Replacing a 2,500-Year-Old Technology
Believe it or not, a technology used to water the Hanging Gardens of Babylon still dominates a part of our power infrastructure.
Behold its first version, the revolutionary Archimedes’ Screw.
The concept is incredibly simple (and predates Archimedes by centuries). You turn a screw threaded through a pipe or trough and it pulls water up.
Human power was replaced by motors late in the 1800s and the extra pressure they created removed the need for massive screws. Reversible turbines were introduced in the 1930s, further improving the design.
Yet the technological advances just improved the efficiency of systems designed to do the same thing Archimedes’ Screw was doing at least 2,500 years ago — move water uphill.
That may not seem too important in the modern era, but it is for electrical grids.
Hydroelectric power plants store kinetic energy overnight for peak demand during the day this way.
As of 2017, moving water uphill then letting it fall back down later accounted for 95% of power storage worldwide.
That is about to change, and it is going to revolutionize power storage on a scale that is hard to imagine.
Storing water to generate electricity this way comes with two big problems.
First, the hydroelectric power plants consume power to pump the water uphill, driving down efficiency.
Taking in water evaporation and energy conversion losses, energy recovery comes to about 70% to 80% of what it takes to pump it uphill.
Then there are the geographic issues. Hydroelectric dams only work with very specific topography, and even then are extremely capital intensive to build.
Building these power storage systems for other baseline power plants, like coal and nuclear, becomes prohibitively expensive without a big hill and a suitable naturally large reservoir.
That is starting to change. Battery storage is now an option that works for the entire grid, regardless of where power sources are located.
The timing couldn’t be better, with the variable output of renewable power sources creating some serious problems for utility companies and the stability of the electrical grid.
Tesla has taken the lion’s share of attention for this by building power storage units with its battery packs, but its approach has a severe limitation.
The cost is too high compared to just adding more generating capacity, to the point where it will not be a long-term solution.
The problem comes from an insurmountable issue. The lithium-ion batteries that Tesla and other companies are using will always be several times more expensive than the cost of simply producing more energy.
It is a matter of basic chemistry. Lithium-ion batteries lose capacity over time and efficiency falls off dramatically over a couple decades.
As a result, the cost of using ordinary batteries for utility-scale storage bottoms out around $0.30 per kilowatt-hour. They price themselves out of the market by tripling the total cost of the power stored.
A completely different kind of battery is needed to make electrical grid-scale storage a reality.
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The Right Kind Of Battery
As it just so happens, a suitable kind of battery is seeing explosive growth in the market right now.
Vanadium flow batteries are nonflammable, compact, can remain uncharged for long periods of time, discharge 100% of the stored energy, and do not degrade for more than 20 years.
As a result of their unique properties, vanadium flow batteries reduce the cost of power storage to about $0.05 per kilowatt-hour.
In short, they solve almost all of the problems that lithium presents for grid-scale power storage.
To put that in perspective, that’s on par with the $0.04 to $0.06 per kilowatt-hour the Dept. of Energy estimates as the mid-range for new U.S. solar power plants.
The combined cost of generation and storage for solar power and vanadium batteries is lower than many coal and natural gas power plants operating today.
The importance of this milestone cannot be understated.
Demand And Prices Will Soar
Lithium is still a fantastic investment due to projected demand for electronics alone outpacing supplies for many years to come.
But demand is driving vanadium prices up far higher. In just the last year, it’s soared five times faster than lithium. Over the last two years, prices are up over 350%.
That may just be the start. The battery storage boom is projected to be 10,000%, or as Bloomberg Energy put it, will “double six times over.”
With all the advantages that new generations of vanadium flow batteries provide, they’re the best option to meet that demand by a long shot.
Adam's editorial talents and analysis drew the attention of senior editors at Outsider Club, which he joined in mid-2012. While he has acquired years of hands-on experience in the editorial room by working side by side with ex-brokers, options floor traders, and financial advisors, he is acutely aware of the challenges faced by retail investors after starting at the ground floor in the financial publishing field. For more on Adam, check out his editor's page.
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