VANADIUM BATTERY STORAGE REPORT Circular Business Model for Vanadium Use in Energy Storage CLIMATE-SMART MINING INITIATIVE Vanadium battery storage report 3 Contents 1 Executive Summary 15 2 Analysis of the Vanadium battery market 23 2.1 Introduction 23 2.2 Global Energy Storage Market 23 2.3 Business Case for the Adoption of VRFBs 25 © 2023 International Bank for 2.4 Overall Market Potential for VRFBs 26 Reconstruction and Development/ The World Bank 2.4.1 Market Forecasts 27 2.5 Cost Analysis 28 1818 H Street NW Washington, DC 20433 2.6 Risk and Opportunity Assessment 33 Telephone: 202-473-1000 2.7 Opportunity Assessment 34 www.worldbank.org 2.7.1 Domestic value capture 34 This work is a product of the staff of The 2.7.2 Innovative business model for mineral financing 35 World Bank with external contributions. 2.8 Case Study: South Africa 37 The findings, interpretations, and conclusions expressed in this work do not necessarily 2.8.1 Energy storage market in South Africa 37 reflect the views of The World Bank, its 2.8.2 Competitiveness in the production of VRFBs over LiBs in South Africa 38 Board of Executive Directors, or the 2.8.3 VRFB market potential in South Africa 41 governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 3 Analysis of the Vanadium leasing model 43 The boundaries, colors, denominations, and 3.1 Overview of Vanadium 43 other information shown on any map in this work do not imply any judgment on the part 3.2 Vanadium Reserves and Resources 44 of The World Bank concerning the legal status 3.3 Vanadium Production 45 of any territory or the endorsement or acceptance of such boundaries. 3.4 Vanadium Consumption 48 This document was written for the 3.5 Vanadium Production Drivers and Challenges 48 World Bank Group’s Climate-Smart Mining 3.6 Vanadium–VRFB Value Chain Analysis 49 Initiative by PwC. 3.7 Vanadium Ore Extraction 50 Rights and Permissions 3.8 Vanadium to Vanadium Electrolyte 51 The material in this work is subject to copyright. Because the World Bank 3.9 VRFB Manufacturing and Assembly 53 encourages dissemination of its knowledge, 3.10 VRFB Installed Capacity 53 this work may be reproduced, in whole or in part, for noncommercial purposes as long as 3.11 VRFB End Use Application 55 full attribution to this work is given. 3.12 Recycling of Vanadium 55 Any queries on rights and licenses, including 3.13 Circular Business Model 56 subsidiary rights, should be addressed to: 3.14 Comparative Analysis 58 World Bank Publications 3.14.1 Platinum 58 The World Bank Group 1818 H Street NW Washington, DC 20433, USA Fax: 202-522-2625 4 Vanadium battery storage report Vanadium battery storage report 5 Contents 3.15 Platinum Ore Extraction 60 6 Regulatory and legal analysis (specific to South Africa) 103 3.16 Beneficiation and Purification of Platinum 60 6.1 Constitution of the Republic of South Africa 104 3.17 Manufacturing of Industrial Products 61 6.2 Energy laws and policies 104 3.18 End Use Application 61 6.3 Environmental Laws and policies 104 3.19 Recycling 61 6.4 Industrial laws and policies 104 3.20 Technical and Market Challenges 62 6.5 Income Tax Act 113 3.21 Reuse of Platinum 62 6.5.1 Mining regulatory recommendations 115 3.22 Circular Business Model for Platinum 63 6.5.2 Environmental regulatory recommendations 115 3.23 Proposed Business Model for Circular Vanadium Ownership 64 6.5.3 Energy regulatory recommendations 115 3.23.1 Scenario A: Single long-term leasing 65 6.5.4 Industrial regulatory recommendations 115 3.23.2 Scenario B: Multiple short-term Leasing 65 6.6 Using a Vanadium Leasing SPV to Benefit the Public Entity 116 3.23.3 Scenario C: Multiple short-term leasing in focused geographical region 66 6.7 Estimating the Macroeconomic and Fiscal Impact on South Africa 118 3.23.4 Financial analysis for setting up the VE recycling facility in the focused end-use geography 66 6.8 Data Validation, Data Quality, and Data Reliance 118 3.23.5 Comparative analysis of different model scenarios 67 6.9 Economic Contribution 119 6.9.1 Estimated economic contribution of capital expenditure, 2022 119 4 Analysis of supply and demand in the Vanadium market 77 6.9.2 Estimated economic contribution from the annual lease fee and recycling of electrolytes 121 4.1 Global Supply 77 6.10 Environmental and Social Analysis 123 4.2 Global Demand 80 6.11 Legal and Regulatory Assessment 124 4.3 Global Market Prices 85 6.12 Stakeholder Mapping 130 4.4 Price Forecast Scenarios 87 6.13 E&S Risk Identification 133 6.14 Vanadium Mining 135 5 Financial and economic analysis 91 6.15 Concentrate Production 135 5.1 Financial Analysis 91 6.16 Extraction Process 135 5.1.1 Key findings 91 6.17 Recovery Process 135 5.1.2 Sensitivity analysis 93 6.18 Refinery Process 135 5.2 Lease Rate (%) 93 6.19 Vanadium Electrolyte Production 137 5.3 Price of Vanadium 93 6.20 VRFB Assembling or Manufacturing 138 5.4 Client Upfront Payment 93 6.21 Environmental and Social Analysis: Key Takeaways 140 5.5 Cost of Debt Funding 94 5.6 Capital Expenditure—Vanadium Cost 94 7 Roadmap to scale up circular business model 145 5.7 Conversion Cost 94 7.1 Critical Success Factors for Growth of the VRFB Market 145 5.8 Reprocessing Costs 94 7.2 Applicability of circular business leasing model for other critical minerals 150 5.9 Lease Term/ PPA Tenor 94 7.3 Dissemination Plan 153 5.10 Annual US dollar Inflation Forecast 94 5.10.1 Risk matrix 94 8 Conclusion and recommendations 155 5.11 Economic Analysis 97 Appendix 159 6 Vanadium battery storage report Vanadium battery storage report 7 List of Tables Table 2.1: Comparative Assessment of Li-ion Batteries and VRFBs 25 Table 6.1: Energy Laws and Policies 105 Table 2.2: Comparison of Characteristics of Battery Types 25 Table 6.2: Environmental Laws and Policies 110 Table 2.3: Battery Technology suitable for Grid Use Cases 26 Table 6.3: Industrial Laws and Policies 112 Table 2.4: Opportunities across the VRFB Value Chain 41 Table 6.4: Tax Incentive Measures 113 Table 2.5: Impact on GDP and Employment 41 Table 6.5: Overview of Relevant Legislation 124 Table 3.1: Manufacturers of Operational VRFBs, 2022 53 Table 6.6: List of South Africa’s Legislative Mechanisms to Promote Equity 126 Table 3.2: VRFB Capacity (Operational + Announced/Under Construction), 2022 54 Table 6.7: South Africa’s Progress on some Critical Sustainable Development Goals 127 Table 3.3: Sources of Platinum, 2017-2021 58 Table 6.8: Key Outcomes of Stakeholder Consultations 131 Table 3.4: Primary Producers of Platinum, 2017-2021 58 Table 6.9: The Road ahead for the VRFB Supply Chain 139 Table 3.5: Comparison of Vanadium Leasing and Platinum Leasing 63 Table 7.1: Milestones required to Implement and Scale Up the Circular Model for Vanadium Leasing 148 Table 3.6: Model 1 and Model 2 Scenarios and their Applicability 64 Table 7.2: List of stakeholders, organizations and with their thematic area 149 Table 3.7: Advantages and Disadvantages of Model 1 and Model 2 64 Table 7.3: Applicability of the Leasing Model to Critical Minerals 151 Table 3.8: Assumptions used for the Financial Analysis 67 Table 7.4: Dissemination Plan 153 Table 3.9: Detailed Comparison of the Feasibility of Various Business Models 68 Table A.8.1: Decision Rule for NPV 161 Table 4.1: Examples of Companies in the Primary Vanadium-Producing Countries 79 Table F.1: Source of Gold (2017-21) 168 Table 4.2: Scenario 1—Price Forecasts up to 2030 87 Table F.2: able F.2: Gold Mine Production, metric tons (2017–21) 168 Table 4.3: Scenario 2—Price Forecasts to 2030 following rapid growth in vanadium demand 88 underscored by little change in vanadium production Table 4.4: Scenario 3—Price Forecasts to 2030 following growth in both vanadium demand and supply 88 Table 5.1: Summary of financial assumptions 94 Table 5.2: High-Level Risk Matrix 95 Table 5.3: Economic CBA criteria and definitions 97 Table 5.4: Costs associated with the Proposed Circular Vanadium Business Model 98 Table 5.5: Benefits associated with the Proposed Circular Vanadium Business Model 99 Table 5.6: Results of the Cost-Benefit Analysis 100 Table 5.7: Summary of CBA Results for the Circular Vanadium Business Model (US$) 100 Table 5.8: Summarized CBA results 101 8 Vanadium battery storage report Vanadium battery storage report 9 List of Figures Figure 2.1: Global Advanced Battery Market in GWh, 2022-30 23 Figure 4.8: Global Vanadium Consumption 86 Figure 2.2: Global Stationary Application Energy Storage Market 24 Figure 5.1: Levelized Cost of Storage Sensitivities (US$c/ kWh) 92 Figure 2.3: Methodology for Demand Projections 27 Figure 5.2: Project IRR Sensitivities (%) 92 Figure 2.4: Global Annual Installed VRFB Deployment Capacity (GWh), 2030 28 Figure 5.3: Steps to Determine the Economic Viability of the 1 MWh Facility Vanadium Business Model 97 Figure 2.5: Lithium-ion Battery Cost Trajectory 29 Figure 6.1: Key Components of a Circular Vanadium Business Model 103 Figure 2.6: VRFB Cost Breakdown 29 Figure 6.2: Key Components of a Circular Vanadium Business Model 114 Figure 2.7: Mineral Cost Contribution, by battery type (%) 30 Figure 6.3: Public Entity SPV Model 117 Figure 2.8: Material Cost Distribution, by component for stack (%) 30 Figure 6.4: Social Accounting Matrix: Key Concepts 118 Figure 2.9: Average Cost of VRFB (US$/ kWh) 31 Figure 6.5: Contribution of the Leasing Facility to the Economy 119 Figure 2.10: Severity Assessment of Risks associated with VRFBs 34 Figure 6.6: Analysis from the Social Accounting Matrix for South Africa 120 Figure 2.11: Electrolyte Rental Model between VERL and Pivot Power, UK 35 Figure 6.7: Leasing company 121 Figure 2.12: Battery Market in South Africa, 2021 and 2030 37 Figure 6.8: Analysis from the Social Accounting Matrix for South Africa 122 Figure 2.13: Total Battery Technology Split, South Africa, 2022-2030 38 Figure 6.9: Overview of the Approach for the Environmental and Social Analysis 123 Figure 2.14: Business Case for the Adoption of VRFBs in South Africa 40 Figure 6.10: Process Flow for VRFB Manufacturing 133 Figure 3.1: Steps for Processing Vanadium Ore to Vanadium Salts 47 Figure 6.11: Key Focus Areas of the Assessment 134 Figure 3.2: Regional Vanadium Consumption (2020) 48 Figure 6.12: Input and Output Material Flow of Vanadium Mining—Environmental Context 136 Figure 3.3: Existing Value Chain for Vanadium to VRFB 49 Figure 6.13: Input and Output Material Flow of Concentrate Production—Environmental Context 136 Figure 3.4: Recycling of Vanadium in the Vanadium–VRFB Value Chain 49 Figure 6.14: Input and Output Material Flow of the Extraction Process—Environmental Context 136 Figure 3.5: Process Map for Vanadium Electrolyte Manufacturing from V2O5 52 Figure 6.15: Input and Output Material Flow of the Recovery Process—Environmental Context 137 Figure 3.6: Schematic Diagram of VRFB Battery 52 Figure 6.16: Input and Output Material Flow of the Refining Process—Environmental Context 137 Figure 3.7: Global Operational Installed Capacity of VRFB, 2022 (MWh) 53 Figure 6.17: Key Components of VRFBs 138 Figure 3.8: Global VRFB Capacity (MWh) (Operational + Announced/Under Construction), 2022 54 Figure 6.18: Weight Distribution of VRFB Components 138 Figure 3.9: Demand for Platinum, by sector, 2021 59 Figure 6.19: Recycling and Reuse Potential of VRFB175 141 Figure 3.10: Circular Value Chain for Platinum 60 Figure 7.1: Milestones required to Implement and Scale up the Circular Model for Vanadium Leasing 146 Figure 4.1: Distribution of Global Vanadium Reserves, 2021 77 Figure 7.2: Roadmap for Scaling up of the Circular Business Model for VRFBs through Demand 147 Creation and Supply Growth Figure 4.2: Global Vanadium Production, 2021 77 Figure 7.3: Roadmap for Scaling up the Circular Business Model for VRFBs through Environmental 147 Figure 4.3: Historical Global Vanadium Production, 1998-2021 78 and Social (E&S) and Regulatory Reforms Figure 4.4: Global Steel Production and Consumption, 2010-2031 80 Figure F.8.1: Demand for Gold, by sector (2021) 169 Figure 4.5: Global Vanadium Consumption, by end use 81 Figure 4.6: Global Demand for Vanadium, 2021 81 Figure 4.7: Exports and Imports of Vanadium, 2016-21 (US$, millions) 82 10 Vanadium battery storage report Vanadium battery storage report 11 List of Maps List of Appendixes Map 3.1: Major Global Vanadium Reserves 45 Appendix A: Methodology for Detailed Cost-Benefit Analysis 159 Map 3.2: Global Vanadium Production (2020) 46 Appendix B: Global Warming Impact of the Supply and Lifecycle of Lithium-Ion and VRFBs 162 Map 6.1: Geology and Vanadium Deposits in South Africa 128 Appendix C: Range of Calculated (CoUE) and (CoLS) on the South African Economy 163 Map 6.2: Areas of Ecological Importance in the Vanadium-rich Geographies of South Africa 129 Appendix D: Shadow Prices 164 Appendix E: Detailed Economic Impact Methodology 166 Appendix F: Comparative Analysis with Gold 168 Appendix G: Stakeholder Mapping and Outreach 170 Appendix H: Summary of Stakeholder Consultation 172 Appendix I: Roadmap—Key Activities required for Uptake of VRFB, Demand Creation 180 Appendix J: Roadmap—Key Activities required for Uptake of VRFB, Supply Growth 181 Appendix K: Roadmap—Key Activities required for Uptake of VRFB, Environment and Social Development 182 Appendix L: Roadmap—Key Activities required for Uptake of VRFB, Regulatory Framework 183 12 Vanadium battery storage report Vanadium battery storage report 13 List of Abbreviations ABET Adult Basic Education and Training GHG greenhouse gas NRCS National Regulator for Compulsory Specifications AMD Acid Mine Drainage GOS gross operating surplus NYP National Youth Policy B-BBEE Broad-Based Black Economic Empowerment GRI Global Reporting Initiative OTC over-the-counter BCR benefit-cost ratio HIA Heritage Impact Assessment PEPUDA Promotion of Equality and Prevention of Unfair Discrimination Act BESS Battery Energy Storage System ICMM International Council on Mining and Metals PC personal computer BoP Balance of Plant IDC Industrial Development Corporation PGM platinum group metal BTM Behind-the-Meter IEA International Energy Agency PPE personal protective equipment CAGR Compound Annual Growth Rate IRP Integrated Resource Plan PV photovoltaic CBA cost-benefit analysis IEP Integrated Energy Plan RE renewable energy CoUE cost of unserved energy IWWMP Integrated Water and Waste Management Plan REIPP Renewable Energy Independent Power Producer CoLS cost of load shedding IRR Internal Rate of Return SABS South African Bureau of Standards CIS Commonwealth of Independent States IWUL Integrated Water Use Licence SAM Social Accounting Matrix CIT corporate income tax JV joint ventures SARB South African Reserve Bank CSIR Council for Scientific and Industrial Research LCOE Levelized Cost of Electricity SDG Sustainable Development Goals CSM Climate Smart Mining LCOS Levelized Cost of Energy Storage SEZ special economic zones CVBM Circular Vanadium Business Model LiB lithium-ion battery SLP Social Labour Plan DMRE Department of Mineral Resources and Energy MEIA macroeconomic impact assessment (MEIA) SMME small, medium and micro enterprises DPE Department of Public Enterprises MHIRA Major Hazard Installation Risk Assessment SOE State-owned enterprise DWS Department of Water and Sanitation ML Megaliter SoC State of Charge EIAR Environmental Impact Assessment Report MPRDA Mineral and Petroleum Resources Development Act SPV special purpose vehicle EIU Economist Intelligence Unit NDC nationally determined contributions SSV sandstone shale-hosted vanadium deposits EMPr Environmental Management Programme NDP National Development Plan UPS uninterrupted power supply EPR Extended Producer Responsibility NEMA National Environmental Management Act USGS United States Geological Survey E&S environmental and social NEMBA National Environmental Management Biodiversity Act VE vanadium electrolyte EV electric vehicle NEMWA National Environmental Management Waste Act V2O5 Vanadium electrolyte ETP effluent treatment plant NEPV Net Economic Present Value VRFB vanadium redox flow batteries FDI foreign direct investment NHRA National Heritage Resources Act VTM vanadium titanium magnetite FI financial institutions NT National Treasury WTP water treatment plant GDP gross domestic product NWA National Water Act WUL Water Use Licence 14 Vanadium battery storage report Vanadium battery storage report 15 1 Executive summary Lowering the footprint of the global energy transition will The report investigates the applicability of a circular business induce finding more sustainable ways of extracting and using model to vanadium all along its extraction and transformation critical minerals for clean energy and battery energy storage value chain, assessing its potential scalability to other critical manufacturing: vanadium is one of them. This report delves into minerals while minimizing environmental impacts. Hence, the the development of circular business models for vanadium, with report explores innovative business models for vanadium, with a particular focus on the leasing model for Vanadium Redox Flow a particular focus on the leasing model for VRFBs. The project Batteries (VRFB). The report assumes that VRFB will play an encompasses eight major tasks, including vanadium battery increasing role in the power systems decarbonization, because market analysis, vanadium leasing model assessment, vanadium of the niche role of this technology in the bouquet of grid-scale supply and demand dynamics analysis, economic and financial energy storage solutions (VRFB is a long duration, modular and evaluation, regulatory and legal review, macroeconomic and site agnostic energy storage), This report is hence focusing on fiscal analysis, environmental and social impact assessment, circular economy principles and will not address VRFB technology and a roadmap for circular business model expansion. The report development potential nor its energy-specific applications. is designed to provide policy advise to: vanadium extraction However, this analysis does highlight the economic attractiveness countries, countries where it is transformed, or countries where and climate sustainability of VRFBs as an energy storage solution. VRFB is utilized. It also emphasizes the potential of innovative business models While the leasing model stands out as a promising avenue for to address the high upfront capital cost barrier that currently VRFB deployment, it is important to acknowledge that this hinders wider adoption of VRFB solutions 1. While showcasing the innovative solution will need to be proofed and is not standalone. leasing model as a promising avenue for VRFB deployment, it is Factors beyond the report's scope may influence the practical crucial to emphasize that this is one among several viable options. scale up of VRFB adoption. Circular Economy Opportunities in Vanadium Approach and Methodology and VRFB Value Chain To thoroughly assess the feasibility and potential impact of a Vanadium's unique chemical (redox versatility, stability, and proposed circular vanadium business model, the analysis adopted recyclability) and VRFB's technical characteristics (modular a comprehensive and multi-dimensional approach. design, safety features, and potential for second-life applications) make them well-suited for circular business models. The economic First, market research was conducted to evaluate the market viability of these models, however, hinges on increased VRFB potential and cost economics of VRFB-based energy storage deployment as a battery storage solution in the future. This, in solutions, while acknowledging that other studies assessed this turn, depends on growing vanadium demand and the development potential in a more detailed manner, using analysis of load flows of a global trading market for VRFB. in selected power systems. South Africa was used as a case study and a complete supply and demand analysis was also performed, Key Objectives and Scope of the Study utilizing subject-specific data to identify key opportunities for local stakeholders. Aligned with and funded through the World Bank's Climate- Smart Mining (CSM) Initiative, which promotes sustainable Second, a detailed analysis of the entire vanadium-VRFB value mining practices and responsible use of critical mineral chain was conducted, encompassing mining, manufacturing, and resources for developing low-carbon technologies, this report recycling2. Insights from leasing and rental models of other metals focuses on innovative circular business models throughout the were incorporated to refine the proposed vanadium leasing model. mineral lifecycle. 1 Unlike other type of grid-scale battery technologies, VRFB does not have other energy storage application driving the technology cost down, hence the essential need to differentiate the asset through its lower footprint and longer lifetime. 2 This is a value chain assessment which excludes operating cost and maintenance of VRFB. 16 Vanadium battery storage report Vanadium battery storage report 17 Third, a cost-benefit analysis (CBA) was employed to assess Over time, the demand for large volumes of stored energy will • Enhanced Circularity: Leasing aligns with the principles over a 20-year period. The summarized results in economic prices the costs and benefits associated with both the current state increase as a consequence of wind and solar photovoltaic power of circular economy by minimizing waste and maximizing are presented as follows. and the proposed circular vanadium business model. This capacity development: VRFBs will be an adequate long duration resource utilization. holistic approach provided a comprehensive understanding of energy storage, in cases where large pump hydropower is not The net economic present value (NEPV), benefit-cost ratio (BCR), and To further expose the potential of leasing models for VRFBs, internal rate of return (IRR) all suggest that the investment in the 1 the case study's potential economic impacts across various feasible and other grid investments are too costly. MWh facility leasing model over the next 20 years is economically a comparative analysis is drawn with platinum, another stages of the value chain. viable as it is expected to yield positive returns. valuable metal with limited natural reserves. The successful Next, the South African vanadium value chain and regulatory Vanadium Leasing Models: A Viable Option for implementation of leasing models for platinum has demonstrated Net Economic Present Value (NEPV), US$ 6,751 framework was reviewed to ensure it facilitates sustainable VRFB Deployment their feasibility, suggesting that leasing could be an effective Internal Rate of Return (IRR) 3% mineral extraction and supports the global low-carbon transition. approach for VRFBs, which also face resource scarcity challenges. The substantial upfront cost of VRFBs poses a significant A high-level mineral rental model utilizing a Special Purpose challenge to their widespread adoption. To address this hurdle, Benefit -Cost Ratio (BCR) 1.02 Vehicle (SPV) was proposed to maximize the study case's benefits. innovative business models, like vanadium electrolyte leasing, Supply and Demand Dynamics Payback Period Years 20 have emerged as promising solutions to accelerate VRFB The subsequent step of the analysis included a macroeconomic The current global vanadium market is dominated by steel and commercialization. These models leverage the high recyclability Source: PwC’s internal strategy and analysis impact assessment (MEIA), which was conducted to quantify other metal production, with battery storage demand currently of vanadium electrolyte, which can be recovered with over 99% the estimated economic net benefits of the proposed case study. accounting for only 2% of total consumption. However, battery For the purpose of this report, the financial analysis employed the efficiency after use in the battery, making it an ideal candidate This analysis highlighted its macroeconomic and fiscal impact storage demand is expected to increase rapidly over the next financial model provided by a company developing the circular for leasing. by demonstrating industry interdependencies within different decade, reaching 10% of total demand by 2030. This increase in vanadium business model (CVBM) to examine the proposed economic sectors. Two business models for circular vanadium ownership have been demand will put upward pressure on vanadium prices. financing structure and assess key sensitivities associated with proposed in this report, each with three different leasing scenarios: the proposed CVBM. The analysis centered on the Project IRR, To make the study exhaustive, a collaborative approach was To meet this growing demand, global vanadium supply will need which serves as a reference point for evaluating the proposed cost adopted to address the environmental and social impacts of the to increase by 6.9% per year between 2022 and 2030. This level Model Scenario of financing or return levels expected by potential investors, and case study. Key stakeholders were consulted on themes including of growth is similar to the rates seen in the past decade, and it is the levelized cost of storage, which benchmarks the model against inclusivity and equity in managing water use, land and air Scenario A Single long-term leasing achievable due to the reactive nature of vanadium producers. alternative storage options. pollution, and waste/tailings management. Leasing Vanadium Multiple short-term Scenario B Secondary production of vanadium from recycling industrial Electrolyte to leasing Model-1 The analysis revealed that the upfront cost of acquiring vanadium, VRFB Battery Manufacturer wastes will play a key role in meeting this increased demand. In Multiple short-term Vanadium Market Dynamics Scenario C leasing in a focused particular, the upcoming changes in bunker fuel specifications will along with lease duration and lease rate, significantly impacts geographical region the levelized cost of storage and Project IRR. A crucial factor in Vanadium redox flow batteries are poised to become a promising lead to an increase in the amount of spent catalyst generated by Scenario A Single long-term leasing understanding the financial viability of the model will be the rates energy storage technology with a growing market. By 2030, the oil refineries, which can be recycled for vanadium production. of return anticipated by prospective investors. In this regard, the Leasing Vanadium Multiple short-term global VRFB deployment is expected to reach 111 gigawatt hours Scenario B Model-2 Electrolyte leasing In conclusion, the vanadium market is expected to undergo report suggests that conducting a market sounding with potential (GWh) globally, driven by applications such as grid use (e.g., for directly to End User Multiple short-term significant changes in the next decade, with increased investors and financiers would be beneficial to better assess the renewable energy integration), or behind the meter power backup Scenario C leasing in a focused geographical region demand for battery storage driving up prices and stimulating attractiveness of the projected returns. (e.g., for health centers in fragile power systems). VRFBs offer secondary production. long-duration storage and minimal degradation – hence, longer In order to provide a comprehensive and accurate assessment of In both cases the commodity is leased to an off taker lifetime than other battery energy storage systems (BESS), but the regulatory, legal, macroeconomic, fiscal, environmental, and (e.g., a VRFB manufacturer or end user) so both models offer their upfront cost is currently higher than competing energy Economic and Financial Implications of Leasing social implications of VRFB leasing models, this report focuses several advantages: storage options. Following similar trend than for other modular The economic and financial implications of the leasing model are on South Africa as a case study. This country-specific approach energy storage technology, the cost of VRFBs is expected to halve • Reduced Upfront Cost: The user avoids the high upfront cost of complex and depend on a number of factors, including the cost of allows for a more in-depth examination of the unique challenges by 2030 due to technological advancements and economies of purchasing the vanadium electrolyte, making VRFB deployment vanadium, the lease duration, and the lease rate. For this report, and opportunities that exist within the South African context. By scale. The levelized cost of electricity (LCOE) is a better metric more affordable. an economic Cost Benefit Analysis (CBA) was carried out and analyzing the specific regulatory framework, economic landscape, for evaluating the cost-effectiveness of VRFBs in commercial • Improved Resource Efficiency: Leasing promotes resource it validates the economic viability of the 1MWh facility leasing and environmental and social dynamics of South Africa, this applications, as these assets have around twenty years lifetime conservation by extending the life of the electrolyte and model, demonstrating that the benefits outweigh the incurred report aims to provide valuable insights that can be applied to and allow full recycling of the electrolyte minerals, the vanadium. reducing the need for new material extraction. costs. The economic CBA used a financial discount rate of 2.4% other countries considering the adoption of VRFB leasing models. 18 Vanadium battery storage report Vanadium battery storage report 19 Regulatory and Legal Requirements for The overall economic contribution of the leasing model in Enabling VRFB Leasing Models South Africa is expected to be even greater than the quantified impacts, as some parts of the value chain, such as mining and South Africa's regulatory framework poses significant obstacles transportation, were not included in the analysis. Additionally, to implementing a circular vanadium business model and the use of VRFB technology is expected to increase demand for deploying large-scale VRFBs. Several key regulatory challenges vanadium, bringing further economic benefits to South Africa. hinder the development and adoption of VRFBs. Firstly, the absence of battery storage standards allows for the importation of substandard products, undermining the growth of the local Environmental and Social Impact Analysis battery storage industry. Secondly, the lack of specific incentives Vanadium redox flow batteries (VRFBs) are a promising for BESS technologies impedes their uptake. Thirdly, the staggered technology for energy storage, offering advantages such as long rollout of energy storage capacity outlined in the IRP2019 is not lifespan, safety, and scalability. However, the environmental conducive to fostering a battery storage industry capable of and social impacts of the VRFB value chain need to be carefully supporting a circular vanadium business model. considered to ensure sustainable development. To address these challenges, the analysis suggests that South In South Africa, the lack of a regulatory framework for recycling Africa needs to introduce BESS-specific regulations under the VRFBs poses a challenge. The inclusion of VRFBs in the existing National Energy Act to promote VRFB deployment, establish extended producer responsibility (EPR) regulation is essential to environmental standards for VRFB project permitting and end- monitor the VRFB market and ensure proper recycling practices. of-life processes, implement regulatory incentives to enhance Additionally, improving primary practices at the mining and VRFB competitiveness, and leverage emerging processing stages of vanadium-bearing ores can mitigate energy regulations to enable VRFB owners' participation in environmental impacts associated with VRFBs. a liberalized electricity market incentivizing the increased deployment of VRFBs when compared to the current single The anticipated increase in demand for VRFBs could lead to -buyer electricity market. expanded vanadium mining activities, potentially impacting regional environmental and social sensitivity and ecological resources. Thus, the primary practices at the mining and Macroeconomic and Fiscal Impact processing stages of vanadium bearing ores are key to reducing A macroeconomic impact assessment (MEIA) was conducted the associated environmental and social impacts. for a proposed vanadium redox flow battery (VRFB) leasing In addition to the primary practices at the mining and processing model in South Africa. The MEIA aimed to evaluate the economic stages of vanadium, strict monitoring mechanisms are also contribution of the leasing model through capital expenditure and necessary to ensure proper treatment and disposal of waste revenue generated from annual leasing fees and recycling products generated from vanadium mining, such as acidic of electrolytes. effluent and calcine tailings. Considering the weight percentage In South Africa, the capital expenditure for preparing vanadium distribution of VRFB components, 85% of the battery component electrolytes for leasing is expected to contribute to increased is V-electrolyte, which is likely to be 100% recyclable. The other tax collection and have long-term positive impacts on economic battery components (metallic, electrical, plastic) can also be easily growth, employment, and poverty alleviation. The revenue recycled through mechanical separation, further reducing the generated from leasing fees and electrolyte recycling is also environmental footprint in the VRFB value chain. expected to have positive impacts on local communities and In terms of social impact, the analysis suggests that the growth governments in terms of job creation, poverty alleviation, and of the vanadium battery market in South Africa presents public finance. opportunities for social development and economic empowerment. 20 Vanadium battery storage report Vanadium battery storage report 21 The VRFB value chain, including recycling, electrolyte movement, To overcome these challenges and scale up VRFB adoption, and increased mining activity, can create gainful employment a roadmap was developed with major themes named Critical opportunities for women and economically disadvantaged Success Factors: communities. Expanding VRFB adoption can contribute to job • Demand creation: Stimulate demand for VRFB technology creation and poverty alleviation. through awareness campaigns, education, and targeted Additionally, the analysis indicates that accelerating a circular incentives. business model for energy storage requires identifying skills-based • Supply growth: Encourage the development of a robust VRFB jobs and upscaling short-term and long-term skills development supply chain, including domestic manufacturing and recycling among local communities. Investing in skills development capabilities. programs can ensure that the workforce is equipped to meet • Regulatory framework: Implement a supportive regulatory the demands of the VRFB industry. Another conclusion driven framework that promotes the adoption of VRFB technology from the analysis is that VRFB energy storage has the potential and addresses concerns related to safety, performance, and to benefit micro entrepreneurs and small to medium businesses environmental impact. in communities with weak grids, unreliable energy supply, • Environmental and Social (E&S) Development: Integrate inadequate infrastructure, and scarce employment opportunities. sustainability principles into the VRFB value chain, ensuring By providing access to reliable and affordable energy, VRFBs can responsible mining practices, minimizing environmental empower these enterprises and stimulate economic growth in footprint, and promoting social equity. underserved areas. Government intervention will play a crucial role in fostering the Another major challenge highlighted in the report is the gender growth of the VRFB industry by providing incentives, creating disparity along the VRFBs value chain. From the stakeholder favorable policies, and investing in research and development. consultations for the report, it was inferred that at present, South Africa serves as a valuable case study, demonstrating the women are underrepresented in the vanadium mining workforce. approach required for governments to effectively support the Therefore, gender inclusivity is yet to be prioritized in the VRFB growth of the VRFB market. By implementing a comprehensive value chain as women do not occupy an active position in the regulatory and policy framework, considering economic and fiscal VRFB manufacturing process and (supply chain) operations. implications, and addressing social and environmental concerns, Addressing inequalities along the line of color, race, gender, governments can pave the way for a thriving VRFB industry. and other factors can accelerate employment for local and economically disadvantaged communities in the country. Roadmap to Scale Up Circular Business Model Despite being available since the 1980s, the commercial application of VRFBs in the energy storage space is a relatively new concept. Our study identified several key challenges hindering the growth of VRFB technology, including low demand, relatively low consumer confidence, higher cost of energy storage for short durations, fluctuating vanadium prices and the absence of a regulatory framework for Battery Energy Storage Systems (BESS). 22 Vanadium battery storage report Vanadium battery storage report 23 2 Analysis of the Vanadium Battery Market 2.1 Introduction Apart from decarbonizing the transportation and electricity sectors, batteries also contribute directly and indirectly to achieving the Several countries worldwide are prioritizing climate change, United Nations Sustainable Development Goals (SDGs), supporting as unpredictable climate variations can pose a serious threat access to energy, productivity, health care, and livelihoods. to global socioeconomic development and long-term poverty reduction goals. With commitments to reduce greenhouse gas (GHG) emissions and attain net-zero emissions, the world is 2.2 Global Energy Storage Market transitioning from the use of fossil fuels to low -carbon technology There has been a drastic change in the global market of energy measures in the electricity and transportation sectors (which storage systems in the past couple of years, with countries currently account for approximately 40% of global GHG emissions). moving toward net-zero carbon transition in electrification and The application of battery energy storage is, therefore, gaining mobility; the investments in and adoption of energy storage prominence in these sectors as well. Globally, energy storage has technologies have increased significantly. evolved a lot in terms of applicability, including the diverse range of advanced cell chemistries employed, to make efficient and In 2021, battery demand grew significantly, with lithium-ion reliable storage applications a reality. batteries (LiB) dominating the market as its demand has grown by 70%, primarily boosted by electric vehicle (EV) sales globally. The For electricity grids to operate efficiently, supply and demand must global demand for batteries is expected to grow five-fold to reach always be balanced. The battery storage ecosystem makes a strong an annual demand of about 5,100 GWh by 20301 from around 933 pitch to integrate renewable energy (RE) into the grid as it reduces GWh in 2021. This surge in market deployments throughout the intermittency and increases the flexibility of the overall system. global electric and transportation sector is largely due to the Figure 2.1: Global Advanced Battery Market in GWh, 2022-30 Tr nsport tion (EVs) St tion r Consum r El ctronics 6,000 5,000 4,000 :1 8% CAGR GWh 3,000 2,000 1,000 0 2022 2023 2024 2025 2026 2027 2028 2029 2030 Source: PwC analysis based on BloombergNEF (BNEF), International Energy Agency (IEA), Interact Analysis 2022, and World Economica Forum (WEF). 1 Interact Analysis (2022), Lithium-Ion Battery Market Is Moving into Surge Mode https://www.interactanalysis.com/lithium-ion-battery-market-is-moving-into-surge-mode/ 24 Vanadium battery storage report Vanadium battery storage report 25 integration of electric vehicles, lower battery storage prices, and the projected demand for battery energy storage across all 2.3 Business Case for the Adoption of VRFBs Table 2.2 compares various characteristics of both battery types.4 increased variable renewable energy generation. Figure 2.1 depicts stationary applications, including grid storage, behind-the-meter It has become increasingly important for the power industry to Table 2.2: Comparison of Characteristics of Battery Types the global demand projection for advanced battery chemistries, applications, railways, and other uses.cations, and data centers. have energy storage, and while Li-ion batteries have been used such as lithium-ion flow batteries, across multiple applications up Figure 2.2 shows the projected demand for battery energy storage in many places, vanadium flow batteries have a lot to offer in Lithium-ion Vanadium Flow to 2030, based on market research and projections. across all stationary applications, including grid storage, behind- Parameter Battery Battery long-term applications and situations that require regular battery the-meter applications, railways, and other uses. There are three main potential uses of battery energy storage: cycling. Several different factors should be considered when Energy Density ‌200–400 ‌20–70 With the increasing demand for stationary energy storage, the (Wh/L) consumer electronics, stationary storage, and e-mobility. Globally, comparing VRFBs and LiBs. Table 2.1 depicts the advantages of e-mobility applications, primarily EVs, account for the majority global investments made in this sector are expected to continue VRFBs over Li-ion batteries in utility-scale storage systems for Specific Energy ‌100–265 ‌10–30 (Wh/Kg) of the battery demand; however, similar momentum is emerging at a rapid pace, reaching more than US$ 30 billion by 2030. long-duration use cases. in stationary energy storage applications. The stationary Furthermore, this huge market for stationary applications is Discharge Time ‌0.02–8 ‌4–12 Table 2.1: Comparative Assessment of Li-ion Batteries and VRFBs (hours) energy storage system can provide up to 17 different services anticipated to have a bigger share of grid-level storage by the to stakeholders at all levels of the electricity system,2 including end of this decade and is expected to be dominated by lithium- Lifetime (cycles) ‌1,000–12 000 ‌20,000–30,000 utilities, grid operators, and other end-use applications. In 2021, ion batteries, as its demand for such applications is projected to Longer Asset Life: Efficiency (%) ‌85–95 ‌70–85 the annual demand for stationary applications was about 116 increase from 56 GWh in 2021 to almost 1,028 GWh by 2030. This, Vanadium flow batteries discharge at —100% throughout their lifetime whereas lithium-ion Source: PwC Analysis GWh and is projected to reach around 1,114 GWh by 2030.3 in turn, also creates huge market potential for VRFBs in the future batteries decay and loose capacity of time The demand for stationary energy storage is currently led by as vanadium redox flow batteries have superior performance in the There are several cases that favor the adoption of VRFBs as they industrial applications such as forklifts, followed by UPS, telecom grid and other long-duration stationary storage applications (as offer many advantages, including their nearly unlimited energy Flexibility: applications, and data centers. Figure 2.2 shows discussed in later sections) compared to LiBs. capacity merely by utilizing larger electrolyte storage tanks and the In contrast to lithium-ion batteries, VRFBs can operate at a wide temperature range without any fact that they can be left completely discharged for long periods adverse effects in its performance without adverse effects. Thus, it is a unique technique for energy Figure 2.2: Global Stationary Application Energy Storage Market storage that has an enormous impact on stabilizing and regulating Scalability: renewable energy. The major consumer of VRFBs in the short and St tion r The kWh and kW capacity of VRFBs can be scaled long term will be stationary applications involving longer -duration independently, whereas the capacity of lithium-ion grid storage, along with other use cases as mentioned below. 1,200 batteries cannot be added incrementally 1114 a) Grid-Scale Uses 1,000 Lower operating cost (LCOS): Although Li-ion batteries have a higher energy density, VRFBs 845 VRFBs typically have a much longer lifespan, which means they have lower LCOE in comparison to are being targeted for stationary applications involving longer 800 lithium-ion batteries if used daily at least once -duration grid storage for the following reasons: GWh 646 600 In grid congested areas, VRFBs can alleviate stress without the same 497 Safety: capital investment and environmental disruption required to build While Li-ion batteries have inherent safety risks due out new transmission and distribution lines 386 400 to overheating and thermal runaway, VRFBs are non- 292 flammable, non-toxic, and have no explosion risk 224 VRFBs while acting as a backup generator can increase grid 177 resiliency without the harmful air pollution effects associated with 200 141 diesel generators, such as microgrids for remote communities Recyclability: 0 Liquid electrolyte used in VRFBs can be nearly i00% In large industrial applications such as manufacturing processes, recovered and, with minimal processing steps and VRFBs can be used to shift energy-intensive processes to off-peak 2022 2023 2024 2025 2026 2027 2028 2029 2030 cost, reused in another battery application hours to relieve strain on the grid Source: PwC analysis based on BloombergNEF (BNEF), International Energy Agency (IEA), Interact Analysis 2022, and World Economica Forum (WEF). Source: PwC Analysis Source: PwC Analysis 2 Energy Storage World Forum, 2022. About Us. https://energystorageforum.com/energy-storage-technologies/applications-of-energy-storage 3 BNEF (2021), Global Energy Storage Market Set to Hit One Terawatt-Hour by 2030 https://about.bnef.com/blog/globalenergy-storage-market-set-to-hit-one-terawatt-hour-by-2030/ 4 Market Intelligence Reports, Technology Specification Brochures of Battery Players. 26 Vanadium battery storage report Vanadium battery storage report 27 Table 2.3: Battery Technology suitable for Grid Use Cases5 2.4.1 Market forecasts Different use cases of VRFB For the market potential assessment exercise, a thorough considered for demand projection Energy Primary Peaker Secondary Distribution & Arbitrage Response Replacement Response Transmission Deferral literature review was conducted that included in-depth secondary research on reports7 to project the global demand for vanadium Battery Types Regional Transmission Operator (RTO) Utility redox flow batteries for energy storage.8 Grid Figure 2.3: Methodology for Demand Projections Service Current Li-ion Sector Based Research: Data is based on Advanced Li-ion extensive desk research to identify most relevant secondary information Flow Renewable Integration Data Validation includes review of existing reports, penetration levels, and correlation Zinc with our global stationary storage demand projections Highly Suitabity Medium Suitabity Low Suitabity Source: Rocky Mountain Institute Analysis and forecast model generation: Backup Power Based on data collected, our in-house subject and UPS matter experts convert them into critical b) Arbitrage (Ancillary Services) c) Other Uses insights Depending on the power market, arbitrage might be the best use VRFBs can be paired with solar photovoltaic (PV) systems to form Source: PwC Analysis case for flow battery capacity as flow batteries can provide power standalone charging systems. They can also be added to existing Three cases have been considered to within milliseconds, depending on the load, and can be recharged charging infrastructure in urban areas because of their ability to Other assumptions and factors included the competitiveness of estimate market growth, namely base case, quickly from many different power sources. Particularly during be cycled frequently without experiencing capacity degradation. In conservative case and optimitic case energy storage against alternatives, the percentage penetration peak seasons, as power costs spike, the capacity available from fact, two trial projects have already been announced where VRFB of VRFB technology in the energy storage market, and the overall large-scale flow battery configurations can become economical. energy storage systems will support electric vehicle charging stationary storage demand in the market. Moreover, while Annual demand for vanadium flow batteries By synchronizing flow battery capacity to be available quickly solutions, one in South Korea and the other in Australia. projecting the addressable market, the average system duration for stationary storage applications is and with durations of six to eight hours or more, while prices per of the vanadium flow batteries was assumed to be greater determined based on the projections from the kilowatt are at a peak, significant revenue can be realized. In 2.4 Overall Market Potential for VRFBs above segments than 4 hours, and thus if shorter duration systems are feasible addition to this, VRFBs are also used to provide ancillary services, in the future with further research and development, then the VRFB technology is a leading energy storage option as it such as balancing and frequency response. Table 2.3 compares the Source: PwC Analysis addressable market would be larger. continues to find a market because of its advantages in suitability of various battery types for different grid use cases.55 providing long-duration energy storage. In addition to the A variety of factors and assumptions were considered to From an optimistic perspective, the market is forecasted to The primary response includes applications such as frequency benefits of the technology, synergies across industries are understand and accurately assess the market of interest, with grow at a higher rate than the base case (to depict an aggressive regulation and control. The secondary response includes helping drive the development of flow batteries. As of April the main assumption being that the redox flow battery energy market, a 2.5% increase in the penetration level of VRFB across applications such as following reserve, spinning, and non-spinning 2022, the cumulative global deployment of vanadium redox flow deployment capacity is only suitable for stationary storage the entire period is assumed) and vice-versa for the conservative reserve, and renewables integration. Peaker replacement refers to batteries is around 289 MWh,66 with China deploying about one applications, including grid use, renewable integration, backup case. Figure 2.4 demonstrates the projected annual installed VRFB a system capacity mechanism to meet peak demand. third of the total capacity. power, and UPS as shown in the following figure. deployment capacity. 