Wind power now accounts for almost a third of all the UK’s electricity, overtaking every other source, including gas. Turbines have been built, capacity has increased and costs have come down. But wind is unpredictable.
On calm days, there is not enough of it. On gusty days, too much. This creates problems. When wind turbines generate more electricity than the grid can absorb or distribute, they are simply asked to stop producing. Over the past two years alone, the process has cost around £1.5 billion and huge amounts of energy has been lost, enough to power over a million households, according to think tank Carbon Tracker.
This problem is growing worse each year, making renewable energy more expensive than it should be and slowing the UK’s path towards a fossil fuel free future. Invinity Energy Systems can help to fix the issue. The company makes vanadium flow batteries, which are safe, last for years and are capable of storing electricity for hours at a time.
Invinity shares are 35p and should increase materially as the group rolls out its batteries not just here but across the world.
Bright future: Invinity’s battery systems can help stop wind energy worth billions of pounds being wasted
Today, lithium batteries dominate the market. Used in phones, computers and electric cars, they are known for being ‘energy dense’ so they can store a lot of electricity for their size. But they are more suited to short bursts of power and they degrade within a few years. They are highly flammable too so extreme care has to be taken about how they are installed and maintained.
Vanadium flow batteries are constructed using completely different chemistry. Ideally suited to storing large amounts of power and discharging it over many hours, they retain their potency for decades and carry no risk of overheating and catching fire.
These batteries are also about 30 per cent more expensive than their lithium counterparts. In 2021 however, Invinity embarked on a joint venture with German engineering giant Siemens to develop a battery that was both cheaper and more effective than anything that had gone before it. The new kit, known as Mistral, is being piloted in Canada and commercial sales are expected from next year.
Siemens chose Invinity for a reason – the company has already sold more vanadium flow batteries than any other operator and has assembled a world-class team operating out of Bathgate in Scotland. The team has delivered results. Upfront costs for Mistral will be on a par with lithium batteries, but the product will last much longer, making the lifetime cost significantly cheaper.
Brokers expect Mistral to turbocharge Invinity’s growth. Figures for 2022 will be unveiled this week and should show sales of around £3.6 million. This year however, sales are expected to surge to £25 million, more than doubling to £53 million in 2024.
Chief executive Larry Zulch is ploughing money into Invinity’s future so the group is loss-making at the moment but prospects are bright.
This year alone, there has been a surge of interest in Invinity’s products. The group already operates a major project in Oxford and in April, the Government awarded Zulch a £11 million grant to build the largest vanadium flow battery outside Asia.
This should be delivered next year. Major projects are also under way in Australia, Canada and California, with more requests for batteries coming in thick and fast.
Rising demand makes sense. When renewable energy accounts for a small proportion of a country’s total power, unpredictability can be managed. As wind and solar increasingly replace fossil fuels however, the need for efficient storage rises in sync.
In the UK, estimates suggest that 46 gigawatts (46,000 megawatts) of battery energy storage will be needed by 2035, half of which is expected to come from so-called long duration products, like vanadium flow batteries. Today, we have just 2.6 gigawatts of energy storage and the vast majority of that can only supply power for an hour or two.
Nor is the need confined to this country. In the US, government subsidies are fuelling growth in renewable energy plants, with a commensurate need for efficient storage. In California alone, policymakers admit that they need to increase storage capacity eightfold by 2030 to meet their renewable energy targets. Canada and Australia are pouring money into renewable energy too, and there is mounting interest across Asia.
Invinity has a troubled past. The group was born out of a merger between US-based firm Avalon and RedT, an AIM-listed vanadium battery producer which consistently disappointed. The merged business should achieve greater success. Its technology is cutting-edge, Zulch is a canny operator and demand for safe, reliable and resilient storage is growing fast.
Midas verdict: Backing a loss-making business is never without risk but Invinity is now working hand in glove with engineering powerhouse Siemens and has attracted support from around the world. At 35p, the shares should go far.
Traded on: AIM Ticker: IES Contact: invinity.com or 020 4526 5789
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