet.
  3. It is a complex financing structure, it may be normal for corporate deals or energy agreements, for me it still adds more complexity than either buying the battery outright or selling the energy from it.
  4. The battery after all the complexity, financing and headache, still may not be cheaper than LFP, even at longer durations.
Honestly, I would rather simply just sell the battery or sell the energy from the battery. If I have to own an asset, I would rather have sooner payback period than later. All the more reason to work on a battery that IS CHEAPER than LFP at longer durations, hence iron chromium flow battery.

None of this is AI generated, so feel free to fact check me and looking forward to your views and help. 


Mayank Jately

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