5 Rocky Mountain Institute, 2020, Breakthrough Batteries: Powering the Era of Clean Electrification, https://rmi.org/insight/breakthrough-batteries/ 7 U.S. Department of Energy 2022, Grid Energy Storage: Supply Chain Deep Dive Assessment, https://www.energy.gov/sites/default/files/2022-02/Energy%20Storage%20Supply%20Chain%20Report%20-%20final.pdf 6 Vanitec 2022, Global VRFB Installations Database & Map, https://vanitec.org/vanadium/map?q=&country=&manufacturer=&status=Operational 8 Guidhouse Insights 2022, Vanadium Redox Flow Batteries: Identifying Market Opportunities and Enablers, https://vanitec.org/images/uploads/Guidehouse_Insights-Vanadium_Redox_Flow_Batteries.pdf 28 Vanadium battery storage report Vanadium battery storage report 29 Figure 2.4: Global Annual Installed VRFB Deployment Capacity (GWh), 2030 Figure 2.5: Lithium-ion Battery Cost Trajectory Cons rv tiv c s B s c s Optimistic c s B tt r Pric R duction 40 1000 40 35% 900 946 35 Annu l Inst ll tion (GWh) 30 800 30 700 744 686 25% Pric (USD/kWh) P rc nt 20 22% 25 600 21% 606 23% 500 18% 20 10 400 13% 13% 15 (%) 393 300 302 10 0 12% 200 226 2022 2023 2024 2025 2026 2027 2028 2029 2030 185 6% 8% 161 5 100 140 132 Cons rv tiv c s 0.35 0.38 2.63 4.53 6.63 10.23 16.45 16.88 19.70 ? ? B s c s 1.75 2.50 5.00 7.25 9.80 14.00 21.00 22.50 26.80 0 0 Optimistic c s 3.68 4.63 7.38 9.98 12.98 17.78 21.55 28.13 33.90 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2024 2030 Source: Vanitec and Market Reports and PwC Analysis Source: BloombergNEF Based on the preceding forecast, the cumulative global demand 2.5 Cost Analysis Figure 2.6: VRFB Cost Breakdown of VRFB by 2030 is around 111 GWh, with annual demand of The commercialization of VRFB battery technology globally has about 27 GWh, or 2.4% of the total required stationary storage been hampered to a large extent by cost economics, which places capacity for that year. This presents significant growth, with V n dium El ctrol t V n dium it among the costlier options for deployment in stationary storage a CAGR of 41% from 2022 to 2030. The preceding forecast C ll St ck Oth r ch mic ls/costs applications. The current pricing for VRFB -based solutions illustrates that the VRFB market is poised for steeper growth D liv r nd Inst ll tion (>US$300/kWh) is much higher than its counterpart Li-ion - based in the coming years, especially as demand for long-duration El ctric l (PCS, Inv rt r) technology (5%) and reduced sulfur (>1%), as well as a of vanadium, at 0.12 million metric tons and 0.045 million amounts of vanadium are available for commercial use as a suite of metals, such as copper, molybdenum, nickel, PGEs, metric tons, respectively. As only about one fifth of the total by-product of petroleum, and minor amounts are produced as silver, uranium, vanadium, and zinc. Generally, the concentration vanadium produced is from primary sources, the rest of the by-products of coal and tar sands. Heavy crude oil contains the level exceeds 0.18% V2O5 and can go up to 1.7% V2O5. vanadium is recovered as a by-product or co-product. Thus, highest concentration of vanadium, and most of the heavy oil the demonstrated world resources of the element are not fully • Vanadate deposits: Vanadates of lead, zinc, and copper and vanadiferous petroleum resources are located in Venezuela. indicative of the available supply as most of the vanadium is (vanadinite and minerals of the descloizite-mottramite series) being produced as a by-product or co-product. form in the oxidized zones of base-metal deposits, especially in According to the data published by the United States Geological areas of arid climate and deep oxidation. Survey (USGS), total worldwide vanadium reserves stand at 46 Vanadium battery storage report Vanadium battery storage report 47 3.3 Vanadium Production Most of the vanadium is produced as a co-product and as a Figure 3.1: Steps for Processing Vanadium Ore to Vanadium Salts by-product from different sources. Primary production only There are three different sources of vanadium production: primary, contributes to about 18% of total worldwide production. secondary and co-production. China is the major producer and contributes around two thirds of • Primary production: Vanadium produced from its ores by Or Millin Ro stin L chin worldwide vanadium production. Most of the production in China salt-roasting, water leaching, filtration, desilication and is from slag generated in the production of steel from vanadium precipitation. This accounted for 18% of the global vanadium titanium magnetite (VTM). Other major producers of vanadium supply in 2020. are Russia, South Africa, Brazil, India, and Vietnam. The top five • Secondary production: Vanadium produced from fly ash, producers in the world contribute 90% of the total vanadium petroleum residues, alumina slag, and from the recycling of production worldwide. South Africa and Brazil were the major Pr n nt Pol v n d t V n dium spent catalysts used in crude oil refining. It accounted for D - mmoni tion primary producers of vanadium in 2020. Liquior Pr cipit tion P nt oxid approximately 10% of the global supply in 2020. Vanadium is produced from different minerals through various • Co-production: As co-production slag produced in iron ore routes, with some common major steps (Figure 3.1). Source: EPA, metallurgist.com processing for steel production. Accounting for 72% of the global supply in 2020. The process for preparing sodium hex-vanadate, producing vanadium pentoxide, and reducing the vanadium pentoxide to metal involves different steps and routes. The ore is sent for process, which separates the uranium, leaving the vanadium in the milling and then roasting. The vanadium slag resulting from the acid solution. This is subsequently oxidized and removed from the Map 3.2: Global Vanadium Production (2020) roasting process is also processed for further use. Leaching is the organic salts with soda ash. Vanadium polyanadate is precipitated next step after roasting and the vanadium pentoxide is prepared by the addition of ammonium sulfate. after the de-ammonization step. Russi Vanadium can also be obtained by various routes from oils in 9,300 MT Vanadium from the titaniferous magnetite ores is extracted as a which it is present. Vanadium-bearing oil-based fuels are burned co-product in steelmaking. The V2O5 is extracted from the slags in the boilers of electric power -generating plants, and vanadium is through a roast-leach process. Kilns or in multi-hearth furnaces left in the fly ash and boiler slags. There are certain metals present with sodium carbonate, chloride, or sulfate are used to roast the in the ashes and slags, which are recovered by various methods. slags. This produces sodium vanadates, which are leached into an As discussed earlier, most of the vanadium is produced in China aqueous phase with water. Ammonium vanadates are precipitated (62%) and Russia (8%) from steel slags as co-production (72%). from this solution by the addition of ammonia and sulfuric acid to This creates precarity in the vanadium supply chain and results in control the pH. volatility in supply and prices of vanadium. The ammonia is removed by de-ammonization and the vanadate is Europ J p n According to the World Bank report25 Vanadium demand is 8,090 MT converted to various oxides by heating under controlled conditions 2,450 MT expected to increase by around 200% by 2050. A similar trend and may vary based on the oxide required. Fused flake V2O5 is Chin can be expected in vanadium production, which is estimated to North Am ric 70,193 MT produced by decomposing the vanadates in a furnace and melting 3,939 MT increase by 45% by 2025. As existing capacity is fully utilized, it Vi tn m the resulting V2O5 into a liquid phase and then casting onto a 1,320 MT will allow for continued extraction of vanadium from sandstone chilling wheel. Indi and coal deposits in China, and significant growth in vanadium 1,600 MT Vanadium from the Colorado carnotite ore is extracted as a co- production from secondary sources is assumed to increase as Br il product during uranium production. The ore from the mines is a result of changes in bunker fuel specifications impacting the 6,686 MT treated with sulfuric acid to dissolve the vanadium and uranium. amount of spent catalyst generated by refineries, and the general South Afric Then the uranium and vanadium are separated from the liquid focus on recycling industrial wastes. 8,560 MT by solvent extraction, followed by a liquid-liquid ion exchange Source: TTP Squared, Inc. VANITEC 9th Energy Storage Committee Meeting, July 13, 2021 25 Minerals for Climate Action: The Mineral Intensity of the Clean Energy Transition 48 Vanadium battery storage report Vanadium battery storage report 49 3.4 Vanadium Consumption • increase in specific vanadium consumption in steel by the 3.6 Vanadium–VRFB Value Chain Analysis major roadblocks in the growth of VRFB applications. Additionally, Chinese steel industry given the finite resource availability and significant growth In the current market scenario, over 95% of the vanadium is To prepare a robust business model for any commodity or product, it • increasing demand for steel globally forecasted for the use of vanadium in VRFBs, it is imperative that being used in the ferrous and non-ferrous alloying industry to is important to analyze the entire value chain involved. The current we identify opportunities for the circularity in the vanadium-VRFB produce high -strength steel and other alloys. Vanadium is also • high demand for the battery manufacturing energy storage state of the value chain is linear and involves five steps of value value chain. Figure 3.3 illustrates two options for achieving this. used in the ceramic industry and chemical industry, as a catalyst, industry addition, from the mining of vanadium to deployment of VRFBs. in superconducting magnets, and as a vanadium electrolyte in • increased crude steel production 1. Recycling of VE that can be re-used in VRFBs In the current market situation, the biggest cost involved in VRFBs. Currently, the energy storage sector consumes less than • high seaborne iron ore prices 2. Reprocessing of vanadium from VE manufacturing a VRFB battery is VE, which is becoming one of the 2% of the total vanadium produced. Region wise, China accounts Production from primary sources and co-production are expected for over 60% of worldwide consumption followed by Europe (12%), to increase, but secondary production is expected to face North America (10%), Japan (4%) and India (3%). challenges. Secondary production is more costly than primary and Figure 3.3: Existing Value Chain for Vanadium to VRFB co-production and will also face the challenge of the availability of 3.5 Vanadium Production Drivers the necessary feedstock. In addition, most of the recent greenfield and Challenges projects announced for development are associated with co- M t llur ic l b n fici tion Oth r compon nts lik R ctors (Ion Exch n M mbr n , Curr nt coll ctor, D plo m nt of VRFB t of V n dium or Flow pl t s), B l nc of Pl nt (Pumps, th nd us r There are various factors influencing the demand and supply production or multi-commodities. They are also hampered by low to V205. t nks, h t xch n rs tc.). loc tion. of vanadium in the coming years. The following are some of the grades and significant capital requirements and a relatively stable major factors expected to boost the demand for vanadium: and higher price outlook than recent prices indicate. V n dium Or V n dium Or V n dium M nuf cturin VFRB End Us r to V n dium to V n dium of oth r B tt r Extr ction Ass mbl Applic tion Production El ctrol t compon nts Figure 3.2: Regional Vanadium Consumption (2020) V n dium Or xtr ction Ch mic l proc ssin Ass mbl of R ctors, El ctrol t , from Min s s prim r sourc for m nuf cturin of BoP nd oth r compon nts to or production of V n dium V n dium El ctrol t s m nuf ctur VRFB th t will b or s b -product. for VRFB from V205. b -product r d for d plo m nt. Chin Europ Applic tion of 3% V n dium in oth r North Am ric industri s 4% 7% J p n Source: PwC Analysis CIS 4% Indi Figure 3.4: Recycling of Vanadium in the Vanadium–VRFB Value Chain Oth rs 10% Option 1 R c clin of V n dium El ctrol t from th b tt r 60% th t c n in b us d in VRFB 12% V n dium Or V n dium M nuf cturin V n dium Or VFRB End Us r to V n dium to V n dium of oth r B tt r Extr ction Ass mbl Applic tion Production El ctrol t compon nts Option 2 R c clin of V of V205 from El ctrol t us d in b tt r th t c n in b us d Source: TTP Squared, Inc. VANITEC 9th Energy Storage Committee Meeting, July 13, 2021 Source: PwC Analysis 50 Vanadium battery storage report Vanadium battery storage report 51 3.8 Vanadium to Vanadium Electrolyte ions are continuously reduced with the aid of electric current. Of the two methods, electrochemical reduction is widely used on a VRFBs use electrolytes to store the energy as chemical energy. commercial scale due to its cost effectiveness and continuous This electrolyte is based on the vanadium element. Vanadium has production capability. four stable oxidation states (V2+, V3+, VO2+, VO2+) making it ideal for manufacturing both catholyte and anolyte. This makes VRFBs The electrochemical process for producing vanadium electrolytes unique compared to other redox flow batteries. Since both the consists of a stirred mixing vessel into which vanadium pentoxide anolyte and catholyte are based on the same material, electrolyte and diluted sulfuric acid are continuously dosed. An overflow cross contamination does not render the electrolyte unusable. ensures the liquid transfer from the mixing vessel into a second tank. A filter is used between the two containers for complete Electrolyte used in the VRFBs is manufactured by dissolving solid retention. From the second tank, the solution is pumped vanadium ions in diluted sulfuric acid. The solubility of the into the cathode of the electrochemical cell and, after reduction, vanadium ions strongly depends on the sulfuric acid concentration returned to the stirred mixing tank. A partial flow is continuously and the electrolyte temperature. For V2+, V3+ and VO2+, an increase discharged as a product stream. The recirculation of the V3+ ions, of the sulfuric acid concentration leads to a reduction of the available in vanadium electrolytes produced in the electrochemical solubility, but for VO2+ the solubility increases with rising H2SO4 cell, causes an accelerated dissolution of the pentavalent concentrations. The temperature dependence follows the opposite vanadium ions in the mixing vessel because of chemical reduction. behavior: VO2+ solubility decreases with increasing electrolyte On the anode side, diluted sulfuric acid is conveyed through the temperature, while the solubility of the other vanadium ions cell from a storage tank. Because of the oxygen evolution reaction is enhanced. The overall best total sulfuric acid concentration 3.7 Vanadium Ore Extraction in western Canada and coal in parts of China and the United in the electrochemical cell, water has to be added continuously to for a VRFB electrolyte is usually set to 2 mol/L to 2.5 mol/L. States. When vanadium-bearing ash is generated as these the anode storage tank. Vanadium is extracted from several types of deposits composed The optimum concentrations must be adapted to the ambient energy sources are refined or burned, it can be further processed of various minerals and from fossil fuels. Vanadate, Titaniferous, temperature of the VRFB site. Moreover, additives such as The cost of raw materials, i.e., V2O5 and H2SO4, is a major for vanadium recovery. Magnetite (VTM) deposits are the principal sources of vanadium in phosphoric acid or ammonium compounds are often added to the contributor to the production of vanadium electrolyte. V2O5 alone Another minor contributor to current vanadium production is electrolyte as stabilizing agents, ensuring VRFB operability in a contributes approximately 75% of the total cost, hence sourcing the world and consist of magmatic accumulations of ilmenite and roscoelite, a mineral processed in alumina production, primarily broader temperature range.27 inexpensive V2O5 becomes critical for the production of vanadium magnetite, containing 0.2 to 1 weight percent vanadium pentoxide in India, that yields vanadium-bearing sludge. electrolyte. (V2O5). Sandstone, Shale -hosted vanadium (SSV) deposits have Vanadium pentoxide (V2O5) is the vanadium compound used average ore grades that range from 0.1 to greater than 1 weight • Extraction most frequently to produce vanadium electrolyte because of its As seen historically, the prices of V2O5 fluctuate significantly, percent of vanadium pentoxide. Concentrations of vanadium in The extraction processes differ based on the requirements and comparatively low prices and high availability as most vanadium which creates challenges for electrolyte manufacturers to source black shales exceed 0.18 weight percent V2O5 and can be as high outputs. The iron from different operations contains about produced is in this form. Other vanadium-containing compounds V2O5. Moreover, prices of V2O5 significantly depend on the steel as 1.7 weight percent V2O5. Vanadium has also been produced 1.5% vanadium, which is removed as slag by low-temperature used for the production of the electrolyte are vanadium trioxide sector as it is also used as a precursor to ferrovanadium in the from the alum shale and ferrophosphorus slag generated during treatment with oxygen. Different countries use different types (V2O3) and vanadyl sulfate (VOSO4). production of steel alloys. It provides an advantageous position the reduction of phosphate to elemental phosphorus in ore from of processes to extract vanadium. for vanadium producers to vertically integrate electrolyte shales of the phosphoric formation in some countries. As briefed earlier, vanadium deposits having dedicated primary For production of vanadium electrolyte from V2O5, reduction of production since (1) they are unaffected by vanadium price vanadium production are available mainly in South Africa, pentavalent vanadium ion is necessary to increase the solubility • Mining volatility, and (2) they benefit from unrestricted availability Brazil, and Australia only. Currently, South Africa and Brazil are of the V2O5. This reduction process can be done by two methods: Titaniferous magnetite ore is mined and processed for of vanadium. Most of the vanadium miners are entering the only major producers. In South Africa, Bushveld Vanadium chemical reduction and electrochemical reduction. vanadium extraction in most of the major producing countries. the vanadium electrolyte manufacturing business, such as produces vanadium ore from its mines at Vametco and Brits Bushveld minerals in South Africa and Largo Resources in Brazil. Titaniferous magnetite ore is also processed in steelmaking In chemical reduction, the vanadium components are reduced Resources. In Brazil, Largo Resources produces vanadium ore Australian Vanadium Limited will produce electrolytes at their operations in China, Russia, and South Africa. with chemical reducing agents such as SO2, oxalic acid C2H2O4, or from its mining operation at Maracas Mechen Mine. In Australia, mining and vanadium production facility. hydrogen (H2), while in electrochemical reduction, the vanadium Vanadium is present in crude oil in the Caribbean basin, vanadium mines are in the development phase and production is parts of the Middle East, and Russia, as well as in tar sands expected to start as early as 2023-24.26 26 Australian Vanadium Limited 27 Preparation of Electrolyte for Vanadium Redox-Flow Batteries Based on Vanadium Pentoxide, Jan Martin, Katharina Schafner, and Thomas Turek 52 Vanadium battery storage report Vanadium battery storage report 53 Figure 3.5: Process Map for Vanadium Electrolyte Manufacturing from V2O5 3.9 VRFB Manufacturing and Assembly installed capacity. A similar trend is observed among the top VRFB manufacturers, with the top five accounting for about 90% A vanadium redox flow battery comprises an assembly of of current installed capacity: Sumitomo, a Japanese company catholyte (electrolyte tank with V4+ and V5+ vanadium ion) and V n dium manufacturing 163.75 MWh of VRFB, which is about 48% of total El ctrol t O2 anolyte (electrolyte tank with V2+ and V3+ vanadium ion). These operational capacity; VRB Energy, Canada (15.61%); Rongke electrolyte tanks are connected to the power cell via a pump. In Power, China (12.71%); Shanghai Electric, China (8.5%); and UET, V n dium El ctrol t the power cell, there are two electrolytes separated by a proton r circul tion the United States (5%). exchange membrane, also known as an ion-selective membrane. Vanadium redox battery also consists of carbon-based electrodes. Table 3.1: Manufacturers of Operational VRFBs, 2022 V2O5 Mixin liquid The most common types of electrodes are carbon felt, carbon H2SO4 ov rflow Name of Manufacturer Operational VRFB Capacity (MWh) paper, carbon cloth, and graphite felt. H2O H2O Sumitomo 163.75 Filt r Pump Pump VRB Energy 53.31 3.10 VRFB Installed Capacity Rongke Power 43.42 VRFB is currently used for stationary electricity storage in more than 35 countries, with an operational installed capacity of Shanghai Electric 28.99 Filt r to Mixin r t in solids Ov rflow El ctroch mic l Anod 341.55 MWh. The top five countries share more than 75% of the UET 17.33 Ch mb r Ch mb r C ll Stor T nk total installed capacity of VRFB, with Japan having 153.5 MWh Others 34.74 of installed capacity, 45% of the total VRFB installed capacity Total 341.55 worldwide. Japan is followed by China (31%), the United States Source: EPA, metallurgist.com (14%), South Korea (2%), and Germany (1%) in terms of VRFB Source: Vanitec.org Figure 3.6: Schematic Diagram of VRFB Battery Figure 3.7: Global Operational Installed Capacity of VRFB, 2022 (MWh) J p n 1% 2% 4.71 Chin 5.64 Unit d St t s of Am ric 7% El ctrod M mbr n El ctrod 22.92 South Kor G rm n 3 V3 V4 4 V V Oth rs 14% 48.70 Anol t C thol t 45% V2 2 5 V5 153.48 V V 31% 106.10 Pump Pump Pow r Sourc /Lo d Source: PwC Analysis Source: Vanitec.org 54 Vanadium battery storage report Vanadium battery storage report 55 Figure 3.8: Global VRFB Capacity (MWh) (Operational + Announced/Under Construction), 2022 3.11 VRFB End Use Application there is no cross-contamination of the electrolyte as only one element is used in its manufacturing, which is unique among With an increasing focus on RE-based power generation for 0% 2% flow batteries. The quality of vanadium electrolyte after 5, 10 Chin achieving lower the temperature by 2 degrees in future, there 11.17 55.87 or 20 years is the same as on day one. The same is true for the Unit d St t s of Am ric is a growing demand for energy storage systems due to the vanadium molecules within the electrolyte. VRFBs can thus be Austr li inherently intermittent nature of solar- and wind-based electricity 6% installed for large -scale capacity. There has been large-scale J p n 153.48 generation. Currently, most of the energy storage requirements adoption of VRFBs in China and Japan, including multiple 400 South Afric 8% are being fulfilled by pumped-Hydro storage. Pumped-Hydro 212.75 MWh sites currently under construction in China. Oth rs storage systems are capital intensive, have a high incubation period, and are geographically constrained. 3.12 Recycling of Vanadium For wide adoption of RE-based power generation, a distributed, 18% When considering the use of the vanadium at the end of the grid -level energy storage system will be required, with the storage 495.82 66% life of the battery, there are two options available for recycling capability of different power and energy requirementswith 1821.10 vanadium: long duration electricity supplying capabilities. These unique requirements of RE-based power generation need unique solutions Option-1: Recycling of Vanadium Electrolyte (VE) for grid-level energy storage systems. Battery Energy Storage Systems (BESS) represent one such solution that is commercially In this option, VE is recycled after usage in a battery to be used viable with availability of the same in the market. Lithium- again in another battery. VE has a virtually infinite lifespan ion (Li-ion) batteries are a leading BESS solution, but several compared to VRFBs and can be reused in different batteries fire incidents at grid-level storage [facilities] and constrained after recycling. VE recycling may become as a viable option when Source: Vanitec.org operational capacity (low discharge duration) are creating a huge quality of VE gets detoriated due to solid precipitation during challenge to the adoption of Li-ion batteries at a wider level. the operational life of the battery or due to cross contamination VRFBs are coming up as the option for the Li-ion batteries in this by anolyte and catholyte. These challenges can easily be solved The total capacity of VRFB is expected to reach around Table 3.2: VRFB Capacity (Operational + Announced/Under space as they offer the most sustainable battery solution for by the ultrafiltration of the electrolyte, which removes the Construction), 2022 precipitated solids. If the balance of electronic valence is off 2,700 MWh, assuming the VRFB projects in the pipeline are large-scale commercial deployment. commissioned.28 Data shows that a seven-fold increase in VRFB between the anolyte and catholyte, some of the 5-valent solution VRFB Capacity (MWh) The major advantages of VRFBs are their long lifespan and the capacity is expected, with the top five countries sharing more than could be replaced with new electrolyte (at a valence of 3.5) to Name of Manufacturer (Operational + Announced/Under Construction) ability to charge/discharge over 30,000 times for over 20 to 25 return it to a balanced state. 97% of the total VRFB installed capacity. A major increase in VRFB years with minimal performance degradation. VRFBs have a installation is planned in China, whose share is expected to reach Rongke Power 857.42 high discharge capacity, up to 100% depth of discharge, which This is the best option for recycling the vanadium contained around two thirds of the total global installed capacity, with 1,821 allows the entire battery to be used all the time. When fully used in the electrolyte. As the vanadium does not deteriorate in the MWh of VRFB installation. China will be followed by the United VRB Energy 557.79 at least once daily, VRFBs currently prove to be cheaper than electrolyte, it can be used as a safe storage solution. Additionally, States (18%), Australia (8%), Japan (6%), and South Africa (0.4%). Shanghai Electric 428.99 Li-ion batteries. There is also no fire risk from thermal runaway. the cost of recycling VE is lower than the cost of reprocessing Again, the top six manufacturers are expected to contribute One of the major advantages of VRFBs is also that nearly all the vanadium for VE. around 96% of the total installed capacity. Rongke Power, a China Concentric Power 226.00 electrolyte in VRFBs is re-usable upon decommissioning. The CO2 -based company, is planning to increase its installed capacity Others 691.02 footprint over the VRFB lifecycle (from mining of vanadium to to around 857.42 MWh of VRFB, which is about 31% of the total disposal of the battery) is smaller than for long -duration Li-Ion projected installed capacity. Rongke Power is followed by VRB Total 2,761.23 battery systems. Electrolyte can be recycled at the end of the Energy, Canada (20.2%), Shanghai Electric, China (15.54%), life of the battery, but if electrolyte becomes non-recyclable, Concentric Power, the United States (8.18%), and CellCube, Austria Source: Vanitec.org vanadium can be recovered from it and redeployed into another (7.67%) in terms of market share of VRFB manufacturing. VRFB system or converted into FeV for use in steel. Theoretically, 28 Vanitec.org 56 Vanadium battery storage report Vanadium battery storage report 57 2. Renting model: In this model, the producer bears the cost of d. Vendor Lease: In this case, the producer and the leasing production and receives the income as a regular payment from companies together offer the user an overall proposition of the user against the renting of the product. The producer is purchase financing or leasing options. The producer and the V n dium V n dium V n dium incurring the capital investment cost and holds the right to the leasing company may agree on topics such as distribution Oxid tion L chin C lcin tion El ctrol t Pr cipit tion P nt oxid product, while the user gets the benefit of not having to pay of the risks, reverse logistics, residual value of the product. the capital cost of the product and only pays regular rent on A vendor lease is always an operation or financial lease. The the product. only difference is that instead of the producer and leasing company working independently, they act together to 3. Leasing model: In this model, a leasing company offers provide leasing options to the user. financing if the producer and user are unable or unwilling to Option-2: Reprocessing of Vanadium from the Vanadium 3.13 Circular Business Model finance the product. The leasing model is further divided into Of the three options above, the renting or operation leasing Electrolyte four categories to provide a product lease: model of VE are suitable models for the circular economy of Vanadium is not consumed and does not degrade in the VE used in a. Operation Lease: In this case the leasing company buys the vanadium as there is very high upfront capital cost involved in This option involves the extraction of vanadium from spent VRFBs.31 After the battery’s end of life, the VE can be recycled and product from the producer and leases it to the user. The producing vanadium and vanadium electrolyte for the VRBF vanadium electrolyte, which can be used in traditional steel redeployed in another VRFB or can be converted into vanadium user has an option to buy the product at the end of the lease manufacturers32. applications or other applications as required. Various companies for reuse in the open market. In addition, the conversion cost globally have successfully demonstrated 92% to 99% recovery29 of for vanadium from VE is significantly lower than the vanadium’s term. It is similar to the renting model, but instead of the As already discussed above in value chain analysis, vertically vanadium from the electrolyte. market value. product comes from the leasing company to the user rather integrating vanadium electrolyte manufacturing for an than from the producer, and the leasing company holds established vanadium producer is technically feasible and There are multiple ways in which vanadium can be recovered from According to the Technical University of Munich, a VRFB produces the right to the product. Product rights are transferred to economically favorable due to the following reasons: spent electrolytes. For reprocessing a vanadium electrolyte, the less “cradle to grave” CO2 emissions than any other BESS. These the user if the user buys the product at the end of the lease • They do not need to depend on the market for the supply of following general process will be required:30 CO2 savings range from 27% to 37%, when compared to multiple term. An operational lease purchase of the product by the vanadium lithium-ion technologies. user is optional. For an existing vanadium processing facility, reprocessing spent • They are uninfluenced by vanadium price movement electrolyte would be much less capital intensive compared to With these environmental and economic advantages, and b. Financial Lease Pledge: In this case, the user buys the • They have an opportunity to bifurcate the vanadium produced setting up a new processing facility altogether as there are according to the hours required to recycle the metals, it is product from the producer with financing from the leasing from a single end -use industry, the steel sector multiple steps in the process that are similar to the beneficiation imperative to study the circular business model of vanadium in the company. The user holds the economic and legal rights to VRFB space. the product, while the leasing company holds the pledge on • It offers a sustainable and recurring income source as a result of of vanadium from the vanadium ores. This provides an opportunity the product in case the user ceases or is unable to pay the leasing or renting the VE for an existing vanadium producer to reprocess spent electrolytes. Three revenue generation options in the circular economy were lease amount. We also studied leasing models being followed in precious metals studied to understand their applicability in the circular economy of Some additional requirements for an existing vanadium vanadium in VRFBs. c. Financial Lease Hire-Purchase: Under this lease type, the for comparative analysis and drew important parameters that beneficiation facility may include the following: user buys the product with financing from the leasing we considered to build a feasible circular business model for • A storage facility to store the spent electrolyte to be 1. Sell and buy back model: According to this model, users must company and holds the economic rights to the product, vanadium. reprocessed either in tanks or totes finance upfront costs to purchase the product from producers while legal ownership of the product rests with the leasing with the assurance from the producers that it will buy back the • Oxidation of the electrolyte from a typical 3.5 -valent solution to company. Legal ownership is automatically transferred to product if the standard operating practices are followed. One 5-valent solution. Oxidation of the electrolyte solution can also the user upon payment of the last installment. Purchase major disadvantage of this model is that it does not provide be done by modifying the circuit as needed for the electrolytes of the product by the user is obligatory in both financial any financial benefit to the users as the full cost of the product and other steps involved in the process lease models. has to be paid by them. In this model, vanadium price volatility Vanadium thus lends itself to a circular economic model where the is still going to be a major challenge for VRFB producers (users value of the metal is maintained for possibly unlimited use and not in this case) and Vanadium Producers (producers in this case). only for the initial value when use is established in a battery for the first time. 29 US Vanadium, Bushveld Vanadium, Electrochem 30 US Vanadium 31 IEEE, Rocky Mountain Institute, The University of New South Wales; Volterion; Technical University of Munich 32 Venitec.org 58 Vanadium battery storage report Vanadium battery storage report 59 3.14 Comparative Analysis 3.14.1 Platinum Figure 3.9: Demand for Platinum, by sector, 2021 In capital-intensive industries, such as manufacturing, Platinum is 30 times rarer than gold and, unlike most other pharmaceuticals, automotive, chemicals, and electronics, metals, is difficult to find among the minerals in the Earth’s outer Autoc t l st precious metals are widely being consumed as a catalyst in their crust. It can, however, be found in its pure form. It is an attractive Industri l production processes. In such processes, the metal itself is not silver-white metal that is malleable, ductile, very heavy, and has J w ll r 4% consumed but is used because of its chemical properties. The a high melting point. It is extremely resistant to tarnishing and B rs, Coins availability of precious metals is limited and unevenly distributed corrosion. Along with platinum metals, small amounts of iridium across the globe, which makes their market pricing quite volatile. are commonly added to produce a harder, stronger alloy that 26% Considering these factors, the decision to purchase or lease these retains the advantages of pure platinum. 36% precious metals will have a material impact on the industrial firm’s Table 3.3 illustrates that over 75% of total platinum production liquidity and balance sheet. comes from primary sources, and approximately 25% of the supply With purchasing precious metals by the industrial firms, the is recycled platinum. Table 3.4 summarizes the major primary upfront cost is significant, and it exposes the company to producers of platinum. commodity price risk and, potentially, currency risk, to limit cash Table 3.3: Sources of Platinum, 2017-2021 consumption. Therefore, many firms choose to lease precious metals from a leasing company, reducing their capital outlay, Platinum 2017 2018 2019 2020 2021 34% while eliminating currency risk and the need for mark -to -market (metric tons) accounting on the price of the commodities owned. It is also Primary 6,160 6,135 6,077 4,906 6,204 evident that the transportation of precious metals is not only production Source: Metals Focus, 2019-2022 time-consuming, but expensive, whereas the leasing market Recycled 1,915 1,955 2,137 1,929 1,936 offered the ability to swap metals from one location—or from one Platinum time period—with someone in another location or at another time. Total supply 8,075 8,090 8,214 6,834 8,140 Table 3.4: Primary Producers of Platinum, 2017-2021 Therefore, it may be assumed that leasing models being adopted This cannot be done for free, thus, there is a premium charged to Source: Metals Focus 2019-2022, SFA (Oxford) 2017-2018. for platinum metal may be considered more relevant compared to use this facility, which depends on the supply and demand in the Platinum leasing models adopted for gold when building business models for 2018 2019 2020 2021 2022 specific location. This is possible if the two parties share the same (metric tons) The production and supply of platinum are highly concentrated leasing vanadium for industrial use. interest in concurrent locations or collaborative leasing companies in South Africa. South Africa is a major producer of platinum, South Africa 137,053 132,989 111,993 141,625 124,401 In the platinum market, the circular value chain is widely practiced in a different location. contributing around three quarters of the total platinum produced Russia 22,000 24,000 23,000 21,000 20,000 globally because the recycling and extraction of platinum metal is globally. South Africa is followed by Russia (10%), Zimbabwe (8%), Precious metals are rare, naturally occurring metallic chemical Zimbabwe 14,703 13,857 15,005 14,732 17,104 cheaper than extraction from its ore33 Click here to enter text. and North America (4%). The top three countries contribute over elements of high economic value, such as gold, silver, and PGMs Canada 7,600 8,600 4,600 5,000 5,400 92% of the total global supply of platinum. This circular value chain can be achieved with the help of leasing (which comprise six metals: platinum (Pt), palladium (Pd), rhodium United States 4,160 4,150 4,200 4,020 3,000 agencies, as explained below. (Rh), ruthenium (Ru), iridium (Ir), and osmium (Os)). These PGMs Figure 3.9 indicates that almost 70% of the demand for platinum China 2,500 2,500 2,500 2,800 2,800 have very high melting points, high heat resistance, high corrosion is for preparing autocatalysis and for industrial purposes. Demand resistance, and unique catalytic properties. Similarly, gold and for jewelry manufacturing stands at 26% and for investment, bar, Finland 1,576 953 1,277 1,447 1,243 silver also have unique physical and chemical properties and and coins, only 4%. Colombia 270 178 414 672 400 high economic value. There are several players working in the Australia 120 110 110 100 90 The supply–demand analysis of gold and platinum reveals that field of leasing precious metals (gold, silver and PGMs), including most platinum consumption or demand (70%) arose from a Ethiopia 4 4 2 4 30 Mitsubishi Corporation International (Europe) Plc (MCIE), Kilo combination of autocatalysis (36%) and industrial use (34%) in 2021, Serbia 5 10 20 20 15 capital, Umicore, Monetary Metals, and Kitko Metals. In this whereas consumption of gold in the industry sector (electronics, report, platinum has been selected for comparative analysis Total 190,000 187,000 163,000 191,000 174,000 dentistry, and other industrial use) stands at approximately 7%. considering its use in industrial contexts. Source: Metals Focus 2019-2022, SFA (Oxford) 2017-2018. Most gold consumption (about 70%) came from the jewelry industry (48%) and the investment sector (21%) in 2021. 33 https://technology.matthey.com/article/56/1/29-35/ Source: Platinum Metals Rev., 2012, 56, (1), 29 doi: 10.1595/147106712X611733 60 Vanadium battery storage report Vanadium battery storage report 61 Figure 3.10: Circular Value Chain for Platinum 3.17 Manufacturing of Industrial Products 3.19 Recycling Platinum metal extracted from the primary source or According to the study report published by Johnson Matthey recycling sources are supplied to the manufacturing units plc,35 mass-produced consumer components, for example, Pl tinum Or / of industrial products, such as autocatalysts, chemical consumer components such as computer motherboards, contain M t l Extr ction productions, electronic products, medical fields, jewelry, and around 200–250 grams per metric ton (g t–1) of gold and around investment institutions. 80 g t–1 of palladium; mobile phone handsets contain up to 350 g t–1 of gold and 130 g t–1 of palladium; and automotive B nifici tion catalytic converters may contain up to 2000 g t–1 of PGM in the R c clin nd Purific tion 3.18 End Use Application ceramic catalyst brick, the active part of the converter. This is Platinum is a highly valued and sought-after metal because of significantly higher than the gold or PGM content in primary ores its properties and wide range of uses. The major applications of (on average < 10 g t–1). Additionally, based on our analysis, the PGMs are as catalysts in the automotive industry, petroleum value for extracting vanadium from VE is only about one quarter refining, environmental uses (gas remediation), industrial chemical of the cost of the production of vanadium from primary sources, End Us Pur M t l production (ammonia production, fine chemical production) which explains the economic viability of recycling these metals Applic tion Extr ction electronics, and medical fields. Catalytic converters are used to (vanadium, platinum, gold). As these metals have high intrinsic reduce pollutants by reducing exhaust gases. This accounts for metal value and low recycling costs, recyclability is attractive about 37% of the platinum used as it is very effective at converting from an economic point of view, and because of the much higher M nuf cturin of toxic gases into less harmful emissions. concentration of metals in the used products, compared to Industri l Products mining of ores, recyclability also helps significantly reduce the It is expected that as the next generation of energy technologies Source: PwC Analysis environmental burden of metal supply, especially in terms of the for hydrogen production, such as electrolyzers and fuel cells impact on the climate. for stationery and transport applications, become mature, the demand for PGMs will further increase. Because of its high value, platinum can readily be recycled. 3.15 Platinum Ore Extraction 3.16 Beneficiation and Purification Currently, most recycling comes from spent automotive The metal is also used extensively in jewelry and PGMs are associated with base metal sulfides, such as of Platinum34 catalysts, used chemicals, old jewelry, and electronic devices. dental alloys, which accounts for about one quarter of chalcopyrite (CuFeS2), millerite (NiS), pentlandite, pyrite and PGM ore extracted from the mine is first treated by the primary In addition to end-of-life recycling, significant volumes of its consumption. Platinum is also used for investment, to pyrrhotite. Gangue minerals associated with PGM-containing and secondary crushers, then beneficiated using gravity platinum are used in closed-loop production processes, for make coins and other currency. It is also employed in the minerals are feldspar, biotite, plagioclase, and pyroxene. separation and floatation. Smelting is used to extract PGM -rich example, in glass manufacturing, where old platinum equipment pharmaceutical industry as a selective hydrogenation agent. Currently, about three quarters of the total platinum produced sulfides from the gangue minerals. After the smelting process, is recycled and turned into new equipment, or in the chemical Platinum is used in pacemakers and other equipment inserted globally is produced by primary sources, the rest is produced by a hydrometallurgical process is used to purify the PGM. These and pharmaceutical world. It is important to note that in all in the human body because of its resistance to corrosion from recycling its end -use products. Mine production occurs mainly hydrometallurgical processes can be dissolution-precipitation applications, technical recyclability does not present a challenge bodily fluids and lack of reactivity to bodily functions. Platinum in South African mines, which account for about 74% of platinum (pressure oxidation leach), solvent extraction and ion exchange, as yields of well over 95% can be achieved if the product or compounds are important chemotherapy drugs used to treat mine production. Platinum mined in South Africa comes mainly and molecular recognition technology. Pressure oxidation leach is the PGM-containing component is sent to a state-of-the-art cancers. Platinum is also used to power computers as it is from the Merensky reef, UG2 reef, and Platreef, which are all part a typical hydrometallurgical process used to separate base metals precious metals refinery. found in thermocouples and hard discs. of the Bushveld complex from the PGM residue. The base metals are leached, while the PGMs remain in the residue. The PGM residue is sent to a precious metal refinery where various solution extraction and precipitation methods are used to separate individual platinum group metals. Solvent extraction is another method by which PGMs can be separated from the base metals. 34 https://dx.doi.org/10.5772/intechopen.73214 Source: Extraction of Platinum Group Metals, Bongephiwe Mpilonhle Thethwayo, February 21st, 2018 35 https://technology.matthey.com/article/56/1/29-35/ 62 Vanadium battery storage report Vanadium battery storage report 63 3.20 Technical and Market Challenges 5. Entry into the recycling chain and remaining up to the final 3.22 Circular Business Model for Platinum This analysis indicates that vanadium can be leased, and a circular step. Items such as PC motherboards, mobile phones, or cars vanadium value chain can be implemented globally. According to There are various technical and market challenges that can There are five major steps involved in a standard circular business containing catalysts are often sent (legally or illegally) to our proposed models for vanadium circularity, long -term models influence the efficiency of recycling at different stages of the model for platinum using the leasing mechanism: countries lacking the proper infrastructure for recycling at with a duration of 20 to 25 years can be implemented easily recycling process: • The lessor supplies the pure metal to the lessee their end of life. This can also result in precious metals being considering the financial, economic, social, and environmental • Well-tuned recycling chain lost to the recycling chain. • The metal is consumed by the lessee for product manufacturing aspects associated with the models. The details of each model are • Diverse specialized stakeholder mix 6. Optimal technical and organizational setup of this recycling • The product is used by the end user explained in section 3.24. • Mechanism adopted for the collection of old products, followed chain. Comprehensive recycling chains, for example, items such • The product is transported to the recycling facility at the end of by sorting/dismantling and pre-processing relevant fractions as PCs or mobile phones, should not be mixed with other low the life of the product Table 3.5: Comparison of Vanadium Leasing and Platinum Leasing • Recovery of metals -grade electronic waste and channeled into a shredder process • The metal is recycled and/ or extracted by the lessee without prior removal of the precious metal-containing circuit Particulars Platinum Vanadium • The platinum is reused To effectively recycle precious metals, including platinum metal, boards. The same applies to the PGM-containing catalyst in a the following conditions must be met: car or fuel cell. Primary sources: Primary Sources: At the end of the lease term, the counterparties return either: about 74% about 18% 1. Technical recyclability of the material or metal combination. 