Circular Business Model for Vanadium Use in Energy Storage

Circular Business Model forVanadium Use in Energy Storage CLIMATE-SMART MINING INITIATIVE Contents Executive Summary Analysis of the Vanadium battery market 2.1Introduction232.2Global Energy Storage Market232.3Business Case for the Adoption of VRFBs252.4Overall Market Potential for VRFBs262.4.1Market Forecasts272.5Cost Analysis282.6Risk and Opportunity Assessment332.7Opportunity Assessment342.7.1Domestic value capture342.7.2Innovative business model for mineral financing352.8Case Study: South Africa372.8.1Energy storage market in South Africa372.8.2Competitiveness in the production of VRFBs over LiBs in South Africa382.8.3VRFB market potential in South Africa41 © 2023 International Bank forReconstruction and Development/The World Bank 1818 H Street NWWashington, DC 20433Telephone: 202-473-1000www.worldbank.org This work is a product of the staff of TheWorld Bank with external contributions.The findings, interpretations, and conclusionsexpressed in this work do not necessarilyreflect the views of The World Bank, itsBoard of Executive Directors, or thegovernments they represent. The World Bank does not guarantee theaccuracy of the data included in this work.The boundaries, colors, denominations, andother information shown on any map in thiswork do not imply any judgment on the partof The World Bank concerning the legal statusof any territory or the endorsementor acceptance of such boundaries. Analysis of the Vanadium leasing model Overview of VanadiumVanadium Reserves and ResourcesVanadium ProductionVanadium ConsumptionVanadium Production Drivers and ChallengesVanadium–VRFB Value Chain AnalysisVanadium Ore ExtractionVanadium to Vanadium ElectrolyteVRFB Manufacturing and Assembly3.10VRFB Installed Capacity3.11VRFB End Use Application3.12Recycling of Vanadium3.13Circular Business Model3.14Comparative Analysis3.14.1Platinum This document was written for theWorld Bank Group’s Climate-Smart MiningInitiative by PwC. Rights and Permissions The material in this work is subject tocopyright. Because the World Bankencourages dissemination of its knowledge,this work may be reproduced, in whole or inpart, for noncommercial purposes as long asfull attribution to this work is given. Any queries on rights and licenses, includingsubsidiary rights, should be addressed to: World Bank PublicationsThe World Bank Group1818 H Street NWWashington, DC 20433,USA Fax: 202-522-2625 Contents 3.15Platinum Ore Extraction3.16Beneficiation and Purification of Platinum3.17Manufacturing of Industrial Products3.18End Use Application3.19Recycling3.20Technical and Market Challenges3.21Reuse of Platinum3.22Circular Business Model for Platinum3.23Proposed Business Model for Circular Vanadium Ownership3.23.1Scenario A: Single long-term leasing3.23.2Scenario B: Multiple short-term Leasing3.23.3Scenario C: Multiple short-term leasing in focused geographical region3.23.4Financial analysis for setting up the VE recycling facility in the focused end-use geography3.23.5Comparative analysis of different model scenarios 4Analysis of supply and demand in the Vanadium market 77 Global SupplyGlobal DemandGlobal Market PricesPrice Forecast Scenarios 5.1Financial Analysis5.1.1Key findings5.1.2Sensitivity analysis5.2Lease Rate (%)5.3Price of Vanadium5.4Client Upfront Payment5.5Cost of Debt Funding5.6Capital Expenditure—Vanadium Cost5.7Conversion Cost5.8Reprocessing Costs5.9Lease Term/ PPA Tenor5.10Annual US dollar Inflation Forecast5.10.1Risk matrix5.11Economic Analysis List of Tables Table 2.1:Comparative Assessment of Li-ion Batteries and VRFBsTable 2.2:Comparison of Characteristics of Battery TypesTable 2.3:Battery Technology suitable for Grid Use CasesTable 2.4:Opportunities across the VRFB Value ChainTable 2.5:Impact on GDP and EmploymentTable 3.1:Manufacturers of Operational VRFBs, 2022Table 3.2:VRFB Capacity (Operational + Announced/Under Construction), 2022Table 3.3:Sources of Platinum, 2017-2021Table 3.4:Primary Producers of Platinum, 2017-2021Table 3.5:Comparison of Vanadium Leasing and Platinum LeasingTable 3.6:Model 1 and Model 2 Scenarios and their ApplicabilityTable 3.7:Advantages and Disadvantages of Model 1 and Model 2Table 3.8:Assumptions used for the Financial AnalysisTable 3.9:Detailed Comparison of the Feasibility of Various Business ModelsTable 4.1:Examples of Companies in the Primary Vanadium-Producing CountriesTable 4.2:Scenario 1—Price Forecasts up to 2030Table 4.3:Scenario 2—Price Forecasts to 2030 following rapid growth in vanadium demandunderscored by little change in vanadium productionTable 4.4:Scenario 3—Price Forecasts to 2030 following growth in both vanadium demand and supplyTable 5.1:Summary of financial assumptionsTable 5.2:High-Level Risk MatrixTable 5.3:Economic CBA criteria and definitionsTable 5.4:Costs associated with the Proposed Circular Vanadium Business ModelTable 5.5:Benefits associated with the Proposed Circular Vanadium Business ModelTable 5.6:Results of the Cost-Benefit AnalysisTable 5.7:Sum