Why Demand Is Expected To Increase

Vanadium, a transition metal now mostly used as an alloy component, could see a sharp increase in demand as new uses are found for the element. If the demand should increase as much as expected, the supply gap will widen and send the price of vanadium soaring. Even without considering new applications, vanadium demand is already predicted to increase more than 100 percent by 2025. In 2010, vanadium consumption was at 61,000 metric tons, and the forecast for 2025 is 123,000 metric tons.

An analyst for Byron Capital, Jonathon Lee, noted that vanadium currently trades for $26 to $27 per kilogram, but the future price is still certain. All that is known is that the price could rise if vanadium began to be used in energy storage applications on a wider scale. The trend to increasingly use vanadium in battery technology has a great deal of momentum behind it, and if demand increases, all of the current data shows that a supply shortage is inevitable.

In an interview, Lee stated, “People are contemplating using the vanadium redox battery as a portion of power grid storage. Whether or not that takes hold is yet to be decided, but one distinct advantage is its long life, given that vanadium is on the anode and cathode side of the battery.” Lee went on to say, “It is a fairly unique technology, and if it could be commercialized on a larger scale, it would definitely increase demand for vanadium significantly.”

Companies Helping Expected Surge In Demand

Energizer Resources Inc, the parent corporation of the Madagascar Green Giant vanadium project, is devoting most of their focus and resources on vanadium exploration and development. The company is betting everything on a prediction that the world will experience a vanadium shortage by 2013.

American Vanadium Corp TSX.V:AVC

According to Reuters, most vanadium, today, is extracted in China, South Africa and Russia. Exploration of new vanadium deposits is currently being conducted by very few mining companies. Among the companies developing new vanadium deposits around the globe are American Vanadium (TSXV: AVC), Apella Resources (TSXV: APA), Energizer Resources (TSX: EGZ, OTCBB: ENZR) and Largo Resources (TSXV: LGO).

On their website, American Vanadium published a report stating the U.S. government plans to invest nearly $185 million to deploy a utility-scale grid storage system and demonstrate its effectiveness. The leading technology used in such storage system solutions are vanadium redox batteries (VRBs).

Concerning VRB technology, Energizer recently reported, “With the ever increasing frequency of news about vanadium and VRBs, it is becoming more apparent than ever before that vanadium’s role will be pivotal in the development of battery technology for electric vehicles and, more importantly, for large scale energy storage systems.” Energizer continued their report by stating, “This new demand stream is being driven by vanadium’s role as a supercharger in lithium batteries for electric and hybrid cars and as an essential and substantial component inVRB storage systems.”

The Commercialization of Vanadium Redox Batteries

VRB technology is currently very limited, being used only in the United States, Australia, Europe, Japan, Korea and China. Because of this, the full development and commercialization of vanadium will take several years.

Prudent Energy, based in Bethesda, Maryland, designs and holds several patents onVRB technology. Prudent Energy announced in 2010 that they were installing a 600-kilowatt VRB power storage system in Oxnard, California, at Gills Onions, one of the largest processing plants of fresh onions in the world.

Another VRB developer is Cellstrom GmbH, an Austrian company that was recently acquired by Gildemeister GmbH out of Germany. Cellstrom has been in the VRB business as a manufacturer and distributor since 2008, selling VRBs in Europe and in India under the brand name CellCube. In early 2011, CellCube gained fame for the use of VRB technology in the media launch of BMW’s new electric car, the BMWi. As part of the BMWi publicity launch, CellCube provided 100 percent renewable energy for the event with VRBs charged by a wind turbine.

Governments Involvement With Vanadium Battery Market

The development of new uses and applications for vanadium combined with the reluctance of China to export raw materials to the United States and Europe has prompted analysts to proclaim that it is imperative for smaller companies to begin vanadium operations as soon as possible. Analysts also say that government must take a role in the matter by implementing policies and laws to clear the way for the commercialization of VRB technology.

On the matter of government involvement, Lee stated, “The government is mandating that certain percentages of electricity production must be sourced from renewable energy. So, it’s really determining how those policies will ultimately be implemented because other technologies are competing with vanadium redox.”

Lee went on to speak about the role of government and competition for storage system materials by noting that zinc bromide and lithium-ion batteries are the main competition for VRBs. The scalability of the technologies and the price differential of peak and off-peak pricing are the key issues. According to Lee, “A slew of different government policies will determine whether vanadium redox can actually go forward.”