7. Sufficient capacity along the entire value chain to make Source of • The original metal provided (after applying chemical processes raw metal All precious metals and many other metals can be recovered comprehensive recycling feasible. Once conditions 1 to 6 are Secondary and Co- to separate it from the other chemicals with which it has been Recycling: production Sources: from, for example, a printed circuit board if state-of-the-art about 26% met, the only requirement is to ensure that there is sufficient about 82% mixed); or processes are used. capacity to process the quantity of material available for • The same type of metal (i.e., platinum) in the same quantity and South Africa (74%) China (67%) 2. Accessibility of the relevant components. An underfloor recycling. Precious metal refiners will invest in enhancing grade as the metal originally provided by the lessor. Source (region) Russia (10%) Russia (17%) automotive catalyst or personal computer (PC) motherboard their recycling capacities if there is sufficient security of feed is easily accessible for dismantling, whereas a circuit board later. Conditions 5 and 6 are thus crucial to triggering timely In return, the lessor receives a lease fee in accordance with the Zimbabwe (8%) South Africa (8%) used in car electronics (for example, in the engine management investments in a principally growing market for (precious) lease agreement signed between the lessee and lessor. Autocatalysts may system) usually is not. As long circuit boards are isolated or metals recycling. contain up to 2000 g/t Under a typical precious metal lease, the leasing company (a of platinum compared dismantled before the car is put through the shredder, the Efficient recycling of end-of-life products today serves as precious metal trading company, bank, metal producer, or other to less than 10g/t in precious metals they contain are easily recyclable. platinum ores. With a insurance for the future. Effective recycling systems would thus lender) bears the risk of the industrial firm failing to return metal high metal content, the The cost of recycling VE Cost of cost of manufacturing is one sixth of the cost 3. Economic viability, whether intrinsically or externally created. contribute significantly to conserving the natural resources of at the end of the lease term. The lessor may seek monetary recycling platinum from of extracting vanadium A dismantled PC motherboard has a positive net value; metals and securing a sufficient supply of PGMs and other scarce reimbursement for any unreturned metals in the event the autocatalysts is much lower therefore, recycling alone is viable. By contrast, a dismantled metals for future generations. They would further mitigate metal manufacturer fails to perform under the lease agreement. compared to platinum manufacturing from ultra-thin PGM-coated PC hard disk usually has a negative net price volatility and limit the climatic impacts of metal production, platinum ore. The technical recyclability of the PGMs, combined with the value due to the cost of processing it. Recovering the platinum which is energy intensive, especially with (precious) metals mined structures in place within the PGM industry, means that it VE can be recycled and/or ruthenium from it would currently not be economically from ores containing low concentrations of the desired metals. almost completely, has reached a leading position in terms of sustainable metals Recyclability Over 95% of platinum and 97% to 99% of the viable unless paid for externally or subsidized. can be recovered vanadium in the VE can management and recycling. In some areas, further scope be recovered 4. Collection mechanisms to ensure the product is available for 3.21 Reuse of Platinum for improvement exists and can be achieved by involving recycling. If collection mechanisms are not in place, items all stakeholders, with the appropriate political support for Autocatalysts, VE manufacturing At the end of the life of the products, after they are processed Application industrial products, Steel manufacturing such as old PCs or mobile phones may end up being stored in the relevant legislation. Similarly, the recycling and reuse of jewelry, and investment through the recycling facility, they move on to the metal households or discarded for landfill or municipal incineration. vanadium and VE can be promoted to achieve sustainable purification process, and pure metal is obtained. This pure metal Short term Short -term leasing The precious metal they contain would effectively be lost to metal management. (1/3/6 month) (5–10 years) is again available for reuse in manufacturing industrial end -use Leasing Period the recycling chain. products. If the metal is procured under the leasing model, the Long term Long -term leasing (1 year+) (20–25 years) recycled platinum can be reused by the metal leaseholder if the lease term has not expired, otherwise the lessee must return the Source: PwC Analysis pure metal to the lessor. 64 Vanadium battery storage report Vanadium battery storage report 65 3.23 Proposed Business Model for Circular Both models work in similar ways with one key difference: in With both models, the following three scenarios emerge: EU Renewable Power Limited leases the electrolyte from XYZ Vanadium Ownership Model 1, VE is leased to VRFB manufacturers, who use this leased 3.23.1 Scenario A: Single long-term leasing Electrolyte Limited for 25 years based on the life of the battery. electrolyte in a single VRFB or multiple VRFBs manufactured by The electrolyte is transported directly to the end-use site in Two business models with three scenarios each have been them. In this model, a VRFB manufacturer may sell all the battery Leasing duration: In this scenario VE, will be leased for the lifespan Sweden from electrolyte manufacturing plants to avoid identified based on the following: components except the VE. VRFB manufacturers are also liable for of the VRFB or longer, i.e., more than or equal to 20 to 25 years. multiple transportation costs. It should be noted that the • A complete vanadium–VRFB value chain analysis, safekeeping of the VE leased by them, wherever it is being used. In electrolyte contains vanadium, a critical metal, hence Movement of VE: After manufacturing, VE is transported to the • The options available for circularity in the vanadium–VRFB value the second model, VE is leased directly to the end user who has the transporting it from one country to another will require end-use location where it is integrated into the VRFB system. chain, and complete VRFB setup done by a VRFB manufacturer without any regulatory and legal approval. Once used, the VE is transported back to the VE manufacturing • The end user of the VRFB provision of VE. The advantages and disadvantages of the two VB Limited supplies the complete VRFB system to EU facility where the VE manufacturer, according to its requirements, models are discussed in Table 3.7. Renewable Power Limited. EU Renewable Power Limited owns either recycles the VE or processes the vanadium from the VE. all the components of the battery except the electrolyte, which Table 3.6: Model 1 and Model 2 Scenarios and their Applicability If the VE requirement exceeds the life of the VRFB and the VE must will be used by EU Renewable Power Limited for a lease term of be recycled before it can be used in another VRFB. It should be 25 years. Model Scenario Applicability evaluated that transporting VE back to the VE manufacturer to be At the end of the lease term, the electrolyte is transported recycled or prepare a makeshift recycling facility at the end -use back to the electrolyte manufacturing facility. XYZ Electrolyte Utility -scale storage solution where battery storage Scenario A Single long-term leasing requirement will be there for whole life of VRFB location only to avoid multiple transportation of the VE. Limited may either recycle the electrolyte for further leasing or Leasing Vanadium Illustrative Example:To further examine and identify the process the vanadium out of the electrolyte to be used according Industrial or domestic storage solution where battery Electrolyte to the Scenario B Multiple short-term leasing Model 1 VRFB Battery requirement will be less than the life of VRFB challenges associated with this scenario an illustration is to the company’s requirements. Manufacturer Industrial or domestic storage solution where battery shown below. Applicability: This scenario will apply when the end use of the Multiple short-term leasing in a Scenario C requirement will be less than the life of VRFB within a focused geographical region VE is for a long period, such as a power distribution company certain geographical location Vanadium Electrolyte Producer: ABC Vanadium Inc. produces requiring energy storage solutions or an electricity generation Utility -scale storage solution where battery storage vanadium from its mining and beneficiation facilities in South Scenario A Single long-term leasing facility that generates RE -based electricity and needs a storage requirement will be there for whole life of VRFB Africa. Most of the produced vanadium is, historically, supplied solution for a continuous and reliable power supply. Leasing Vanadium Industrial or domestic storage solution where battery to steel manufacturers worldwide. ABC Vanadium Inc. also Scenario B Multiple short-term leasing Model 2 Electrolyte directly requirement will be less than the life of VE to the End User supplies vanadium to XYZ Electrolyte Limited, its subsidiary in 3.23.2 Scenario B: Multiple short-term Leasing Industrial or domestic storage solution where battery Austria, to produce vanadium electrolyte. Multiple short-term leasing in a Leasing duration: In this scenario, VE will be leased to the end user Scenario C requirement will be less than the life of VRFB within a focused geographical region certain geographical location VRFB Manufacturing company: VB Limited is a VRFB or VRFB manufacturer for shorter durations than the lifespan of Source: PwC Analysis manufacturing company based in Germany. the VRFB battery system. The lease term will be between 5 to 10 End User: EU Renewable Power Limited, an RE -based electricity years, depending on the end use. generation company, plans to set up a battery energy storage Table 3.7: Advantages and Disadvantages of Model 1 and Model 2 Movement of VE: Post manufacturing, VE transported to the first system in Sweden to supply uninterrupted electricity. end-use location to be used for the short-term lease. During the Model Advantages Disadvantages EU Renewable Power Limited ordered a VRFB system at its first lease term, the VE manufacturer may identify another client facilities in Sweden for an uninterrupted power supply. for leasing the VE for another term of 5 to 10 years. At the end of Legal ownership during the lease period and end As discussed previously, the largest share of the cost in a Model 1 The VRFB manufacturer is better placed to reach the -use location of VE is different, which may lower the the first lease term, VE will be recycled at the VE manufacturing local customer base. standards with which the VE is utilized. VRFB is attributed to the vanadium electrolyte. Additionally, location and transported to the second end -use location. In the electrolyte is stored in separate tanks from the core this way, VE manufacturers can lease the VE until it can no Legal ownership during the lease period and the end -use location of the VE are the same, which helps battery stack and circulated into the battery system through longer be used, at which time VE will be transported back to the maintain the standards with which the VE is utilized. The manufacturer must create its own customer base pumps; electrolyte can be integrated into the battery at a later manufacturing location to be processed into vanadium and can be to compete with the local VRFB manufacturer. Additional benefits of removing the intermediary from stage before starting the operation of the VRFB. In case of further re-used. Model 2 the leasing process are an increase in profitability for the VE manufacturer and a lower cost for end users. unavailability of the required capital, a VRFB manufacturer may opt to lease the electrolyte. Source: PwC Analysis 66 Vanadium battery storage report Vanadium battery storage report 67 Illustrative Example: To further examine and identify the facility to process the vanadium out of the electrolyte for use 4. If theCAPEX:3376 3.23.5 Comparative analysis of different model scenarios challenges associated with this scenario an illustration is according the company’s requirements. 5. The CAPEX required to set up the reprocessing facility To further understand which business model scenario is best shown below. (80% of the total cost) totals US$21449.26/MWh.37 Applicability: This scenario will apply when the end use of the VE suited for implementation, various parameters, such as financial, Vanadium Electrolyte Producer: ABC Vanadium Inc. produces is for a short duration, for example, a factory owner that needs 6. It was assumed that the cost of setting up the recycling economic, regulatory, environment and social aspects, are vanadium from its mining and beneficiation facilities in South an electricity storage solution for load shedding or to reduce the facility is the same as the reprocessing cost. analyzed. The proposed business model scenarios are compared Africa. Most of the vanadium produced is, historically, supplied cost of power consumption by offsetting peak hour consumption. 7. The cost of transporting VE from South Africa to Europe is based on various factors associated with these parameters. to steel manufacturers worldwide. ABC Vanadium Inc. also A small VRFB solution would be required for such applications. US$0.31/L. supplies vanadium to XYZ Electrolyte Limited, its subsidiary in In the current market scenario, the major consumers of VRFBs in Austria, to produce vanadium electrolyte. 3.23.3 Scenario C: Multiple short-term leasing in the next decade will involve utilities (generation, transmission, and focused geographical region Table 3.8: Assumptions used for the Financial Analysis distribution) and commercial and industrial consumers, including VRFB Manufacturing company: VB Limited, a VRFB manufacturing company, based in Germany. In this scenario, VE will be leased to multiple players for short telecom towers that will require long-term deployment of the durations, similar to scenario B, within a focused geographical Particulars Value Unit battery. Key application include the following: End User: location to minimize the logistic costs and other logistic • Grid Congestion Relief: In congested areas where new 1. PQR Manufacturing Limited is a small-scale manufacturing ‌ CAPEX for Recycling VE per MWh 21,449.26 ‌US$/MWh challenges. transmission and distribution lines may be needed, VRFBs company based in Nigeria. PQR Manufacturing Limited has Per MWh VE Requirement 52,630 L/MWh can alleviate stress without the same capital investment and an unreliable power supply. It is expected that a reliable, In this scenario, all the lessees are from a focused geographical environmental disruption required to build out new lines. continuous power supply will be available after five years. area, for example, a country, making the transportation of VE C Liter of VE ‌ APEX Required per ‌ 0.41 ‌US$/Liter Hence, PQR Manufacturing Limited ordered the VRFB from one lessee to another much easier and ore cost effective. Recycled • Distributed Generation: VRFBs can be installed in rural or battery from VB Limited for that period (2023 to 2028). However, in this scenario, the identification of multiple lessees remote microgrids to act as a potential replacement for diesel ‌ iter VE Transportation Cost Per L 0.31 ‌US$/L generators providing backup power. in a certain geographical area would present a challenge. (one side) 2. STU Industries is planning to set up a factory in Zambia by the year 2029. It faces the challenge of an unreliable • Arbitrage: In large industrial applications such as To reduce the transportation cost in this scenario, the recycling ‌ iter VE Transportation Cost Per L 0.62 ‌US$/L manufacturing processes, VRFBs can shift energy-intensive electricity supply for the first seven years of operation and (both ‌sides) facility will need to be established at the end-use location. The requires the VRFB battery for that period (2029 to 2036). processes to off-peak hours to relieve strain on the grid. financial analysis below compares the costs of transporting VE Per MWh Transportation Cost 16,315 ‌US$/MWh • Ancillary Services: VRFBs are also being used to provide PQR Manufacturing Limited procures the complete VRFB (one side) and establishing the VE recycling facility to assess the viability system from VB Limited, except for the electrolyte, which it ancillary services, such as balancing and frequency response. of this scenario. Per MWh Transportation cost 32,630 ‌ US$/MWh • RE Integration: VRFBs will become increasingly important as procures on a five-year lease directly from XYZ Electrolyte (both ‌sides) Limited. PQR Limited minimizes its cost by leasing the 3.23.4 Financial analysis for setting up the VE the decade progresses with more renewable generation sources recycling facility in the focused coming online and longer -duration energy storage (i.e., longer electrolyte in the VRFB system instead of buying it. end-use geography During this five-year period, XYZ Electrolyte found another than four hours) required to balance the grid. Table 3.8 demonstrates that the capital cost for setting up the client, STU Industries, for its electrolyte. STU Industries had The following assumptions formed the basis of the financial • Standalone Charging Systems: VRFBs can be paired with recycling facility is 1.31 times the one-way transportation cost the entire VRBF installed from a VRFB manufacturer at its analysis: solar PV systems to form standalone charging systems. They of the VE between the end -use location (Europe) and the VE facility, except the electrolyte it leases for seven years from XYZ 1. South Africa is considered the VE manufacturing country and can also be added to existing charging infrastructure in urban recycling location (South Africa). Since the VE will be transported Electrolyte Ltd. Europe as an end -use location, since transportation data for areas because of their ability to be cycled frequently without to and from the VE recycling location (South Africa) to the end XYZ Electrolyte brings the VE from Nigeria to South Africa for these locations was obtained from the financial model provided experiencing capacity degradation. -use location (Europe) after completion of each lease period for recycling at its manufacturing plant and then sends it to STU by the client. However, the transportation cost is influenced by recycling, the transportation cost will be higher compared to the industries in Zambia for the next duration of leasing. . the distance between the VE manufacturing facility and the cost of setting up the recycling facility. The analysis revealed that In this way, XYZ leases its electrolyte to multiple end users until end-use location. setting up a recycling facility in a focused geography is economical the electrolyte becomes unusable in a VRFB. XYZ Limited then 2. The fee for reprocessing the electrolyte is US$5.5/kgV. 36 compared to the frequent transportation of VE from the end-use transports the electrolyte back to its electrolyte manufacturing location to the manufacturing facility. 3. Obtaining 1 MWh of VRFB36 will require 4.8748 metric tons of vanadium. 36 Bushveld financial model 37 Bushveld Financial model and PwC estimates 68 Vanadium battery storage report Vanadium battery storage report 69 Table 3.9: Detailed Comparison of the Feasibility of Various Business Models Scenario C: Scenario C: Scenario A: Scenario B: Scenario Scenario A: Scenario B: Scenario Parameters Factors Short-term Leasing— Parameters Factors Short-term Leasing— Long -Term Leasing Short -Term Leasing Ranking Long -Term Leasing Short -Term Leasing Ranking Focused Market Focused Market Financial Financial 1. Cost of Transportation frequency Transportation frequency Although the VE C>A>B 7. Levelized Cost of LCOS is expected to be lower LCOS is expected to be As the distance of travel A>C>B transportation of the VE being used in the of the VE being used in the transportation frequency Storage (LCOS) due to low lease rates and higher because of high between lease periods will be battery will be lower with long- battery will be higher with will be higher compared lower transportation and lease rates and more significantly lower compared term leasing, resulting in a the short-term leasing, to the long-term scenario, reprocessing costs because of frequent transportation and to the other two scenarios, lower cost for transportation. resulting in a higher cost for transportation will occur in a long lease terms. reprocessing costs. transportation costs will be transportation. focused geography, resulting lower. in significantly lower travel However, because of shorter distances between each lease terms, the cost of lease period. Hence, the recycling would be higher than transportation cost in this in scenario A. scenario will be the lowest. LCOS is expected to be higher than in scenario A but lower 2. Cost of recycling The frequency of VE recycling With increased recycling The impact will be the same as A>B=C than in scenario C due to: is lower compared to other frequency, the recycling cost in scenario B. • Higher lease rate scenarios, making the per unit of VE will be higher recycling frequency the lowest with short -term leasing. • Higher recycling cost among the proposed scenarios With multiple movements • Lowest transportation cost Because of the low frequency of the electrolyte, the risk among the scenarios. of transportation and of contamination increases, shifting, there is a lower risk resulting in a shorter life of 8. Profitability Profitability is expected to Profitability is expected to be The impact will be the same as A>B=C of contamination to the VE, the electrolyte before it is be higher because of a longer lower because of a shorter PPA in scenario B. resulting in a lower cost for recycled. more predictable PPA tenor tenor and the need to secure recycling. and one-off transportation multiple clients for leasing and and reprocessing costs. multiple transportation and 3. Per unit upfront Since the battery setup will be Since the battery setup will The impact will be the same as A>B=C reprocessing costs. cost of setting up for a long duration, the cost be for a short duration, the in scenario B. the battery system incurred for setup will be lower cost incurred for setup will Environmental at the end -use per unit of energy stored. be higher per unit of energy location. (Upfront stored. cost) 1. Environmental The frequency of VE The frequency of VE As the traveling distance C>A>B impact due to transportation is low and will transportation is high and will between lease periods will be transportation result in: result in: significantly lower compared 4. Total cost The maintenance cost The short life of the battery The impact will be the same as B=C>A • Lower carbon emissions, • Higher carbon emissions, to the other two scenarios, the of battery increases with time, resulting will require lower maintenance, in scenario B. environmental impact from maintenance in a higher maintenance cost resulting in a lower overall cost • Lower natural resource • Higher natural resource transportation will be the with long -term leasing. of maintenance. utilization (fuel /other utilization (fuel/other lowest. packaging material for packaging material for transportation), and transportation), and 5. Damages With a lower frequency of There will be a higher The impact will be the same as A>B=C and spills during movement of the VE, there frequency of VE shifting in scenario B. • Fewer direct and indirect • More direct and indirect shifting and will be less shifting of the from the battery to the environmental impacts (air, environmental impacts (air, transportation electrolyte from the battery transportation vehicle, noise, water, and marine noise, water, and marine to the transportation vehicle, increasing the risk of damage pollution). pollution). decreasing the risk of spillage and spillage of the VE. and other damages to the VE. 2. Waste It is expected that long-term With short-term leasing, the The impact will be the same as A>B=C generation leasing will be directly linked battery parts will be used in scenario B. 6. Lease rate The lease rate is expected to The lease rate is expected to The impact will be the same as A>B=C to the life expectancy of the for a shorter duration. In this be lower due to a longer PPA be higher due to a shorter PPA in scenario B. battery and battery parts scenario, battery waste will be tenor and greater of cash flow tenor and the need to secure (other than the electrolyte), generated at the completion predictability. multiple clients for leasing. thus onetime generation of of each leasing period, i.e., at battery waste will be involved, frequent intervals, which will which can be recycled as result in a higher quantum of electrical/plastic/metal waste battery waste generation. by mechanical separation. Thus, the long-term leasing model will have minimal waste generation potential due to VRFB operations. 70 Vanadium battery storage report Vanadium battery storage report 71 Table 3.9: Detailed Comparison of the Feasibility of Various Business Models (continued) Scenario C: Scenario C: Scenario A: Scenario B: Scenario Scenario A: Scenario B: Scenario Parameters Factors Short-term Leasing— Parameters Factors Short-term Leasing— Long -Term Leasing Short -Term Leasing Ranking Long -Term Leasing Short -Term Leasing Ranking Focused Market Focused Market Environmental Social 1. Employment 3. Toxic discharge There is a lower risk of soil There is a higher risk of soil The impact will be the same as A>B=C b) Employment 1. VE recycling: The duration No influence on job duration No influence on job duration C>A>B to soil contamination due to toxic contamination due to toxic in scenario B. duration of jobs will not be impacted for jobs related to VE recycling, for jobs related to VE recycling, discharge as the frequency of discharge during shifting of in different scenarios as it is VE transportation, and VRFB VE transportation, and VRFB VE shifting is lower. the VE from the battery to the the recycling that will occur installation and dismantling. installation and dismantling. transportation vehicle and continuously at the recycling However, for VRFB However, for VRFB vice versa. plant in all the scenarios. maintenance, the battery maintenance, as the battery 2. VE transportation: will be installed for a shorter installation is done in a The duration of jobs duration in this scenario, specific geographical location, 4. Environmental In the VRFBs, there are other In short-term leasing, the The impact will be the same as A>B=C will not be impacted in which will result in a shorter the same maintenance impact due to components like reactors (ion other battery components will in scenario B. different scenarios, as the employment duration for personnel can be deployed for the production exchange membrane, current be used for a shorter duration, transportation of VE will maintenance of the VRFB. the maintenance of various of other battery collector, flow plates), balance which will result in a higher occur continuously for all the battery systems installed in components of plant (pumps, tanks, pipes, environmental impact due scenarios. that region/geography. This heat exchangers, etc.) to the production of these 3. VRFB installation and will result in a longer duration In long -term leasing, these components. dismantling: VRFB installation of maintenance -related jobs components will be used for a in this scenario. is a one-off job, hence it longer duration will have no duration of job, Hence, the environmental but will have an impact on impact to produce other immigration (discussed below). components will be lower. 4. VRFB maintenance: The battery will be installed for Social 1. Employment a longer duration in this scenario, which will result in a longer employment duration Three sections of VE recycling will generate additional jobs in the VRFB space as, after every lease period, the VE will need to be for maintenance of the VRFB. employment are recycled before being deployed for another lease. The direct jobs will be generated in two forms: compared: 1. VE recycling: Jobs generated to recycle the VE. c) Immigration VRFB is a relatively new, With the increased frequency The frequency of setting up B>A>C a) Job creation 2.VE transportation: Jobs generated to transport VE from the end -use location to the recycling facility at the end commercially deployed of VRFB installation and will increase but will occur in b) Employment of the first lease and then to the new lease location at the start of the new lease term. battery system. To install and dismantling, immigration is a specific location. Hence, the duration, and In addition to the abovementioned jobs related to recycling and movement of VE, there will be an additional need operationalize it, specialized expected to be the highest in immigration requirement will c) Immigration for: skills will be required. Hence, this scenario. be the lowest in this scenario. we assume that there will be VRFB installation and dismantling: Jobs generated to install and dismantle the VRFB at the start and end of the immigration involved until the lease period. technology becomes more VRFB maintenance: Jobs generated for maintenance of the various VRFB components, such as the pumps, pipes, prevalent and such skills are battery stacks. developed with increased deployment. As the frequency of a) Job creation In this scenario, VE recycling This scenario will have a higher The impact will be the same as C>B>A installation and dismantling will happen every 20–25 frequency of VE recycling, in scenario B. will be lower in this scenario, years compared to every VE transportation, and international movement of 5–10 years in other scenarios, installation and dismantling the personnel setting up i.e., low frequency of VE of VRFB, which will result in a the battery system will be recycling, VE transportation, higher quantum of work and lower compared to the other and VRFB installation and more job creation. scenarios. dismantling. This scenario However, short-term will require a lower quantum installation will require less of work, resulting in less job frequent maintenance, creation for VE recycling, VE resulting in fewer maintenance transportation, and VRFB -related jobs. installation and dismantling. However, due to long -term installation in this scenario, the requirement for maintenance will be higher, resulting in more maintenance job creation. 72 Vanadium battery storage report Vanadium battery storage report 73 Table 3.9: Detailed Comparison of the Feasibility of Various Business Models (continued) Scenario C: Scenario C: Scenario A: Scenario B: Scenario Scenario A: Scenario B: Scenario Parameters Factors Short-term Leasing— Parameters Factors Short-term Leasing— Long -Term Leasing Short -Term Leasing Ranking Long -Term Leasing Short -Term Leasing Ranking Focused Market Focused Market Social 1. Employment Social 1. Employment 2. Skills 1. VE Recycling: 1. VE Recycling: 1. VE Recycling: C>A>B 4. At present, long- term At present, short-term leasing The impact will be the same as A>B=C Development • New skills will be required • New skills will be required • New skills will be required Energy access in leasing is a cheaper option as is a more expensive option in scenario B. low-income areas compared to other scenarios. than long -term leasing. • Skills development will • Skills development will be • Skills development will be It has better potential to be There will be lower potential be lower compared to other higher compared to other higher compared to other implemented in economically for implementation in scenarios due to the lower scenarios due to the higher scenarios due to the higher weaker areas of society economically weaker areas of frequency of recycling. frequency of recycling. frequency of recycling. with poor grid connectivity, society. resulting in better energy 2. VE Transportation: 2. VE Transportation: 2. VE Transportation: availability. • No new skills will be required. • No new skills will be required. • No new skills will be required. 5. Health and The lower exposure of the With the increased exposure The impact will be the same as A>B=C safety of the workforce to the VE due to the of the workforce to the in scenario B. 3. Installation and dismantling 3. Installation and dismantling 3. Installation & dismantling workforce lower frequency of movement toxic vanadium electrolyte, of VRFB: of VRFB: of VRFB: of the VE will decrease the increased safeguards will be • New skills will be required • New skills will be required • New skills will be required risks to the health and safety required for shifting the VE • In this scenario, the • In this scenario, the • In this scenario, the of the workforce. from electrolyte tanks to the frequency of installation and frequency of installation and frequency of installation transportation vehicle. dismantling is low, resulting in dismantling is high. However, and dismantling is high. lower demand for these skills the installation will occur Moreover, the installation and compared to other scenarios in various locations (not in Regulatory dismantling will be happening and lower skill development a focused location as done in a specific location, resulting opportunities for the wider in scenario C), resulting in in higher skill development 1. Licensing Because of international Due to increased international Since the leasing is done in a C>A>B population. more immigration (discussed opportunities for the wider and permitting movements, regulatory movements resulting from focused geographical area, above) compared to wider skill population. requirements approvals will be required, and multiple and more frequent the regulatory approval development. regulations/ guidelines must leasing agreements, requirement will be for 4. Maintenance of VRFB: 4. Maintenance of VRFB: be followed. This includes compliance commitments onetime transportation of • New skills will be required customs and excise licensing related to licensing and VE from the manufacturing 4. Maintenance of VRFB: • New skill will be required In this scenario, maintenance requirements associated permitting will increase and location to the end-use requirements will be higher, • New skills will be required Although VRFB deployment with the export and import of pose a more significant risk location. resulting in higher potential In this scenario, maintenance will take place over a shorter vanadium and its associated when compared to the long- After onetime transportation, skill development for the wider requirements will be lower period, resulting in lower derivatives. However, the term leasing option. This can the movement of VE will occur population. as well as the duration of job maintenance requirements, it frequency of transportation decrease the ease of doing in a specific location, hence will lower, resulting in lower will occur in a specific location, and compliance with related business. compliance risks will be lower potential for skill development. resulting in the highest degree licensing requirements will than with short -term leasing. of development of localized be less and would present maintenance skills in this reduced compliance risks. scenario. 2. Environmental While the impact of mining More frequent recycling The environmental impact C>A>B impact regulations regulations would stay and end-of-life occurrences of transportation of the VE 3. Micro With long-term leasing, the In this scenario, the duration As the battery installation will C>A>B constant across the three linked to short -term leasing will be the lowest as the entrepreneurship size of the battery deployed for which the battery will be occur in a specific location, options, regulations pertaining will trigger more significant movement of VE is happening will be greater. Because of installed is lower, requiring the maintenance and service to the recycling of VE and compliance risks from an in a particular geography the longer life of the battery, less maintenance and services requirements will be the other environmental impacts environmental perspective. (distance is significantly maintenance and service for the mechanical parts, such highest of all scenarios, will be less cumbersome in a reduced because of focused requirements will be higher as pumps and pipes, resulting creating a greater opportunity long-term leasing scenario, geographical movement), there compared to short -term in fewer opportunities for the development of due to less frequent and less would be fewer environmental leasing, increasing the for the development of a a service-oriented value environmentally intensive regulatory hurdles in this potential for the development service-oriented value chain chain and resulting in more processes occurring as part of scenario. of a service-oriented value and low potential for micro micro entrepreneurship the long-term leasing model. Additionally, understanding chain and creating more entrepreneurship. opportunities. the environmental regulations opportunities for micro of a specific geographical area entrepreneurship. will be less onerous compared to the need to comply with environmental requirements in multiple jurisdictions in the other two models. 74 Vanadium battery storage report Vanadium battery storage report 75 Conclusion • Long -term leasing (scenario A) is the most suitable option for leasing VE as it provides the most economical storage solution to the end user due to low transportation costs and associated logistical costs. Moreover, in the current market conditions, VRFBs are limited to long -term deployment, making this scenario the best option for deployment in the near future. • It is expected that, as VRFB technology evolves, short -term deployment opportunities may arise, such as battery back-up for UPS systems. In such conditions, focused market leasing (scenario C) will be a better option for leasing, as it provides better social benefits to the end -use location due to the increased frequency of recycling and movement of the VE, which leads to increased employment opportunities. • Because of the high frequency of transportation and longer distances, resulting in more significant financial and environmental impacts, short-term leasing (scenario B) is infeasible. 76 Vanadium battery storage report Vanadium battery storage report 77 4 Analysis of Supply and Demand in the Vanadium Market 4.1 Global Supply Figure 4.1: Distribution of Global Vanadium Reserves, 2021 Vanadium is one of the most abundant elements on earth, with known reserves sufficient to meet current market demand for over Chin 150 years. Vanadium occurs as a major constituent in four types Austr li of mineral deposits: Russi • Vanadiferous titanomagnetite deposits (VTM) South Afric 4% Oth r • Sandstone-hosted vanadium deposits (SSV) • Shale-hosted vanadium deposits 14% • Vanadate deposits The United States Geological Survey (USGS) estimates global 38% vanadium reserves at 24 million metric tons. China (the world’s largest producer and consumer of the mineral, as well as the 20% world’s third-largest country by land area) holds the largest share of these reserves. Australia (which does not currently produce vanadium commercially) holds the second-largest reserves, followed by Russia and South Africa. Brazil and the United States, 24% which are among the other” category of countries in Figure 4.1, have much smaller vanadium reserves. Source: Merchant Research & Consulting Vanadium production is concentrated in only a few countries, with several countries having ceased production over the past 25 Figure 4.2: Global Vanadium Production, 2021 years. According to the USGS, between 1998 and 2005, vanadium production occurred in the following countries: Australia, China, Hungary, Kazakhstan, Russia, South Africa, and the United Chin States. However, by 2009, three countries (Australia, Hungary, Russi Kazakhstan) ceased production, with one new country (Brazil) South Afric starting vanadium production in subsequent years. Br il 2% Oth r In 2021, the USGS reported global production of 110,000 mtV, primarily by four countries: China, Russia, South Africa, and 6% Brazil. China alone accounted for two thirds of global output in 8% 2021, having almost doubled its proportion of global production from 1998, from only 36% of the global total in 1998 to over 60% in 2021. In terms of volume, China’s output increased from 17% 15,500 mtV in 1998 to 73,000 mtV in 2021. Given the country’s dominance in global steel production and its vast reserves of 67% vanadium, this increase in production is not surprising. Source: USGS 78 Vanadium battery storage report Vanadium battery storage report 79 Figure 4.3: Historical Global Vanadium Production, 1998-2021 Table 4.1: Examples of Companies in the Primary Vanadium-Producing Countries Chin Russi South Afric Br il Oth r Country Company Detail 120,000 Pangang Group is headquartered in Panzhihua, a prefecture-level city in Sichuan province, considered the vanadium and titanium capital of China. 110,000 Pangang Group Its principal operations include the manufacture and sale of vanadium and Vanadium titanium products, with the company having won the National Technological 100,000 China Titanium & Invention Award through its vanadium-nitride production technology. With a Resources Co., Ltd production capacity of 40,000 mtV products, it is the world's leading supplier of 90,000 vanadium products like vanadium pentoxide, ferro-vanadium, vanadium nitride, and vanadium aluminum. 80,000 Evraz Lgok, part of the multinational steel manufacturing and mining company 70,000 M tric tonn s EVRAZ, is a major mining company in Russia. Evraz Lgok is one of Russia’s largest iron ore mines and extracts vanadium content at the Gusevogorskoe 60,000 deposit. This is part of the Mt Kachkanar deposit, which is the only source Russia Evraz Lgok of vanadium ore in Russia. The company recently invested in new mining 50,000 equipment, with plans to purchase more over the 2022–24 period as production expands. In addition, railway tracks and cable power lines were built to 40,000 accommodate expansion. 30,000 Bushveld Minerals, which owns two of the four operating vanadium processing facilities in the world, is a vertically integrated, low-cost, primary producer of 20,000 vanadium. It is also one of only three such producers globally. Bushveld Minerals produced 3% of the world’s vanadium in 2021, approximately 3,600 mtV. Its two 10,000 South Africa Bushveld Minerals main operational pillars are Bushveld Vanadium and Bushveld Energy, which allows the company to participate in the entire vanadium value chain. These 0 two operations mine and process vanadium, as well as provide energy storage 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 solutions, respectively. Source: USGS Largo Resources is headquartered in Canada and supplies vanadium products Vanadium production data is published annually in preliminary form with subsequent updates to the data as more information becomes available. The data here are the latest available estimates from the sourced from its Maracás Menchen Mine in Brazil. Largo’s two vanadium supply USGS for each year and may not necessarily align with the first round of data published for each year. brands are its VPURE™ and VPURE+™ products. There was also a recent 2020 Canada / Brazil Largo Resources acquisition of vanadium redox flow battery (VRFB) technology, with integration South Africa’s global market share has fallen from 50% in the Despite holding nearly one quarter of global vanadium reserves, into its VCHARGE vanadium battery technology. Currently, Largo Resources is early 2000s to less than 10% in recent years. Production peaked Australia is not currently one of the top vanadium -producing combining its vanadium operations with its manufacturing capabilities, which at 27,172 mtV in 2003 and moderated thereafter to an average countries. In addition, the country does not have any flow battery will provide energy storage solutions  focused on vanadium. of 20,500 mtV per annum during 2011-15. Production then fell or electrolyte production plants, even though it is the birthplace from 17,788 mtV in 2015 to 8,163 mtV in 2016 because of a mine of the vanadium flow battery. Early in 2022, the Australian Prime Energy Fuels Inc. mainly produces uranium, but it is also the United States’ only closure by Evraz Highveld Steel and Vanadium. South Africa’s Minister, Scott Morrison, announced that Australian Vanadium primary vanadium producer, with the element found in many of its uranium United States Energy Fuels Inc. mines. The company mines and produces vanadium and operates the countries’ production increased to 9,100 mtV in 2021. Limited would receive $A 49 million to help fund their vanadium sole conventional vanadium mill (the White Mesa Mill) in southern Utah. processing plant, as support for technology sector projects in the Table 4.1 lists companies located in the primary vanadium manufacturing industry, with the company planning to process producing countries, with a short introduction to each of these Source: PwC research high-purity vanadium. companies’ operations. 80 Vanadium battery storage report Vanadium battery storage report 81 4.2 Global Demand Vanadium is used in the production of alloys, such as titanium and Figure 4.5: Global Vanadium Consumption, by end use aluminum. For example, the strength-to-weight ratio of vanadium- Vanadium is a medium-hard, steel-blue metal. It is valuable in titanium alloys makes it ideal for aerospace applications. In the manufacturing industry because of its malleable, ductile, St l nd oth r B tt r stor addition, vanadium is used in tubes and pipes that carry chemicals and corrosion-resistant qualities. The mineral is primarily used 120,000 because of its corrosion-resistant properties. in the production of steel alloys which are used in the production of diverse products. These include the construction of buildings, Using vanadium alloy in automobiles helps increase fuel efficiency 100,000 nuclear reactors, ships, engines, and hand tools, among other by reducing the overall weight, and includes armor plating, uses. Vanadium is also increasingly being used as part of battery vehicle axles, and engine parts. This use of vanadium has rapidly 80,000 storage applications, in particular the storage of renewable energy expanded, as vanadium was not being incorporated into cars two M tric Tonn s created from solar and wind installations. decades ago, versus its use in 45% of cars in 2017. It is estimated 60,000 that by 2025, the alloy will be incorporated into the production of Approximately 90% of global vanadium consumption is in the almost 85% of automobiles. making of steel for end-products in the industrial and automobile 40,000 sectors. Low-alloy, high-strength steel, for example, is used in Unsurprisingly, given its diverse applications, global demand for construction rebar. Steel accounts for most vanadium use, with vanadium continues to grow. 20,000 steel production and consumption having grown significantly China is the world’s largest steel producer and accounted for over the past two decades. In 2010, average steel production and 65% of global demand for vanadium in 2021. Industrialization 0 consumption was around 1.4 billion metric tons. By 2021, this in China, with increased demand for steel in construction, 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 increased to 1.9 billion metric tons, and by 2031 steel production infrastructure, and rebar applications, is a significant driver of and consumption is forecast at 2.2 billion metric tons. Source: Merchant Research & Consulting; PwC research the demand for vanadium. Figure 4.4: Global Steel Production and Consumption, 2010-2031 Figure 4.6: Global Demand for Vanadium, 2021 St l production St l consumption Chin 2,300 Russi 2,200 Unit d St t s of Am ric Oth r 2,100 2,000 29% Million Tonn s 1,900 1,800 1,700 65% 1,600 3% 1,500 3% 1,400 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Source: Fitch Solutions Source: Vanitec.org 82 Vanadium battery storage report Vanadium battery storage report 83 Country example: ‌ Country example: commodities China’s exports and imports of vanadium-related ‌ United States applications of imported vanadium-related products China, as the dominant vanadium producer, is the worlds’ largest exporter of the metal in various forms. However, Demand growth is attributed to vanadium’s many uses. The United States, for example, imports vanadium in the the country’s own demand for vanadium, which has been steadily increasing over the years, exceeds its supply following forms for domestic consumption:‌ capacity. Due to this, China also imports vanadium in different forms. The following table lists China’s vanadium- ‌ Aluminum-vanadium master alloy‌ • related trade data for 2021 highlighting the share of its top sources and destinations. • Ash and residues‌ ‌ ‌• Ferrovanadium‌ • Hydrides and nitrides of vanadium‌ ‌ ‌ • Oxides and hydroxides‌ Niobium, tantalum, vanadium ores and concentrates Ferrovanadium ‌• Sulfates‌ ‌• Vanadates‌ Exports Imports Exports Imports (98% of total) (90% of total) (97% of total) (98% of total) ‌• Vanadium chlorides‌ ‌• Vanadium metal‌ Hong Kong Nigeria South Korea Czech Republic ‌ • Vanadium ores and concentrates‌ ‌ • Vanadium pentoxide (anhydride) Other Asia Democratic Republic Netherlands Austria (not elsewhere specified) of the Congo Vanadium pentoxide (anhydride) accounted for the largest portion of the country’s imports at 48.0% of the total United States Rwanda Japan Russia and is the main component of the VRFB, the most recent application of vanadium in batteries. Ferrovanadium, the second largest contributor at 39.0% of imports, is used in steel metallurgy processes, with vanadium’s Belgium Brazil Taiwan Germany primary use being to strengthen steel. Nigeria Sierra Leone Canada South Korea St l nd oth r B tt r stor 120,000 Oth r 100,000 13% 80,000 V n dium p nt oxid 60,000 ( mh drid ) 48% F rrov n dium 40,000 39% 20,000 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 84 Vanadium battery storage report Vanadium battery storage report 85 Figure 4.7: Exports and Imports of Vanadium, 2016-21 (USD millions) A push for green stimulus plans, along with increasing support The COVID-19 pandemic adversely affected global steel production and demand for energy storage geared toward renewable energy, and consumption in 2020 as countries implemented various is also increasing the demand for VRFBs and vanadium. Increased restrictions and lockdowns. Most sectors saw contractions in Or s Export Or s Import F rro-v n dium Export F rro-v n dium Import demand for fuel efficiency to decrease the carbon footprint is growth, including the industrial sector, which had both direct and 350 another driver of demand for vanadium, which is used to lighten indirect effects on the steel industry, disrupting steel demand. The the weight of automobiles and reduce fuel consumption. pandemic also saw excess inventory at mills, with the steel supply 300 chain impacted, resulting in a decline in steel prices. As a result, the vanadium price declined to a low of US$13,632 per metric ton 250 4.3 Global Market Prices in November 2020. Vanadium prices have fluctuated over the past few decades due to USD millions 200 supply and demand factors. For example, market prices declined Prices have once again started rising in 2021/22 as economies during 2013–15 after feedstock production increased and peaked around the demonstrate a recovery in growth. Increasing demand 150 for vanadium even saw the USGS adding the commodity to their in 2013. Periods of lower demand also impacted market pricing: global consumption declined from 88,500 metric tons in 2014 list of critical minerals in 2022. This list contains those minerals 100 to 81,500 metric tons in 2015, alongside a decline in global steel that play a critical role in the United States’ renewable energy production. As a result, vanadium declined from US$15,395 per development, national security, infrastructure, and overall 50 metric ton in December 2012 to a low of US$6,354 per metric ton economy. The vanadium price averaged US$21,055 per metric ton 0 in December 2015. during the first half of 2022. 