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Morgan Stanley building, New York. Image: Flickr user: Son of Groucho.
Financial services giant Morgan Stanley has anticipated that the US energy storage market will grow faster than current consensus expectations, while Deloitte has earmarked the technology for exponential growth – although not perhaps this year.
Morgan Stanley’s “Energy storage: An underappreciated disruptor” says it expects US utilities to “deploy a large amount of storage in the next two to five years”, driven forward primarily by the need to accommodate ever-growing amounts of wind and solar on power networks. It projects growth in the industry from less than US$300 million per year now to a value of US$2- US$4 billion per year by 2020.
Looking at some of the key players in the space, the investment company also identified LG Chem and Tesla as likely dominators of the supply chain, with the scale and manufacturing efficiency to outpace rivals. It expects LG Chem’s production output for energy storage system batteries to reach 11GWh by 2020, while Tesla’s well-documented Gigafactory should be churning out 35GWh of cells and 50GWh of battery packs by 2018, albeit to also serve its electric vehicle range. Nonetheless it rated stock price upside on both of these players as “modest”.
The report’s base case scenario sees the US addressable market for energy storage as around 85GWh, worth US$30 billion. This addressable market could vary greatly in size based on ongoing regulatory wrangling, primarily whether the Federal Energy Regulatory Committee (FERC) will allow utilities to deploy storage in deregulated markets as competitive generator assets.
This could mean a boost of as much as 60GWh over the base case scenario if allowed. The outcome of this dynamic is partly dependent on President Trump’s new appointees to FERC and the answer is likely to be found by late in this year or early next. However, the report’s authors, led by analyst Stephen Byrd, said they did not believe FERC would decide to allow utilities to deploy storage in those deregulated power markets due to the commission’s recent record on the matter.
The report claims utilities will be the majority customers of energy storage systems, rather than individuals or businesses, because the range of benefits offered to utilities is much greater, allowing greater utilisation of grid infrastructure, for example, and also because utilities can factor investment of storage into their business planning.
Morgan Stanley doesn’t foresee tremendous growth in storage linked with rooftop solar besides in leading markets with high penetration like California and Hawaii, expecting that net metering programmes will remain in place for the most part and therefore adding little incentive to homeowners to add batteries.
Meanwhile, consulting and advisory major Deloitte has identified energy storage as one of four technologies that while still some way from mainstream adoption, will “grow exponentially” once it gets there.
Along with nano-engineered materials, synthetic biology and quantum optimisation, energy storage was picked out by the firm for inclusion in the “Exponentials” section of its annual Tech Trends report. The overall report sees mainly IT innovations like mixed reality – a blend of augmented reality, virtual reality and Internet of Things (and presumably reality itself) and dark analytics transforming the business landscape during this year.
However, the Exponentials section looks at advances in technology that it sees as a little further off from making truly disruptive waves in the mainstream – defined as a timeframe of 24 to 60 months away. Each of those four areas “when they manifest, the speed with which they impact markets will likely grow exponentially,” the authors wrote.
These four “exponential forces” were selected for the significant growth in both private and public investment as well as research they have each enjoyed in the recent past. While their impact may not be transformative for another two years minimum, Deloitte said they are all likely to offer competitive opportunities within the near-term for early adopters.
The section devoted to energy storage opens with a recognition of the rapid growth of wind and solar and iterates that as much as two-thirds of new generation added over the next 25 years will be renewable. With this, energy storage could be critical in matching disparity between generation and demand and the ability to dispatch electricity flexibly and in differing geographies.
Deloitte refers to an “explosion of new and improving storage technologies” appearing in the past decade and to specific projects such as SolarCity-Tesla’s large-scale solar-plus-storage project in Hawaii and a compressed air pilot programme from start-up Hydrostor in Ontario. The report also notes that utilities in the US have started offering storage to their customers and that Japan is introducing ‘zero energy’ standards for buildings in the coming years.
The advent of mainstream storage, the report explains, is likely to be a component of a forthcoming business model revolution in energy, as decentralised large generators are increasingly pushed aside by distributed assets. Deloitte said the mix of energy storage technologies and customer types was a broad range and difficult to generalise, but nonetheless it would be part of this overall transformation, presenting both consumers and producers of energy with a wider range of choices and greater complexity, “transforming the traditional supply, demand, and economic relationships between many parties”.
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