Bushveld Energy - Your Time has Now Arrived
Phase 1 (800MWh)
22 November 2018
Given the fact that we have effectively been told to expect the launch of Bushveld Energy this year (Personally I am clear, that it's coming in November), let's now try to better understand the Bushveld Energy VRFB story and in particular it's ability to succeed in tendering for the 1,440 MWh Eskom BESS project
Discussed below are the 3 key documents ;
1. The Bushveld Energy presentation that was delivered at the SA Energy Storage Conference in October this year. The same conference where the 800MWH phase 1 Eskom Battery Energy Storage System project was announced (BE Article).
2. The EE Publishers article by Eskom's Prince Moyo, discussing the Eskom BESS project (Eskom article).
3. The 'Bushveld Minerals - Energy Storage and VRFB Webinar 13th November 2018'
Firstly, it is important to understand that whilst the Eskom article covers a number of general topics associated with BESS such as current world programmes and general use cases, it is clear that ;
“the article proposes some guidelines for the specification, testing, operation, maintenance and disposal of BESS systems and potential for wide-spread application on the South African power system.”
Given the author is Prince Moyo, the General Manager for Power Delivery Engineering at ESKOM and a key stakeholder in the launch of the Eskom BESS project, then I am inclined to believe that the guidelines will be included in the tender for their very first phase 1 800MWh battery project.
According to the Eskom article “the Eskom BESS project involves deployment of solutions at multiple sites in various operating units.” It further states ;
“All solutions will have a primary function and supplemental functions in the form of “stacked benefits”, in order to maximise the value of the BESS. For example, a unit primarily meant for capex deferral during peak times in winter months will be available for functions such as frequency support at any time and peak clipping during summer months. Peak hour discharge shall be for four hours.”
Under the ‘Process Flow’ section the same article further makes clear that “the most attractive applications are for distribution deferred investment and congestion management, and this was prioritised wherever possible.”
If we refer to the BE presentation slide 5 then we see “VRFB’s value proposition is to equalise power distribution and bridges gaps in power generation over longer durations,” so essentially the same thing:-
In the same slide BE are quite clear that the “VRFB is ideal for daily, multi-hour, deep cycle storage (e.g. with solar PV), grid support (e.g. peak shaving, system balancing) and off-grid installations (e.g. mines, farms, islands)” based around “utility transmission and distribution support with stacked values.”
Battery Lifecycle Costs
So a great many perfect fit performance options for the Eskom BESS but as is always the go to question on VRFBs, can it possibly beat a mass-produced lithium-ion battery on cost?
Well the Eskom article goes on to state under Step 5 ‘The Contracting Phase’ that ;
“The evaluation criteria involves preliminary assessment, technical assessment and finally economic lifecycle assessment. The lifecycle phase considers capital cost, energy cost (inefficiency), maintenance cost, replacement/augmentation cost and disposal cost.”
This is a key statement from Eskom because what they are saying is that they are not just looking at the initial capital costs, where it is perceived that Lithium-ion holds the advantage, but at the “lifecycle costs.” For the record that represents a giant leap forward in utility provider thinking and opens a sizeable door of opportunity for the right VRFB play.
If we refer to slide 23 of the BMN Energy Storage Webinar, we can see what this truly means for the VRFB and its ability to outperform the lithium-ion alternative and thus secure this project.
Whilst on first glance Lithium-ion batteries look to be chepaer than VRFBs, the reality is the analysis is limited in its scope because Lazard "assume not more than one 100% discharge cycle per day." However, as BMN demonstrate, a great many applications will require the battery to discharge more than this and thus even at 1.5 cycles per day the VRFB becomes 15% cheaper for 'wholesale' and 30% cheaper for ‘distribution’ solutions, but as BMN explain "For a VRFB, achieving two cycles per day would cut the LCOE by 50%."
So in reality we aren’t talking a close run race here when the customer is prepared to understand and consider the “economic lifecycle assessment.”
But it gets better.
The Lazard analysis has been conducted globally. It does not consider a South African based VRFB that has access to locally sourced vanadium and electrolyte, an advantage that no other VRFB producer can match, thus placing all other VRFB producers firmly on the back foot when it comes to that Eskom BESS prize.
As BE demonstrate on slide 8 “Vanadium is a more significant contributor to the cost of VRFBs than key minerals in comparative battery technologies” at circa 30%. However, the delivery and installation is also up to 13% of that cost. Therefore, a South African based VRFB developer executing local contracts for the likes of Eskom, has the ability to further substantially reduce costs by focusing first and foremost on that 43%.
But let’s go further.
This very same slide highlights 2 key points ;
1. High dependence on one mineral presents a challenge for the technology but an opportunity for vanadium suppliers
2. Strategies for countering high vanadium prices will be key to VRFBs’ sustained success
A fully integrated vanadium producer has the ability to affect the vanadium value chain in a manner that has never been seen before and thus has not yet been measured or analysed. That is the clearly communicated goal of BE, be it that the exact details are still to be made public.
One way that such a producer can and will counter high vanadium prices will be through their ability to affect the method by which the vanadium is sold.
On slide 9 of the BE presentation, shown below, it explains that “Bushveld Energy’s vanadium rental product takes advantage of the unique properties of vanadium and VRFB technology”
This model describes 3 key benefits of which 2 are listed below ;
1. Significantly lower and predictable CAPEX for the battery that could make it cheaper than lithium ion
2. Lower overall total cost of ownership / levelised cost for a VRFB than an outright purchase
Therefore, not only is the VRFB already up to 32% cheaper than its greatest competitive rival lithium-ion, when measured under the Eskom BESS project scope criteria, but a BE led VRFB also has the ability to further extend both the “lifecycle” cost advantage AND reduce the upfront capex costs (where lithium-ion is still perceived to hold an advantage), by introducing a leasing model.
So not only does a BE led VRFB have home advantage and thus delivers high local content, locally beneficiated minerals, a new energy industry and therefore the capacity to provide “1,000’s of jobs for young South Africans,” but that very same VRFB is technologically more suitable for Eskom’s stated needs, far better value for money on a levelised cost basis, and now with the foresight of Bushveld Energy, potentially more cost effective on front end CAPEX as well.
All they need to do is make sure that the vanadium (Vametco 5,000 mtv production output expected in 2019) and the electrolyte (First phase 200MWh facility output expected in 2019) are in place, ready to take maximum advantage of the pending Eskom windfall.
VRFB’s greatest battle was not only to convince the utilities that battery based energy storage had a place in their systems and their regulatory framework, but that those batteries should be measured by their lifecycle costs, not their upfront CAPEX. The Eskom BESS project delivers the victory that the VRFB needed and it sits right on the doorstep of the world’s only fully integrated vanadium producer and VRFB developer, Bushveld Minerals.
Thus it is very easy to understand why Bushveld Energy was presenting at the SA Energy Storage Conference, and why Bushveld Minerals tweeted the following Engineering News article on 22nd October 2018 with the message ;
Well haven’t you just Bushveld. . . and it looks like you are more than ready.
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