2016 2017 2018 2019 2020 2021 Market prices increased during 2016 following the closure of the Source: Merchant Research & Consulting Evraz Highveld’s Mapochs mine in South Africa, as well as the Outlook for future demand and supply suspension of operations at the vanadium-processing facility, The steel and alloy industries currently account for 95% of Venchem. South Africa was the second -largest vanadium Figure 4.8: Ferro Vanadium 50% China spot price (US$ per metric ton) vanadium consumption, with a further 3% used by the ceramic producer in 2013, but production fell over 60% by 2016. These and chemical industries. Global steel production increased by a factors resulted in an increase in the price of vanadium to CAGR of 2.4% per annum during the decade ending in 2021 and will F rro V n dium US$13,000 per metric ton by the close of 2016. remain the dominant consumption market for vanadium over the 80,000 Vanadium prices spiked during 2017/18, partly due to China’s coming decade. shift toward more environmentally friendly mining and production 70,000 However, vanadium demand from steel manufacturers will face practices. Multiple mines that were causing pollution were 60,000 pressure over the next several years. A previously expected closed, with many vanadium producers forced to shut down recovery in steel production after the COVID-19 pandemic has USD/ m tric ton operations. With this decrease in supply, the demand for steel 50,000 been undone by the fallout from the Russian invasion of Ukraine. continued to grow, pushing steel prices upward. In 2018, China 40,000 This has had several adverse impacts that result in a weaker also implemented the Chinese Rebar Standard GB/T 1499.2.2018, demand for steel, including (but not limited to) the following: which saw stricter rules enforced on rebar producers to produce 30,000 high-strength rebar. Vanadium micro-alloying increases the • Weaker economic growth: A slowdown in global economic 20,000 strength of rebar and improves its properties, making it the growth—and in particular in Europe—is adversely impacting perfect solution for producers. As a result, vanadium consumption the world’s construction and manufacturing industries. 10,000 in China increased significantly during 2018, compared to the The European economy is being negatively affected by the 0 previous year. This change in regulation impacted the production economic fallout from the Russian invasion of Ukraine and FEB-09 SEP-09 APR-10 NOV-10 JUN-11 JAN-12 AUG-12 MAR-13 OCT-13 MAY-14 DEC-14 JUL-15 FEB-16 SEP-16 APR-17 NOV-17 JUN-18 JAN-19 AUG-19 MAR-20 OCT-20 MAY-21 DEC-21 and exports of steel rebar, resulting in a further increase in slower economic growth in China. The impact is expected to global steel prices. The vanadium price peaked above US$73,000 last several years which will reduce the speed of construction per metric ton in October 2018, before correcting to less than activity and fixed capital formation. Source: Investing.com US$15,000 per metric ton by the close of 2019. 86 Vanadium battery storage report Vanadium battery storage report 87 Figure 4.8: Global Vanadium Consumption 4.4 Price Forecast Scenarios Future scenario 2 includes global vanadium production and vanadium demand from battery storage as explanatory variables. PwC used the widely accepted econometric modeling software The model also includes a one-year lag vanadium price to further St l nd oth r B tt r stor package Eviews to compile historical and forecast data series, improve model fit. With the introduction of these real-work 180,000 conduct correlation analysis, and subsequently produce various demand factors, the projected vanadium price rises significantly, regression models with the vanadium price (US$ per metric ton) 160,000 increasing up to six times by 2030 because of the additional as the dependent (forecast) variable. The data considered in our demand for vanadium from outside the steel industry. 140,000 correlation analysis, which is an initial step to understanding the relationship between the vanadium price and other relevant Table 4.2: Scenario 1—Price Forecasts up to 2030 120,000 factors, include the following: M tric Tonn s 100,000 Global steel • Global vanadium consumption Vanadium V2O5 price Year consumption US$ per metric ton) (‌ 80,000 (million ‌metric tons) • Global vanadium production (excluding China) 2020 14,468 1,878 60,000 • Chinese vanadium production 2021 19,268 1,954 40,000 • Market balance for vanadium (consumption/production) 2022 21,055 1,987 20,000 • Global steel price (US$ per metric ton) 2023 20,900 2,007 • Global steel production 0 2024 21,506 2,035 • Global steel consumption 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022f 2023f 2024f 2025f 2026f 2027f 2028f 2029f 2030f 2025 22,150 2,065 • Market balance for steel (consumption/production) Source: PwC 2026 22,726 2,092 • Global vanadium demand for battery storage 2027 23,175 2,113 • Global vanadium demand for steel 2028 23,613 2,134 • Sanctions against the Putin administration: Russia is among 10% of the market by 2030. PwC forecasts that battery storage the world’s five largest steel producers. Economic sanctions in demand will grow by an average of 25% per annum over the PwC produced three standard ordinary least squares (OLS) 2029 24,031 2,153 the wake of the invasion of Ukraine have disrupted normal trade long term, reaching 16,391 metric tons by 2030. This outlook is regression models forecasting the vanadium price from 2023 2030 24,443 2,173 patterns in and out of the country, which has adversely affected premised on the importance of vanadium as a clean energy input to 2030. All data series are presented and applied on an annual Source: PwC (Forecast based on scarce demand for vanadium for battery storage) the country’s steel production and demand for associated and the growth of renewable and sustainable energy solutions basis. All three models feature a dummy variable to nullify the imported inputs. (e.g., wind and solar) requiring storage capacity. 2018 vanadium price spike. In addition, all three models are The second model suggests that, given the expected rapid normally distributed, are homoscedastic, do not have serial increase in vanadium demand for battery applications, the current • China’s zero-COVID policy: Beijing’s approach to eradicating correlation up to tw0 lags, and passed all necessary residual tests. projected increase in global supply up to 2030 will be insufficient the pandemic has resulted in a considerably negative impact Over the past four years in particular, vanadium production has to keep market prices affordable. This is easy to understand: on the world’s second-largest economy. The Chinese economy kept pace with the growth in vanadium consumption. The supply Future scenario 1 forecasts the vanadium price based on a simple with increasing demand from a relatively new user of vanadium grew by only 0.4% year-on-year in the second quarter of 2022 side of the market is very responsive to changes in demand. For regression using only global steel consumption as an explanatory (battery storage) competing with the traditional uses of steel and when dozens of cities (including the country’s commercial example, China increased its production from around 48,500 (predictor) variable. This model indicates a situation where there other metal production, competition for the resource will intensify. center, Shanghai) imposed strict weeks-long lockdowns. China mtV per annum during 2014-2016 to 54,100 mtV in 2017 to fill is no significant demand for vanadium from a battery storage This will inherently include some speculative investment in (the world’s largest producer and consumer of steel) will see its the gap left by the closure of Evraz Highveld’s Mapochs mine perspective. The model assumes that global steel consumption vanadium, which will add to upside pressure on market prices. economy grow by less than 4% this year. in South Africa. Chinese production—reinforced by the world’s increases by 1.2% per annum up to 2030. Based on this projection, As a result of these factors, global steel production is expected largest reserves of vanadium—increased by almost one third in the vanadium price increases steadily from around US$21,000 to grow by a CAGR of only 1.8% per annum during 2022–25, 2019, to 70,600 mtV, reflecting the country’s agility in adapting per metric ton in 2022 to approximately US$24,500 per metric compared to 2.4% per annum during the decade ending in 2021. to changing market conditions. Most of the production in China ton by 2030. is from slag generated in the production of steel from vanadium Battery storage currently accounts for only 2% of vanadium titanium magnetite (VTM). demand, equal to 2,200 of 110,400 mtV in 2021. Under the baseline scenario, this share is forecast to increase to just over 88 Vanadium battery storage report Vanadium battery storage report 89 Table 4.3: Scenario 2—Price Forecasts to 2030 following rapid growth in vanadium demand underscored by little change in vanadium production Vanadium V2O5 price Global steel consumption Vanadium battery Year Vanadium production mtV US$ per metric ton) (‌ (million metric tons) demand mtV 2020 14,468 1,878 102,400 1,760 2021 19,268 1,954 110,000 2,200 2022 21,055 1,987 112,400 2,750 2023 25,690 2,007 116,300 3,438 2024 31,849 2,035 122,000 4,297 2025 38,929 2,065 127,500 5,371 2026 48,457 2,092 133,000 6,714 2027 61,110 2,113 138,000 8,392 2028 78,207 2,134 144,900 10,490 2029 99,257 2,153 153,000 13,113 Future scenario 3 attempts to remedy this price escalation by Apart from increasing output at existing primary, secondary, 2030 125,718 2,173 161,000 16,391 assuming accelerated growth in global vanadium production. and co-production operations, several new vanadium projects are Source: PwC Under scenario 2, global supply is forecast to grow by a CAGR of expected to come online over the coming decade, including (but Note: Forecast based on rapid growth in vanadium demand accompaniedby little change in vanadium production 4.3% during 2022–30, while under scenario 3, this growth rate not limited to) the following: is lifted to a CAGR of 6.9%. This increase in supply (resulting in • The Gibellini open pit mine in the US state of Nevada’s Battle Table 4.4: Scenario 3—Price Forecasts to 2030 following growth in both vanadium demand and supply a market surplus) would keep price growth capped to just below Mountain region: The partnership between Hitachi Energy and US$30,000 per metric ton by 2030. Nevada Vanadium is expected to start operations in 2024. Vanadium price Global steel consumption Vanadium battery Year Vanadium production mtV (USD/tonne) (million tonnes) demand mtV • The Richmond Vanadium Project with prospects in the A vanadium supply CAGR of 6.9% up to 2030 is certainly 2020 14,468 1,878 102,400 1,760 not unrealistic: similar growth rates were recorded during Richmond and Julia Creek districts of Australia’s North 2009–14 and 2016–19. The key to these growth rates is market Queensland: The resource is one of the largest undeveloped 2021 19,268 1,954 110,000 2,200 reactiveness to demand due to the diversity of source material for vanadium assets in the world. According to Horizon Minerals 2022 21,055 1,987 123,640 2,750 producing vanadium. Vanadium is often mined with one of the 65 (HRZ), which is working in a joint venture with Richmond other minerals with which it is chemically combined. Vanadium Technology (RVT), a Definitive Feasibility Study 2023 25,690 2,007 139,560 3,438 (DFS) was completed in the second half of 2021 to determine 2024 31,849 2,035 146,400 4,297 Secondary vanadium production (vanadium produced from, for power supply needs for the project. Progress is being made on example, fly ash, petroleum residues, alumina slag, and from the environmental studies, and HRZ is preparing documents for 2025 38,929 2,065 153,000 5,371 recycling of spent catalysts used in crude oil refining) accounts for government permitting and approvals. 2026 48,457 2,092 159,600 6,714 10% of global supply and is diverse in origin. Secondary production • Jangada Mines Plc’s Pitombeiras project in Brazil’s northeastern 2027 61,110 2,113 172,500 8,392 sources have grown significantly over the past two years, with region of Ceará: The exact timing of construction of the plant is a strong focus globally on recycling industrial wastes. Further 2028 78,207 2,134 181,125 10,490 currently unknown. significant growth in secondary production is expected over the 2029 99,257 2,153 191,250 13,113 next decade as changes in bunker fuel specifications impact (increase) the amount of spent catalyst generated by oil refineries. 2030 125,718 2,173 201,250 16,391 The general focus on recycling industrial wastes will add to this Source: PwC upward trend. Note: Forecast based on rapid growth in vanadium demand accompaniedby little change in vanadium production 90 Vanadium battery storage report Vanadium battery storage report 91 5 Financial and Economic analysis 5.1 Financial Analysis • Conversion cost (only assessed for the Project IRR—The impact on the levelized cost of storage is captured under the As part of the financial analysis, we used the financial model38 aforementioned “Client upfront payment” sensitivity) provided by the company developing this new Circular Vanadium • Reprocessing costs Business Model (CVBM) (the 1 MWh facility referred to in the Scope) to understand the proposed financing structure and to • Lease term / Power Purchase Agreement (“PPA”) tenor assess the key sensitivities related to the proposed CVBM. This • US dollar inflation forecast per annum analysis was primarily performed on scenario 1 (“vanadium sale”) Data tables for each variable were run in the financial model to in the financial model. determine the impact of adjusting each variable on the levelized The financial model assumed that the full cost of vanadium cost of storage and Project IRR (Project IRR is calculated pre- would be funded by an investor seeking to gain exposure to the financing and is a key performance indicator included in the underlying commodity price, and a meaningful equity internal financial model). Each key variable was sensitized up and down rate of return (IRR) could not be calculated in the financial model between 10% to 40%. The results yielded are presented in the (100% debt, representing the cash realized from the vanadium sensitivity analysis in section 5.1.2. commodity investor, 0% equity). Our analysis therefore assessed Note: The financial model provided contained a circular reference, which is typically avoided by the Project IRR, which represents the internal rate of return prior PwC when developing financial models. This concern was raised with the company that shared the financial model for our analysis, and it was concluded that the analysis should proceed without to any financing considerations. This Project IRR can be used as further adjustment to the financial model to remove the circularity. a reference when assessing a proposed cost of financing or the return levels required by a potential investor. 5.1.1 Key findings The financial model provided to us assumes the following financing The commercial structure presented in the financial model did not assumptions: allow for the assessment of debt carrying capacity as typical debt covenants were not considered relevant or were not calculated in • Mined vanadium is sold to an investor with an interest in gaining the financial model. The Project IRR acts as a proxy for assessing exposure to the movement in the price of vanadium, who carries the ability to finance or fund the proposed CVBM. the full cost of acquiring the vanadium commodity (100% financing—the financing obtained by / return required by the To understand the impact of the various assumptions used for the speculative investor is, however, not considered further). proposed CVBM, a sensitivity analysis was performed on select • The capital cost of vanadium assumed for the 1 kWh revenue and cost drivers in the financial model provided. Key facility (the amount purchased by the investor / lessor) is financial sensitivities were run by calculating the cost of storage US$192,000, calculated using circa 4.87 metric tons of (US$c/kwh) and the Project IRR by adjusting the following key vanadium at a spot price of US$39.39 per kilogram. model assumptions to understand the degree of sensitivity to the proposed CVBM: • The commodity is then leased to an off taker (e.g., a VRFB • Lease rate (%) manufacturer or end user). • Price of vanadium • The off taker pays an upfront fee equal to the direct costs associated with the logistics of transporting the vanadium to • Client upfront payment (includes customs duty and shipping its destination (c. 54% of the cost of vanadium and c. 35% of costs) the total cost—aggregate of vanadium cost and conversion • Cost of debt funding and transport cost—based on the current assumptions for the • Capital expenditure—vanadium cost financial model). 38 The financial model was developed by the third party company developing a CVBM and was provided to the World Bank for the purposes of this Report. The financial model was used as-is to perform the financial and sensitivity analysis presented in this section and was not verified / audited by PwC in any way. 92 Vanadium battery storage report Vanadium battery storage report 93 Figure 5.1: Levelized Cost of Storage Sensitivities (US$c/ kWh) • In addition to the upfront fee, the off taker pays a fixed annual A 10% increase in the lease rate resulted in a c.4.5% increase lease consideration, calculated with reference to the cost of the in levelized cost of storage and c.11.6% increase in IRR. A 10% vanadium, the assumed future value of the vanadium at the decrease in the lease rate resulted in a c.4.4% decrease in levelized L s Pric of Cli nt upfront Cost of d bt CAPEX - Conv rsion R proc ssin PPA USD infl tion r t V n dium p m nt fundin V n dium cost costs costs - EOL T nor for c st p. . end of the lease period (assumed to be 20 years in the financial cost of storage and a c.11.5% decrease in IRR. model), and the lease rate (assumed to be 3.5% per annum in the 6.89 financial model). The annual lease consideration is then indexed 6.73 5.3 Price of Vanadium by an inflationary factor annually (US inflation assumed to be 2.3% per annum in the financial model). The assumed spot price of the vanadium commodity at the end 6.04 5.95 of the lease term is used to determine the value of the vanadium • An intermediary acts as a collection agent for the lease 5.86 recovered at the end of the lease. payments and collects a management fee. 5.28 • The vanadium is returned to the commodity owner at the end A 10% increase in the price of vanadium resulted in a c.4.0% 5.05 5.04 5.05 of the lease period. decrease in levelized cost of storage and c.2.8% decrease in IRR. A 5.05 5.05 5.05 Note: Costs associated with transporting the vanadium back to the owner are not currently 10% decrease in the price of vanadium resulted in a c.4.0% increase 4.84 included in the financial model. This may be justified if the vanadium will be re-processed at a in levelized cost of storage and a c.2.9% increase in IRR. location close to the site used by the end user but should otherwise be considered since logistical 4.23 4.42 costs are viewed as significant under the current model (c. 35% of initial cost when entering the lease). 4.16 4.05 5.4 Client Upfront Payment Given that the financial model considers the proposed CVBM, the The upfront payment by the lessee is used to cover the conversion operating costs (OPEX) in the model are limited to reprocessing and transport costs incurred by the vanadium producer (c.35% 3.20 costs and management fees (assumed to be the net income in the Source: PwC analysis of the total cost). These costs include the initial conversion costs Note: The financial model base case is US$5.05c / kWh. model after servicing the payments to the lessor). from vanadium into vanadium electrolyte (but exclude the cost The after-tax IRR (Project IRR) calculated in the model is 3.6%. of conversion at the end of the lease term), customs duties, and Figure 5.2: Project IRR Sensitivities (%) The financial model assumes a cost of financing (in US dollars) of shipping costs. c. 2.88% per annum. The proposed return and financing levels were A 10% increase in the client upfront payment resulted in a c.4.9% not assessed as part of our scope of services. L s Pric of Cli nt upfront Cost of d bt CAPEX - Conv rsion R proc ssin PPA USD infl tion increase in levelized cost of storage and a c.2.0% increase in IRR. r t V n dium p m nt fundin V n dium cost costs costs - EOL T nor for c st p. . 5.1.2 Sensitivity analysis A 10% decrease in the client upfront payment resulted in a c.4.9% 5.3% decrease in levelized cost of storage and a c.2.1% decrease in IRR. The sensitivity analysis ranges shown below indicate the impact on 4.8% (i) the levelized cost of storage and (ii) the Project IRR respectively, for a 40% increase or decrease in the stated input metric. 5.5 Cost of Debt Funding 4.1% This is the assumed interest or return rate charged to acquire 4.1% 4.0% 3.9% 3.8% 3.8% 5.2 Lease Rate (%) the vanadium commodity by the investor (excluding the costs 3.6% of conversion and transport which are covered by the upfront The annual lease fee charged to the end user (the lessee) by the payment). 3.6% vanadium lessor over the duration of the PPA tenor is calculated 3.5% 3.3% 3.4% on the basis of an annual repayment with a starting balance As the cost of debt is not directly passed through to the lease rate, 3.2% 3.2% 3.0% 2.9% equal to the cost of vanadium on commencement of the lease, and the IRR presented is a project-level IRR (i.e., pre-financing), an assumed lease rate (effectively the annual interest rate on the levelized cost of storage and Project IRR were not affected the financing instrument), and the assumed future value of the by changes in the cost of debt funding. The cost of debt funding vanadium at the end of the lease period. and required equity returns should, however, be compared to the 2.0% Project IRR to assess the likely return profile for the investors. Source: PwC analysis Note: The financial model base case is 3.6%. 94 Vanadium battery storage report Vanadium battery storage report 95 5.6 Capital Expenditure—Vanadium Cost 5.10 Annual US dollar Inflation Forecast Table 5.2: High-Level Risk Matrix The assumed cost of mining and preparing the vanadium by the The lease rate is increased annually based on the US dollar No. Risk category Description Mitigation vanadium producer prior to leasing or sale. inflation rate. Financing Risk A 10% increase in CAPEX resulted in a c.9.2% increase in levelized A 10% increase in the US dollar inflation forecast resulted in a cost of storage and a c. 6.9% increase in IRR. A 10% decrease in c.1.1% increase in the levelized cost of storage and a c.3% increase Determining which party will raise the financing for the The vanadium producer will likely require CAPEX resulted in a c.9.2% decrease in levelized cost of storage in IRR. A 10% decrease in the US dollar inflation forecast resulted CVBM. continuous cash flow to support its mining and a c. 4.1% decrease in IRR. in a c.1.1% decrease in levelized cost of storage and a c.2.9% operations. Therefore, if the vanadium producer The vanadium producer could consider selling the vanadium Financing to a Special Purpose Vehicle (SPV) that can raise bespoke also becomes the lessor, and the leasing revenue is decrease in IRR. 1 structure financing aligned to the commercial nuances of the CVBM. deferred over the contract period with a material terminal value, this will require that external 5.7 Conversion Cost 5.10.1 Risk matrix The SPV’s investors would likely need to take a speculative funding is raised to finance the vanadium used in view and be comfortable with the potential market the batteries. movements in the vanadium price. This is the cost of converting the vanadium into vanadium We have prepared a high-level risk matrix based on our electrolyte and vice versa. The initial conversion costs are understanding of the proposed CVBM, which has been The market needs to be educated about the Financing or investment may not be available or may be addressed in the client upfront payment sensitivity assessment supplemented through a discussion with Largo Resources. proposed benefits of the CVBM and the expected difficult to secure because of the relatively novel nature of trajectory of vanadium commodity prices. A above, but the conversion cost at the end of the lease term Availability of the CVBM or the perceived risk of investing in vanadium as 2 market sounding with prospective investors and impacts the Project IRR separately. The risk matrix aims to provide a high-level overview of potential funding (liquidity) a long-term commodity. The CVBM risk and reward profile financiers would be beneficial to obtain input into will be benchmarked against alternative investments into risks that may be considered from an investor’s perspective. This key considerations for providing funding for the other long-term assets or commodity classes. A 10% increase in the conversion cost resulted in a c. 1.6% decrease proposed CVBM. should not be considered an exhaustive list of all risks relevant in IRR. A 10% decrease in the conversion cost resulted in a c.1.5% to the proposed CVBM. There may be additional risks (which In the context of financing obtained by the lessor, there Consider a lease rate or income stream indexed to increase in IRR. may have a significant impact on the CVBM) that can only be is a risk that interest rates may increase over time, the the underlying interest rates of lessor financing 3 Interest rate risk increased cost of which the lessor cannot pass through to or using fixed or hedged interest rates for lessor identified, assessed, and addressed once the CVBM, or a specific the end user of the vanadium battery financing. 5.8 Reprocessing Costs proposed project, is at a more advanced stage of development and after detailed interrogation and due diligence has been performed. One of the primary objectives of the CVBM is that a The repayment structure envisaged may not be This is the cost of recycling or reprocessing vanadium from substantial portion of the value of the CVBM is realized achieved if more traditional debt financing is used. electrolyte so that it can again be used in VRFB. at the end of the battery’s life, with only limited lease A fully amortizing instrument, where interest Table 5.1: Summary of financial assumptions payments being received over the PPA tenor. In the and principal are paid over the course of the PPA, financial model considered, interest is serviced over the should be considered to understand the impact of A 10% increase in the reprocessing costs did not impact the Financial Assumption Value Debt repayment PPA tenor, and principal is returned at the end of the the mismatch in cash flow profiles between lease 4 levelized cost of storage but resulted in a c.1.1% decrease in IRR. A structure term to match this profile. If more traditional debt that income and debt service. Lease rate 3.5% per annum will require ongoing principal repayments is raised, there 10% decrease in the reprocessing costs did not impact the levelized Price of vanadium USD 39.39 per kg may be a mismatch in the timing of cash flows as the Lessors may need to consider cost of storage but resulted in a c.1.1% increase in IRR. lease payments of the CVBM are structured to earn a accepting an element of refinancing risk if shorter Client upfront Direct costs associated with logistics of transporting steady yield, while the principal will only be returned to the dated, bullet-repayment instruments are being payment vanadium (54% of vanadium cost, 35% of total cost) investor or financier at the end of the lease period. considered. Cost of debt funding c. 2.88% per annum 5.9 Lease Term/ PPA Tenor Capital expenditure - Operating Phase USD 192,000 This is the period over which the end user leases the vanadium vanadium cost from the vanadium producer (assumed to be 20 years). The conversion cost is the cost of converting vanadium The SPV may need to assess the credit risk and into vanadium electrolyte and vice versa. The initial require counterparty guarantees (parent-company Conversion cost conversion costs are addressed in the "Client upfront End users may offer weak credit ratings or weak capacity guarantees) and termination obligations from the A 10% increase in PPA tenor resulted in a c.2.6% increase in 5 Counterparty risk payment" sensitivity, but the conversion cost at the end to meet their obligations under the lease. end user or VRFB manufacturer regarding offtake levelized cost of storage and a c.3.8% increase in IRR. A 10% of the lease term impacts the Project IRR separately obligations, including payment and return of the vanadium or electrolyte. decrease in PPA tenor resulted in a c.2.8% decrease in levelized The reprocessing cost is mentioned as one of the key cost of storage and a c.4.2% decrease in IRR. Reprocessing cost model assumptions and is part of the operating costs Financing costs, revenues, and capital expenditure (OPEX) in the financial model. should be denominated in a single currency, where Lease term / PPA The lessor faces exposure to fluctuations in foreign possible, providing a natural hedge against foreign 20 years 6 Foreign exchange tenor currencies exchange movements. Alternatively, hedging arrangements should be considered, but these USD inflation 2.3% may impact the overall cost. forecast per annum Source: PwC 96 Vanadium battery storage report Vanadium battery storage report 97 Table 5.2: High-Level Risk Matrix (continued) 5.11 Economic Analysis Table 5.3: Economic CBA criteria and definitions No. Risk category Description Mitigation The aim of the cost-benefit analysis (CBA) is to assign a Criteria Definition monetary value to the benefits expected from the proposed Operating Phase circular vanadium business model and compare them to the Net Economic NEPV is the difference between the benefits expected costs. If the benefits exceed the costs, there is economic Present Value and the costs, discounted to the present using An adequate insurance program should be maintained (NEPV) The VRFB manufacturer or end user should justification for proceeding with the leasing model. a discount rate. For the project to be accepted, 7 Insurance (to cover, for example, the risk of theft, damage, or the NPV has to be positive as this indicates maintain the appropriate insurance. expropriation and loss of commodity) that the overall benefits outweigh the overall An economic CBA was conducted to quantify the economic costs of the project. The vanadium producer should ensure that viability of the leasing model, based on the financial feasibility recycling or reprocessing technologies are model that was provided by the company developing this new acceptable and expected to be readily available at the end of the lease term. End users should business model (the 1 MWh facility). The economic CBA tool was Benefit -Cost BCR is the ratio between the present value of Ratio (BCR) the benefits and the present value of the costs. be required to return vanadium in a predefined developed using economic (shadow) prices and real (inflation Electrolyte The considers the ability to effectively recycle or reprocess condition. A project is considered viable if the BCR is 8 recycling risk vanadium electrolyte at the end of the lease term -adjusted) prices. The economic prices reflect the true scarcity of greater than one. The BCR indicates the return A defined hand-back regime with the VRFB expected from the proposed circular vanadium resources. Economic prices are also a better reflection of actual manufacturer or end user should be required to business model for every US dollar invested. ensure the electrolyte or vanadium is returned in demand or supply conditions in the market that should determine the appropriate condition, with defined penalties the real commercial viability of the project. Market prices do or compensation for non-compliance. not capture the scarcity of resources because of interference in Internal Rate IRR is the discount rate at which the present of Return value of both the costs and benefits are equal. The cost of transportation or logistics should be market price setting, such as electricity tariffs and wage levels. (IRR) For a project to be considered viable, the IRR passed on to the VRFB manufacturer or end user There is a risk that transport costs (including freight, Furthermore, the CBA considers other economic variables that the has to be greater than the discount rate. where possible. customs duties, etc.) incurred to transport vanadium from financial modeling does not include, such as external social costs the producer to the end user increase, impacting the overall A market sounding exercise with prospective economic feasibility of the CVBM. The financial model lessees would provide useful guidance on how and benefits and environmental costs. provided assumes that the end user will fund the upfront these upfront costs are expected to be funded Figure 5.3 summarizes the steps taken through the economic payment to cover conversion transportation costs. There The economic CBA was conducted over a 20-year period with Shipping cost to (cash funding, included in a project finance CBA to determine the economic viability of the 1 MWh facility 9 is a risk that the end -user may need to fund the upfront end user package, etc.), as the nature of the funding will an economic discount rate of 2.41%.39 .The shadow factors used contribution from internal cash resources if the cost cannot dictate the risks. vanadium business model. be incorporated as part of a project finance solution. in the analysis are described in Appendix A. Three standard CBA Electrolyte or vanadium reprocessing facilities An explanation of these steps is provided in Appendix A. Shorter-dated leases may also require more frequent evaluation criteria were used to determine the economic viability should be in proximity to the end users where logistical costs to be incurred to move the vanadium possible to reduce the logistical costs when of the 1 MWh facility vanadium business model. electrolyte from one geographic location to another. moving the commodity at the end of the lease term. 39 South African 10-year bond: 10.5%; Inflation: 7.9% y-o-y, Discount Rate =((10 year bond yield)/Inflation-1)X 100, Discount Rate =(1.105/1.079-1)X 100, Discount Rate= 2.4% The VRFB manufacturer must be carefully selected, with high -quality controls and a sound Figure 5.3: Steps to Determine the Economic Viability of the 1 MWh Facility Vanadium Business Model Loss of vanadium This considers the loss of vanadium when converted to reputation in the market. The appropriate VRFB 10 on conversion vanadium electrolyte battery storage technology should be used to ensure the integrity of the vanadium electrolyte over the lease term. The ownership of vanadium should be transferred Vanadium This considers the value of vanadium recovered at the end 11 to an investor who is willing to take a speculative St p 2: terminal value of the PPA tenor St p 1: St p 3: St p 4: St p 5: view of the future value of vanadium. Id ntif nd D fin Discount cost C lcul t NPV Int rpr t qu ntif costs A market sounding exercise with prospective proj ct nd b n fits nd BCR r sults Lease rate or lessees would provide useful guidance on expected nd b n fits This considers the attractiveness of the rate of return to 12 rate of return of rates of return. This would need to be taken into investors or lessors leasing commodity consideration when assessing the affordability of the CVBM. Source: PwC analysis 98 Vanadium battery storage report Vanadium battery storage report 99 Table 5.4: Costs associated with the Proposed Circular Vanadium Business Model Costs associated with leasing a circular flow model in inconsistent costs in obtaining the vanadium. The end -user that could not be included in the CBA faces transportation and storage costs. The substantial size of Risk category Mitigation the batteries will require trucks for transportation, while their The following costs are associated with leasing a circular flow size may induce elevated rental costs. Last, the extraction of model and could be included in the CBA. In obtaining an objective Commodity prices: The spot price of vanadium is vulnerable to commodity price fluctuations. In September 2022, the price vanadium has a larger impact on the environment for its kg CO2 of vanadium pentoxide 98% was USD3.31/kg, marginally up from the average price of USD3.13/kg for September 201740,41 picture of the costs associated with the proposed circular Leasing equivalent, which could induce higher carbon taxes compared to However, during this five-year period the price of vanadium has fluctuated between USD2.31/kg and USD13.04/kg. Such vanadium business model, we then identified the following costs company fluctuations in the price of vanadium will likely cause disparities on the price of electrolytes particularly for a 20-year leasing options such as lithium-ion. agreement. and who they impact. We note that some of these costs were not quantifiable; nonetheless, they will have a cost impact on the In obtaining an objective picture of the benefits associated with Transport costs: The costs of transporting a VRFB to the end consumer will depend on the size of the battery that will be proposed circular vanadium business model. the proposed circular vanadium business model, we then identified leased as this will determine the truck size required to deliver the battery. A VRF battery comes in both a 20ft container and a the following benefits and who they impact. We note that some of 40ft container, which will require a truck and a shipping container. The estimated costs are as follow: The proposed circular vanadium business model has additional these benefits were not quantifiable; nonetheless, they will have a • Truck hire: costs that are non-quantifiable. The leasing company will have to 20 Tin Flatbed Trailer – US$100.76 rate per day, US$1.14 per kilometer and US$40.93 driver per day.42 (Costs will vary cost impact on the economic model. depending on a company’s rates.)43 contend with fluctuations in commodity prices, which can result in • Shipping containers44: 20-ft Shipping Container: US$850.13 per unit Table 5.5: Benefits associated with the Proposed Circular Vanadium Business Model 40-ft Shipping Container: US$1,196.47 per unit The loading of a VRFB on and off a truck for transportation can incur handling damage. This could have a negative impact on End -user the pipes and the electrolyte reservoir. Although these are likely to be one-off costs, incurred at the point of transportation, Risk category Mitigation damages or maintenance work that may require the VRFB to be replaced or moved would imply that additional costs pertaining to the above will be incurred. Storage capacity: The electrolytes used in VRFBs are usually stored in liquid form, in large tanks. The leasing company may No extraction costs: The leasing company will not incur any costs associated with the extraction (mining) of the vanadium. Leasing seek to rent existing premises as opposed to building new facilities to store the electrolytes. Because of a lack of adequate data The leasing company will therefore not have to pay carbon emission taxes, which will fall to the mining company. This will company to quantify the average rental costs for commercial property per square meter in South Africa, we will use the average building minimize the overhead costs of the leasing company. cost per square meter for shopping centers and commercial and industrial property as a proxy for rental fees. According to data from EstimationQS, the building costs per square meter for commercial property, shopping centers, and industrial property are US$499.63, US$483.38, and US$419.86 per month, respectively.45 Increased lifespan and durability: With an ability to cycle more than 20,000 times over a 20-year to 25-year period, VRFB are a more attractive option than current options, such as lithium-ion batteries, which have a life cycle of between 500 to • Industrial property: 13.86m2 X US$419.86/m2 = US$5,819.26 per month. 5,000 cycles. This ability of VRFB to last longer generates additional benefits, such as mitigating the need to frequently • Commercial property: 13.86m2 X US$499.63/m2 = US$6,924.87 per month. replace/recycle the VRFB compared to a lithium-ion battery. Over time, VRFB provides a constant flow of electricity • Shopping Centers: 13.86m2 X US$483.38/m2 = US$6,699.65 per month. relative to lithium-ion batteries, which tend to demonstrate a reduction in power as capacity declines. Safety: Unlike VRFB, lithium-ion batteries experience thermal runaway, which can cause fires and significant financial Global warming: To quantify the cost of vanadium on the environment, we looked at the carbon dioxide impact of the extraction End -user losses. For example, in 2021, a fire broke out in South Korea’s Hongseong-gun, Chungcheongnam-do ESS. Despite there and life cycle of vanadium compared to lithium-ion. From extraction and during its life cycle, vanadium has a more costly being no casualties, the ESS building and 140 internal batteries were burned down, resulting in property damage of impact on global warming per carbon dioxide equivalent (kg CO2 eq.), relative to lithium-ion.46 To quantify this cost for this approximately US$385,800. The outage of an ESS can impact the supply of electricity and end users’ production, report, we have used South Africa’s carbon tax rate. For 2022, South Africa’s carbon tax rate is US$9 per metric ton of carbon especially given the length of time the ESS remains inactive. dioxide equivalent and is expected to increase by US$1 per annum until 2030.47 This is below the global standard for carbon taxes of between US$40 and US$80 per metric ton carbon dioxide equivalent.48 South Africa is expected to increase carbon tax Power density: VRFBs offer a consistent supply of energy for up to 10 hours compared to lithium-ion batteries, which only Leasing company emission rates gradually to meet global standards. The environmental cost of global warming associated with the supply and offer up to two hours of large amounts of energy. This boosts the attractiveness of VRFBs as an alternative energy source life cycle of VRFB will have a growing impact on operational costs. The carbon emissions cost of vanadium is approximately 4% relative to lithium-ion batteries, particularly for energy -intensive industries such as mining and manufacturing. higher than lithium-ion. Calculations of the global warming impact from the supply and life cycle of lithium-ion and VRFB can be found in the appendix We note that the cost calculations pertain solely to the supply phase and life cycle of a lithium-ion battery and vanadium battery. With limited studies and data available pertaining to the end -of -life (recycling) cost of global Mitigant to load shedding: It has been 15 years since businesses and households in South Africa started experiencing warming, we note that costs will likely vary from the costs above. rolling blackouts (load shedding). Below are various calculations of the impact of load shedding on the South African economy using the cost of unserved energy (CoUE) method. The CoUE is a descriptor of electricity interruption cost and is used to determine the value placed on a unit of energy not supplied because of an unplanned electricity outage. This has also often been a reference point for calculating the cost of load shedding (CoLS). 40 Vanadium Pentoxide 98%Min Europe Spot Historical Prices, Investing.com, https://www.investing.com/commodities/vanadium-pentoxide-98-min-europe-futures-historical-data 41 Vandium Pentoxide 98%Min Europe Spot Historical Prices Conversion. 1lbs = 0.453592kg Economy Our analysis shows that load shedding has a significant impact on South Africa’s economy. In 2021, planned load 42 Please note that the exchange rate conversion used for these figures was an average exchange rate of R15.88/US$ for 2022 according to data from IHS Markit. 43 “Johannesburg Truck Hire.” Johannesburg Truck Hire, https://www.jhbtruckhire.co.za/Truck-Hire-Rates.jma. Accessed 29 August 2022. shedding cost the economy between US$810 million and US$8.6 billion,49 while unplanned load shedding cost between 44 “How Much Does A Container Cost In South Africa? – Greater Good SA.” Greater Good SA, https://www.myggsa.co.za/how-much-does-a-container-cost-in-south-africa/. Accessed 29 August 2022. US$1.56 billion and US$17.23 billion. The use of a VRFB will function as a mitigant to load shedding, which can help reduce 45 “Building Costs Per Square Meter in South Africa - For New Residential, Commercial and Industrial Properties.” Estimation QS, 22 March 2022, https://estimationqs.com/building-costs-per-square-metre-in-south- production losses for firms that are heavily reliant on electricity, such as those in the mining and manufacturing sectors. africa/. Accessed 29 August 2022 46 da Silva Lima, Lígia, et al. “Life cycle assessment of lithium-ion batteries and vanadium redox flow batteries-based renewable energy storage systems.” Sustainable Energy Technologies and Assessments, vol. Volume VRFB offers an extended life span relative to alternatives such as lithium-ion batteries. This will allow the end -user to have 46, no. 101286, August 2021, p. 6, https://www.sciencedirect.com/science/article/pii/S2213138821002964. extended hours of production during load shedding, despite the stage of load shedding. 47 South Africa's carbon tax rate goes up but emitters get more time to clean up, The Conversation, https://theconversation.com/south-africas-carbon-tax-rate-goes-up-but-emitters-get-more-time-to-clean-up- 177834,February 25, 2022, Lee Steenkamp 48 Report of the High-Level Commission on Carbon Prices, Columbia Academic Commons, https://static1.squarespace.com/static/54ff9c5ce4b0a53decccfb4c/t/59b7f2409f8dce5316811916/1505227332748/ CarbonPricing_FullReport.pdf 49 Please note that the exchange rate conversion used for these figures was an average exchange rate of R15.88/US$ for 2022 according to data from IHS Markit. 100 Vanadium battery storage report Vanadium battery storage report 101 The non-quantifiable benefits offered by the proposed circular Table 5.7: Summary of CBA Results for the Circular Vanadium Business The summarized CBA results are presented in Table 5.8. In this case, both the NPV and the BCR confirm that the Model (US$) vanadium business model further strengthen its investment case. 1 MWh facility leasing model is economically viable, as the Table 5.8: Summarized CBA results The proposed circular vanadium business model mitigates against benefits outweigh the costs. Nonetheless, one should be careful Description Present Value Total extraction costs for the leasing company. The end user derives when interpreting these results, given that there are several NPV (US$) BCR (Ratio) IRR (%) many benefits such as, safety, power density and the increased COSTS (US$) benefits and costs that have been derived through the proposed life span of the battery. Last, the proposed circular vanadium 1. Capital expenditure 50 Indicators 6,751 1.02 3 circular vanadium business model that the team could not business model offers a benefit to the economy by offering a Vanadium Electrolyte Cost 192,956 197,606 Source: PwC calculations quantify in the analysis. mitigant to load shedding. Conversion Cost 79,325 81,237 The CBA results are interpreted as follows: Results of the Cost -Benefit Analysis Customs Duty 74,424 76,217 • The NPV of the 1 MWh facility leasing model compares the In this section, the results of the CBA are presented for the 1 Shipping Cost to EU – Vanadium 1,720 1,761 present value of the quantifiable benefits associated with MWh facility vanadium business model. We carried out the CBA Shipping Cost – Electrolyte 18,069 18,504 the vanadium business model with the present value of the in nominal Rand values at a discount rate of 2.41% over a 20-year quantifiable costs attributable to the vanadium business model. Other CAPEX 0 0 period. In analyzing the viability of the model, we considered the These costs and benefits have been calculated over a 20-year Total capital cost (US$) 366,493 375,325 results of the NPV, IRR and BCR. period, discounted at 2.41%. The present value of benefits should 2. Operational cost be greater than the present value of the costs for the 1 MWh Table 5.6: Results of the Cost -Benefit Analysis facility leasing model to be considered viable (the NPV should be Other Cost 0 0 greater than zero). The NPV, BCR, and IRR all suggest that the investment in the 1 Holding Cost 0 0 MWh facility leasing model over the next 20 years is economically • Based on the calculations, the 1 MWh facility leasing model NPV viable as its expected to yield positive returns. Shipping Costs 0 0 is positive, so the total quantifiable benefits of the leasing model Reprocessing Costs – EOL 12,928 21,317 Net Present Value (NPV), US$ 6,751 outweigh the quantifiable costs over the period of analysis. This Management Fee 0 0 results in a gain of about US$6,751. This amount is not a surplus Internal Rate of Return (IRR) 3% Total operating cost (US$) 12,928 21,317 per annum but the overall gains over the 20-year period. This TOTAL COST (US$) 379,421 396,642 would mean that, on average, there is a gain of approximately Benefit -Cost Ratio (BCR) 1.02 US$338 per annum (US$6,751 over 20 years) due to the BENEFITS (US$) Payback Period Years 20 proposed circular vanadium business model. 1. Revenue51 • The BCR calculates the ratio of the present value of the Source: PwC analysis Scrap Vanadium Value 0 0 quantifiable benefits attributable to the 1 MWh facility leasing All three measures yielded positive results, which suggests that Write-Back of Pre-Payment 109,523 139,320 model relative to the present value of the costs. Simply stated, the model would be viable for investment. For the project to be Gain on Vanadium Revaluation 76,047 94,474 it is the present value of these benefits divided by the present accepted, the NPV must be positive. For this project, the criteria value of the costs. This ratio measures the efficiency of the Vanadium Recovery 133,550 215,027 are met, with an NPV of US$6,751 stemming from total benefits proposed leasing model by calculating the US dollar value Annual Lease Fee Premium 0 0 of US$386,172 less the total costs of US$379,421. With a BCR of received for every US$1 invested in the 1 MWh facility leasing 1.02, the project meets the criteria for a viable investment. The Annual Lease Fee 67,051 86,840 model. For the leasing model to be considered efficient, it should IRR of 3% for the circular vanadium business model, is higher than Total revenue (US$) 386,172 535,661 yield a return that is greater than US$1, which means that the the 2.41% economic discount rate and meets the criteria for the BCR ratio should be greater than one. TOTAL BENEFITS (US$) 386,172 535,661 project to be a viable investment. All three measurement tools • The BCR for the 1 MWh facility leasing model is 1.02, indicating used suggest that the project presents an economically viable that for each US dollar spent on the leasing model, there is an investment opportunity. SURPLUS/DEFICIT 6,751 139,019 expected return of US$1.02. This means that the 1 MWh facility Source: PwC analysis leasing model is efficient. 