Best stock to invest in – Vanadium Flow Battery Stocks: Barely A Dribble



Best stock to invest in

by Debra Fiakas CFA
 
The previous post “Investing
With The Flow Battery
” introduced a series of articles on flow
batteries for grid-scale energy storage.  Investors focused on
renewable investments should at least consider the implications of
storage requirements in evaluating renewable energy technologies
even if storage developers are not considered
portfolio-worthy.  Owners of grid-connected solar and wind
power systems must design a network that can meet the highest peak
load of the year even if a large part of the generating capacity
sits idle for extended periods.  Storage technologies convert
electrical power into chemical or mechanical energy and then send it
to the grid when as needed.

Batteries, of course, fall into the category of chemical
solutions.  According to the Department of Energy about 20% of
the energy storage solutions in place today rely on batteries. 
Total capacity is just over 300 megawatts.  Lithium ion
technology represented the vast majority of this installed battery
capacity.  Fast response time makes lithium ion batteries
popular.  Unfortunately, they do not hold up well under
repeated charge and discharge cycles.  Lithium ion batteries
must be replaced frequently, increasing cost of operation.

The deficiencies of lithium ion battery technology have opened a
door for flow battery technologies.  Flow batteries have a long
battery life and tolerate as many as 10,000 charge and discharge
cycles.  Additionally, the liquid electrolyte can be replaced,
making it possible to extend the life of the battery through a
refurbish cycle that delays expensive replacement.

Flow batteries are composed of two chemical components dissolved in
liquids and separated by a membrane.  The liquids or
electrolytes are pumped through a stack of electrochemical cells
thereby converting chemical energy into electricity.  Ion
exchange occurs through the membrane as the two liquids circulate in
their respective cell.  This provides for the ‘flow’ of
electric current. Energy capacity is determined by the electrolyte
volume and the surface area of the membranes.

There are several flow battery developers that are using vanadium
material –   a hard, silvery metal  –  for the
electrolyte.  Vanadium is attractive to battery developers
because it oxidizes into four different valence states, all four of
which can be used for a flow battery.  On its own vanadium is
tough to find.  It is almost always a by-product of another
mining or minerals process.  China and Russia extract vanadium
from slag produced by steel smelters.  It is also a by-product
of uranium mining.

Most of the companies using vanadium materials for flow batteries
are private.  Imergy and UniEnergy Technologies are two
examples that cast something of a harsh light on the challenges of
an early stage industry.


Indeed, Imergy’s story already has an ending and it is not a happy
one.  In July 2016, the company filed for bankruptcy and is
liquidating its assets, including the flow battery intellectual
property.  Imergy’s success was in part the beginning of its
end.  In 2015, the company has been tapped by SunEdison to
provide vanadium flow batteries for an ambitious rural
electrification project in India.  Unfortunately, Imergy only
installed two systems before SunEdison’s own financial problems
forced it to declare bankruptcy.  Having already extended its
operations to meet the demands of a large order, Imergy was unable
to land on its feet with the loss of that customer.  Venture
capital backers abandoned Imergy and it was forced to close its
doors.  There has been no public report of what entity might
have gained control of Imergy’s flow battery technology.

UniEnergy Technology
has managed to find success AND stay in business.  The company
targets multiple markets, including utilities, microgrid,
commercial, and industrial applications besides renewable energy
systems.  The company differentiates itself from the other flow
battery suppliers with a small footprint and user-friendly
controls.  Perhaps the most compelling competitive advantage
that UniEnergy has is its longevity and experience. UniEnergy has
licensed flow battery technology originally developed over a decade
ago at the Pacific Northwest National Laboratory run by the
Department of Energy.  UniEnergy has been adding additional
improvements in design since its inception in 2012, culminating in a
demonstration project in 2015.  Most recently the company
installed a 8-megawatt hour system on the grid in Snohomish County
in Washington State.  While small in comparison to some lithium
ion battery systems, the Snohomish system is the largest
containerized flow battery system in the world.

On the other end of the spectrum there are very large companies in
the flow battery space.  Through its subsidiary Gildemeister Energy
Solutions, DMG Mori AG (GIL: GE or MRSKY:  OTC)
offers
vanadium-based flow batteries in 130 kilowatt and 200 kilowatt
capacities.  Scalable systems of various sizes can be assembled
through parallel connections of multiple CellCube units. 
Gildemeisters has successfully installed several of its systems, but
its financial profile is buried so deep in the financial reports of
Gildemeister’s  parent company DMG Mori, it is not clear if it
is a profitable venture.

A DMG MOri gives the investors so much more than vanadium-based flow
batteries.   The company is one of Germany’s largest
manufacturers of cutting machine tools, shipping its lathes and
milling machines all around the globe.  The company converts
almost 5% of its sales to operating cash flow, which helps support
an ample dividend.  That said, the forward dividend yield is an
attractive 1.7%.

Publicly traded American
Vanadium
(AVC:  TSX or AVCVF: 
OTC) gives investors a chance for a pure play in the flow battery
market.  The company has been the master sales agent in North
America for Gildemeister’s CellCube.  The company has its
origins as a vanadium materials producer with a focus on the battery
market.  The company had mineral claims on a vanadium deposit
in Nevada up through the end of 2016.  After working for years
to develop a market for its vanadium materials, the company has
integrated forward into batteries.  The move has the potential
to capture more value from the shift in energy to renewable sources
as well as the disaggregation of power systems from large grids to
into smaller distributed systems.

American Vanadium made headlines with the installation of a CellCube
system as a demonstration for the Metropolitan Transportation
Authority in Manhattan, New York.  In early 2016, American
Vanadium even made bid to buy the CellCube assets from Gildemeister,
but was unable to raise sufficient capital and had to retract the
offer.  Since then the company has even suspended marketing
efforts in an effort to conserve its remaining capital.

Clearly along the vanadium arm of flow battery technology there are
few options for investors.  A position in the healthiest
company is more a stake in machine tools than flow batteries, albeit
an attractive one with a regular dividend check.  The only
dedicated vanadium flow battery developer is more ‘played out’ than
‘pure play’.

Debra Fiakas is the Managing Director of Crystal Equity
Research
, an alternative
research resource on small capitalization companies in selected
industries.

Neither the author of the Small Cap
Strategist
web log,
Crystal Equity Research nor its affiliates have a beneficial
interest in the companies mentioned herein.

– Best stock to invest in

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