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.