50 The cost -benefit analysis was modelled in South African rand based on an average forecasted exchange rate of R15.88/US$1 for 2022 according to data from IHS Markit. 51 The cost -benefit analysis was modelled in South African rand. An average forecasted exchange rate of R20.10/US$1 (average between 2022–42) was used to convert revenue to US dollars according to data from IHS Markit . 102 Vanadium battery storage report Vanadium battery storage report 103 6 Regulatory and Legal Analysis (specific to South Africa) The commercial viability of a circular vanadium battery model regulations do not prevent BESS uptake, little to no guidance is depends on the regulatory provisions of the relevant jurisdiction provided as to how BESS and, more specifically, VRFB applications and the extent to which such a model is supported by domestic will be supported. However, the existing laws and policies also legislation. An enabling environment created by existing energy, create regulatory barriers that would need to be overcome for BESS mining, industrial, and environmental laws and policies must to truly become a commercially viable option for South Africa. be created to ensure that the business model is feasible from a The Department of Mineral Resources and Energy has regulatory perspective. South Africa’s energy sector is currently acknowledged in its Strategic Plan (2020-2025) that the demand experiencing a dynamic shift when considering the laws and policies for vanadium is an opportunity that needs to be managed in a way that are being published. From a policy perspective, it is clear that that ensures the sustainability of the mining industry and to move there is a deliberate move towards creating a regulatory framework from a raw export economy to a beneficiation processing economy. that would facilitate the country’s decarbonization journey. However, to achieve this, law and policy must create an enabling Although a circular vanadium business model would contribute to environment to support a circular vanadium business model. Mining, the realization of the county’s decarbonization efforts, the enabling energy, environmental and industrial legal frameworks must be regulatory environment facilitates the increased deployment of integrated and aligned to minimize regulatory barriers that the VRFBs and the circular vanadium model is underdeveloped. vanadium sector will face, whilst also being robust enough to While South Africa is well endowed with renewable energy resources ensure compliance with the principle of climate smart mining. The that can be sustainable alternatives to fossil fuels, so far, these harmonization of laws and policies related to the vanadium value have remained largely untapped and BESS applications remain chain will ultimately contribute to a commercially feasible vanadium underdeveloped within the South African context. Moreover, circular business model, as illustrated in Figure 6.1. the application of BESS technologies has suffered because of Every component of the value chain has certain regulatory hurdles regulations that are primarily focused on increasing fossil fuel and requirements that need to be understood and navigated deployment. Direct legal regulatory intervention has become urgent to ensure that the business model complies with the following in view of South Africa’s electricity supply deficit. Although current relevant laws and policies. Figure 6.1: Key Components of a Circular Vanadium Business Model Environm nt Min r ls nd L w nd Minin L w nd Polic Polic V n dium circul r busin ss mod l Industri l En r L w nd Polic L w nd Polic Source: PwC South Africa 104 Vanadium battery storage report Vanadium battery storage report 105 6.1 Constitution of the Republic 6.2 Energy laws and policies Table 6.1: Energy Laws and Policies of South Africa The following energy laws and policies are relevant for the Integrated energy plan The Constitution operates as a framework within which South successful deployment of VRFBs in South Africa. Table 6.1 Africa’s mining, environmental, and industrial legislation must highlights the purpose of each Act, as well as supportive provisions Purpose of the Act and relevance to CVBM Supportive provisions / Barriers operate. Any law or conduct inconsistent with the Constitution is and barriers to VRFB deployment. The Integrated Energy Plan (IEP) aims to guide future South Africa’s Integrated Energy Plan specifically promotes opportunities related invalid, and as the supreme law of South Africa, the obligations energy infrastructure investments and identify and to BESS applications. The IEP states that: “Solar PV and CSP with storage present imposed by it must be fulfilled. A common denominator of most recommend policy development to shape the future excellent opportunities to diversify the electricity mix, to produce distributed 6.3 Environmental Laws and policies energy landscape of the country. It is an overarching plan generation and to provide off-grid electricity. Solar technologies also present the mining, energy, environmental, and industrial laws and policies is that informs the development of future energy sector greatest potential for job creation and localization. Incentive programs and special that their provisions are embedded in the concept of sustainable Environmental requirements for utility-scale VRFB deployment focused programs to promote further development in the technology, as well as roadmaps, i.e., for the security of supply (liquid fuels development, as enshrined in section 24 of the Constitution. may concern the identification of suitable locations for the and electricity) and a diversity of supply (coal, gas, and solar roll-out programs, should be pursued.” renewable energy). project deployment, safety requirements for hazard avoidance Section 24 of the Constitution is arguably the cornerstone for the (e.g., fire, thermal runway, explosive, chemical and toxic leaks Applicability in value chain: End user application promotion of sustainable mining in South Africa. It proclaims the etc.) and asset end-of-life (e.g., circularity, reuse, repurpose and right of everyone: storage of used batteries). South Africa still lacks environmental Integrated resources plan of 2019 a) To an environment that is not harmful to their health or laws and regulations specifically focused on the environmental Purpose of the Act and relevance to CVBM Supportive provisions wellbeing; and management associated with utility -scale BESS operations. b) To have the environment protected, for the benefit of present South Africa’s existing environmental framework for the The Integrated Resources Plan (IRP) is South Africa’s The IRP promotes the increased uptake of energy storage applications and deployment of VRFBs is discussed in Table 6.2. overarching electricity infrastructure development provides that: “taking into account the longer gas infrastructure lead time, the and future generations, through legislative and other measures plan based on least-cost electricity supply and demand power system selects more energy storage. This can be expected, given the that: balance, taking into account the security of supply and extent of the wind and solar PV option in the IRP.” The IRP has allocated a total of the environment (minimize negative emissions and water 2088 MW of storage up to 2030 as part of South Africa’s energy mix, with 513 i. prevent pollution and ecological degradation 6.4 Industrial laws and policies usage). The IRP 2019 explains that it is developed within MW being allocated to 2022 and the remaining 1575 MW to be procured in 2029. a context characterized by rapid changes in energy ii. promote conservation; and Considering South Africa’s ample vanadium reserves, the country technologies and uncertainty regarding the impact of A significant change introduced by the Electricity Regulation Amendment Bill has an immense opportunity for further development of a local technological changes on the future energy provision 2022 allows the Minister of Energy to publish a section 34 determination that iii. secure ecologically sustainable development and use of system. The pace of technological development of BESS/ deviates from the Integrated Resource Plan or Transmission Development natural resources while promoting justifiable economic and battery value chain. However, increased localization for the VRFBs technologies will be one of the key advancements Plan in an emergency or if it is necessary to do so in the national interest. This deployment of utility -scale VRFBs will require the introduction that will impact South Africa’s energy planning going means that the capacity provisions outlined in the IRP can be ignored in the social development. event of an emergency or if it is in the national interest and therefore allows forward. of incentives and enabling industrial laws and policies. South BESS applications to be procured at far greater capacities to address the peak Section 24(b) affirms that the State is obligated to protect the capacity constraints faced by the country. Africa’s overarching policies aimed at facilitating the industrial environment through legislative and other measures that, inter development of the country are the Industrial Policy Action Furthermore, the IRP provides that: “Storage technologies including battery alia, “secure ecologically sustainable development and use of systems, compressed air energy storage, flywheel energy storage, hydrogen Plan (IPAP) and the Medium-Term Strategic Framework (MTSF). natural resources while promoting justifiable economic and social fuel cells etc. are developments which can address this issue (variability and However, to date, South Africa has developed no policies or intermittency), especially in the South African context where over 6 GW of development.” The circular model proposed by this study will renewable energy has been introduced, yet the power system does not have the regulatory measures that are specifically targeted to incentivize ensure that vanadium mining in South Africa is aligned with the requisite storage capacity or flexibility.” the increased uptake of VRFBs. There has, however, been a range principle of sustainable development while promoting economic It is clear from the provisions in the IRP that the government considered BESS of incentives aimed at increasing the uptake of renewables. and social development within an emerging sector in South applications to be an integral part of the energy transition; however, the capacity The introduction of clean energy tax incentives has historically limitations set out in the IRP restrict the ability of the BESS industry to grow Africa. The sustainable application of vanadium in utility -scale and compete at the levels necessary to become a commercially viable option for been provided for in Section 12 of the Income Tax Act and has VRFBs will also contribute to the decarbonization of the South South Africa. resulted in increased renewable energy uptake and energy African electricity grid as envisaged in the country’s Nationally efficiency measures. Some measures set out in Section 12 can be Determined Contribution. It is within this context that a circular interpreted as also covering BESS/VRFB applications. Table 6.3 vanadium business model and the increased deployment of VRFBs outlines some incentives that could support the uptake of BESS in South Africa can realize the sustainable development objectives in South Africa and the key policies related to the industrial set out in the Constitution. development of VRFBs. 106 Vanadium battery storage report Vanadium battery storage report 107 Table 6.1: Energy Laws and Policies (continued) Table 6.1: Energy Laws and Policies (continued) Electricity Regulation Act Electricity Regulation Ammendment Nill of 2022 Purpose of the Act and relevance to CVBM Supportive provisions / Barriers Purpose of the Act and relevance to CVBM Supportive provisions / Barriers The Act aims to “promote the use of diverse energy Section 34 of the Act gives effect to the energy diversification objective of On February 10, 2022, the South African government The following key amendments are relevant to the development of the BESS/VRFB sources and energy efficiency.” A 2011 Amendment the Act and empowers the Minister of Mineral Resources and Energy to issue published the proposed Electricity Regulation Amendment industry. Bill proposed to amend this Act to add expressly that determinations, in line with the capacity provisions set out in the IRP, to procure Bill. The proposed amendments broaden the national the objective would be to promote the use of “diverse energy from different generation sources. This includes the procurement of regulatory framework for the electricity supply industry. The Bill specifically provides for the procurement of ancillary services, that is, sources of energy, renewable energy sources, and energy renewable energy and BESS capacity provided for the IRP. They aim to establish a wholesale electricity market in “services necessary to support the continuous and secure operation of electric efficiency”, but the Bill was never passed. line with international best practice and provide for the power system and necessary to maintain reliable operations of the interconnected Section 46(1)(b) is one of the key enabling provisions underpinning the drafting and establishment and functions of a Transmission System power system, including, but not limited to, those services necessary for voltage Applicability in value chain: End user application revisions of the IRP and provides that the minister may determine which types of Operator. The proposed amendments form part of several and reactive power control, automatic generation control, frequency control energy sources may be procured and the percentages of electricity that must be steps the country is taking to reform the electricity and black start capabilities.” This implicitly promotes the deployment of BESS generated from such sources. This enables the minister to make determinations sector to achieve a stable and secure supply of energy. applications such as VRFBs to provide ancillary services. specifically aimed at procurement of renewable energy and could be leveraged to The Bill is yet to be finalized and promulgated, but its also require renewable energy capacity to be paired with BESS capacity as part provisions will result in a significant paradigm shift for However, it must be noted that Eskom’s Ancillary Services Technical Requirements of the renewable procurement requirements. the country’s energy sector. for 2022/23—2026/27 explicitly excludes BESS and renewable energy technologies as viable options to provide ancillary services. For the proposed In October 2020, the Minister of Mineral Resources and Energy published an Applicability in value chain: End user application ancillary services provision in the Bill to be effective in relation to BESS and amendment to the Electricity Regulations on New Generation Capacity published renewables, Eskom would have to amend their Ancillary Services Technical under the Electricity Regulation Act. The amendment allows municipalities to Requirements to allow BESS and renewable energy technologies to be considered apply to the minister to procure or buy new generation capacity in accordance with as options for ancillary services. the Integrated Resource Plan, subject to certain conditions.52 This provision is a fundamental change in the existing municipal electricity procurement model and The Minister of Public Enterprises will establish a juristic person known as the provides a regulatory platform for municipalities to not only procure renewable Transmission System Operator SOC Ltd. to provide for an open market that will energy directly from IPPs, but to build BESS capacity requirements into energy allow for a non-discriminatory competitive electricity trading platform. Market procurement processes. participants will trade energy based on regulated and bilateral agreements in the day ahead market. Furthermore, the Bill provides that “Market participants However, a serious flaw in this legal regime is that it makes energy procurement will supply reserves in the day ahead reserve market and Balance Responsible entirely dependent on ministerial discretion. This implies that private sector Parties will trade physicals with one another after the day's market closing to investors, other spheres of government (such as metropolitan municipalities), and account for changing circumstances.” This provides an opportunity for BESS large corporates wanting to generate electricity cannot do so unless there is a capacity to enter the market and for BESS owners to purchase surplus energy determination. Another barrier plaguing the uptake of VRFBs is section 34 of ERA after market closure at the end of each day. In such a case, energy arbitrage that limits the energy regulator’s (NERSA) power to issue a generation license by would be possible whereby BESS owners could purchase surplus electricity at making it subject to ministerial consent. The minister, rather than the regulator, has lower rates at closure of the market and sell the electricity back into the market de facto control over who can enter the electricity market and the sources used. at a later stage, for a higher tariff. Schedule 2 of the Bill exempts generation facilities with energy storage to be registered or licensed with NERSA only if such facilities are used to provide standby or back-up electricity in the event of, or for a duration no longer than, an electricity supply interruption. This provision specifically aims to reduce the administrative burden if BESS applications are adopted to provide electricity during planned and unplanned electricity outages. Schedule 2 of the Bill exempts generation facilities with energy storage to be licensed with NERSA where the facility has a capacity of no more than 100 MW with a Point of Connection on the transmission or distribution power system. This provision minimizes the administrative burden for renewable energy project developers and enables them to build renewable energy plants paired with BESS without the risk of electricity curtailment. 52 See regulation 5(3) that provides that: “A municipality, as an organ of state, may apply to the Minister to procure or buy new generation capacity in accordance with the Integrated Resource Plan, and such municipality must: (a) conduct and submit a feasibility study as contemplated in sub-regulation (2), where it intends to deliver the new generation capacity project through an internal mechanism as contemplated in section 76(a) of the Municipal Systems Act: (b) submit proof that it has complied with the provisions of section 120 of the Municipal Finance Management Act and the Municipal Public-Private Partnership Regulations published by Government Notice No R. 309 in Government Gazette No. 27431 of 1 April 2005, where it intends to deliver the new generation capacity project through an external mechanism as contemplated in section 76 (b) of the Municipal Systems Act, and (c) submit proof that the application is aligned with its Integrated Development Plan.” 108 Vanadium battery storage report Vanadium battery storage report 109 Table 6.1: Energy Laws and Policies (continued) Table 6.1: Energy Laws and Policies (continued) National Energy Act The Exploration Strategy for the Mining Industry in South Africa (April 2022) Purpose of the Act and relevance to CVBM Supportive provisions / Barriers Purpose of the Act and relevance to CVBM Supportive provisions / Barriers The National Energy Act is South Africa’s overarching The Act requires the Minister of Energy, in consultation with the Minister of Trade The purpose of the Exploration Strategy is to attract The Strategy identifies the “Rising Demand for Clean Energy” as an opportunity for legislation regulating the energy sector. Section 5 of the and Industry, the Minister of Labor, and the Minister of Environmental Affairs, mineral exploration investment, reignite mineral the South African mining industry. More specifically, battery storage is considered National Energy Act imposes a duty on the Minister of to “adopt measures not contemplated in any other legislation, to minimize the development, accelerate new mineral discoveries, and a key opportunity for South Africa to leverage, given the global demand in BESS Energy to promote access to affordable, sustainable, and negative safety, health and environmental impacts of energy carriers.” encourage optimal utilization of the South African technologies. environmentally suitable energy and energy services to mineral resources in line with the environmental, social, all people. and corporate governance principles for sustainable Additionally, energy instability is considered a key weakness for the mining growth, and to propel South Africa to a competitive sector because of the inability of the mining sector to access a stable and reliable Applicability in value chain: End user application position against other jurisdictions of comparable mineral electricity grid. This presents VRFB producers with an opportunity to not only endowment. contribute to the global demand for clean energy, but to contribute to solving one of the most pressing challenges currently faced by the mining sector. Mineral and Mining Laws and Policies Mineral and Petroleum Resources Development Act Applicability in value chain: Vanadium Ore Extraction The strategy identified vanadium as a “critical mineral” essential for the shift Purpose of the Act and relevance to CVBM Supportive provisions / Barriers toward a green economy. To support exploration of the vanadium resources, the Department of Mineral Resources and Energy will outline an investment promotion plan focusing on promoting the country’s minerals industry, cognizant of the Mineral resource exploitation in South Africa is regulated Under Section 3(1), all mineral and petroleum resources, which includes vanadium, global trends within the mining and metals sector, and the economic realities of by both statute and common law. The Mineral and are the common heritage of the people of South Africa, and the State is the the country, such as unemployment and slow economic growth. This will include Petroleum Resources Development Act 28 of 2002 (the custodian thereof for the benefit of all South Africans. The government has the providing junior exploration companies and other projects with technical and MPRDA) is the primary regulatory framework legislation discretion to grant, issue, refuse, control, administer, and manage any mining and financial support until the feasibility stage. governing ore extraction. The Act aims to provide for petroleum rights. equitable access to and the sustainable development of The Strategy provides the basis for VRFB producers and vanadium ore extraction As the custodian of mineral rights, only the State can authorize exploitation companies to participate in a new generation of the mining industry that is responsive the nation’s mineral and petroleum resources and related to current and future market demands matters. of mineral resources and grant these rights through the minister. In terms of section 26 of the Act, the minister can also promote the beneficiation of a specific Applicability in value chain: Vanadium Ore Extraction mineral, such as vanadium, subject to such terms and conditions as the minister Draft Mine Closure Strategy (2021) and Processing may determine. Given the potential of vanadium beneficiation to contribute to the alleviation of South Africa’s electricity crisis in VRFBs, there is a need for the Minister of Mineral Resources and Energy to introduce measures specifically aimed Purpose of the Act and relevance to CVBM Supportive provisions / Barriers at supporting the beneficiation of vanadium. The draft National Mine Closure strategy was published The strategy does not explicitly support the deployment of BESS or VRFBs. Minerals and Petroleum Resources Royalty Act for comment in 2021. The draft strategy highlighted However, the draft Strategy recognizes the energy supply crisis in South Africa the adverse impacts of mining and the irreversible and the fact that self-generation of energy by mining companies is a critically environmental degradation and economic hardship when important aspect of promoting sustainable post-mining economies. The Strategy Purpose of the Act and relevance to CVBM Supportive provisions /Barriers a mine closes. Therefore, the strategy seeks concurrent recognizes that the recent developments whereby operating mines generate their economic diversification, looking beyond non-renewable own power will create a generation base that can provide energy post -mining In terms of section 3(4) of the MPRDA, the Minister of The following persons/entity must register for the payment of the royalty to SARS: resources and seeking long-term solutions. developments, as well as provide sustainable energy where long-term pumping and Finance must determine and levy a State royalty by treatment of water is required. This presents an opportunity for BESS operators • Any persons/entity who holds a prospecting right, retention permit, exploration to participate in post-mine closure strategies and play a key role in relation of the means of an Act of Parliament. The minister did this right, mining right, mining permit, or production right or a lease or sublease by promulgating the Mineral and Petroleum Resources Strategy’s objectives. regarding such a right; or Royalty Act, 2008 as well as the Mineral and Petroleum Resources Royalty (Administration) Act, 2008, both of • Any person/entity who wins or recovers a mineral resource extracted within the which are administered bySARS. The royalty is triggered Republic. on transferring a mineral extracted from within the Royalties are payable for the duration of the mining right, according to Section 25 Republic. As for all other taxes, duties, levies, fees, or (2) (g) of the MPRDA. The Mineral and Petroleum Resources Royalty Act (2008) money collected by SARS, the royalty collected is paid to (“Royalty Act”) requires that a royalty fee be paid to the National Revenue Fund the National Revenue Fund. regarding the transfer of mineral resources extracted within the Republic. According to Schedule 2 of the Royalty Act, vanadium >1 % V2O5 equivalent and <2% calcium (CaO) and silica (SIO2) bearing gangue minerals is classified as an unrefined mineral resource. The royalty payable for an unrefined mineral resource is calculated as follows: 0.5 + [earnings before interest and taxes / (gross sales in respect of unrefined mineral resource x 9)] x 100. The royalty is required bi-annually, with the deficit between forecast sales and actual sales payable in a third payment. 110 Vanadium battery storage report Vanadium battery storage report 111 Table 6.2: Environmental Laws and Policies Table 6.2: Environmental Laws and Policies (continued) National Environmental Management Act (NEMA) The National Environmental Management Air Quality Act (NEM:AQA) Act No. 39 of 2004 Purpose of the Act and relevance to CVBM Supportive provisions / Barriers Purpose of the Act and relevance to CVBM Supportive provisions / Barriers The Act helps provide for co-operative environmental MPRDA stipulates that the principles of the NEMA apply to all mining and serve Section 21 of the NEM: AQA refers to activities that result “Vanadium Ore Processing” is listed as an emissions activity and must therefore governance by establishing principles for decision making as guidelines for the interpretation, administration, and implementation of the in atmospheric emissions with significant impacts. A list comply with various requirements. No company or person may, without a on matters affecting the environment, institutions that environmental requirements of the MPRDA. detailing related activities shall be published, including provisional atmospheric emission license or an atmospheric emission license, will promote cooperative governance, and procedures for minimum emission standards regarding polluting conduct an activity (vanadium ore processing) coordinating environmental functions exercised by organs Consequently, a holder of a mining permission, right, or permit: substances. These will outline permissible emissions of the State. volumes, rates, or concentrations and measurement (a) listed on the national list anywhere in the Republic; or • Must consider, investigate, assess, and communicate the impact of their procedures. For such activities, an atmospheric emission The Act also provides for certain aspects of the activities on the environment comprehensively. license is required before commencement of operations. (b) listed on the list applicable in a province anywhere in that province. administration and enforcement of other relevant The Act establishes the procedure for the application environmental management laws and matters. • Must, as far as is reasonably practicable, rehabilitate the environment to its With Vanadium Ore Processing, the requirement to obtain an atmospheric for and issuance of atmospheric emission licenses. natural or predetermined state, or to a land use that conforms to the generally emission license applies on a national level, and any company conducting The license will specify the maximum allowed volume, accepted principle of sustainable development vanadium ore extraction would have to obtain an atmospheric emission license, no emission rate, or concentration of pollutants that may be matter where in the country such an activity occurs. • Is responsible for environmental damage, pollution, or ecological degradation as a discharged into the atmosphere. result of reconnaissance, prospecting, or mining operations that may occur inside and outside the boundaries of the areas to which such right, permission, or permit South Africa’s revised Nationally Determined Contribution (2021) relates. • Must ensure that it will take place within the framework of national Purpose of the Act and relevance to CVBM Supportive provisions / Barriers environmental management policies, norms, and standards However, most of the measures applicable to the vanadium sector are outlined On September 14, 2021, the Cabinet approved South The NDC does not outline any provisions explicitly linked to the increased in subsets of regulations published under NEMA, which is the overarching Africa’s updated climate change mitigation target range deployment of BESS or VRFBs. However, the updated NDC contains certain environmental legislation for South Africa. The most relevant regulatory measures for 2030 in its Nationally Determined Contribution provisions that implicitly support the uptake of BESS technologies in South Africa. are outlined below. (NDC) for submission to the United Nations Framework Convention on Climate Change (UNFCCC). First, the updated NDC acknowledges that South Africa’s electricity sector is the country’s largest source of emissions and that it will be one of the most Environmental Impact Assessment Regulations Therefore, this year’s update conveys a significantly challenging sectors to decarbonize. The NDC explicitly states that the achievement more ambitious mitigation target, whereby the country’s of the mitigation goals set out in the NDC will depend on massive investment in emissions will peak in 2025 at 510 MtCO2-eq, which is renewable energy over the next decade. However, such an investment would not Purpose of the Act and relevance to CVBM Supportive provisions / Barriers lower than anticipated, and whereby the entire target be a logical investment without a commensurate investment in BESS technologies range has been lowered for 2030. such as VRFBs. The Act aids in providing for co-operative environmental South Africa has yet to develop the necessary regulatory provisions to ensure governance by establishing principles for decision making that the environmental impact of BESS applications is managed appropriately. South Africa’s revised Nationally Determined Contribution (2021) on matters affecting the environment, institutions that However, sections 24 and 44 of National Environmental Management Act make will promote cooperative governance, and procedures for provisions for the promulgation of regulations that identify activities that coordinating environmental functions exercised by organs may not commence without an environmental authorization (EA) issued by the Purpose of the Act and relevance to CVBM Supportive provisions / Barriers of the State. competent authority. In this context, the Environmental Impact Assessment Regulations that came into effect on December 8, 2014, and were amended in Published by the Department of Forestry, Fisheries and In March 2022, the Minster for the Department of Forestry Fisheries and the The Act also provides for certain aspects of the April 2017, promulgated in terms of NEMA, govern the process, methodologies, and the Environment (DFFE) in November 2020 (in line with Environment initiated a consultation process linked to the requirement of specified administration and enforcement of other relevant requirements for undertaking environmental impact assessments to support EA the National Environmental Management: Waste Act No. sectors, including battery manufacturers, to implement Extended Producer environmental management laws and matters. applications. Listing Notice 1 of the Regulations lists activities that require a Basic 59 of 2008), the regulations require the establishment Responsibility (EPR) measures. However, the ambit of the regulations currently Assessment process, while Listing Notice 2 lists activities that require a Scoping of Producer Responsibility Organizations (PRO), through only covers the manufacturing of “portable” batteries. According to the definition & Environmental Impact Report (S&EIR). Listing Notice 3 lists activities in certain which producers of batteries, in this case, need to provide in the regulations, a “portable” battery is a sealed battery that can be “carried sensitive geographic areas that require a Basic Assessment. a framework for ensuring the effective and efficient without difficulty” and is neither an automotive nor an industrial battery. Given management of end-of-life products and to encourage the nature of VRFBs, manufacturers of such batteries would not be subject to the and enable the implementation of circular economy provisions set out in the regulations. initiatives. Extended Producer Responsibility is a means through which the manufacturers and importers of products are required to bear a significant responsibility for the impact their products have on the environment, from manufacture to the day they are discarded. The Regulations ensure that products that can be recycled or upcycled are and that waste products diverted to landfill are kept at a minimum, fulfilling the Waste Management Strategy 2020 goal of creating a circular economy. 112 Vanadium battery storage report Vanadium battery storage report 113 Table 6.3: Industrial Laws and Policies 6.5 Income Tax Act • Currently, the market is purely driven by behind-the-meter (BTM) battery installations in Uninterrupted Power Supply Industrial Policy Action Plan (IPAP) In South Africa, the government has introduced a range of (UPS), telecom, rooftop solar, solar home lighting systems, incentives aimed at increasing the uptake of renewables. The Purpose of the Act and relevance to CVBM Supportive provisions / Barriers and microgrids. The lack of an enabling regulatory framework introduction of clean energy tax incentives has historically been contributes to the slow uptake of VRFBs as a utility-scale provided for in Section 12 of the Income Tax Act and has resulted The principal objective of IPAP is to achieve structural The IPAP identifies vanadium (among other metals such as manganese and nickel) solution. change by encouraging the development, growth, as sought-after metals in the battery materials market and highlights vanadium in increased renewable energy uptake and energy efficiency and increased competitiveness of the South African electrolyte manufacturing projects as a key mineral beneficiation project. The IPAP measures. Some measures set out in Section 12 can, however, • Inadequate standards for storage batteries in South Africa manufacturing sector. Its provisions stimulate demand acknowledges the important role of BESS in distributed energy generation models, be interpreted to also cover BESS applications. Table 6.4 outlines enables the import of substandard and uncertified products to for a vast range of upstream inputs and services, while which are increasingly becoming the business-as-usual approach in developed also stimulating additional downstream activity. It is a economies. Furthermore, the IPAP recognizes the opportunities for BESS in South some incentives that could support the uptake of BESS/VRFBs the detriment of the development of the local market and local critical driver of innovation and productivity growth on a Africa in relation to capital deferrals and arbitrage (storing production surplus in South Africa. manufacturers. domestic level and is also central to the development of a during low demand periods and meeting higher demand during peak periods). strong export strategy. • A lack of incentives specifically aimed at promoting the To realize the potential of VRFBs, the IPAP introduced a key action program Key barriers preventing the uptake of storage competitiveness and commercial feasibility of BESS Applicability in value chain: Vanadium electrolyte specifically focused on the demonstration of energy storage technologies in South manufacturing, VRFB manufacturing, VRFB end use Africa. This will include the development of a vanadium electrolyte production in South Africa technologies is hampering the uptake of BESS technologies. facility, followed by a vanadium redox flow battery assembly/manufacturing plant in South Africa. This will facilitate new industrial development opportunities with a The preceding analysis of the South African laws and policies • The IRP2019 foresees the addition of 0.5 GW of energy storage global market perspective. identified the following key barriers as the most limiting factors in 2022 and the addition of a further 1.5 GW only seven years This project will support: prohibiting the increased uptake of VRFBs as a utility -scale later. This staggered timing of energy storage additions is not BESS solution: conducive to stimulating a battery storage industry. • Increased beneficiation of South African vanadium resources. • Localization of vanadium redox flow battery technology to support market development in South Africa and regionally. Table 6.4: Tax Incentive Measures Medium-Term Strategic Framework (MTSF) Description Details Section Application to BESS Purpose of the Act and relevance to CVBM Supportive provisions / Barriers Accelerated depreciation Regarding assets brought into use for the first time The application of Section The Medium-Term Strategic Framework (MTSF) 2019- Although the MTSF does not outline any specific provisions relating to BESS allowance (RE) and solely to produce renewable electricity. The 12B should be extended to 2024 is the country’s second five-year implementation technologies, securing the supply of energy is a key outcome to realize economic allowance is based on the cost of the assets, and 50%, 12B(1)(h) include BESS applications plan to achieve the goals set out in the county’s National transformation. As part of securing energy supply, the following outcomes are 30%, and 20% is granted in each of the first three years as generation assets. Development Plan. The MTSF 2019-2024 also sets out highlighted in the framework that could support the increased deployment of of use, respectively. the package of interventions and programs that will BESS/VRFB technologies: advance the seven priorities adopted by the government. South Africa’s energy transition forms part of Priority 2: • Explore embedded generation options to augment Eskom capacity—the Industrial policy project (IPP) Industrial policy projects that use improved energy BESS projects could be Economic Transformation and Job Creation. increased deployment of BESS/VRFBs is a key aspect to consider as part of the allowance (Energy Efficiency) efficiency and cleaner production technology, inter classified as industrial increasing number of large-scale embedded generation options. alia, are entitled to an allowance of 35% – 100% of the policy projects to receive 12I • Diversify energy sources by implementing the approved Integrated Resource cost of new and unused manufacturing assets used in the additional investment Plan—if the IRP is amended to increase the capacity of renewables in the the project. and training allowance set South African electricity grid, BESS applications will play a fundamental role out in Section 12 in decreasing the variability associated with the increased uptake of renewable energy technologies. Research and Development A 150% allowance for expenditure incurred directly To encourage pilot allowance (Renewable Energy and solely on approved R&D activities undertaken projects, Sections 11D and and Energy efficiency) in South Africa. The expenditure must be incurred in 11A could be extended to 11D; 11A the production of income in any trade. The allowance include BESS research and also extends to pre-trade expenditure incurred for development projects. approved R&D activities. Source: PwC calculations 114 Vanadium battery storage report Vanadium battery storage report 115 Key recommendations South Africa, the country has yet to develop the regulatory regime Leveraging the provisions of existing legislation, such as 6.5.3 Energy regulatory recommendations that would promote the uptake of BESS, and more specifically, section 19(1) of the National Energy Act that allows the • Amend South Africa’s IRP: The projected decline in VRFB prices, the continuing innovation VRFBs. Urgent action is required by the Department of Industry Minister of Mineral Resources and Energy to publish BESS in new battery technologies, as well as their benefits at times of • For BESS to be commercially feasible, the IRP must be and Competition (DTC) and entities such as the National Regulator -specific regulations, can bring about tremendous development peak demand and load shedding are continuously strengthening updated to at least triple the renewable energy capacity for Compulsory Specifications (NRCS) and the South African opportunities for BESS. Such regulations would support BESS the commercial case for increased BESS deployments. However, as provisions for wind and solar to address South Africa’s Bureau of Standards (SABS) to put relevant standards and testing provisions currently set out in existing developmental policies BESS applications represent a new form of energy technology in international climate change commitments, set out its IDC capabilities in place. such as the IRP and IEP. and the country’s energy crisis. Additionally, emerging energy regulation, such as the • Balancing a large quantity of renewable power, especially Figure 6.2: Key Components of a Circular Vanadium Business Model Electricity Regulation Amendment Bill, will make it possible solar PV and wind (both variable sources), requires the support for VRFBs owners to participate in a liberalized electricity of energy storage systems, such as VRFBs. market, incentivizing the increased deployment of VRFBs when compared to the current single -buyer electricity market. From • Introduce a set of regulations under section 19 of the National the assessment, it is clear that the greatest regulatory reform Energy Act, specifically aimed at promoting the increased required to support a circular vanadium business model would be deployment of BESS and VRFBs. Introduc v n dium inv stm nt promotion pl n in in the energy policy space. The key regulatory changes set out ccord nc with th Dr ft below would contribute to the successful implementation of a 6.5.4 Industrial regulatory recommendations Explor tion Str t for th Minin Industr . circular vanadium business model in South Africa. • Introduce tax incentives associated with the manufacturing, piloting, and deployment of VRFBs similar to the tax incentives Am nd th IRP to incr s BESS c p cit introduc n 6.5.1 Mining regulatory recommendations introduced for the increased uptake of renewable energy in op n multim rk t s st m in section 12 of the Income Tax Act. Min r ls nd South Afric llowin BESS • Introduce an investment promotion plan in accordance with Minin L w own rs to p rtidp t s the Draft Exploration Strategy for the Mining Industry in South • Introduce free trade zones: Special Economic Zones (SEZs) are nd Polic l ctricit n r tors nd bu rs duty-free areas offering storage and distribution facilities for of l ctricit in th op n m rk t Africa that focuses on supporting the vanadium extraction industry. value-adding activities within the Special Economic Zone for Introduc s t of D v lop principl s nd proc dur s subsequent export. Vanadium electrolyte manufacturers will nvironm nt l st nd rds • Introduce vanadium beneficiation support mechanisms for th s ttin if BESS t riffs nd sp cific ll im d tr dudn Environm nt V n dium uid lin s t riffs in ccord nc benefit from the development of a free trade zone to increase th imp ct of VRFBs on th En r under section 26 of the Minerals and Petroleum Resources L w nd circul r L w nd with th El ctridt r ul tion the commercial feasibility of exporting vanadium electrolytes nvironm nt (for x mpl Development Act. nvironm nt l p rmittin nd Polic busin ss Polic Am ndm nt Bill to end users. nd of lif st nd rds for l r mod l Introduc rul s nd r ul tions sc l BESS pplic tions). SEZs could play an important part in the development of local to llow VRFBs/BESS 6.5.2 Environmental regulatory recommendations t chnolo i s nd r n w bl battery value chains. For example, the vanadium electrolyte plant n r to contribut to th rid • Develop a specific recycling/reuse regulatory regime aimed Industri l of Bushveld Energy is being established in the Coega SEZ in the s ncill r s rvic s. at reducing the impact of the vanadium value chain on the L w nd Polic Eastern Cape, at the port of Coega. It could be advantageous to D v lop s t of r ul tions environment. This should include the following: locate additional battery value chain activities, such as VRFB und r s ction 19 of th N tion l En r Act im d t supportin • Guidelines on the identification of appropriate locations for battery manufacturers, in the same SEZ. th incr s d d plo m nt of BESS solutions considering various factors such as weather VRFBs in South Afric . Introduc t x inc ntiv s nd SEZs conditions, natural resources, access to infrastructure, and sp cific ll im d to stimul t the natural environment, among others. inv stm nt nd improv th comm rd l f sibilit of VRFBs in • Guidelines for the dismantling of BESS equipment and the end South Afric . of its service life, including specific BESS end-of-life provisions regarding qualifications for entities engaged in recycling used battery equipment and the reconditioning and testing of such Source: PwC South Africa materials, equipment, and devices. 