Bushveld Minerals Limited (LON:BMN) took the first big step to becoming an energy storage business after it signed an outline deal with UniEnergy Technologies.
The American company builds energy storage facilities with vanadium at the core of their new technology, the vanadium redox flow battery.
In 2014 Bushveld Minerals said the group was aiming to be “the world’s cheapest vanadium producer” and said possible partnerships were in the pipeline.
You’ve spoken for a while now about the potential of vanadium, why has it taken so long to secure a partnership?
“Two main reasons. The first is that we wanted to be sure we were picking the right partner,” said Nikomarov.
At present there are over a dozen companies deploying or developing vanadium redox flow technology.
“Yes, I was surprised the number was that high - and it is growing quarterly.”
“We wanted to find a partner with a deployed technology that combined performance and cost and had people at the senior levels that shared our vision,”
Bushveld Energy’s primary concern is the need for continued cost reduction while also pursuing opportunities in Africa.
Three US companies, including UniEnergy, have the advantage of access to a better electrolyte patent, but there are only three such licenses.
“Other vanadium redox flow companies will need to compensate for that to match the performance, cost and size, and we have not seen that yet. “
“And secondly, we wanted this to be more than just a 2 page MoU, the likes of which are very common. It needed to spell out our joint vision for the short term and the medium term and has some very specific activities.”
Is this the first step in a redirection to the energy storage market?
“I do not see this as a redirection - rather as a valuable complement.”
“The economics of Bushveld's vanadium project are strong enough on their own, so it will go forward with or without energy storage. Storage just makes it better.”
Nikomarov highlighted that the main challenge with more niche commodities in the industry - such as vanadium - is that is when there is more product on the market, the price will be immediately driven down.
How do you add to the supply without pushing down prices?
“You grow demand in parallel,” he explained.
“More energy storage does that. The vanadium and the batteries are an ideal industrial hedge in an industry that does not have long term hedging products. When vanadium prices are down, the batteries offer better margins.”
“While you lose some of that when prices recover, the mining operations in turn perform better. That is the beauty of Bushveld's integrated model. We can capture more value while also reducing the overall volatility.”
South Africa, unlike most other leading Vanadium producing nations, such as China and Russia, exports a vast majority of its vanadium.
“Bushveld Energy allows us to create more value in South Africa, through project development, installation and maintenance services, vanadium manufacturing and all the way through battery production.”
The national government has been pushing a "mineral beneficiation" agenda for the last decade.
The Mineral and Petroleum Resources Development Amendment Bill 2013, which came into force in 2014, made it compulsory right holders would need to fulfil local beneficiation requirements before exporting any designated minerals.
“We see energy storage as a way to use vanadium to add value for Bushveld, jobs for South Africans and growth to the economy.”
How long before this partnership develops into a profitable model?
“We can be profitable on off-grid projects today where the battery replaces diesel, such as with a renewable generation source like solar or wind.”
The economics work, claims Bushveld and the group is already pursuing projects where the customer benefits from lower prices while also capturing value.
“I would like to have more such projects and if awareness of vanadium battery technology was higher and funding for smaller bankable projects was readily available, we would have more - but it can be profitable already.”
What about South Africa?
In South Africa the grid is already developed, but the tariff structure is not conducive to storage and the exchange rate has made imported systems non-competitive for most commercial and industrial applications.
But the utilities and power grid overall could benefit from the battery technology, but is a harder application to implement, he explained.
“It is taking some time. I have seen the utilities looking at storage more intently and the government has been open-minded on storage before.”
In January last year, South Africa’s Department of Energy allowed concentrated solar power plants to store and sell electricity from thermal energy.
“It’s an incentive to produce here and localise as much of the costs as possible,” he added.
Are you looking at a particular time-line?
Bushveld Energy wants to be one of the largest energy storage providers in Africa by 2020.
“I do not want to disclose our internal business plans but we think the energy storage opportunity in Africa is immediate and understated, in fact, it is rarely stated at all.”
At present, World Bank estimates that 25 African countries are facing an immediate energy crisis, meaning power is often inaccessible and unreliable for most people.
Across the continent only 10% of the population has access to the electrical grid.
Access to commercial energy is a key factor when combatting poverty in less developed countries.
“The continent will surprise some people in this sector in the next few years.”
How confident are you in the potential of vanadium?
“Very confident, and I think we are not alone.”
“The performance superiority of vanadium batteries to any other batteries on the market is well documented, especially for daily, deep cycle, long life applications.”
“Now that people are becoming more sophisticated they are also starting to realise that the technology is cheaper, too.”
Analysts at Lazard and Goldman Sachs showed that levelised cost (the net cost to install the system divided by expected life-time energy output) of vanadium-based energy storage is 20-30% cheaper than existing lithium-based storage.
“Obviously new battery technologies may come up in the future and this is where the vanadium industry will need to innovate. We expect UniEnergy Technologies to innovate and improve the vanadium redox flow technology system and we, in turn, will innovate on business models and vanadium production. That is how good, long-term partnerships should work.”