Emerging Utility-Scale Energy Storage And Demand Charge Response Markets Will Drive Flow Battery Demand

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 |  Includes: ARTX, AVCVF, ESNC
by: Livio Filice

Summary

Key technology and product advantages of flow batteries.

Emerging markets that will benefit from batteries.

3 public flow battery companies that are focused on these market opportunities.

A flow battery has very few similarities to a lithium ion battery outside of the rechargeability factor. Flow batteries technologies are a type of battery where rechargeability is provided by two chemical components dissolving in liquids contained within the system and separated by a membrane. Ion exchange occurs through the membrane, while both liquids circulate in their own respective space.

Key product and technology advantages of flow batteries are many, including: the ease of scaling up power storage rating, reliability, long life and highly efficient. Most notable of the advantages is the scalability factor, which allows for the storage capacity to expand from hours to days without the need to upgrade the power generation system.

The disadvantages for flow batteries continue to pose a threat for the battery systems, but are being overcome as additional capital is deployed into research and development. The primary disadvantages include the high capital cost, which creates a long payback period, along with some material issues, including polymer membranes.

Ongoing research efforts are focused on the cost reduction of materials, higher energy density and better energy efficiency.

Emerging Market for Utility-Scale Energy Storage Will Drive Flow Battery Systems

The grid-connected intermittent energy sources such as solar PV and wind are going to benefit from flow battery systems. Energy that is produced from solar PV and wind generating sources is variable, due to inconsistency in wind and cloud patterns. Due to these real-world factors, the amount of energy produced varies with time, season, and weather patterns. Without energy storage systems, which include flow batteries, the grid operators would need to respond to each weather situation, or renewable energy sources will only produce a smaller portion of the overall energy supply.

This illustrates the advantages of energy storage systems in assisting grid operators in smoothing out renewable energy production to better match the demand patterns.

Demand Charges: Unlocking Value for Customer-Based Storage

Even without renewable energy production, there is still demand for energy storage systems within the electrical power grid. Electrical energy is stored during times when production from traditional fossil fuel power plants exceeds consumption, which can be stored in flow-based battery systems for release and consumption at a later point. Under this method, new significant power production operations are not required. The simple addition of energy storage systems can dramatically expand the grid capability.

In May 2014, Hawaii Electric launched one of the largest energy storage proposals globally to assist with the over-penetration of solar PV on the islands. The proposal calls for 60 to 200 MW of storage projects.

In October 2013, the State of California issued a mandate for the 3 largest private utilities to significant ramp up their storage capacity. The mandate, which was issued by the California Public Utilities Commission, unanimously approved its proposal that will require the utilities to add 1.3GW of energy storage to their grids by the end of the decade.

Three Public Companies in the Flow Space: ZBB Energy, Arotech and American Vanadium

ZBB Energy Corporation (ZBB) is a leader in the design and manufacturing of modular Zinc-Bromide batteries used for energy storage. Further, the company develops and manufactures energy storage and innovative power control technologies serving the global need for reliable power in off-grid and grid-connected environments. The company operates in two segments: ZBB Energy Storage and Power Electronic Systems and Tier Electronics Power Conversion Systems.

The company targets a number of applications with its Zinc-Bromide fully integrated energy storage system, including: remote operations, communication towers, commercial buildings, electric vehicle charging, microgrids and disaster relief.

ZBB has seen its product sales decrease 58% to $2.6 from $6.3 million for the 9 months ended 3rd quarter fiscal 2013, but the company remains optimistic about its product offering. In a press release, the company states that. "We believe our products are the right fit for the multi-billion dollar energy storage proposals in California, New York, Province of Ontario and South Korea." And "We expect additional energy storage proposals going forward, including in China, which we believe over time has the potential to be a $40 billion market opportunity."

It is important to note the company is in a non-compliance situation with the NYSE MKT Company Guide, and has until October 15, 2014 to regain compliance with Section 1003(a)(iv). If the company fails to regain compliance, then it may be forced to delist its shares.

Arotech Corporation (NASDAQ:ARTX), which primarily operates a growing defense and security products and services company, has recently launched into the flow battery technology space. The defense and security division is engaged in three business areas: interactive simulation for military, law enforcement and commercial markets; batteries and charging systems for the military. The company has grown both through acquisitions and organically. Today, the company operates through its various sub-subsidiaries, which it has organized into two divisions. It manufactures and sells lithium and Zinc-Air batteries for defense and security products and other military applications through its Battery and Power Systems Division.

The Power Systems Division announced in March 2016 that the company had advanced the development of its iron flow battery which will provide storage for grid power applications. The company stated that its iron chemistry provides the highest ROI, with the lowest total lifecycle, capital and maintenance costs. These comments are early considering the technology is in development.

Arotech stated that it expects the size of the market for grid-tied battery storage systems will exceed $400 billion by 2020. Its flow battery will primarily target power smoothing of the highly variable supply of electricity generated from renewable sources, such as solar PV and wind power.

The third company, American Vanadium Corp. (OTC:AVCVF), is a junior mining company focusing on the exploration and development of vanadium resources in the United States. The company's primary exploration property is the Gibellini Property, located in Eureka County, Nevada. Beyond its mining activity, the company is an integrated energy storage company holding the Master Sales Agent agreement in North America for GILDEMEISTER's energy solution "CellCube". CellCube is a vanadium-based flow battery system delivering a powerful, durable and reliable energy storage system that ensures a clean, emission-free energy supply at all times. The CellCube is the world's only commercially available vanadium flow battery providing long duration solutions over a 20+ year life, and is ideal for utility-scale grid-tied energy storage applications.

American Vanadium had two recent announcements which have kick-started its North American sales efforts for the CellCube vanadium flow battery systems. The first announcement was that the US Department of Energy's National Renewable Energy Laboratory will evaluate and demonstrate the CellCube vanadium redox flow energy storage system at its state-of-the-art testing facility. After the demonstration of the energy storage system at NREL's facility in Golden, Colorado, the CellCube would be sold to a US utility company.

The second announcement was that the company will partner with the New York State Energy Research and Development Authority (NYSERDA) to demonstrate the CellCube™ vanadium redox flow energy storage system. The Metropolitan Transportation Authority (MTA) and the New York City Transit (NYCT) Office of Strategic Innovation and Technology will host this demonstration at the MTA's Energy Star-certified facility at 2 Broadway in downtown Manhattan. ConEdison and the Advanced Energy Research Technology Center (AERTC) at Stony Brook will also support this effort.

In October 2013, Dundee Corporation acquired a significant interest in American Vanadium via a private placement. 6,000,000 units of American Vanadium were issued at 50 cents per unit, giving Dundee an approximate 14% interest on an undiluted basis, and 25% assuming that the share warrants are converted. Dundee demonstrated only months later that it still had an appetite for American Vanadium. It announced that Dundee had increased its ownership position to 28% on an undiluted basis, and 40% assuming that all the warrants are converted. In April 2014, American Vanadium announced that Board of Directors has appointed Brett Whalen as the company's non-executive chairman. Mr. Whalen is vice president at Dundee Corporation.

According to American Vanadium, "The long-duration flow battery market is expected to be worth $5 billion in 2020. The CellCube is expected to be a major global player, capturing at least 20 percent of the market by then".

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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