116 Vanadium battery storage report Vanadium battery storage report 117 6.6 Using a Vanadium Leasing SPV contractual terms, to ensure the realization of more economic to become a member in the vanadium leasing SPV and share in tax reduction or exemption could then be recovered through to Benefit the Public Entity linkages from their mineral resources. One way the South the revenue generated by the SPV. Ideally, the establishment of a vanadium leasing SPV that includes the public entity as a African government aimed to effectively obtain more benefits a vanadium leasing SPV should benefit the vanadium industry member, reducing the tax liability of the vanadium extraction A Special Purpose Vehicle (SPV) is a legal entity created by the from the development of its natural resource endowments for and the overall circular business model. Therefore, the possibility company during the extraction phase while also ensuring that sponsor or originator (private sector or public sector), to fulfill present and future generations was through the enactment of reducing or exempting companies from certain taxes and/or the public entity benefits from the leasing model during the a temporary or permanent objective of the sponsoring entity. of the MPRDA. The MPRDA specifies that royalty payments mineral royalties can be explored to support the development leasing phase. This concept has been set out in Figure 6.3. Its powers are very limited, and it will end when the purpose are to be charged when [mineral and petroleum] resources are of the sector during the extraction and processing phases. The is attained. Public sector SPVs generally have a much longer transferred or sold in accordance with the MPRDA’s provision life span. However, to structure a vanadium leasing model that for State custodianship over its mineral resources. The royalty would also benefit the public sector, it would be necessary to Figure 6.3: Public Entity SPV Model payments collected by this instrument represent an additional establish a private sector SPV that includes a public entity. revenue stream to the government in conjunction with corporate While such mechanisms were a rarity in the 1990s, they income tax (CIT) receipts, because both payments are collected have become increasingly popular, and we now see many in the same time cycle. Thus, in South Africa, the key streams Curr nt structur of public ntit b n fit types of SPVs with various legal, ownership, governance, and of government revenue from the vanadium leasing model would management structures—some of which would appear to flow from two sources of levies: have worked better than others. Some are legislated (e.g., the 1. Corporate Income Tax: Corporate income tax is charged Saldanha Bay Industrial Development Zone), some are not (e.g., under the Income Tax Act. For tax years ending before March the Mandela Bay Development Agency). When considering V n diumor V n dium M n uf cturin of VFRB 31, 2023, the CIT rate applicable to the corporate income of xtr ction proc ssin b tt r compon nt nd us vanadium leasing models, there have already been developments both resident and non-resident companies is a flat 28%. This in this space. In September 2020, Invinity Energy Systems, rate will be reduced to 27% with effect for assessment years a manufacturer of vanadium flow batteries for the large- ending on or after March 31, 2023. This rate will be payable scale energy storage requirements of businesses, industry, to vanadium mining and vanadium processing companies. and electricity networks, formed a special purpose company, Corpor t Incom T x nd Min r l 2. Mineral Royalties: An entity that wins or recovers a mineral Ro liti s p bl to public ntit Vanadium Electrolyte Rental Limited (VERL), in partnership with resource within the Republic must pay a royalty for such Bushveld Minerals to provide an electrolyte rental option for the extraction to the South African government under the company’s customers. The formation of VERL provides Invinity Minerals and Petroleum Resources Royalty Act. The payment Possibl public ntit b n fit usin SPV customers with the additional option of renting the electrolyte of a mining royalty is aligned with the idea that South used in the Vanadium Flow Battery (VFB) system over a set term. Africa’s mineral resources are the common heritage of all the This approach allows customers to reduce the upfront capital people of South Africa, with the State as custodian thereof outlay of a flow battery system by renting the electrolyte over for the benefit of all South Africans. the life of a project, rather than purchasing it at the outset. Both these sources of revenue are paid at the vanadium V n diumor V n dium M n uf cturin of VFRB The structure and purpose of the SPV only benefits the private extraction and processing phases to the National Revenue Fund xtr ction proc ssin b tt r compon nt nd us sector entities involved in the establishment of the SPV. No for the benefit and use of the South African government. The public-private sector SPV has been established to benefit the public sector benefits from such charges in the early stages public entity when considering vanadium leasing models. To of the value chain associated with a vanadium leasing model. benefit a public entity, government participation in such an For the public entity to partake and benefit from a vanadium • Norm l Min r l Ro liti s p bl • Form tion of V n dium L sin SPV SPV would have to be facilitated. More than ever, the capture leasing SPV, without placing an additional financial burden on to public ntit with public ntit s b n fic r m mb r of a greater direct share of the wealth potential of mineral • R duc d Corpor t t x r t pplic bl • Public ntit to sh r r v nu n r t d vanadium mining and processing companies, regulatory reform development, along with obtaining more socioeconomic linkages, to Minin ri hthold r b V n dium L sin SPV would be required in the current fiscal regime. Such reforms has topped the agenda of many mineral-rich countries. This should enable the exemption or reduction in either the corporate re-emergent drive has prompted many governments to revise income tax rate or the mineral royalties payable. In exchange mineral policy and fiscal instruments as well as renegotiate Source: PwC South Africa for such a tax concession, the government should be allowed 118 Vanadium battery storage report Vanadium battery storage report 119 6.7 Estimating the Macroeconomic 6.8 Data Validation, Data Quality, 6.9 Economic Contribution53 6.9.1 Estimated economic contribution and Fiscal Impact on South Africa and Data Reliance Using data from the leasing company on capital expenditure for of capital expenditure, 2022 This section aims to quantify the estimated economic PwC received the data used in this analysis from the vanadium preparing the vanadium electrolytes for leasing, the estimated This section provides insight into the nature and magnitude of contribution to the South African economy of the electrolyte leasing company. The company developed a financial feasibility operating costs, and expected revenue, we calculated the following: the 1 MWh leasing facility’s contribution to the economy through leasing model through the annual lease fee and recycling of the model for a 1 MWh facility, on which the impacts that will be capital expenditure and the knock-on effects of this expenditure. • The estimated economic contribution of capital expenditure for electrolytes. To do this, a macroeconomic impact assessment reported on in this report are based. The type of data provided electrolyte leasing GDP is one of the broadest measures of economic growth. (MEIA) was conducted using an internationally accepted includes capital expenditure, revenue, and operating costs. This Therefore, it is an all-encompassing measure representing • The estimated economic contribution of the electrolyte leasing approach. The approach was informed by the Global Report information was then checked by the PwC team before allocating the leasing company’s contribution to economic growth in model through the annual lease fee and recycling of the Initiative (GRI) standards to quantify the economic value of the it to industries using the globally employed Standard Industrial South Africa. In 2022, the estimated economic activity to be electrolytes investment and operational expenditure in one or more parts of Classification (SIC) codes. These data were entered the MEIA generated in South Africa as a result of the investment is around the economy and indicate how this affects other sectors of the model to understand the impact. In addition, we modeled the potential long-term impact of US$293,530. The direct impact accounted for 57% of the total economy as well as how those impacts are distributed. The continuous leasing of the vanadium electrolytes. The contributions MEIAs are widely accepted, with several credible international GDP multiplier effect, while the indirect and induced impacts made Social Accounting Matrix (SAM) methodology estimated how the are estimated through the impact on GDP, jobs, household income organizations such as the United Nations Food and Agriculture up the remaining 43%. activities associated with the investment affect other sectors of and public finance. Organization, World Bank, International Model for Policy Analysis the economy and how the revenue is distributed in the economy. of Agricultural Commodities and Trade, and the Organisation Figure 6.5: Contribution of the Leasing Facility to the Economy The SAM uses national accounts based on data from the South for Economic Co-operation and Development employing the African Reserve Bank (SARB), National Treasury (NT), Statistics methodology. The model is not without its limitations: South Africa (Stats SA), Labour Force Survey, as well as local and V n dium El ctrol t Cost In 2022, the leasing company is expected provincial accounts. • There must be no supply constraints Conv rsion Cost to invest US$293,530 to prepare the • Substitution is not allowed Shippin Cost - El ctrol t vanadium electrolytes for leasing, • Prices must be fixed Customs Dut approximately 65% of the total costs • The model must be static Shippin Cost to EU - V n dium calculated for a leasing company. This is • There should be no welfare effects 2% 1% 5% because of the high costs associated with Figure 6.4: Social Accounting Matrix: Key Concepts the production of the electrolytes. The conversion cost is the second most Th SAM mod l outputs w r us d to stim t Th conomic imp ct is compris d of significant cost item, accounting for tot l conomic imp ct cross th or ni tion dir ct, indir ct nd induc d imp cts approximately 27% of the costs related to Th dir ct imp ct is ssoci t d with th inv stm nt the vanadium business model. Therefore, 27% to t th V n dium l ctrol t s r d for l sin the costs for shipping and customs duty nd op r tion l xp nditur und rt k n b th account for the balance of total expenditure. l sin comp n . Corpor t to Contribut to conomic rowth public fin nc throu h th GDP cr t d throu h t x r v nu Th indir ct imp ct includ s th s cond round 65% ff cts th t m n t from th incr s d d m nd for oods nd s rvic s n r t d b th l sin comp n . Contribut to Contribut to mplo m nt pov rt Th induc d imp ct r sults from th mplo s of cr tion ll vi tion th l sin comp n purch sin oods nd s rvic s t hous hold l v l. Source: Leasing company, PwC analysis Source: PwC analysis using Social Accounting Matrix methodology 53 Please note that economic contribution was modelled in South African rand. An average forecasted exchange rate was used to convert the results to US dollars. 120 Vanadium battery storage report Vanadium battery storage report 121 Figure 6.6: Analysis from the Social Accounting Matrix for South Africa direct and indirect tax collected by the national fiscus from 6.9.2 Estimated economic contribution from the companies in South Africa that are associated with the leasing annual lease fee and recycling of electrolytes company’s capital expenditure. Estim t d conomic contribution of th l ctrol t l sin mod l throu h c pit l xp ntitur 2022 In addition to the economic impacts associated with the capital The total income to be received by households is estimated at expenditure of preparing the vanadium electrolytes for leasing, approximately US$126,097. An estimated US$3,714 is expected 55 there will also be long-term economic contributions created by Job GDP the electrolyte leasing model through the annual lease fee and (Numb r) (R Million) to go to lower-income households in the country, representing about 2.9% of total household income. recycling of the electrolytes. 3 $68,506 23% 5 $165,252 Investment by the leasing company is expected to contribute This section of the report considers the leasing company’s $58,353 57% direct contribution to the economy, in terms of revenue and the positively to improving economic development in the country. 20% 10 2 $292,111 This could increase the leasing company’s output, leading to an administrative function, as well as the knock-on effects of such jobs sust in d on tot l GDP imp ct increased economic contribution across the sectors in which the expenditure over the period 2023–42. v r p r r ov r th 2022 p riod leasing company operates and in those sectors that provide inputs Since leasing is an administrative function, there will be limited to the leasing company. Continuing to lease vanadium electrolytes impact during the 2023–42 period. However, at the end of the could have a long-term economic benefits. leasing period in 2042, more value is expected because of the Hous hold incom T x r v nu As some parts of the value chain, such as mining and recyclable nature of the electrolytes. The impact is greater every $126,097 transportation, have not been considered, the economic impact time the electrolytes are reused. imp ct on hous holds in could be significantly higher. South Afric 2.9% Figure 6.7: Leasing company of tot l hou shold incom $50,000 is xp ct d to o to tot l imp ct on th low r-incom housholds n tion l fiscus R v nu s Dir ct imp ct Indir ct imp ct Induc d imp ct 200 Source: PwC analysis from the Social Accounting Matrix for South Africa $185 175 Through the investment by the leasing company, job opportunities and/or sustained. An average of five jobs will be created directly, R v nu s (USD Thous nd) 150 are expected to be created and sustained in the South African while two jobs will be sustained indirectly in those sectors that economy. This will directly and indirectly generate income for provide inputs to the leasing company. Over the same period, an 125 households. Three types of jobs are expected to be created and/or average of three jobs will be created from economic activity that 100 sustained in the economy: will result from the payment of salaries and wages to people who • Estimated direct jobs that are expected to be created from are directly employed by these companies and its suppliers. 75 ongoing investment The contribution to public finance represents a major part of 50 • Estimated indirect jobs resulting from the multiplier effects of the positive impact on societies in South Africa. This is through the investment 25 $15 $15 $15 $15 $15 $16 $16 $16 $16 $17 $17 the payment of direct and indirect taxes and non-tax revenue $13 $13 $13 $14 $14 $14 $14 $14 • Estimated induced jobs from the increase in household-to- mechanisms. The investment by leasing company is expected to 0 business activity caused by the direct and indirect effects result in tax revenue for the government from induced taxes.54 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 PwC estimated that because of the expected investment by the The contribution is expected to increase by an estimated leasing company in 2022, about 10 jobs on average will be created US$50,000 on average in 2022. This amount is associated with Source: Leasing company data 54 Induced taxation: The different rounds of the multiplier effect, from the initial spending in the sector, through to employees spending their salaries on goods and services (and its resultant effects). 55 Estimated average exchange rate for 2022 is R15.88 (Source: IHS Markit Forecast) 122 Vanadium battery storage report Vanadium battery storage report 123 Figure 6.8: Analysis from the Social Accounting Matrix for South Africa The total income to be received by households is estimated at 6.10 Environmental and Social Analysis approximately US$39,076.60An estimated US$1,111 is expected to The environmental and social analysis focused on evaluating go to lower-income households in the country, representing about Estim t d conomic contribution of th l ctrol t l s f nd r c clin of l ctrol t s in 2042 the likelihood of potential impacts associated with the 2.8% of total household income. development in VRFB sector in South Africa, considering the The leasing company’s administrative activities associated with regional ecological sensitivity and the socioeconomic, cultural, Job GDP (Numb r) (R Million) the vanadium recovery/recycling process contributed positively and environmental health -related beneficial and adverse 1 to improving economic development in South Africa. This impacts. The key findings presented in this report have been $98,187 increased the leasing company’s output, which led to a greater drawn from a desk review and inputs received from stakeholder 2 36% $162,876 59% economic contribution. consultations. The overall outcome of the environmental and $15,065 social analysis is linked to the terms of reference requirements 4 1 $276,128 5% This analysis shows that investment in vanadium electrolyte and agreed approach and methodology. The findings of the jobs sust in d on tot l GDP imp ct leasing, the resultant administrative activities, and the recycling v r p r r ov r th 2042 p riod environmental and social analysis have been structured across process is expected to contribute positively to improving economic the segments identified in Figure 6.9. development in South Africa. In addition, it is expected to have a positive impact on local communities and the South African Hous hold incom T x r v nu government in terms of job creation, poverty alleviation, and contribution to public finances. $39,076 imp ct on hous holds in South Afric Figure 6.9: Overview of the Approach for the Environmental and Social Analysis 2.8% of tot l hou shold incom $68,873 is xp ct d to o to tot l imp ct on th low r-incom housholds n tion l fiscus 1 2 3 4 5 6 Source: PwC analysis from the Social Accounting Matrix for South Africa Dir ct imp ct Indir ct imp ct Induc d imp ct L l nd M ppin of St k hold r St k hold r E&S Risk E&S An l sis R ul tor R ion l E&S M ppin Consult tion Id ntific tion R port Ass ssm nt S nsitivit The economic activity from vanadium recovery or recycling is Owing to the planned administrative activities associated with the This ctivit This knowl d Id ntifi d nd C pturin critic l Id ntific tion of Fin li in th E&S estimated at US$276,128 in 2042. The direct impact accounts 56 vanadium recovery/recycling process, total government revenue is will includ th rin ph s m ppin of insi hts of loc l k nvironm nt l n l sis r port for approximately 59% of the total GDP impact, while the indirect expected to increase by an estimated US$67,87357 in 2042. r vi win th will involv th rin k st k hold rs, st k hold rs on nd soci l risks ft r tri n ul tion E&S r ul tions r l v nt docum nts cross th priv t , xistin pr ctic s ssoci t d with of s cond r and induced impacts make up the remaining 41%. ssoci t d with nd r vi win s ctor, ov rnm nt nd und rst ndin VRFB s ctor nd d t nd inputs Poverty alleviation is one of the main priorities of the South minin nd b tt r th m st blishin s ctor nd th k E&S risks m ppin th m from st k hold r During the vanadium recovery/recycling process, the African government. According to the Stats SA national poverty m nuf cturin n ‘ s-is’ sc n rio, communit l v l. ssoci t d with cross th consult tions. s ctor. b for in VRFB s ctor. v lu ch in. administrative activities by the leasing company are expected lines report, there are some 30.4 million people in South Africa with st k hold rs. to create and/or sustain on average about four jobs in that who are living below the upper-bound poverty line58of US$9059 period. From this, the leasing company is expected to create per person per month. Therefore, it is important to understand and/or sustain an average of one direct job, one indirect job in how households in South Africa will benefit from the Leasing those sectors that will supply inputs to this process, and two company’s administrative activities associated with the vanadium induced jobs. recovery/ recycling process. Source: Approach taken by PwC for E&S Analysis 56 Please note that the exchange rate conversion used for these figures was an average exchange rate of R25.01/US$1 for 2042 according to data from IHS Markit. 57 Average exchange rate of R25.01/US$1 for 2042 according to data from IHS Markit. 58 This refers to the food poverty line plus the average amount derived from non-food items of households whose food expenditure is equal to the food poverty line. 59 Average exchange rate of R14.79/US$1 for 2021 according to data from IHS Markit. 60 Average exchange rate of R25.01/US$1 for 2042 according to data from IHS Markit. 124 Vanadium battery storage report Vanadium battery storage report 125 6.11 Legal and Regulatory Assessment context of the VRFB sector. The second column gives a brief Table 6.5: Overview of Relevant Legislation (continued) description of this legislation, and the third column describes The key environmental regulations that are likely to be directly Remarks Regulatory Authority the requirements to comply with and respond to the policy and Legislation Purpose and Relevance and Permit Requirements applicable to the VRFB value chain were analyzed to understand legislative context. the extent of the environmental risk assessment and mitigation 4 National Water Act, 1998 The purpose of the NWA, as set out in Section 2 thereof, is Water Usage Licence (WUL) or IWUL processes being followed according to the existing regulations. In addition to the relevant environmental legislative and (Act No. 36 of 1998) – (NWA) to ensure that the country’s water resources are protected, The IWWMP is to be developed in line used, developed, conserved, managed, and controlled in a with regulations and guidelines issued as Some of the key regulations that will apply to vanadium mining regulatory frameworks, the social regulatory frameworks relevant way that, inter alia, considers the reduction and prevention part of this Act. and the production of vanadium electrolytes are summarized to the various components of the vanadium mining and VRFB of pollution and degradation of water resources. in Table 6.5. The first column references the legislation and value chain process are compiled in Table 6.6. 5 The National Environmental This Act signifies the reforms in South Africa’s laws The applicability of the permit is to be guidelines used to determine the legislative background and Management: Biodiversity regulating biodiversity. assessed on a case-by-case basis. Act (NEMBA), 2004 In terms of Section 57 of the NEMBA, no person may (Act 10 of 2004) conduct any restricted activity involving any species that Environmental Regulatory Framework has been identified by the minister as “critically endangered species”, “endangered species”, “vulnerable species” or Table 6.5: Overview of Relevant Legislation “protected species” without a permit. 6 The National Environmental The Act promotes the conservation of the coastal The applicability of the permit is to be Remarks Regulatory Authority Management: Integrated environment and ensures sustainable development assessed on a case-by-case basis. Legislation Purpose and Relevance and Permit Requirements Coastal Management Act, practices and the sustainable use of natural resources. 2008 (Act 24 of 2008) 1 The National Environmental NEMA has provisions for Environmental Authorisations Environmental Authorization—A full Management Act (NEMA), under section 24 of the act. It also sets out the provisions -scale EIA should be conducted for 7 The National Environmental The Act provides necessary protection to the national If the project site falls within an area that 1998 (Act 108 of 1998) and for conducting an EIA study. The chapter 5 of the mining activity and for setting up Management: Protected parks, special parks, and heritage sites of South Africa. is formally protected or declared as a amendments. NEMA also specifies the general objectives for taking industrial facilities for vanadium Areas Amendment Act, nature reserve, certain restrictions under Environmental Impact an Integrated Environmental Management approach. electrolyte production. 2009 (Act 15 of 2009) & this Act would apply. Assessment Regulations, Section 24(1) specified that , the potential impact on The Scoping Report, Environmental National World Heritage 2014. the environment due to the listed activities must be Impact Assessment Report (EIAR), and an Convention Act, 1999 (Act considered, investigated, assessed, and reported to Environmental Management Programme 49 of 1999) the competent authority authorised by the NEMA for (EMPr) are to be developed in line with granting the relevant environmental authorization. the requirements of this Act and EIA 8 National Heritage Section 34 of the NHRA provides for a mechanism for The requirement of a permit or license In terms of section 24F(1) of the NEMA, no person are regulations. Resources Act (NHRA), 1999 protecting immovable property through an outright is determined by conducting a Heritage allowed to commence any activity listed or specified in (Act No. 25 of 1999) prohibition on altering or demolishing any structure or Impact Assessment (HIA) study in terms of section 24(2)(a) or (b), unless the competent part of any structure that is older than 60 years without a accordance with Section 38 of the authority has granted an environmental authorization for permit issued by the relevant provincial heritage resources National Heritage Resources Act (No 25 such activity. authority. If a permit is refused, consideration must be of 1999). given to designating the place concerned as a heritage site, or protected area or heritage area within three months of such refusal. 2 The National Environmental This act regulates air emissions to protect the Atmospheric Emission license Management: Air Quality Act, environment by providing reasonable measures for 9 The National Forests Act, The Act promotes the sustainable management and The requirement of a permit or license 2004 (Act 39 of 2004) preventing pollution and ecological degradation and 1998 (Act 84 of 1998) development of forests for the benefit of all and creates is envisaged if any protected trees or securing ecologically sustainable development; it the conditions necessary to restructure forestry in state resources are present in the project area. provides for national norms and standards that regulate forests in relation to protection and sustainable use. the monitoring of air quality. The same is to be determined according to the provisions stipulated in this Act. 10 The Occupational Health The purpose of the Act is to provide for the health and Conduct an MHI RA and follow 3 The National Environmental The law regulates waste management to protect A Waste License in line with the NEMWA and Safety Act, 1993 safety of people at work or in connection with the use of the guidelines specified in the MHI Management: Waste Act, health and the environment by providing reasonable is required. (Act 181 of 1993) plants and machinery. Regulations. (NEMWA) 2008 (Act 59 of measures to prevent pollution. This Act aims to enforce The Regulations and Guidelines specified According to the provisions of the Act, a Major Hazard 2008). an integrated approach to waste management, with as part of this Act are also to be complied Installation Risk Assessment (MHI RA) is to be conducted emphasis on the prevention and reduction of waste at with, along with the development to ascertain the associated risks and potential impact. the source and, where this is not possible, to encourage of an Integrated Water and Waste According to the provision under this Act, the local fire and reuse and recycling instead of disposal. Management Plan (IWWMP), which is emergency services, local Department of Labour, Provincial required to obtain the Integrated Water Department of Labour, and National Department of Labour Use Licence (IWUL) need to be provided with a copy of the risk assessment. Note: The table only discusses the key environmental regulations that are likely to be applicable to the VRFB sector. This table does not include all country-specific environmental regulatory frameworks. 126 Vanadium battery storage report Vanadium battery storage report 127 Social Regulatory Framework Mapping of Regional Environmental and Social Sensitivity and poorer crop yields and production.65,66 Keeping the sustainability goals on par with the NDC, the country can harness Table 6.6: List of South Africa’s Legislative Mechanisms to Promote Equity61 South Africa’s commitment to improving the environment and the huge resource potential and market opportunities, from major social landscape through sustainable development goals (SDGs) Legislative Mechanism Purpose and Relevance institutional investors and private sector players.67 South Africa, according to its new set of commitments, aims to Some of the human development challenges in South Africa 1 The Promotion of Equality and Aimed at implementing gender parity by 2030 in accordance with the African Union’s limit GHG emissions to 398–510 MtCO2e by 2025, and 350–420 Prevention of Unfair Discrimination Agenda 2063. relating to the SDGs68 have been compiled to highlight the critical Act 2000 (PEPUDA or the Equality Act, MtCO2e by 2030 with a 28% reduction in GHG emissions from the development challenges in analyzing the risk, opportunity, and Act No. 4 of 2000) 2015 NDC targets.62 Compared to its first NDC, it targeted an GHG safeguards to be considered while leveraging the potential of the emissions level in the range of 398–614 MtCO2 equivalent during 2 Employment Equity Act The Act aims to support the promotion of equal opportunity and fair treatment in employment VRFB value chain . through the elimination of unfair discrimination. 2025–2030.63 The country accounted for 1.31% of the world’s fossil (no. 55 of 1998) carbon dioxide (CO2) emissions in 2019 — about 480 million metric Some of the SDGs most critical to addressing the environmental, Implementation of affirmative action measures to redress the disadvantages in employment experienced by designated groups in order to ensure their equitable representation in all tons of CO2.64 social, and economic concerns in the present country context occupational categories and levels in the workforce. have been identified in Table 6.7. Scaling up of the VRFB industry As specified in publication by accord, Africa is one of the most would increase the vanadium mining activtites which is likely 3 Code of Good Practice The Act highlights the following: vulnerable continents to climate change and climate variability, (Labour Relations Act (66/1995) • The need to ensure equal pay for work of equal value within the next five years to improve the following areas of human development over the with almost all the top 10 world’s most vulnerable countries based • The need for women at the forefront, including procurement changes next few years through poverty reduction, improved access to in Sub-Saharan Africa. Several African regions are considered • The need for inclusion for women to reach universal financial access by 2020 education, gender equality, better sanitation and water, and • The need for gender-responsive budgets climate change hotspots, exposed to conflicts and violence, and energy affordability, and inclusive and economic opportunities, face a state of water scarcity, damaged coastal infrastructure, while scaling up industry and infrastructure. 4 Broad-based Black Economic Empowerment Charter for the South African Mining and Minerals Industry or the Mining Empowerment (B-BBEE) Act 53 of 2003 Charter: for transformation of the mining industry Table 6.7: South Africa’s Progress on some Critical Sustainable Development Goals 5 Department of Social Development Aimed at addressing poverty reduction, unemployment, and inequality. However, it does not 2020/21 — 2024/25 Strategic Plan have a particular framework for or mention poverty, unemployment, and inequality (there is no mention of mining as an occupation or social protection and/or development for mining Sustainable Development Goal South Africa’s Progress communities or workers). Goal 1: No Poverty Poverty has steeply declined, although it remains high among Black Africans, female-headed households, the poorly educated, and the rural population. 6 The National Youth Policy (NYP) This is a cross-sectoral policy aimed at effecting positive youth development outcomes for 2020-2030 young people at the local, provincial, and national levels in South Africa Goal 4: Quality Education Access to education and literacy has increased, as has the overall share of children benefiting from early education. However, completion rates in the upper secondary grades and enrolment rates in tertiary education are still low combined and demonstrate inadequate skill levels. 7 The Adult Basic Education and Training This Act highlights the regulation of basic education and training for adults and supports the (Abet) Act (Act 52 of 2000) establishment, governance, and funding of public adult learning centers Goal 5: Gender Equality Despite considerable progress, women continue to have unequal access to income, which impedes the full attainment of women’s human rights and dignity and gender-equitable opportunities. 8 Small, Medium and Micro Enterprises This framework provides the institutional structure to address the needs of urban and rural Goal 6: Clean Water Despite improved access to safe water and sanitation services, poor conservation practices affect the (SMMEs) policy and legal framework women -owned SMMEs and accelerate funding. and Sanitation sustainability of water resources. Goal 7: Affordable and Access to electrical power has increased, although informal settlements and rural areas face cost constraints that 9 The Department of Employment and The legislation highlights provisions that support the regulation of labor practices that outline Clean Energy hamper accessibility. While the use of renewables has risen sharply, the electricity grid remains highly dependent Labour comprise: The Basic Conditions the rights and duties of employees and employers. It is aimed at ensuring social justice through on coal. of Employment Act of 1997 the provision of the basic standards for employment pertaining to working hours, wages, Goal 8: Decent Work and Low skill levels, limited competition, inadequate infrastructure, and inconsistent government policies hinder dismissal, leave, and conflict resolution. Economic Growth productivity and growth and result in high levels of unemployment, particularly among women and youth. 10 The Occupational Health and Safety This legislation is aimed at providing for the health and safety of persons at work who work Goal 9: Industry, Innovation, Public services infrastructure, such as in transport facilities, is weak and there has been a decline in the share of Act of 1993 closely with the plants and machinery, and against hazards to health and safety emerging out and Infrastructure manufacturing in output over the past 25 years. of the activities that the persons are engaged with. Goal 10: Reduced Inequalities Despite targeted policies and legislative frameworks, discriminatory practices persist. Women, especially young African women, face disparities in unemployment and poverty due to discrimination based on race and ethnicity 11 Social Labour Plan (SLP) Companies are required to plan an SLP under Regulation 42 of the Minerals and Petroleum South Africa’s Mineral and Petroleum Resources Development Act (MPRDA) and to devise and submit the SLP to the Department of Resources Development Act 2002 Mineral Resources and Energy (DMRE)5 8[1] as a prerequisite for the granting of a mining right. 62 https://www.dffe.gov.za/mediarelease/creecy_indc2021draftlaunch_climatechangecop26 63 https://climatepromise.undp.org/what-we-do/where-we-work/south-africa#:~:text=The%20 revised%20 NDC%20 includes%20the,its%20 Low%2DEmission%20Development%20 Strategy 64 https://www.downtoearth.org.in/news/climate-change/cop26-progress-china-south-africa-boost-climate-action-momentum-but-global-ambition-remains-inadequate-79421 65 https://www.accord.org.za/analysis/cop26-an-african-perspective/ Note: The table only discusses the key social regulations that are likely to be applicable to the VRFB sector. This table does not include all country-specific social regulatory frameworks. 66 https://www.accord.org.za/analysis/cop26-an-african-perspective/ 67 https://unfccc.int/news/climate-change-is-an-increasing-threat-to-africa 68 https://sustainabledevelopment.un.org/content/documents/23402RSA_Voluntary_National_Review_Report___The_Final_24_July_2019.pdf 61 https://www.gov.za/ 128 Vanadium battery storage report Vanadium battery storage report 129 Map 6.1: Geology and Vanadium Deposits in South Africa Map 6.2: Areas of Ecological Importance in the Vanadium-rich Geographies of South Africa Source: Council for Geoscience Source: Protected and Conservation Areas Database, https://egis.environment.gov.za/protected_and_conservation_areas_database Contextualizing SDG Opportunities However, renewable energy sources, such as wind and solar Vanadium Deposits in South Africa and environmental conditions and ecological resources. It must also for the Vanadium Sector energy, are subject to considerable fluctuations, so storage Regional Environmental and Social (E&S) Sensitivity be noted that the regions with predominant vanadium deposits At COP26–the Glasgow Climate Pact, there was a move to technologies are required. These technologies must be able exhibit greater ecological richness compared to the other South Africa has nine provinces, which differ considerably in size. end international support for fossil fuels and redirect funds to store energy during times of overproduction and feed it provinces in South Africa. Map 6.2 showcases the protected The smallest is Gauteng, a highly urbanized region, and the largest to cleaner energy. A declaration signed by over 30 countries back into the power grid during peak loads, thus ensuring areas, natural reserves, world heritage sites, and other protected is Northern Cape, which takes up almost one third of South Africa’s and development banks calls for a halt to overseas funding for the stability of the grid. This is currently achieved by flexibly environments in vanadium -rich deposits in South Africa. total land area. Each province has its own Legislature, Premier, unabated fossil fuels next year. Reducing or eliminating the use of operated thermal power plants and pump storages. With the and Executive Council.71 Based on the Council of Geoscience, the Some of the key findings from a social development perspective fossil fuel as a source of energy is the one of the key initiatives for rising share of renewable energy in electricity generation, vanadium deposits are predominantly located in the Limpopo, include information related to the availability of basic facilities, moving toward a sustainable future. however, additional energy storage facilities are necessary, Mpumalanga, Gauteng, and Northwest provinces. This section will the incidence of poverty, and employment data from the especially for short-term storage. VRFBs offer an interesting focus on the environmental sensitivity of these four provinces. national statistics that emerge across the regions of Limpopo, The negative environmental impact of carbon dioxide emissions option for energy storage technology.70 Map 6.1 highlights the areas with vanadium deposits. Mpumalanga, and Northwest provinces. from burning of fossil fuels leads to a continuous expansion of renewable energies. According to the International Energy Agency There is likelihood of an increase in vanadium mining activity with (IEA), the share of renewables in global electricity generation the increased market demand for VRFB. Thus, increased mining jumped to 29% in 2020, up from 27% in 2019.69 activity is likely to have a direct impact on the regional 69 https://www.iea.org/reports/global-energy-review-2021/renewables 70 Preparation of Electrolyte for Vanadium Redox-Flow Batteries Based on Vanadium Pentoxide, Jan Martin,* Katharina Schafner, and Thomas Turek 71 https://www.gov.za/about-sa/south-africas-provinces 130 Vanadium battery storage report Vanadium battery storage report 131 Table 6.8: Key Outcomes of Stakeholder Consultation Stakeholder Key Takeaways 1 Department of Water The Integrated Water Usage Licence (IWUL) must be secured for the industries associated with V-electrolyte and Sanitation production or processing and associated activities. The industry needs to ensure that the conditions stipulated in the WUL regarding water conservation (WC) and water demand management (WDM) are complied with and that a WC and WDM plan are in place. Compliance with the WC or WDM should be submitted annually as part of the Integrated water and waste management plan (IWWMP) to ensure the productive and efficient use of water resources. The effluent or wastewater discharge of the industrial setup must comply with the General and Special Effluent Standards gazetted in 1984. The IWUL and the General Authorization for waste -related activities will specify which standards a user must respect depending on the type of discharge or disposal, irrigating with wastewater, discharging into a resource, or storing in a pollution -control dam. The user is required to comply with the effluent discharge standards as stipulated in IWUL y. The consultation reflected on the general aspects of mining-related processes. There was no insight on the workforce, gender, or social impacts in the mining sector, nor issues specific to VRFBs and vanadium mining. 2 Department of Mineral No specific insight was provided by the stakeholders regarding the VRFB value chain. Resources and Energy 3 Department of The presence of limited battery -recycling facilities and the absence of government -owned or -operated Trade, Industry & recycling units can present a challenge at a later stage. Competition Furthermore, the current regulations in South Africa are limited in terms of addressing the environmental safeguards needed for lead -acid batteries and are yet to consider the impacts associated with the VRFB market 6.12 Stakeholder Mapping consultation process aimed to ascertain regional environmental to formulate the relevant policies. and social sensitivity and potential opportunities, and to include The incentives available regarding the establishment of production or manufacturing plants in special economic The selection process for stakeholders included the identification zones were highlighted during the consultation, although no clear insight was provided regarding the benefits of E&S safeguards as regulatory requirements and good practice in introducing sustainable energy storage solutions promoting the renewable energy sector. of key governmental departments, private market players (in the the country. industry of mining and battery production), and nongovernmental 4 Department of Public No specific insight was provided by the stakeholder regarding the VRFB value chain. However, the DPE specified organizations. While the previous activities offered a diagnostic and holistic view Enterprises that no areas of concerns are foreseen in the upcoming investments in vanadium-related sectors, whereas there are concerns relating to the coal mining sector. of the E&S sensitivity and landscape at the country and regional Seventeen stakeholders were identified based on these levels, this activity aimed to provide critical insight, relying on 5 CSIR South Africa has an existing framework for various types of energy storage solutions and promotes their categories, and requests for consultations were sent to individual local understanding, across the spectrum of stakeholders —from collection and recycling using the existing legislative framework. These frameworks do not encompass stakeholders. However, availability consultations was low, and stationary battery solutions such as VRFBs, which calls for reforms in the framework that include VRFBs to the private sector, government, and civil society. ensure the implementation of safety provisions in the VRFB industry and monitor the operation and recycling of consultations was conducted with seven stakeholders: the VRFBs from an environmental standpoint. Department of Water and Sanitation; Department of Mineral The consultations were conducted to strengthen the sector Resources and Energy; Department of Trade, Industry and baseline and E&S risks as established during secondary research 6 Bushveld Vanadium The key environmental concerns across the VRFB value chain are concentrated in the mining stage, until the Competition; Department of Public Enterprises (DPE); the Council production of vanadium extract. and understand potential bottlenecks in improving E&S Off-gassing during the mining stage is considerably higher and includes the emission of gases such as carbon for Scientific and Industrial Research (CSIR); Bushveld Vanadium; performance. monoxide (CO) and carbon dioxide (CO2); flammable gases such as methane (CH4), CO, and hydrogen (H2); and Largo. suffocating gases such as CO2, nitrogen (N20), and CH4; and toxic gases such as CO, nitrogen oxides (NOx), and The consultation was completed with seven stakeholders. During hydrogen sulfide (H2S). Furthermore, SO2 is the primary gaseous emission during the V-electrolyte production Appendix G provides a list of the stakeholders identified, stage, released as a result of the chemical reactions during electrolyte production. These pollutants have the the consultations, the stakeholders clearly communicated that potential to significantly decrease the air quality of the area and are a major contributor to the carbon footprint consultations undertaken, and stakeholder outreach initiatives. their sector-specific understanding of VRFBs was limited because in the VRFB sector. The uncontrolled emissions of these gases can have detrimental impacts on the workers and of the evolving maturity and limited scope in the current context. the local population. Both mining and electrolyte production must be authorized through an Air Emission License Stakeholder Consultations issued by the regulatory body in South Africa and must take steps to ensure the implementation of mitigation The stakeholders consulted demonstrated a willingness to provide measures (installation of stack) and adequately monitor emissions. This stakeholder consultation process was launched to obtain a broad picture of E&S risks associated with mining and industries The calcine tailings generated by the extraction process are considered contaminated material (hazardous a concrete understanding of the environmental and social waste) in South Africa according to the waste classification. To dump such waste onto the ground, permits and the current provisions to safeguard the environmental and are required according to the regulatory norms. The disposal of this hazardous waste requires an HDPE -lined impacts of vanadium mining and vanadium processing and the social aspects. Table 6.8 notes the key takeaways based on the surface, in accordance with the waste classification, as this waste category is deemed to have significant manufacture and transportation of VRFBs and other materials potential to pollute groundwater. stakeholder consultations. Appendix H provides details about the associated with VRFBs in South Africa. Moreover, the stakeholder objective of the consultations and a summary of the outcomes. 