Vanadium Leasing Alberto Arias of Arias Resource Capital Management and Julian Dawson of Ultra Power Systems
After lunch Alberto started out by outlining that one of the key problems in VRFB commercialisation – namely the very large fraction of the battery cost that can be attributed to Vanadium, a commodity with some history of volatile pricing, also represented an opportunity for a different form of financing model.
Unless VRFB companies can establish long-term off-take or other agreements with Vanadium producers they will alway be exposed to potential price rises in Vanadium due to 1) circumstances beyond their control or 2) their own success in establishing a VRFB industry. Unlike solid states batteries such as Lithium-ion the structure (or microscopic morphology) of the key component in a VRFB does not change significantly during the lifetime of the battery – indeed the electrolyte is expected to stay essentially unchanged during tens of years of operation.
Thus the Vanadium component of the battery, like catalysts made from platinum, retains its intrinsic value for the full period of the project. An asset which does not depreciate is one which can be effectively leased whilst staying owned by third party financial organisations. Alberto explained that he believe that a leasing model is close to being commercially announced and that the potential arrangement might be summarised thus:
The subject then turned to a discussion of exactly what part of the system would be leased and what would be purchased outright by the battery user. Initial suggestions may have focussed on leasing the Vanadium electrolyte as the active component in the battery – this again returns to the issue of whether there is a standard electrolyte that could be used somewhat interchangeably across batteries from different manufacturers – as part 2 of this review details there is quite some variation across the different electrolyte strains even just in the classic electrolyte family, let alone the differences between those and the mixed acids electrolytes.
Perhaps electrolytes can be standardised in the course of time to conform to some standard specifications, perhaps not. It is clear that leasing proposals do not wish to wait for that point and are contemplating moving ahead imminently (according to Alberto) with two alternative routes – leasing V2O5 by itself and leasing the entire battery.
The first route clearly – leasing V2O5 seems more understandable for financing organisations – after all there is a long term market and price history for V2O5 as a commodity. Route 3 – leasing the entire battery, effectively providing ‘energy storage as a service’ clearly provides a very simple proposition to the end user, with minimal outlay on Capital expenditure (maybe just prepare some foundations).
Route 3 is clearly the preference of Julian Dawson of Ultra Power Systems, who act as ‘project developers’ – essentially connecting up with potential large scale energy storage users and navigating the VRFB technology landscape with them. He pointed out that the fully integrated leased battery can remove a lot of confusion with regard to project pricing and maintenance and would also provide a quick response to the emerging utility scale Lithium-ion sector.
Julian also pointed out that a lot of project specifications are written specifically with Lithium-ion technology in mind and that these preconceptions needed to be challenged at both the customer and regulator level (we returned to the role of regulators during the afternoon session) and that the quoted kWh energy storage rates for Vanadium Flow technologies seem to cover a surprisingly wide range of prices.
A brief discussion followed in which it was revealed that Gildemeister energy storage systems AG, based in Vienna – had failed to secure the financial backing based that had been expected from Asia, resulting in its subsequent bankruptcy – it may well be that it was the timing of the recent Vanadium price shock, and its origins in the chinese environmental inspections, which was the thing that gave those investors cause to rethink their investment.
Marketing Consultation Workshop with Jessica van Onselen of Lifa Communications
Jessica gave a little background about her career in mining communications, including stints working in London and working for the World Gold council as well as the ongoing role to be played by Lifa communications, headed by Gabriella von Ille, mining journalist turned communications consultant. She went on to explain that the two workshops that day were to help her to understand where all the different Vanadium flow community players currently are and what they are currently doing in terms of marketing as well as trying to build some consensus that a future marketing roadmap might be built around.
We split into 3 groups to discuss the first issue “Can we clarify our principles and expectations for promoting Vanitec/VRFB technology” – who are we trying to communicate with, who will the marketing campaign speak on behalf of and what are the three key objectives that we would wish to establish for such a campaign. Discussion was in some groups apparently quite coherent, in others quite confused, so the overall process was useful in both forming some consensus and revealing the various viewpoints that different parts of the Vanadium flow community see the world from. One of the key objectives that everyone seemed to agree on is that we need to get “Vanadium on the menu” – for the general public, journalists, regulators and potential energy storage users.
After a brief injection of caffeine we returned for workshop number two to discuss “what is our key messaging and why does it matter“, together with the old chestnut – “what is the name of our technology“. On the first subject, after the main meeting reformed, there was useful discussion about some of the key messages that might be usable in a marketing campaign, including things we did not wish to do. To avoid stealing the wind from Jessica’s subsequent plan I shall not mention any of these except to mention that in this discussion Robert Friedland’s name came up. One of those present said that they thought Mr Friedland was rather close to announcing something very large – and another rather well connected market participant then agreed that this was really quite likely and might involve the launching of a battery company. All very interesting….
Back to the thorny question of what we might be able to call these battery type thingies that we are going to make – after all it is hard to develop a coherent strategy for promoting something if we cannot have a coherent strategy for even naming it. Long-time observers may not be surprised to discover that following an afternoons pleasant workshopping those present were unable to form a consensus on the big Vanadium Flow Battery/VRFB/VFB/Vanadium Redox Flow Battery/VESS issue. Looks like it is just one of those embedded issues that Jessica will have to find a way to navigate creatively around.
Watch this space.
[You can get the complete deck of Vanitec slides for the meeting here.]