132 Vanadium battery storage report Vanadium battery storage report 133 Table 6.8: Key Outcomes of Stakeholder Consultation (continued) 6.13 E&S Risk Identification Based on our findings from the study of the social scenario so far, although the number of women working in the mining sector Stakeholder Key Takeaways The environmental and social impacts were mapped by has increased significantly over the years, from approximately conducting a broad-based material flow analysis across the VRFB 11,400 in 2002 to 56,691 in 2019, the participation of women 6 Bushveld Vanadium Mining, processing, and V-electrolyte production involve transportation, handling, and storage of hazardous material. The inappropriate storage and handling of hazardous substances (such as sulfuric acid, other value chain. The material flow analysis majorly focused on the in the sector is still quite low. In South Africa, women represent chemicals) can pose a significant threat to health and safety. raw material requirements for manufacturing V-Electrolyte and only 12% of South Africa’s total mining labor force of 454,861 On whether Baseline studies have been conducted by Bushveld on labor, demographics, and social sensitivity and the methodology or process flow for manufacturing VRFBs, as other parameters for assessment in one or more of the areas or provinces - A baseline study was conducted for people.72 Furthermore, as the VRFB sector is an emerging industry, Vametco in 2020, and Bushveld is finalizing the scope for a revised Socio-Economic Development This body of illustrated in Figure 6.10. based on our reviews of secondary literature and stakeholder work will be completed in mid-2023. The E&S risk assessment for vanadium mining, processing consultations, women are still not engaged in the VRFB workforce. There are no Click here to enter text.baseline studies yet on the workforce and diversity both in vanadium mining and VRFB value chain in their current locations – Britztown, Northwest Province, Wit Bank (Mpumalanga (vanadium electrolyte), recycling VRFB and vanadium electrolyte, There is a greater need for improving skills development among province), and East London. Moreover,there are no specific safeguard practices for enterprise development for women in the mining and mineral sector.73 Black women (as was shared by Bushveld during consultation. Some documents were shared on ring -fenced and the disposal of waste (tailings) focused on the use of or the opportunities for local entrepreneurs at Vametco for the operation to meet its local procurement targets once impact on natural resources, effluent generation, pollution emission, the VRFB operations start, and priority for these opportunities will be given to companies owned by Black women and youth. and waste generation caused by the VRFB value chain. The key focus There are no procedure and assessment conducted for their upcoming project in Limpopo. However, some areas with enironmental implications are specified in Figure 6.11. opportunities for enterprises for women have been earmarked as part of the Bushveld Incubation program, aimed at developing women into seasoned entrepreneurs. Figure 6.10: Process Flow for VRFB Manufacturing The Vametco SLP document includes commitments regarding the health and safety of workers (page 23), but does not mention communities settling around the mine or human rights policies. The operation has an Employment Equity Plan in place; some of the commitments can be found on pages 35–40 of the attached SLP. A socioeconomic baseline study that was conducted for Vametco in 2020 was shared. Bushveld is finalizing the 1 2 3 4 scope for a revised SED study that will include ESD. This body of work will be completed in mid-2023. Currently, no literature is available on gender and equity or the social perspectives critical to VRFB workforce and diversity in Britztown, Northwest Province, Witbank (Mpumalanga province), and East London. The overall finding that has emerged from the consultation is that their baseline studies may be useful to refer to and draw from in future VRFB and vanadium operations, particularly for certain provinces, such as Mpumalanga, M t llur ic l Oth r compon nts lik R ctors (Ion D plo m nt Limpopo, and the Northwest province, which PwC identified as vanadium geographies faces challenges with b n fici tion Exch n M mbr n , Curr nt coll ctor, of VRFB t unemployment, poverty, and a lack of decent living conditions in our mid-term report. of V n dium or Flow pl t s), B l nc of Pl nt (Pumps, th nd us r to V205. t nks, h t xch n rs tc.). loc tion. 7 Largo Largo’s annual report 2021 (shared by Largo) on sustainability serves as a reference document on the management of material ESG risks, opportunities, and impacts in their major operations in Brazil. These operations are not specifically relevant to the VRFB sector and are not contextually relevant in terms of sharing V n dium Or V n dium M nuf cturin or replicating best practices relating to VRFBs. V n dium Or VFRB End Us r to V n dium to V n dium of oth r B tt r Extr ction Ass mbl Applic tion The key takeaways from the information sources shared by Largo are in line with the assessment carried out as Production El ctrol t compon nts part of secondary research. These key points are also mentioned below: The key E&S risks such as extraction of raw material, usage of water, generation of off gases, generation of solid waste i.e. waste rock and burden are significantly associated with the production of Vanadium pentaoxide. Whereas, at the VRFB assembly stage (the prodcution of battery assembly components, other than the V n dium Or xtr ction Ch mic l proc ssin Ass mbl of R ctors, El ctrol t , from Min s s prim r sourc for m nuf cturin of BoP nd oth r compon nts to V-Electrolyte, is not considered in this document) the pollution generation potential is on lower side as comapred or production of V n dium V n dium El ctrol t s m nuf ctur VRFB th t will b to the Vandium Pentaoxide production. Thus, the environmental impacts associated with VRFBs are majorly or s b -product. for VRFB from V205. b -product r d for d plo m nt. associated till the vanadium pentoxide production stage. The primary practices at the mining and processing stages of vanadium -bearing ores are key to reducing the associated environmental and social impacts. The findings of LCA studies6 9 estimate that when the VRFB is connected to a wind energy source, it produces 31 kg CO2eq less than an LiB for every MWh of electricity produced; when connected to a solar source it saves Applic tion of 11 kg CO2eq/MWh more than LiB for every MWh of electricity produced.As specified in the study document, the V n dium in oth r study and corresponding results are Click here to enter text. subject to the assumptions: (a) VRFB battery with industri s a rated power of 1 MW and a storage capacity of 8.3 MWh . (b) the carbon savings assciated with the use of recycled materials for both the LiB and VRFB. Source: Stakeholder Consultations (Bushveld Vanadium, Largo) 72 minerals-council-women-in-mining-sa-2022.pdf 73 https://www.gov.za/speeches/deputy-minister-nobuhle-nkabinde-13th-annual-women-mining-conference-career-expo-23-feb 134 Vanadium battery storage report Vanadium battery storage report 135 Figure 6.11: Key Focus Areas of the Assessment Environmental concerns mapped across the 6.16 Extraction Process VRFB value chain74 During the extraction process, the vanadium is extracted from the magnetite. The main inputs include a kilning/roasting process 6.14 Vanadium Mining where roasting agents and coal are used. The outputs include With titaniferous magnetites ore and vanadium ore, mining is scrubber sludge. generally done through traditional mining methods in South Calcine is generated from the kilning process, which is followed by Proc ss flow missions: Suppl Ch in missions: • Minin proc ss (M n tit • Tr nsport tion of m t ri l from Africa. This involves drill and blast, as well as load and haul the leaching process. The kilning stacks generate off-gas during Or nd V n dium Or ) minin sit to proc ssin units procedures to mine the magnetite ore. In this process, waste • Industri l Proc ss — • Tr nsport tion of r w m t ri l this process, which is likely to be monitored according to the V 0 production for production of V 0 rocks or overburden are generated. High -level environmental stipulations of the Air Emission License. • V El ctrol t Production • M t ri l sourcin for risks associated with this stage include open void areas, • VRFB B tt r Ass mblin V- l ctrol t production • Suppl of V- l ctrol t to dumps, and the use of explosives, which could contaminate In the leaching process, the major input materials are acids and Air Emissions ss mblin units. wash water. This will generate calcine tailings as a waste or by- Air Emissions from Suppl groundwater (nitrates). from Industri l Ch in nd product. From the output, leaching of calcine tailings is performed Proc ss Tr nsport tion The legal, environmental requirements for mining state that an and the solid material from tailings is extracted. environmental impact assessment must be done prior to mining. Once the impact assessment is in place, the environmental Finally, the soluble vanadium (vanadium converted from a solid W t r us nd management plan is compiled, which details the management of to liquid form) can be extracted. The next step is precipitation, R ul tor W t r its qu ntum: impacts. After approval, an environmental authorization is issued. which will again require the addition of water along with AMSUL Cl r nc s Us • Minin proc ss Applic bl r ul tor (ammonium sulfate). This process will also produce off-gas (M n tit Or cl r nc st blishin : nd V n dium Or ) The environmental impacts during the mining stages are more from the stacks. The output of the precipitation process will • Minin Units • Industri l Proc ss intensive than during VRFB manufacturing and recycling. Only be mother liquor along with continuous recovery of ammonium • Production nd Environm nt l — V 0 production 18% of the vanadium is extracted from v-ore; the rest is a co- Industri l s tup • V El ctrol t metavanadate (through AMV dryers) using LPG gas as an input. • Ass mbl units Risks Production product or secondary production. • R ul tor L ndsc p • VRFB B tt r for VRFB s ctor Ass mblin 6.17 Recovery Process W t r R w 6.15 Concentrate Production G n r tion M t ri l During the recovery process, a barren dam feeds into a sulfate The primary activities in this phase include crushing processes recovery plant. This process also produces off-gas and requires (to downsize the ore or the rock into manageable pieces), water, softeners, and coal (for burning). Most of the liquid in this R sourcin nd us screening (to sort the crushed material by size), milling of r w m t ri ls: process is evaporated to extract vanadium in a solid state. R c clin H rd • En r utili tion (pulverizing the product into powder), and separation of the Pot nti l Pot nti l magnetic and nonmagnetic forms. 6.18 Refinery Process The main inputs for concentration production are magnetite ore, W st G n r tion nd Involv m nt of H rdous The main input in this process is LPG. In this process, the its qu ntum: m t ri l nd ctiviti s raw water, and electricity, and the main outputs are vanadium • Minin proc ss (M n tit involvin m nu l h ndin vanadium oxide reactors produce V2O5 and MVO powder. The MVO -bearing magnetite and tailings. The nonmagnetic tailings are Or nd V n dium Or ) of ch mic ls: powder is added to the mix plant, which requires proven air, starch • Industri l Proc ss — • List of h rdous stored in a slimes dam or a tailings storage facility, which are binders, and water. The final extracted product is then shipped to V 0 production m t ri l in input kept adjacent to the mining areas, while the ore is transported to • V El ctrol t Production • Output h rdous consumers using road transportation. • VRFB B tt r Ass mblin m t ri ls the processing area via trucks and then on road, which creates a transportation safety risk. Most consumption of the vanadium batteries (VRFB) occurs in the form of V2O5 or as vanadium ore, which contains high amounts of waste, or milled and concentrated products. Source: PwC Analysis 74 Stakeholder Consultation with Department of Water and Sanitation and Bushveld Minerals 136 Vanadium battery storage report Vanadium battery storage report 137 Figure 6.12: Input and Output Material Flow of Vanadium Mining—Environmental Context Figure 6.15: Input and Output Material Flow of the Recovery Process—Environmental Context Input W st Co l & Proc ss W t r M t ri l G n r tion Soft n r Explosiv Minin (Drill, Bl st, W st Rock nd Di s l Lo d nd H ul) nd Burd n B rr n Sulph t Dr Ammonium Solution R cov r Pl nt M t v n d t Or Source: Stakeholder Consultations (Bushveld Vanadium, Largo, Department of Water and Sanitation) Off G s Source: Stakeholder Consultations (Bushveld Vanadium, Largo, Department of Water and Sanitation) Figure 6.13: Input and Output Material Flow of Concentrate Production—Environmental Context Figure 6.16: Input and Output Material Flow of the Refining Process—Environmental Context W sh W t r Non M n tic W t r LPG Crushin Scr nin Milin T ilin R finin Off G s Proc ss W st Rock Ch mic l Bind rs nd Burd n V n dium b rin m n tit Source: Stakeholder Consultations (Bushveld Vanadium, Largo,Department of Water and Sanitation) Source: Stakeholder Consultations (Bushveld Vanadium, Largo, Department of Water and Sanitation) Figure 6.14: Input and Output Material Flow of the Extraction Process—Environmental Context 6.19 Vanadium Electrolyte Production The key environmental risks associated with V-electrolyte production involve the transportation, handling, and storage of Vanadium electrolyte production requires the pre-purification of hazardous chemicals such as sulfuric acid, hydrochloric acid, and Ro stin A nt W sh W sh W t r vanadium ore feedstock to produce the vanadium compounds Acids LPG hydrogen peroxide. & Duff Co l W t r & AMSUL ammonium polyvanadate (APV) and ammonium metavanadate (AMV), then further purification of AMV to produce high -purity Furthermore, the production of V-electrolyte will also result in vanadium oxide. Production of the vanadium electrolyte is the generation of acidic waste and effluent with higher sulfuric Ro stin L chin Pr cipit tion AMV Dr r achieved by dissolution of vanadium oxide in acid. acid content. This can have a noticeable impact on the sewerage infrastructure, groundwater, and soil quality if not handled and To produce the electrolyte to be used in the manufacture of treated properly before disposal. the VRFBs, the high -purity vanadium oxide is soluble in acid. Scrubb r This process can be undertaken by following one of three Considering the chemical reactions occurring in the production of Off G s C lcin T ilin Off G s Off G s Slud methods: electrochemical dissolution, chemical reduction, and V-electrolyte, air emissions will be higher for SO2 and SO3. These thermochemical reduction. pollutants have the potential to significantly decrease the quality Source: Stakeholder Consultations (Bushveld Vanadium, Largo, Department of Water and Sanitation) of the air in the surrounding area. 138 Vanadium battery storage report Vanadium battery storage report 139 Figure 6.17: Key Components of VRFBs Social concerns mapped across the VRFB value chain public or archival documents and information) offers insights into the scenario in the South African labor market, indicating The overall aim was to identify opportunities and risks in that youth continue to be vulnerable in the labor market as the vanadium mining and the VRFB sector and value chain, number of unemployed youth has increased in the first quarter envisioning a transformation within the miningindustrial sectors Pow r En r P riph r of 2022. Child labor has declined considerably. in South Africa, via a vertically integrated mineral supply chain. South Africa’s Social Regulatory Framework is aligned with the • Overall, the number of unemployed people in South Africa has • M mbr n - G n r ll N fion® • El ctrol t V n dium-b s d • Pump Pl stic-Co t d St l Sustainable Development Goals (SDGs) 2030 prioritizing poverty been high although some of the sectors in the country offering • El ctrod - PAN C rbon F lt • T nk - Gl ss Fib r • Pip s St l, T flon® linin employment opportunities include trade, finance, construction, reduction, gender equality, and accelerating economic growth for • Bipol r Pl t • Inv rt r • Curr nt Coll ctor - Copp r • C bl s Copp r human development. In this context, some of the key findings from and social services. • C ll Fr m - PVC • H t Exch n St inl ss St l the current scenario indicates the following: • The National Development Plan (NDP) calls for local governments • G sk t • St ck Fr m - St l to promote inclusivity and greater participation by women, and • The desk research and secondary literature (drawn from the to make budgetary priorities; however, gender discrimination Republic of South Africa’s Department of Statistics, and other continues to be pervasive in key sectors such as mining. Source: Stakeholder Consultations (Bushveld Vanadium, Largo) Table 6.9: The Road ahead for the VRFB Supply Chain Aspects of VRFB Current scenario and way forward 6.20 VRFB Assembling or Manufacturing Figure 6.18: Weight Distribution of VRFB Components78 supply chain The VRFB battery composition can be broadly divided into Domestic • Vanadium mining and, thus, the VRFB supply chain is yet to gain momentum three functional areas: the power function, the energy function, El ctrol t R s rvoirs Biopl r Pl t competitiveness in • Small business development and micro entrepreneurship have not accelerated but can offer opportunities for VRFB technology community investment for vulnerable and socioeconomically marginalized populations and the periphery of the battery. While the manufacturing of P riph r El ctrod s St ck Fr m • Promote investment in enterprises that are owned by women and other vulnerable groups in less developed VRFB components, other than the electrolyte, is not taken into G sk t C ll Fr m M mbr n s municipalities and provinces in the country consideration, the assembly of VRFBs is subject to health and 0.39% safety norms and is likely to have low environmental impacts. Labor market and • There is a workforce gap and unemployment among youth 1.60% workforce • There are gender gaps in the labor market, which is currently more advantageous to men than women Figure 6.17 outlines the key components of these functional areas. 1.72% The vanadium electrolyte in VRFBs has reuse potential of 100%75 Mapping E&S • Some of the poorest provinces that host vanadium deposits (but are not yet actively mining them) are vulnerable to 10.20% sensitivities across poverty, show higher unemployment trends, and lack basic access to education and health care and requires reprocessing and purification before being reused South Africa • Migration, education, income and social grants, employment, mortality, housing conditions, and access to and quality in VRFBs or as V2O5. The recycling efficiency of the metal parts of basic services are some of the key indicators to assess the social risks and opportunities in South Africa of VRFBs is approximately 95%, and the metal component of 0.28% VRFBs can be dismantled (mechanical separation on a macro Access to energy • Mapping of vulnerable and economically disadvantaged communities is crucial to assess communities’ needs and storage solutions access to energy storage solutions in households and marginal housing areas in poor municipalities scale) with a lower energy input. The plastic components, such 76 • Concurrently, enterprises can have sustained business operations if energy storage is made more accessible and as polyvinyl fluoride and other waste plastic, are likely to be 0.13% affordable incinerated and disposed of in a landfill or recycled, while the 85.10% Human rights, equity, • A strong gender bias and lack of equity persists in the workforce, where women lack opportunities electronic component can be recycled and used. Figure 6.18 0.10% and social safeguards • Female employment is lower in the mining sector compared to the service sectors presents a breakdown of VRFB components in terms of their 0.05% • Interrelated economic linkages (which are currently lacking) can be accelerated through mining, weight distribution (assuming a total weight of 6.52 kg/MWh for Source: Merchant Research & Consulting VRFB system).77 Recyclability • Not yet emerged as an active element, but is potential in model leasing and for a sustainable, circular economy • Recycling the battery can promote small business development and opportunities for micro entrepreneurship • Recyclability will increase the overall demand for raw materials for battery production 75 https://www.storen.tech/the-modern-energy-market • The involvement of local players will increase, which will enhance the possibility of utilizing locally sourced 76 https://pubs.acs.org/doi/pdf/10.1021/acs.est.8b02073 components, enabling a higher degree of micro entrepreneurship 77 https://reader.elsevier.com/reader/sd/pii/S0959652621037082?token=A991739764533EFA0C9627F1332B4537FF1B810E8759CAECF290446BF95C50CA749003399A09E03595568E6AD869BCED&originRegio n=eu-west-1&originCreation=20220727070623 • Recycling will benefit communities as it will accelerate skill development 78 https://reader.elsevier.com/reader/sd/pii/S0959652621037082?token=A991739764533EFA0C9627F1332B4537FF1B810E8759CAECF290446BF95C50CA749003399A09E03595568E6AD869BCED&originRegio n=eu-west-1&originCreation=20220727070623 140 Vanadium battery storage report Vanadium battery storage report 141 6.21 Environmental and Social Analysis: such as CO2, nitrogen (N20), and CH4; and toxic gases such as CO, Figure 6.19: Recycling and Reuse Potential of VRFB Key Takeaways nitrogen oxides (NOx), and hydrogen sulfide (H2S). Furthermore, SO2 is the primary gaseous emission during the V-electrolyte 1. Water Usage: Water usage across the entire process, from V n dium Or proc ssin production stage, released as a result of the chemical reactions minin nd r finin mining until the production of V2O5, is carried out in a circular during electrolyte production. These pollutants have the manner. Based on the consultation with Bushveld Minerals, potential to significantly decrease the air quality of the area approximately 60% of the water used in this process is recycled and are a major contributor to the carbon footprint in the VRFB water or water recovered from the process itself, while about sector. The uncontrolled emissions of these gases can have 30% of water is lost through evaporation. Water is sourced from detrimental impacts on the workers and local population. Both an open pit as sub seepage, as well as water from the third mining and electrolyte production must be authorized through B tt r B tt r El ctrol t parties (municipalities) and or boreholes. an Air Emission License issued by the regulatory body in South us ss mblin m nuf cturin Africa and must take steps to ensure the implementation of 2. Waste Disposal: The overburden or waste rock generated from mitigation measures (installation of stack) and adequately this process is disposed of or dumped at the nearest point within monitor emissions. the mining area. During the concentration process, non-magnetic tailings are generated as waste. The nonmagnetic tailings In line with the section 6.13 of this report, the key E&S are more like silica sand in nature and is likely to be used for risks such as extraction of raw material, usage of water, B tt r dis ss mblin , r c clin Us of r -proc ss V n dium R c clin nd r us of oth r backfilling into the pit after closure of the mine. generation of off gases, generation of solid waste i.e. waste nd r finin of V-El ctrol t in oth r industri s b tt r compon nts rock and burden are significantly associated with the M t ls 3. Hazardous Waste Management and Handling: During the El ctric ls production of Vanadium pentaoxide. Whereas, at the extraction process, calcine tailings are generated, which are Pl stics VRFB assembly stage (the prodcution of battery assembly considered contaminated material (hazardous waste) in South components, other than the V-Electrolyte, is not considered in Africa according to the waste classification. To dump such waste this document) the pollution generation potential is on lower side onto the ground, permits are required according to the regulatory Source: PwC Analysis as comapred to the Vandium Pentaoxide production. Thus, the norms. The disposal of this hazardous waste requires an HDPE environmental impacts associated with the VRFB are associated -lined surface, in accordance with the waste classification, as unil the vanadium pentoxide production stage. The primary this waste category is deemed to have significant potential to practices at the mining and processing stages of vanadium 6. Recycling and Reuse Potential: The waste and effluent in South Africa across sectors.81 Scaling up vanadium mining pollute groundwater -bearing ores are key to reducing the associated environmental generated from vanadium mining has limited potential for re-use, and the VRFB value chain can boost employment opportunities 4. Hazardous Material Management: The transportation, and social impacts. while disposal requires a strict monitoring mechanism to ensure for communities in economically vulnerable provinces where handling, and storage of hazardous material during the mining, the pre-treatment of acidic effluent and calcine tailings. However, vanadium deposits are found, but where mining activities have not The findings of LCA studies79 estimate that when the VRFB is processing, and V-electrolyte production process is required. The the recycling potential of VRFBs is certainly higher: 85% of the yet begun. The Agenda can also create opportunities for women connected to a wind energy source, it produces 31 kg CO2eq inappropriate storage and handling of hazardous substances battery component is V-electrolyte with 100% recycling potential, in the mining sector and the VRFB supply chain. Furthermore, less than an LiB for every MWh of electricity produced; when (such as sulfuric acid, other chemicals) can pose a significant and the other metallic components and electrical components can the procurement of batteries will boost skills development connected to a solar source it saves 11 kg CO2eq/MWh more than threat to the health and safety of the employees of the facility be easily recycled for further use through mechanical separation. among local communities in economically disadvantaged areas, LiB for every MWh of electricity produced. (These results are and surrounding tenants. particularly in economically vulnerable municipalities and directly taken from the secondary research. These results are 7. Job Opportunities and Entrepreneurship: The 2030 Agenda for provinces. Additionally, energy storage can benefit communities 5. Gaseous Emissions: Off gassing during the mining stage is subject to the assumptions: (a) VRFB battery with a rated power Sustainable Development aims to promote sustained economic in municipalities with a weak grid, an unreliable energy supply, considerably higher and includes the emission of gases such as of 1 MW and a storage capacity of 8.3 MWh80. (b) the carbon growth by attaining higher levels of productivity through inadequate housing and sanitation facilities, weak infrastructure, carbon monoxide (CO) and carbon dioxide (CO2); flammable gases savings assciated with the use of recycled materials for both the technological innovation. Additionally, it aims to promote policies and a lack of employment opportunities. such as methane (CH4), CO, and hydrogen (H2); suffocating gases LiB and VRFB. that boost entrepreneurship and small businesses and create jobs 79 Selina Weber, Jens F. Peters, Manuel Baumann, and Marcel Weil Environmental Science & Technology 2018 52 (18), 10864-10873 DOI: 10.1021/acs.est.8b02073 David A. Santos, Manish K. Dixit, Pranav Pradeep Kumar, Sarbajit Banerjee, Assessing the role of vanadium technologies in decarbonizing hard-to-abate sectors and enabling the energy transition, iScience, Volume 24, Issue 11, 2021, 103277, ISSN 2589-0042, https://doi.org/10.1016/j.isci.2021.103277 80 Weber et al., 2018 - Life Cycle Assessment of a Vanadium Redox Flow Battery, Environmental Science & Technology 81 https://www.statssa.gov.za/?p=14606#:~:text=According%20to%20the%20expanded%20definition,the%20second%20quarter%20of%202021. 142 Vanadium battery storage report Vanadium battery storage report 143 8. Geography and Vulnerability of Mining Communities: Considering the above trends, research on women’s participation pandemic, we gather scaling up vanadium mining can boost The need for scaling mining in the mining sector is yet to gain momentum. Parallelly, when women’s employment opportunities in the mining sector as well • The mining communities are estimated to comprise nearly plans for vanadium mining and VRFB expansion are developed, as create a robust and inclusive VRFB supply chain. 5.4 million people, which is more than 10 percent of the communities in the vulnerable provinces will most likely benefit 11. Social Findings: The social findings conclusively reveal country’s population82 through wider gender inclusivity. in the VRFB supply chain as that the mining sector and services supply chain can create vanadium mining and VRFBs gather momentum. • An estimated forty-one host communities, of over 1.3 million employment. In the case of South Africa, VRFBs for energy people, are “mining towns” that are mainly dependent on 10. Gender-equitable Participation and Inclusion for an Inclusive storage solutions possess considerable potential to benefit mining for jobs, income, and even public services 83 Value Chain 88, 89 historically disadvantaged communities, with a focus on youth, women, and suppliers. In this context, the supply chain, and in In regions with vanadium deposits, such as Limpopo province, According to a study by the DMRE,90 research by the particular, the local supply of components, is critical and can Mpumalanga province, and Northwest province, poverty, Commission for Gender Equality (CGE) on South African mining advance and accelerate the growth of SMMEs in the country. This inadequate nutrition, poor access to education and health care, companies’ progress toward gender mainstreaming indicates would promote opportunities for women and other economically and unemployment have been historically persistent issues. that the mining industry has historically faced challenges in disadvantaged groups who are likely to benefit from the promotion 9. Women in Mining and the need for strengthening gender gender transformation. Furthermore, the secondary literature of energy storage solutions, and the VRFB value chain through equity in the sector identifies the following key findings that reveal the gaps in local supply chain procurement. This will simultaneously create workforce inclusivity and employment trends, particularly over a space for skilling or upskilling. Mining companies can expand The limited involvement of women in the vanadium and VRFB the past two years: local (battery) manufacturing capabilities through localized sector is evident. However, it also remains an area of opportunity • National reports indicate that the rate of unemployment among supply chain development. Local industrialization and related for expansion when plans are developed, as the sector gains women is 48.7 %, 0.1 percentage points higher than their male businesses in the economic hubs of South Africa within local momentum. The following gaps regarding women’s current counterparts as of the second quarter of 2021. communities can create sustainable job opportunities and skills position within the mining sector have been identified : • Women face gender-based hindrances in accessing employment upliftment. It should be noted that secondary academic research • The mining sector in South Africa continues to be among the on SLPs in South Africa reveals that historically, there has been opportunities. A report by the Quarterly Labour Force Survey of industries with the least gender diversity.84 limited research on SLPs94 in the country context, and that most the second quarter of 2021 concludes that South Africa’s labor • In South Africa, the percentage of women graduating with STEM market is less advantageous for women.91 Women’s labor force communities are not well-informed about the SLP system. In degrees exceeds their representation in the mining workforce. 85 participation is lower than men’s. strengthening the vanadium mining and VRFB sector, SLPs can • Gender-based violence and harassment (GBVH), an occupational help communities benefit from mining and, eventually, from the • During the national lockdown in 2020, three million people in the safety and health risk, is faced by women in mines “above and VRFB value chain and community development. As indicated in the country lost their jobs of which 2 million were women employed below ground” (ILO 2021), and the gender pay gap is pervasive in social analysis, scaling up the vanadium mining and VRFB sector in the informal sector. the mining sector. 86 will naturally widen the scope for local manufacture or local supply • In the second quarter of 2021, male workers (51.3%) were more chain procurement, thereby improving livelihood opportunities for • Women make up only 12% of the mining industry in South Africa, likely to have received pension/retirement fund than women, communities in vanadium-rich provinces as well those living as in up from 6% in 2008.87 compared to 45.8% of women.92, 93 Considering that the gender other socio-economically vulnerable areas. diparity in labour was already visible and reinforced during the 82 Cole MJ, Broadhurst JL. Mapping and classification of mining host communities: a case study of South Africa. Extractive Ind Soc. 2020;7(3):954–64 83 Cole MJ, Broadhurst JL, 2020. 84 The Minerals Council South Africa (2020) https://internationalwim.org/iwim-reports/committed-to-change-for-women-in-mining Accessed on 26 July 2022 85 https://www.igfmining.org/women-mining-workforce-future/ Accessed on 26 July 2022 86 https://www.industriall-union.org/sites/default/files/uploads/documents/2022/GBVH/gbvh_mining.pdf Accessed on 26 July 2022 87 https://internationalwim.org/iwim-reports/committed-to-change-for-women-in-mining/ Accessed on 26 July 2022 88 https://www.statssa.gov.za/?p=14606#:~:text=According%20to%20the%20expanded%20definition,the%20second%20quarter%20of%202021. 89 https://www.statssa.gov.za/publications/P0211/P02111stQuarter2022.pdf 90 https://www.dmr.gov.za/news-room/post/1950/keynote-speech-by-dr-nobuhle-nkabane-mp-deputy-minister-of-mineral-resources-energy-of-the-republic-of-south-africa-at-the-13th-annual-women-in-mining- conference-career-expo-held-on-23-february-2022-at-indaba-hotel-fourways 91 https://www.statssa.gov.za/?p=14606 92 https://www.statssa.gov.za/?p=13690 93 https://www.statssa.gov.za/?p=14606 94 https://www.wits.ac.za/cals/our-programmes/environmental-justice/social-and-labour-plans/ 144 Vanadium battery storage report Vanadium battery storage report 145 7 Roadmap to Scale up the Circular Business Model The roadmap suggests an approach for scaling up the proposed • Evaluate the growth of the VRFB market, assess (as required business model for a company and for government intervention and agreed) the challenges or bottlenecks faced by industry required to promote VRFB technology through regulatory changes players, and suggest possible remedies during the initial and policy reforms for a growing VRFB sector in energy storage. implementation phase. In developing the roadmap, South Africa is used as an example The CoE should consist of the following team members to to illustrate the approach required by a government in terms of gather the requisite expertise from the VRFB market. This is the regulatory and policy framework, the economic and fiscal a suggestive and non-exhaustive list that could be amended impact, and the social and environmental impact in a growing periodically as needed, in line with actual requirements during the VRFB sector. In addition, the roadmap provides insight from global implementation phase. markets such as the BESS market and the growth of VRFBs as a 1. Battery storage market expert stationary energy storage system, global vanadium supply chain The stationary storage battery market is poised to grow and financial aspects of leasing business were also taken up in the rapidly in the near future. Creating a space for VRFBs by roadmap preparation. replacing other battery technologies will be easier and critical for the growth of the VRFB market. For this purpose, a battery 7.1 Critical Success Factors for Growth of the storage market expert will be required to provide insight from VRFB Market the battery storage industry on a granular scale and identify Although the technology has been available since the 1980s, opportunities for VRFB technology. The expert shall also be commercial application of VRFBs is relatively new. The growth responsible for the other avenues and sectors where VRFBs of the VRFB market will be the most crucial factor in creating can be sustainably deployed. an ecosystem for a circular business model in the VRFB space. 2. VRFB industry expert Challenges such as low demand, relatively low consumer Given the commercial application of VRFBs in the recent past, confidence, the higher cost of energy storage, fluctuating the maturity of the technology is significantly lower than the vanadium prices, and the absence of a regulatory framework for competing battery solutions. The industry has ample opportunity BESS inhibit the widespread use of VRFB technology. Government to have a high learning rate . Significant R&D effort will be intervention will be critical for sustainable growth of the VRFB required to reduce the cost compared to the competing battery market, in addition to strong traction from the industry. technologies. VRFB industry experts to set-up a scalable R&D A potential initiative is to launch a Center of Excellence (CoE) for facility in association with major VRFB producers, educational structured growth of the VRFB market. The CoE will oversee and institutes, and the government. manage the activities to promote growth and implementation of a 3. Regulatory and policy expert circular business model. The CoE will aim to achieve the following: The development of new technology requires government support • Drive the growth of the VRFB market by generating demand for in the form of capital expenditure, taxation methodologies, VRFBs and increasing the supply through cost reduction. funding, policies, and regulations. The same applies to VRFBs; • Drive R&D activities in the VRFB space. direct legal regulatory intervention will be required as most of • Establish procedures for sustainable growth of the VRFB the countries do not have a standard regulatory framework for market. VRFBs. The regulatory expert will provide the CoE with critical intervention from the government to create demand centers for • Provide insight to the government to develop the necessary VRFBs by providing: regulations and policies aligned with national development plans and energy transition plans. • Guidance on increasing uptake of VRFBs and restricting the unwanted outcomes by establishing controlling measures • Help (suggestive in nature) the industry players connect with throughout the VRFB value chain investors to explore the development of partnerships. 146 Vanadium battery storage report Vanadium battery storage report 147 • Incentives to VRFB manufacturers to promote its production containing or minimizing the environmental impact from the VRFB Figure 7.2: Roadmap for Scaling up of the Circular Business Model for VRFBs through Demand Creation and Supply Growth and availability at competitive prices value chain by providing the environmental impact monitoring • Incentives for the end users of VRFB to promote its consumption framework and providing inputs for framing environmental Short t rm M dium t rm Lon t rm regulations for the VRFB value chain. • Assistance to the government in drafting the requisite 2022 2023 2024 2025 2026 2027 2028 2029 2030 B ond 2030 frameworks and policies in this space following the necessary The CoE will focus on the four thematic areas in which Industr l d initi tiv s with ov rnm nt b ckin to furth r d v lop th m rk t approvals. governments need to intervene and work with the industry to L r sc l industri l proj cts for VRFB 4. Social expert grow the market and eventually develop the circular business Govt Inc ntiv polic model suggested. VRFB As the VRFB market is at a nascent stage of its development, R pl c m nt of Di s l G n r tors with VRFB D m nd social inclusion at this stage will be key for its growth. The social Figure 7.2 presents key activities under each theme. At the start Cr tion St k hold r w r n ss of b n fits of VRFB’s expert will be responsible for increasing the representation of the of the roadmap, there are multiple coinciding activities for the Impl m nt VE l sin mod l disadvantaged communities, establishing the skill development following reasons: R&D to r duc cost of VRFB framework in the VRFB value chain, and providing the necessary Int r ov rnm nt l T chnolo nd Skill tr nsf r withfocus to r duc cost of VRFB • Some activities will gain momentum at the start of the timeline; input in framing regulations and policies for social growth of the these activities are expected to be completed sooner. Explor tion of V n dium d posits VRFB market. D v lopm nt of V n dium min s • Some activities will gain momentum over time and in line with VRFB Govt Inc ntiv polic for Promotin VRFB Production 5. Environmental expert the achievement of other milestones. Suppl Growth From the extraction of vanadium to the production of VRFBs and Fr Tr d Zon s /SEZs • These key thematic areas are not mutually exclusive and require the recycling of vanadium, all stages will have an environmental Str t ic s t-up of m nuf cturin units attention in the near future to launch the process. impact. The environmental expert will have the important task of Source: PwC Figure 7.1: Milestones required to Implement and Scale up the Circular Model for Vanadium Leasing Figure 7.3: Roadmap for Scaling up the Circular Business Model for VRFBs through Environmental and Social (E&S) and Regulatory Reforms Short t rm M dium t rm Lon t rm • Industr rowth initi itiv s with ov rnm nt support to th fl d lin s ctor of n r tiv incr s d d m nd D m nd • S ttin -up si bl pilot proj cts with inc ntiv s to VRFB for nd us rs, polic support to op n for i n 2022 2023 2024 2025 2026 2027 2028 2029 2030 B ond 2030 Cr tion m rk ts for xports • Focuss d R&D ctiviti s to improv t chnolo which will r duc cost furth r Skill M ppin Impl m nt tion of Skill D v lopm nt Pl n Soci l s f u rd nd Environm nt L v r th nh nc d cc ss to n r for soci l d v lopm nt communit d v pl n • Industr xp nsion with ov rnm nt support to produc rs nd suppli rs throu hout VRFB v lu ch in nd Soci l Suppl D v lopm nt W st M n m nt Pl ns to incr s suppl whil drivin down costs of production Growth • Inc ntiv s for s ttin -up th n w production f ciliti s or incr sin output from xistin production f ciliti s Av il bilit nd c p cit of Impl m nt tion of r c clin nd r cov r m sur s r c clin /r cov r f ciliti s Inv stm nt promotion pl n • En bl s of lob l tr din nd lo istics R ul tor V n dium b n fic ri s support • To s f u rd th nvironm nt nd communit int r st nd conc rns with rowin VRFB s ctor m ch nisms Fr m work • Inc ntiv s for s ttin -up th n w production f ciliti s or incr s in ouput from xistin production f ciliti s D v lop Environm nt l R ul tor Gov rnm nt Fr m work for VRFB dism t lin R ul tions nd r c clin • To m ximi b n fits to th loc l communiti s s r sult of incr s d conomic nd soci l (E&S) E&S n quit bl nd inclusiv ppro ch Upd t IRP to incr s RE C p cit D v lopm nt • Gov rnm nt to d v lop skill d v lopm nt pl n to r spond to th m rk t d m nds of th VRFB v lu ch in Introduc / upd t to promot • Ensur nvironm nt l imp cts throu hout th v lu ch in of VRFB’s r minimis d, m int in d nd k pt in ch ck VRFB m nuf cturin Source: PwC Source: Applicable to the South African context. 148 Vanadium battery storage report Vanadium battery storage report 149 Implementing and scaling up the circular business model will not be solved by battery storage alone; however, battery storage balanced for battery storage. South Africa possesses significant plants and have active Power Purchase Agreements (PPAs) with require seven milestones from the industry side. Table 7.1 offers a will play a key role in the country’s future. The CoE mentioned potential for renewable power. The Northern Cape province is well the national utility through the Renewable Energy Independent snapshot of these milestones. above needs to be established to support and help solve the energy suited to solar power interventions, while the coastlines of the Power Producer (REIPP) program. The future of battery storage in crisis with a focus on battery storage as part of this solution. As Eastern and Western Cape provinces favor wind power. Private South Africa will require that the CoE focus on the four thematic The key thematic areas and milestones mentioned above are for mentioned earlier, through the IRP, South Africa has specified the organizations, such as large mining and industrial power users, are areas outlined in Figure 7.1 by engaging the following relevant the VRFB industry and apply on globally. From the South African inclusion of renewable power and batteries in the energy plan. investing in their own renewable power plants in these provinces. stakeholders. This list is neither exclusive nor exhaustive. perspective, the overall supply of energy is critical to the economic The proportion of battery storage to renewable power is not well Major global energy players have established renewable power growth of the country. The energy supply crisis in South Africa will Table 7.1: Milestones required to Implement and Scale Up the Circular Model for Vanadium Leasing Table 7.2: List of stakeholders, organizations and with their thematic area 2022-23 Secure support from major stakeholders: Stakeholders Organization Thematic Area Model • Vanadium suppliers Acceptance 1 Department of Water and Sanitation Government E&S Development, Government Regulations • VE manufacturers • VRFB manufacturers 2 Department of Mineral Resources and Energy Government Demand Creation, Supply Growth • Industrial end users • Regulators and the government 3 Department of Trade, Industry & Competition Government Demand Creation, Supply Growth • Vanadium industry forum 4 Department of Public Enterprises Government South Africa • Establishment of the CoE for market development 5 Council for Scientific and Industrial Research (CSIR) Government Demand Creation 2022-23 Set up the procedure for defining responsibility for damages and loss of the vanadium or the electrolyte: 6 Department of Science and Innovation Government Demand Creation Establishing • VE end -use procedures for the standardized use of VE during operation to maximize recovery Procedures 7 Department of Environment, Forestry and Fisheries Government E&S Development, Government Regulations • Regular quality checks to verify the quality of the VE during operations 8 South African Human Rights Council Government E&S Development, Government Regulations 2022-23 Set up the revenue model 9 Mineral Council South Africa Government Demand Creation, Supply Growth Revenue Model • CAPEX and OPEX estimates • Financial model preparation 10 TIPS trade and industrial policy strategies Non-Profit Organization Demand Creation • Market sounding with prospective investors and commodity traders to understand the revenue models, return levels, and investment considerations. 11 NGOs working in the mining Industry, battery industry, Non-Profit Organization E&S Development, Government Regulations environmental and social sectors 2023 Onboarding Attract investment from prospective investors: 12 Universities (research and educational institutions) Government & Private E&S Development, Government Regulations Investors • Educate prospective investors 13 Centre of Environmental Rights Non-Profit Organization E&S Development, Government Regulations • Provide the business case for the leasing model 14 Municipalities Government Demand Creation 2023-24 Create distribution channels 15 Power utilities and independent power producers Government & Private Demand Creation Distribution Channels • Identify prospective end -use locations, such as RE -based power generation, a power distribution hub, and potential VRFB manufacturing or assembly locations 16 Energy Council of South Africa Government & Private Demand Creation • Onboard distributor partners • Implement forward logistics, from manufacturing to distributors to end users 17 Mining companies in South Africa Private Demand Creation, Supply Growth 18 South African Energy Storage Association Non-Profit Organization Demand Creation, Supply Growth 2024 onward Launch sales and marketing: Sales & Marketing • Create a sales and marketing strategy 19 South African Photovoltaic Industry Association Non-Profit Organization Demand Creation, Supply Growth • Implement the strategy 20 Industrial Development Corporation of South Africa Government Demand Creation, Supply Growth 2027 onward Develop a strategy for collection at the end of the lease term: 21 Central Energy Fund Government Demand Creation, Supply Growth Reverse Logistics • Set up VE collection centers at the end of lease duration • Identify locations to set up VE quality assessment and recycling units to make VE reusable in new VRFBs 22 Banking industry Private Demand Creation, Supply Growth • Optimize VE transport by specialized containers or other means 23 Energy Intensive Users Group of South Africa Non-Profit Organization Demand Creation, Supply Growth 150 Vanadium battery storage report Vanadium battery storage report 151 7.2 Applicability of the Circular With other prominent metals (Li, Co, Ni, Mn) used as active Table 7.3: Applicability of the Leasing Model to Critical Minerals Business Leasing Model for other materials in the cathodes of prominent Li-ion cell chemistries, Battery storage Specific usage Leasing Critical Minerals circularity is challenging because the spent batteries undergo a Mineral application in battery applicability Applicability of the mineral in a circular leasing model hydrometallurgical or pyrometallurgical recycling process (involving Table 7.3 provides a high-level, qualitative view of the possible • High overall cost towards battery dismantling of the entire battery) after which the metal salts application of a circular leasing model to other critical minerals • Large volumes of electrolyte in a single location (not mobile) of lithium, cobalt, nickel, and manganese are extracted with an Vanadium Yes Active metal, VE High • Ease of extraction, recycling, reuse needed for the clean energy transition.95 This analysis addresses efficiency of 80% to 90%. The cost of recovery from these processes • High quality extraction of metal for reuse the use of these minerals or metals in energy storage applications would directly impact lease pricing, likely making it unattractive only as this was the focus of this report. Further detailed analysis • High overall cost towards battery Primarily used as a (further financial and economic analysis would be required). These current collector in • Large volumes of electrolyte in a single location (not mobile) would be required to determine the applicability and impact of Aluminum Yes cathode and anode Medium metals would typically be used in the mobile space, with significant • Ease of extraction, recycling, reuse applying a circular leasing model to these metals. in Li-ion chemistries • High quality extraction of metal for reuse involvement in EV applications. The logistics of collecting and Establishing circularity with VRFBs is comparatively easy as recycling the leased metal would present an additional challenge Chromium No NA Not applicable to energy storage (Not part of this assessment) vanadium contributes a significant portion in the electrolyte (30% in applying a leasing model. The battery -grade recycled materials • Cost contribution to battery is relatively significant and thus leasing could to 50%), facilitating the overall recovery process. It is typically (such as Li, Co, Ni, Mn, and graphite with 99% purity) are sold to possibly apply to reduce overall cost of electricity used in large -scale stationary applications for ease of metal the same battery cell or cathode manufacturers or to traders who Active cathode • Recycling occurs and is reused by battery manufacturers for reuse in material in Li-ion batteries logistics and recovery. supply them to battery cell manufacturers. Alternatively, some of Cobalt Yes batteries such as Medium • Metallurgical processes required for extraction increases the cost of the NMC, NCA, LCO overall cost lease possibly making this an unattractive leasing model the extracted minerals are sold at commodity prices in the health • Logistics for collection of metal is challenging due to use of batteries in care, ceramics, steel, and other industries. mobile applications (EVs etc.) • Contribution to overall cost of storage is not significant enough to lease the Used as current metal collector in Li-ion • Extensively recycled chemistries and • Mature market on both supply and demand. Copper Yes VRFB anode. Low Also used in • High use in industrial application manufacturing cell • Circular leasing model would not typically be applied to this metal as it is stack for VRFBs used extensively in multiple industries and not specific to battery storage Primarily used as an active material in • Contribution to overall cost of storage is not significant enough to lease the anode for all major metal Li-ion battery types. Graphite Yes In VRFBs, graphite Low • Recycling occurs and is reused by battery manufacturers for reuse in batteries is used in bipolar plates and in anode as carbon fiber Indium No NA Not applicable to energy storage (Not part of this assessment) • Contribution to overall cost of storage is not significant enough to lease the metal • Mature market on both supply and demand Active cathode material in popular • High use in industrial applications Iron Yes LFP battery Low • Extensively recycled chemistry • Circular model would not typically apply to this metal as it is used extensively in multiple industries and is not specific to battery storage Used as anode • Battery not regarded as advanced cell chemistry (ACC) material in lead acid • Extensively recycled in smelters batteries. Also used • High toxicity metal Lead Yes in lead dioxide as Low • Circular lease model would not typically apply to this metal as the cathode material in metal price is on a downward trend the same battery 95 Hund, Kirsten, et al. Minerals for Climate Action: The Mineral Intensity of the Clean Energy Transition. 2020. The Mineral Intensity of the Clean Energy Transition 152 Vanadium battery storage report Vanadium battery storage report 153 Table 7.3: Applicability of the Leasing Model to Critical Minerals (continued) 7.3 Dissemination Plan and reduce the carbon footprint. In the future, VRFB technology and the VRFB market will flourish, but investment policies must Battery storage Specific usage Leasing The VRFB market is expected to mature over time, with Mineral Applicability of the mineral in a circular leasing model be established now to facilitate this future state by 2030 at a application in battery applicability substantial growth by 2030 depending on various factors, such considerable level. To achieve the outcomes and new possibilities • Cost contribution to battery is relatively significant so leasing could apply to as the development and promotion of RE and VRFB technologies. reduce the overall cost of electricity associated with VRFB technology, the government must start This VRFB market growth will need to be supplemented with the Active cathode • Recycling occurs and is reused by battery manufacturers for reuse in formulating and amending policies, SOPs, rules, regulations, and material in all major batteries required raw material, including the development of vanadium Lithium Yes LiBs—FP, LMO, LCO, Medium • Metallurgical processes required for extraction increase the cost of the guidelines over the next two to three years to eventually attain NMC, NCA, LTO mines for primary vanadium production. Development of VRFB lease, possibly making this an unattractive leasing model this desirable state. In addition, the large industrial base in the • Logistics for collection of metal are challenging because of the use of market will create employment opportunities throughout the batteries in mobile applications (EVs, etc.) energy storage sector needs to create demand and adapt to such VRFB value chain and can be very beneficial for local communities. technology to achieve clean energy and a sustainable future. Active cathode It will also support the sustainable development of clean energy Manganese Yes material in LiBs— Medium Not applicable to energy storage (Not part of this assessment) LMO and NMC Table 7.4: Dissemination Plan Molybdenum No NA Not applicable to energy storage (Not part of this assessment) Target Neodymium No NA Not applicable to energy storage (Not part of this assessment) Theme Notes Success Factor Audience Date • Recycling occurs and is reused by battery manufacturers for reuse in batteries • Sizeable pilot VRFB -based projects for • Metallurgical processes required for extraction increase the cost of the • The VRFB market is relatively new in proving technology lease, possibly making this an unattractive leasing model Demand terms of commercial application, thus • Increased RE penetration through Active cathode Creation creation of the demand for VRFB is stationary storage 2023–30 Nickel Yes material in LiBs— Medium • Logistics for collection of spent batteries are challenging because of the use NMC and NCA of batteries in mobile applications needed • VRFBs as a viable alternative • Circular model would not typically apply to this metal as it is used technology solution extensively in multiple industries and is not specific to battery storage • Growth of raw material supply with growing demand to contain the prices • Development of vanadium reserves and for sustainable growth of the VRFB Silver No NA Not applicable to energy storage (Not part of this assessment) Supply mine production • Industry bodies market 2023–30 Growth • Manufacturing growth throughout the • Government • No downstream processing and VRFB value chain Used as an active • Circular model application would be difficult in this case because of low manufacturing facilities in the VRFB • Power utilities material in anode in volumes of LTO technology, limited contribution in battery composition, sector and limited players operating in the recycling space with widely dispersed • IPPs LTO chemistry. Also Titanium Yes Low facilities • Mining industry used as a current • Employment opportunity for local collector in zinc flow • Technology is relatively new with little demand at present • Equitable growth with a holistic view of • Large industrial community in the VRFB value chain batteries. reducing the net environmental impact clients (See Table 6.5) E&S • Improved and equitable access to and ensuring social development would 2022–30 Development services be critical as the VRFB sector grows in • Circular model would not typically apply to this metal as it is relatively • Waste management and its South Africa Active metal in zinc inexpensive environmental impacts Zinc Yes flow battery. (Zinc Low • Contribution to overall cost of storage is not significant enough to lease the bromide electrolyte) metal • Misalignment of NDP to support battery • Regulations for environmental impact of storage, coupled with renewable power the VRFB value chain in South Africa • Energy regulations to promote RE and Regulation • Regulations for BESS are lacking in the VRFBs 2022–25 country. Evolving policies • Industrial regulations for the growth of VRFB (e.g., free trade zones) 154 Vanadium battery storage report Vanadium battery storage report 155 8 Conclusion and recommendations Understanding the Vanadium The Economic and Financial Implications Battery Market of the Leasing Models The global VRFB market is expected to reach around 111 GWh, Our financial analysis found that the upfront cost of acquiring the with an annual demand of 27 GWh, accounting for 2.4% of the vanadium, together with the lease duration and lease rate, had total required stationary storage capacity by 2030. Long- the largest impact on the levelized cost of storage and Project duration services (>4 hours) spanning grid uses, RE integration, IRR. A key consideration in understanding the financial viability power backup, and UPS are some of the major applications for of the model will be the rates of return expected by prospective VRFBs. Although the current upfront cost is not comparable investors in such a model, and we believe that market sounding to Li-ion battery chemistries, the cost of VRFBs is expected to with prospective investors and financiers would be beneficial as a decline by 50% by 2030 on account of a reduction in the cost next step to better understand the attractiveness of the projected of stack and electrolyte manufacturing, improved efficiency in returns. processes through automation, economies of scale, and R&D Based on the economic cost-benefit analysis (CBA) for the 1 MWh efforts to improve power density. All these cost reduction factors facility leasing model, using economic prices with a financial are expected to assist in the commercialization of VRFB batteries, discount rate of 2.4% over a 20-year period, we concluded that the gradually increasing market penetration. Considering the high 1 MWh facility leasing model is economically viable as the benefits cost contribution of recyclable VE in overall CAPEX (40% to 80%), outweigh the costs incurred. VRFB leasing will act as a mitigant to there is a strong business case for leasing to make the battery load shedding, particularly for industries that are heavily reliant solution more financially viable. on electricity, such as mining and manufacturing. The Vanadium Leasing Models Regulatory and Legal Requirements Achieving over 99% recovery of the vanadium electrolyte after for Implementing the Leasing Models its use in the battery creates an ideal case for its leasing. We (specific to South Africa) proposed two business models for circular vanadium ownership In order to support a circular vanadium business model, with three different leasing scenarios, which can promote urgent regulatory reforms would be required to support VRFB recyclability of the metal and reduce the upfront cost for VRFB manufacturing and VE leasing. The South African regulatory manufacturers. The two models are Leasing VE to VRFB Battery review revealed that its legislative environment is not conducive Manufacturers and Leasing VE directly to End Users. to the implementation of a circular vanadium business model, nor to the deployment of large utility -scale VRFBs. Reforms can The Vanadium Supply and Demand include the introduction of a set of regulations under section Market Dynamics 19(1) of the National Energy Act specifically aimed at promoting Battery storage demand currently accounts for 2% of global the deployment of BESS. Additionally, regulatory incentives, in vanadium demand but is expected to increase to 10% of global the form of income tax breaks, and other industrial mechanisms, demand by 2030, equaling 16,391 mtV. To meet this demand such as free trade zones, can be introduced to increase the and to keep price growth capped below US$30,000 per metric competitiveness of VRFB technologies. ton by 2030, the supply of vanadium must increase by a CAGR of 6.9% during 2022-2030. These growth rates in production Macroeconomic and Fiscal Impact have been seen in recent history. Secondary production has of the Leasing Models grown significantly over the past two years, with a strong focus A macroeconomic impact assessment (MEIA) was carried out globally on recycling industrial wastes, and it will play a key role in for the proposed leasing model for a 1 MWh facility to determine increasing global output volumes going forward. the estimated economic contribution of a 1 MWh facility leasing 156 Vanadium battery storage report Vanadium battery storage report 157 model through capital expenditure, the annual leasing fee, and chain and leasing models can be established. Short-term leasing the recycling of electrolytes. The leasing company’s capital and focused market leasing in specific geographies can increase expenditure is expected to contribute to increased tax collection the demand for jobs and the supply of opportunities. and will have long-term economic impacts on economic growth, sustained employment, and poverty alleviation. Moreover, the Conclusions leasing model’s estimated revenue from the annual leasing fee and recycling of electrolytes is expected to have a positive impact on To understand which business model scenario is best suited for local communities and the government in terms of job creation, implementation, the associated Financial, Economic, Regulatory, poverty alleviation, and contribution to public finance. Furthermore, Environment, and Social parameters were analyzed. It was an increase in demand for vanadium will bring added benefits, concluded that long -term leasing (scenario A) is the most suitable including increasing the value chain economic contributions. option for leasing VE as it provides the most economical storage solution for the end user. In the current market conditions, the application of VRFBs is limited to long -term deployment, which Environmental and Social Impact supports scenario A, as the best option for implementation in of the Leasing Models the near future. It is also expected that with the development of Based on our analysis of the environmental and social (E&S) VRFB technology, short -term leasing opportunities may arise, regulatory landscape in South Africa, the main potential E&S for example, as a battery back-up solution for UPS systems. In concern across the VRFB value chain is the lack of a regulatory such conditions, focused market leasing (scenario C) would be the framework around the recycling of VRFB (such as Extended better leasing option as it provides more social benefits to the end Producer Responsibility (EPR) for stationary battery storage -use location as a result of the increased frequency of movement solutions). This must be included in the existing EPR regulation within the locality and the associated employment opportunities. for monitoring the VRFB market VRFB and recycling. As the The roadmap presented highlights the four key thematic areas environmental impacts associated with VRFBs are strongly to focus on in order for vanadium battery storage solutions to be correlated with the VE production stage, the primary practices at deployed. These are: the mining and processing stages of vanadium bearing ores are key for reducing the associated environmental and social impacts. • Demand Creation - Showcase the technology and models to key The social analysis revealed that by strengthening the vanadium stakeholders in order for the demand for VRFBs to be created. mining and VRFB sector, SLPs can help communities benefit from • Supply Growth - As demand increases, the supply of vanadium mining and, gradually, from the VRFB value chain and community must match the demand to ensure low pricing and availability of development. Scaling up the vanadium mining sector and VRFBs the metal. will naturally widen the scope for local manufacture and/or • Environmental and Social Development - As VRFBs are local supply chain procurement, thus scaling up opportunities adopted, skills mapping is required to meet the needs of the for women and other economically disadvantaged groups and industry. Environmental regulations are required to ensure that building a socially inclusive value chain. The VRFB value chain for a BESS value chains guarantee the protection and enhancement circular business model can accelerate the emergence of economic of environmental quality. opportunities for youth and women, groups which are presently underrepresented in South Africa’s labor market. The various • Government regulation - Governments need to ensure that consultations demonstrated that there is inadequate research policies are in place to support the BESS solution as a part of on social and gender inclusivity in mining, even though there are the energy plans in their countries. semi-skilled people who can be engaged in the VRFB value chain. A Center of Excellence (CoE) should be established to support the It also emerged from the consultations that overall, there is a lack growth and development of VRFBs and understand the market of gender equity in the mining sector which needs more attention. and investment opportunities to further build on the leasing These, we understand, can widely improve as the VFRB value models through various stakeholder engagements. 158 Vanadium battery storage report Vanadium battery storage report 159 Appendix A: Methodology for Detailed Cost -Benefit Analysis A CBA is an appraisal tool that analyzes the social gains and market price setting, such as government tax regulation, and losses that could arise from a project. The aim of a CBA is to artificial adjustments, such as electricity tariffs and minimum assign a monetary value to the benefits expected from a project wage levels. and compare these to the expected costs. If the benefits exceed The economic CBA was conducted over a 20-year period using the costs, there is economic justification for the project to economic prices (shadow prices), and an economic discount rate proceed. Projects that result in an increase in aggregate real of 2.41%. The shadow factors used in the analysis are provided in income are always desirable because the potential exists to Appendix D. Three standard CBA evaluation criteria as well as two make society better off. Reasons for adopting a CBA approach additional criteria were used to determine the economic viability could include: of the proposed circular vanadium business model. • To describe a project that is currently under consideration but has not begun. This type of a CBA is referred to as ex-ante and The steps taken through the economic CBA to determine the is used to assist in decision-making and in the evaluation of the economic viability of the proposed circular vanadium business costs and benefits of a project. model are outlined below: • To evaluate a project after a project ends. In cases such as Step 1—Define the project these, all project-related costs have been invested in the project and the benefits accrued. This type of CBA primarily provides Under Step 1, the objective is to conduct an economic analysis lessons learned and assists in gathering information for demonstrating the costs and benefits of the proposed circular assessing future similar projects. This type of CBA is referred to vanadium business model for energy storage. as ex-post. Step 2—Identify and quantify costs and benefits • To evaluate a project during the operational period, when The team identified the costs and benefits that are directly the project is already under way but is not complete. The attributable to the proposed circular vanadium business model analysis helps determine the efficiency of a project in achieving for energy storage. A monetary value was then assigned to the its objectives. Where there is an additional investment made costs and benefits identified. It is important to note that not all during the life of a project, the CBA helps to evaluate the costs and benefits could be quantified. These costs and benefits, viability of additional investment. This is done by looking at however, are still an important aspect of the CBA and are the project performance before additional investment and discussed in this section. after additional investment. The evaluation of the proposed circular vanadium business Step 3—Discount costs and benefits model involves the use of an ex-ante CBA, whereby the costs and Discounting benefits of the proposed investment projects are assessed. The CBA was carried out at economic prices. An economic CBA uses The standard approach to placing a value on costs and benefits shadow or economic prices and real prices. Shadow pricing is that occur in different periods assumes that: preferable where prices do not reflect the actual value of a good • One rand today would be worth more than one rand tomorrow or commodity or no market value for a good or commodity exists. because of inflation. This means that immediate income is preferable to future income (i.e., social time preference). Shadow pricing is a proxy value of a good, often defined by what • An investment always has an opportunity cost. This means an individual must give up to gain an extra unit of the good. The that the investment could earn a better rate of return doing shadow prices reflect the true scarcity of resources. These prices something else if it was not locked in the current project (i.e., are a better reflection of actual demand and supply conditions in opportunity cost). the market that should determine the real commercial viability of the project. Market prices rarely give a true representation The discounting approach, therefore, was used to value the of the scarcity values of resources because of interference in costs and benefits related to the proposed circular vanadium 160 Vanadium battery storage report Vanadium battery storage report 161 business model over a 20-year period to a comparable amount in Where: BCR is calculated as follows: rand prices. This amount is the present value (PV) of the future South Africa 10 - year bond costs and benefits that are attributable to the proposed circular o= -1 X 100 Bn = benefits in year n expressed in constant rand values Inflation rate PVBenefits vanadium business model for energy storage. Cn = costs in year n expressed in constant rand values BCR = PVCosts The formula for the calculation of PV of costs and benefits is 1.105 r = real discount rate presented below: o= -1 X 100 1.079 n = time in years Where: N = Number of years over which project is evaluated. N Σ Cn o = 2.4% PV costs = N (1 + r)n Σ As shown in Table 8.A, in order for the proposed circular vanadium n=o Bn business model to be considered cost-effective, its NPV should be PV benefits = The CBA was conducted at current prices (i.e., nominal rand positive (i.e., greater than zero) as this indicates that its overall (1 + r)n N values) at a real discount rate of 2.4% per annum, which reflects 96 n=o Σ benefits derived through the proposed circular vanadium business Bn the current estimated cost of capital. The nominal discount rate PV benefits = model outweigh its overall costs over time. N (1 + r)n Σ calculation is in line with the criteria outlined in the CBA Manual n=o Cn for South Africa97, which recommends that if costs and benefits Table A.8.1: Decision Rule for NPV PV costs = (1 + r)n are measured in nominal (or current) rand value terms, then a n=o nominal discount rate (including inflation) should be used. If Meaning Action Where: NPV > 0 The proposed circular Accept the proposed Step 4—Calculate the Net Present Value (NPV) and Benefit vanadium business circular vanadium Cn= cost in year n expressed in constant terms -Cost Ratio (BCR) model would be viable business model as Internal Rate of Return (IRR) planned or continue Bn = benefits in year n expressed in constant rand values Using the information collected, we then considered the following with its current implementation IRR is the discount rate at which the present value of both the r = real discount rate criteria that could be used to reflect the cost effectiveness of the costs and benefits are equal. For a project to be considered viable, proposed circular vanadium business model: n = time in years NPV < 0 The proposed circular Review the proposed the IRR must be greater than the discount rate. • Net Present Value vanadium business circular vanadium N = number of years over which project is evaluated model would not be business model and • Benefit -Cost Ratio, and viable make changes to its The IRR is the discount rate at which the present value of costs implementation and benefits are equal. It is the value of the discount rate, r, which • Internal Rate of Return (IRR) satisfies the following criteria: Appropriate discount rate NPV = 0 The proposed circular The proposed circular Net Present Value vanadium business vanadium business The following assumptions were made in determining the model would neither add model could be accepted economic discount rate: NPV is the sum of the discounted project benefits less the value to nor take away since the required rate value from the economy of return is equal to Σbj Σcj discounted project costs. It indicates whether a project has opportunity cost - =0 • For this project, to determine the appropriate discount, we have financial and economic merit. The following formula is used to (1 + r) j (1 + r) j opted to use the South African 10-year bond yield rate of 10.5% calculate the NPV of a project: as of July 25, 2022, as a representation of the nominal discount Benefit -Cost Ratio rate, and inflation of 7.9% y-o-y. The calculation is as follows: Only projects with an IRR higher than the social discount rate, N Σ The BCR is the ratio of the present value of benefits attributable Bn - Cn which forms a limit, will be considered for funding. The IRR must NPV = to a project to the present value of its costs. The BCR, therefore, be handled carefully, because there are situations in which the (1 + r)n indicates the expected return for every US$1 invested in a mathematical solution of the above equation is not unique. This n=o project. The proposed circular vanadium business model would be happens when the stream of net benefits over the assessment considered viable if its BCR is greater than 1. period changes its sign (positive or negative) more than once. 96 Financial discount rate we provided in the financial model provided by the company developing this new business model. 97 A Manual for Cost Benefit Analysis in South Africa with Specific Reference to Water Resource Development, Third Edition (Updated and Revised), Conningarth Economists for the Water Research Commission 162 Vanadium battery storage report Vanadium battery storage report 163 Appendix B: Appendix C: Global Warming Impact of the Supply and Lifecycle of Lithium-Ion and VRFBs Range of Calculated (CoUE) and (CoLS) on the South African Economy Supply Phase Life Cycle Total Impact Total Cost (US$) Economic Potential CoUE Estimated Potential CoLS impact of Research Approach Cost per kWh (unplanned): opportunity (planned): 50% planned Lithium-Ion Battery Global Warming entity used (US$) Total cost in cost in job (kg CO2 eq) 56.3 95.0 151.3 1,371.99 ratio (real 2015) interruptions rand (real 2015) numbers (real 2015) Vanadium Redox Flow Battery Global Warming 57 100.8 157.8 1,430.93 NERSA total (2020 (kg CO2 eq) CoUE 6.86 17.23 billion 8.6 billion 2.9% 350,000 proposed) Note: Total cost is calculated at US$9.07 per metric ton carbon dioxide equivalent NERSA direct (2020 CoUE 1.96 4.75 billion D2.5 billion 0.8% 100,000 proposed) NERSA total CoUE 5.69 14.37 billion 7.43 billion 2.4% 290,000 (previously approved) SAIEE / UCT (2017 CoLS 5.81 12.16 billion 6.28 billion 2.3% 280,000 figure inflated to 2021) NOVA Economics CoLS 0.59 1.56 billion 810 million9 4 0.4% 50,000 Note: Calculations. 164 Vanadium battery storage report Vanadium battery storage report 165 Appendix D: Shadow Prices Petroleum Weighted Petroleum Weighted products Unskilled Exchange Customs shadow products Unskilled Exchange Customs shadow Diesel Petrol (includes Electricity Diesel Petrol (includes Electricity petrol and labor rate duty price petrol and labor rate duty price diesel) factor diesel) factor A. ASSETS CONTAINED IN THE SOUTH AFRICAN A. ASSETS CONTAINED IN THE SOUTH AFRICAN SOCIAL ACCOUNTING MATRIX SOCIAL ACCOUNTING MATRIX 1. Furniture 0.000 0.000 0.005 0.007 0.001 0.569 0.569 1.099 1. Furniture 0.000 0.000 0.005 0.007 0.001 0.569 0.569 1.099 2. Rubber products 0.000 0.000 0.062 0.022 0.016 0.426 0.426 1.064 2. Rubber products 0.000 0.000 0.062 0.022 0.016 0.426 0.426 1.064 3. Structural metal products 0.000 0.000 0.005 0.002 0.015 0.475 0.475 1.077 3. Structural metal products 0.000 0.000 0.005 0.002 0.015 0.475 0.475 1.077 4. Other fabricated metal products 0.000 0.000 0.020 0.014 0.015 0.190 0.190 1.029 4. Other fabricated metal products 0.000 0.000 0.020 0.014 0.015 0.190 0.190 1.029 5. Machinery and equipment 0.000 0.000 0.021 0.005 0.010 0.668 0.668 1.109 5. Machinery and equipment 0.000 0.000 0.021 0.005 0.010 0.668 0.668 1.109 6. Electrical machinery and 6. Electrical machinery and apparatus 0.000 0.000 0.022 0.004 0.010 0.458 0.458 1.073 0.000 0.000 0.022 0.004 0.010 0.458 0.458 1.073 apparatus 7. Manufacturing of transport equipment 0.000 0.000 0.005 0.001 0.007 0.844 0.844 1.142 7. Manufacturing of transport 0.000 0.000 0.005 0.001 0.007 0.844 0.844 1.142 equipment 8. Other manufacturing and recycling 0.000 0.000 0.005 0.003 0.011 0.279 0.279 1.045 8. Other manufacturing and 9. Buildings 0.000 0.000 0.023 0.001 0.016 0.136 0.136 1.014 0.000 0.000 0.005 0.003 0.011 0.279 0.279 1.045 recycling 10. Civil construction 0.000 0.000 0.048 0.002 0.020 0.138 0.138 1.009 9. Buildings 0.000 0.000 0.023 0.001 0.016 0.136 0.136 1.014 11. Business activities (architects, 10. Civil construction 0.000 0.000 0.048 0.002 0.020 0.138 0.138 1.009 0.000 0.000 0.025 0.001 0.011 0.10 0.10 1.009 attorneys, etc.) 11. Business activities (architects, B. WATER AUGMENTATION COMPONENTS 0.000 0.000 0.025 0.001 0.011 0.10 0.10 1.009 attorneys, etc.) 12. Bulk water (dams) 0.120 0.060 0.000 0.020 0.130 0.000 0.000 0.934 B. WATER AUGMENTATION COMPONENTS 13. Reservoirs 0.030 0.000 0.000 0.000 0.170 0.070 0.070 0.956 12. Bulk water (dams) 0.120 0.060 0.000 0.020 0.130 0.000 0.000 0.934 14. Pump stations (water & sewer) 0.030 0.000 0.000 0.000 0.170 0.100 0.100 0.961 13. Reservoirs 0.030 0.000 0.000 0.000 0.170 0.070 0.070 0.956 15. Bulk pipelines (water & sewer) 0.070 0.000 0.000 0.000 0.170 0.170 0.170 0.964 14. Pump stations (water & sewer) 0.030 0.000 0.000 0.000 0.170 0.100 0.100 0.961 16. Treatment works (water & sewer) 0.030 0.000 0.000 0.000 0.170 0.070 0.070 0.956 15. Bulk pipelines (water & sewer) 0.070 0.000 0.000 0.000 0.170 0.170 0.170 0.964 17. Reticulation (water & sewer) 0.030 0.000 0.000 0.000 0.170 0.100 0.100 0.961 16. Treatment works (water & sewer) 0.030 0.000 0.000 0.000 0.170 0.070 0.070 0.956 18. Storm water 0.100 0.050 0.000 0.010 0.130 0.000 0.000 0.936 17. Reticulation (water & sewer) 0.030 0.000 0.000 0.000 0.170 0.100 0.100 0.961 C. Other assets 18. Storm water 0.100 0.050 0.000 0.010 0.130 0.000 0.000 0.936 19. Roads 0.210 0.120 0.000 0.000 0.120 0.000 0.000 0.902 20. Parks and recreation 0.210 0.120 0.000 0.000 0.120 0.000 0.000 0.902 21. Schools, crèches, etc. 0.080 0.020 0.000 0.050 0.140 0.000 0.000 0.956 D. Costs associated with construction 22. Maintenance and operation 0.160 0.090 0.000 0.020 0.170 0.000 0.000 0.909 23. Earth works 0.000 0.000 0.111 0.000 0.102 0.065 0.065 0.959 24. Research and development 0.000 0.000 0.007 0.018 0.017 0.022 0.022 1.004 25. Relocation costs 0.000 0.000 0.009 0.000 0.044 0.062 0.062 0.996 Shadow price adjustment factor 0.791 0.844 0.804 1.337 0.704 1.222 0.950 166 Vanadium battery storage report Vanadium battery storage report 167 Appendix E: Detailed Economic Impact Methodology With an internationally accepted approach, informed by the associated with investment and operational expenditure in one or income (measured through GDP) at a national level. The basic within the economy and indicates the direct, indirect, and induced Global Reporting Initiative (GRI) standards, PwC will quantify the more parts of the economy affect other sectors of the economy principle of this theory is that increased spending will have effects of a given expenditure on the following economic factors: estimated economic contribution of the proposed project from and how the impacts are distributed. It highlights the economic carry-through or multiplier effects, which result in even greater A forward linkage exists where a particular firm or industry uses extraction and processing and the VRFB battery manufacturing linkages within the economy and indicates the direct, indirect, and aggregate spending over time. The multiplier itself is an attempt the products produced through the vanadium value chain as an and recycling stages to the South African economy using a induced effects of a given expenditure. to measure the size of those carry-through effects or impacts. input or raw material. Conversely, a backward linkage occurs macroeconomic impact assessment (MEIA). The analysis allows The multiplier considers all direct and indirect benefits from that The size of the added economic activity generated is measured where the value chain uses the product of another firm or industry us to capture the proposed project’s macroeconomic and fiscal investment or from the change in demand. The size of the impact through a multiplier effect. The different rounds of the multiplier as raw materials or inputs during the production process. There contribution by showing the industry’s interdependencies within or the effect on the economy depends on the size of the multiplier effect—from the first spending at the extraction and processing are specific linkages based on the sector in which a company different sectors of the economy. The structure of the MEIA is in the economy. phase through the worker spending his or her salary on goods operates. These linkages are based on the sector’s average incorporated into a national accounting system. The approach and services (and its resultant effects)—is then estimated as the We will use this theory as the basis for estimating the spending pattern. The number of linkages and the size of each demonstrates the economically related industry clusters and key direct, indirect, and induced contributions. macroeconomic and fiscal impact of the proposed business model. linkage influence the multiplier effect of the specific sector. The or target industries that are most likely to increase the internal spending categories are defined according to the internationally coherence of the economy. The sum of the direct, indirect, and induced impacts is the total The South Africa SAM can estimate how the activities of the accepted SIC classifications. impact. According to Keynesian economic theory, any injection proposed business model, in one or more parts of the economy, The MEIA makes use of the Social Accounting Matrix (SAM) into the economy via investment capital or government spending, could affect other industries of the economy, and how the impact methodology to analyze the economic contribution of the project. for example, will result in a proportionate increase in overall is distributed in the economy. It highlights the economic linkages The SAM methodology estimates how the project’s activities Economic f ctors Th dir ct imp ct includ s th first round ff cts wh r incr s d d m nd for p rticul r Dir ct oods/s rvic s l ds to incr s d busin ss ctivit nd thus dir ct ch n in s ctor l Imp ct production. This is th imp ct ssoci t d with th op r tion l xp nditur nd infr structur inv stm nt und rt k n b th v rious ph s s of th proj ct. Th indir ct imp ct includ s th s cond round ff cts th t ch n th d m nd for f ctors of Gross Dom stic Public Low-incom production nd hous hold incom , which c n b xpl in d b th int r-link s of s ctors in th Emplo m nt Indir ct Product (GDP) fin nc s hous holds conom . With r f r nc to this proj ct, th s imp cts m n t from th incr s d d m nd for Imp ct oods nd s rvic s cquir d from xt rn l s rvic provid rs, s w ll s incr s d mplo m nt GDP is ood indic tor L bour nd ntr pr n ur- Th imp ct on public On of th compon nts of opportuniti s cr t d on th b ck of this conomic ctivit . of conomic rowth nd ship form n import nt fin nc s is th dir ct t x th EIA is to d t rmin w lf r — it r pr s nts, p rt of th prim r contributions. In ddition, wh th r th inv stm nt mon st oth rs, th production f ctors n d d th r is indir ct contribu- nd op r tions h v r mun r tion of mplo - for th proj ct’s op r - tion to public fin nc positiv imp ct on pov rt s nd ross op r tin tions. Th ddition l qu ntifi d throu h th ll vi tion. W show how Th induc d imp ct includ s th multipli r ff ct th t ris s throu h th first nd s cond round surplus (GOS) (profits) s numb r of p opl n l sis th proj ct b n fit Induc d of sp ndin . This is th incr s in hous hold incom , nd th ddition l sp ndin th t ris s compon nts of v lu mplo d s r sult of low-incom hous holds Imp ct from th ch n in incom l v ls, from th n w mplo m nt opportuniti s cr t d du to dd d to th conom inv stm nt sp ndin nd throu h th ddition l op r tion l ctiviti s is incom th t th s xp nditur . d t rmin d b th EIA hous holds r c iv 168 Vanadium battery storage report Vanadium battery storage report 169 Appendix F: Comparative Analysis with Gold Gold is a precious metal and is one of the least reactive chemical elements, remaining solid under standard conditions. Gold often occurs Figure F.8.1: Demand for Gold, by sector (2021) in its native form as nuggets or grains, in rocks, veins, and alluvial deposits. Gold has widespread use in jewelry, technology, investment, and instruments of monetary exchange in various transactions in banks. J w ll r f bric tion Inv stm nt C ntr l b nk nd oth r institutions 14% Table F.1: Source of Gold (2017-21) T chnolo metric tons) Gold (‌ 2017 2018 2019 2020 2021 OTC nd oth r 7% Mine production 3,573 3,655 3,595 3,476 3,582 Net producer hedging -25.5 -11.6 6.2 -39.1 -22.7 48% Recycled gold 1,112 1,132 1,276 1,293 1,136 10% Total supply 4,660 4,775 4,877 4,730 4,696 Source: Metals Focus, World Gold Council 21% Table F. shows that approximately 75% of the total supply of gold is from primary sources (mine production) and the rest of the gold supplied is recycled gold. In 2021 around 4.7 kt of gold was supplied, of which 1.1 kt was recycled gold. Source: Metals Focus, Refinitiv GFMS, ICE Benchmark Administration, World Gold Council Table F.2: Gold Mine Production, metric tons (2017–21) According to the demand data, around 4.7 kt of gold was consumed in 2021. About 48% of gold demand is coming from the jewelry Country 2017 2018 2019 2020 2021 industry, followed by investment (21%), central banks and others (10%), technology (7%), and over-the-counter (OTC) transactions and others combined (14%). Based on past gold consumption trends, only about one tenth of the total gold is being consumed in the China 429 404 383 368 332 manufacturing of electronics, dentistry, and other industrial use (excluding jewelry fabrication). Russia 280 295 327 331 330 Australia 292 313 325 327 315 Canada 171 191 185 173 192 United States 236 222 200 193 186 South Africa 147 126 113 102 113 Others 2,163 2,228 2,174 2,081 2,223 Total 3,573 3,655 3,595 3,475 3,580 Source: Metals Focus, World Gold Council China is the major primary producer of gold, producing around 9.3% of total gold produced globally in 2021. China is followed by Russia (9.2%), Australia (8.8%), Canada (5.4%) and the United States (5.2%) in production of primary gold in 2021. South Africa is contributing only around 3.2% of total primary gold production. 170 Vanadium battery storage report Vanadium battery storage report 171 Appendix G: Stakeholder Mapping and Outreach feedback sent feedback sent Consultation Consultation Initial email/ Initial email/ email/phone email/phone Information Information Request for Request for Follow -up Follow -up phone call phone call Received? Received? follow up follow up follow up follow up Second Second ‌First ‌First date date call call Stakeholder Contact person Stakeholder Contact person ‌ ‌ Departmental Spokesperson: Facilitated by Adriana Unzeuta Saavedra August 30 Department Mr Sputnik Ratau (RatauS@dws.gov.za), (aunzuetasaavedra@worldbank.org) Yes 1 of Water and KritzingerI@dws.gov.za June 1 June 6 June 9 June 13 June 15 June 17 aguthrie@largoinc.com (July‌ 1) Sanitation MuirA@dws.gov.za 7. Largo eric.watson@largoinc.com July 18 July 26 Yes manusl@dws.gov.za f.dalessio@largoinc.com September 10 September 12 September 14 pv@largoinc.com Regional Manager (Limpopo): stephen.prince@largoinc.com June 1 June 9 N/A Mr Azwihangwisi Mulaudzi First National charlesv@battery.co.za David Msiza (David.Msiza@dmr.gov.za) 8 Contact from CSIR September 23 No Department Battery russellb@battery.co.za Mmadikeledi Malebe of Mineral 2 (Mmadikeledi.Malebe@dmr.gov.za) Dept of Science Resources and 9 Contact from CSIR September 23 No Energy Kagiso Menoe (Kagiso.Menoe@dmre.gov.za) July 26 July 27 August 3 August 3 August 19 September 21 No and Innovation mbangiseni.mabudafhasi@dst.gov.za Setepane Mohale (Setepane.Mohale@dmre.gov.za) General contact June 1 June 6 N/A Ntokozo Ngcwabe Department of (Ntokozo.Ngcwabe@dmr.gov.za) Environment, 10. Marc Gordon July 26 July 29 N/A Forestry and Ms Maggie Mabuela Fisheries June 1 June 6 N/A Ntando Mhkize July 26 N/A Mr Shane Raman Brian Soldaat (Brians@thedtic.gov.za) ceo@sahrc.org.za, Department Annelize van der Merwe South African wbaloyi@sahrc.org.za, of Trade, (AvdMerwe@thedtic.gov.za) 11 Human Rights hkhumalo@sahrc.org.za, July 26 July 27 N/A 3 Mahendra Shunmoogam Council Industry ‌and mngobeni@sahrc.org.za, Competition (MShunmoogam@thedtic.gov.za) July 26 July 27 August 1 August 3 August 19 No vmavhidula@sahrc.org.za Umeesha Naidoo (UmeeshaN@idc.co.za) Yunus Hoosen (YHoosen@thedtic.gov.za) Mineral Council Department of Environment: Babalwa Bharti Daya (BDaya@thedtic.gov.za) 12 June 1 June 9 N/A South Africa Matiwane Rashmee Ragaven (RRagaven@thedtic.gov.za) TIPS- trade Esther.Nenungwi@dpe.gov.za and industrial Nadia.Valley@dpe.gov.za 13 June 1 June 6 N/A policy Donald.Nkadimeng@dpe.gov.za strategies Mbofholowo Tsedu Funeka.Mothoa@dpe.gov.za June 1 June 6 June 13 July 5 July 8 No jacky.molisane@dpe.gov.za 14 Just Share Robyn Hugo June 1 June 6 N/A Johannes.Mahlangu@dpe.gov.za Department Kedibone.Magaqa@dpe.gov.za Professor Genc June 1 June 6 N/A 4 of Public Nonhlanhla.Mokoena@dpe.gov.za Enterprises bekir.genc@wits.ac.za, Director General: Mr Kgathatso Tlhakudi carl.beaumont@wits.ac.za, Intergovernmental Relations: Mr Tsholofelo Wits (School of 15 bryan.watson@wits.ac.za, Motlogelwa June 9 July 15 N/A Mining) clinton.birch@wits.ac.za, July 26 July 29 N/A Provincial Manager (Limpopo): Mr Victor Mavhidula cuthbert.musingwini@wits.ac.za, HQ research contact: Martin Nsibirwa huw.thomas@wits.ac.za, kelello.chabedi@wits.ac.za Hartmat Brodner June 1 June 6 N/A University of mpm.ntsoane@up.ac.za, Renesh Thakoordeen: RThakoordeen@csir. 16 July 19 July 26 N/A Pretoria joseph.makhasa@up.ac.za 5 CSIR co.za July 15 July 18 August 1 August 3 August 19 No MmalewaneModibedi: MModibedi@csir.co.za Centre of Mesfin Kebede: MKebede@csir.co.za 17 Environmental Matome Kapa, Catherine Horsfield and Leeane June 1 June 6 N/A Rights Govindsamy Fredrick Mphephu June 29 June 29 July 1 July 5 (fredrick.mphephu@bushveldminerals.com) (Environmental) Rudzani Mudau (Rudzani.Mudau@ bushveldminerals.com) Johanna Maloba (Johanna.Maloba@ June 17 June 23 Yes Bushveld bushveldminerals.com) 6 (July‌ 18) Vanadium Mikhail Nikomarov (Mikhail.Nikomarov@ July 13 (Social) July 15 July 18 bushveldminerals.com) Bonani Nyabane (Bonani.Nyabane@ bushveldminerals.com) Dr P.J Cox June 1 June 6 No 172 Vanadium battery storage report Vanadium battery storage report 173 Appendix H: Summary of Stakeholder Consultation 1. Department of Water and Sanitation (DWS) 2. Department of Mineral Resources and Energy (DMRE) Date of Date of June 9, 2022 August 3 Consultation Consultation Category of Category of Government Stakeholder Government Stakeholder Stakeholder Stakeholder “The Department of Water and Sanitation is the custodian of South Africa’s water resources. It is primarily responsible for the formulation “DMRE is a leader in the transformation of South Africa through economic growth and sustainable development in the mining and energy and implementation of policy governing this sector. While striving to ensure that all South Africans gain access to clean water and dignified sectors. DMRE aims to develop a mineral resources and energy sector that promotes economic growth and development, social equity and About sanitation, the department also promotes effective and efficient water resources management to ensure sustainable economic and social environmental sustainability. Department development.” About DMRE The mission of DMRE is to regulate, transform and promote the minerals and energy sectors, providing sustainable and affordable energy for of Water and growth and development, and ensuring that all South Africans derive sustainable benefit from the country’s mineral wealth.” The Water and Sanitation Division is responsible for the bulk water supply, sanitation services, and water and sanitation infrastructure Sanitation planning and implementation in the city. Source: https://www.dmr.gov.za/about-dmre/overview Source: https://www.dws.gov.za/about.aspx The consultation aimed to achieve the following: The consultation focused ‌ understanding natural resource u ‌ tilization (water) and waste generation in the existing mining and processing Understand the policy and technology i ‌nterventions in VRFB and the mining industry in South Africa and the role of DMRE in promoting operations within the vanadium industry in South Africa. In addition to this, the consultation aimed to understand the scope of improving the ‌ egarding pollution prevention and sustainable energy storage solutions. The key focus of consultation also included technology limitations r Key Focus current practice for effective and efficient use of water and management of effluent generated from the sector. control in view of the stakeholders. Area of ‌ focused on understanding the extent of applicability of the National Water Act, 1998 (Act 36 of 1998) and Furthermore, the consultation ‌ insight into the deployment of energy storage technologies‌and identify risks and opportunities for VRFB batteries in the South African Gain ‌ Consultation National Water Amendment Act, 2014 (June 2014) across the VRFB value chain. context. (Environment) Key Focus Area The consultation also aimed to focus on the existing practices towards regulatory provisions stipulating the need of water recycling or the of Consultation Understand the existing pollution prevention‌and control technologies/interventions in place across the VRFB value chain. mandate of installing an WTP/ETP as part of water usage ‌ license. (Environment) ‌ nderstand the national i U toward renewable energy ‌nterventions regarding the decommissioning of coal -powered plants and the transition ‌ Consultation Summary with integrated energy storage solutions and proposed policy around streamlining the sustainable energy storage solutions. 1. The applicability of Water Use ‌ according to the National Water Act, Act no. 36 of 1998 for mining activity License (WUL) applications ‌ Another target area for discussion included policies and technical interventions around battery recycling and reuse‌; current disposal ‌ ‌nto the applicability of this ‌ and the industry operations associated with V Electrolyte Manufacturing. No insight i license was obtained for mechanisms for battery waste, electronic waste, and electrical waste‌ ‌ for e-waste disposal and current implementation ; the policy framework ‌ battery assembly operations. approaches to extended producer responsibility (EPR) in VRFB batteries. ‌ 2. for discharge and disposal limits from the mining area ‌ The WUL includes specific provisions ‌ and the industrial setup, which needs to be ‌ respected. Furthermore, separate standards are available for non-potable water and potable water the Department includes drinking water standards (General and Special Effluent Standards gazetted in 1984). Consultation Summary 3. DWS specified that a typical vanadium processing industry (processing unit) withdraws approximately 1511 m /day of water for its 3 The objective of the consultation on social aspects was to identify the risks, challenges, and opportunities that are prevalent or likely to arise operation. The typical source of this water extraction is surface ‌ and groundwater (rivers and ‌ dams). in the VRFB domain and its supply chain‌and in vanadium mining. Consultation 4. The communities near mining intensive catchments, such as the Mpumalanga (‌ due to coal mining), Gauteng (Western, Central and Consultation 1. The DMRE representative and team ‌shared that ‌their department does not deal with environmental and social aspects related to Summary Eastern Basins) and Northwest (Platinum belt) region, are identified as critically polluted areas. The key contributors to pollution are the Summary , but more with the economics, import/export, financials, and production information, etc. the sector‌ (Environment) dysfunctional wastewater treatment plants and unlawful mine water discharges. DWS also s ‌ hared that complaints have been received ‌in the (Environment) 2. The representative at the DMRE further conveyed that their colleagues at the Mineral and Petroleum department may provide past about unregulated effluent disposal resulting in water pollution. into the environmental and social aspects related to the subject. insights ‌ 5. DWS does not recommend the technologies ‌ ; however, it ‌ relating to water conservation for the VRFB sector‌ encourages the industries 3. ‌ to share the answers, in discussion with other Last, the DMRE confirmed the receipt of the consultation questionnaire and agreed ‌ to ‌ on water conservation. For the mining sector, DWS has developed the Water Usage Benchmarks915 for the ‌coal, ‌gold, focus technology ‌ of the department. PwC has received ‌ members ‌ no response from DMRE post multiple follow -ups. ‌ platinum and other mines within the same commodity group. The new (greenfield) mines in South Africa have been compelled to consider environmental and energy aspects and are incorporating cleaner technology into their operations. Consultation Consultation Summary 6. DWS is also working ‌ on addressing the impacts of Acid Mine Drainage (AMD) by developing mitigation measure‌ . Based on the current Summary ‌nformation as they were not On social safeguards‌and social equity in VRFB and the vanadium value chain, DMRE did not have the necessary i scenario, three AMD treatment plants are operating in the ‌ western, central and eastern basins (Krugersdorp, Germiston and Springs), (Social) experts in VRFB or vanadium mining treating a combined volume of between 150 ML/day ‌ and 200 ML/day and a few treatment plants in the Mpumalanga region‌ —the Emalahleni Water Reclamation Plant, New Vaal Colliery Treatment plant, Middelburg Water Reclamation Plant are operational to address the treatment of AMD. Consultation Summary The aim of the consultation was to ‌gain insight into the deployment of energy storage technologies‌and identify risks and opportunities for VRFB batteries in the South African context. The objective of the consultation on social aspects was to identify risks, challenges, and opportunities that are prevalent or likely to arise in the VRFB domain and its supply chain‌and in vanadium mining. 1. the impact of water contamination on settlements near mining areas related to agricultural production, farming, and crop quality, On ‌ DWS cited the example of West Rand goldfields (Krugersdorp/Randfontein area), where residents have been found ingesting mine tailings, Consultation this subject to date. washing laundry, and irrigating their crops with mine-impacted water. However, there have been few studies on ‌ Summary 2. Additionally, irrigation using mine-impacted water is site-based‌ aspects among the communities ; thus, the effects on health and other ‌ (Social) living in proximity may differ from one site to another. As stated by the stakeholders, further studies are needed to determine the extent of the impact. 3. On any provision of services, such as water and electricity, among occupational communities (mineworkers and other l‌abor groups) , DWS stated that ‌ who lack access to water and sanitation in the areas‌ these communities fall within the mandate of the water services authorities and the local government‌—DWS does not have this information readily available. 4. On whether the provision of water has improved conditions ‌for women in the households and additionally (maybe) employed as mineworkers, DWS does not have this information readily available. https://www.imwa.info/docs/imwa_2019/IMWA2019_Annandale_71.pdf ‌ 1 ‌95 file:///C:/Users/navrozk266/Downloads/benchmarks-report-06june2018.pdf 174 Vanadium battery storage report Vanadium battery storage report 175 Appendix H: Summary of Stakeholder Consultation 3. The Department of Trade, Industry & Competition (the dtic) 4. Department of Public Enterprises (DPE) Date of Date of August 1 June 13 Consultation Consultation Category of Category of Government Stakeholder Government Stakeholder Stakeholder Stakeholder “The mission of the dtic is to promote structural transformation, towards a dynamic industrial and globally competitive economy; provide a predictable, “The DPE is the shareholder representative for the Government and is mandated by the Executive to oversee a number of SOCs that operate in competitive, equitable and socially responsible environment conducive to investment, trade and enterprise development; broaden participation in the core sectors of the economy like Mining, Defence, Energy, Logistics and others. The DPE is the primary interface between Government and the About dtic economy to strengthen economic development; and continually improve the skills and capabilities of the dtic to effectively deliver on its mandate and SOCs concerned and, in addition to oversight, provides input to the formulation of policy, legislation and regulation. respond to the needs of South Africa’s economic citizens.” About DPE Source: http://www.thedtic.gov.za/ The vision of DPE is to create an enabling environment in which SOCs add real economic value by ‌ focusing on operational excellence, ‌ndustrialization, job creation and skills development.” commercial viability and fiscal prudence. This will drive developmental objectives, i to understand the role of the Department of Trade, Industry and Competition (the dtic) i The consultation aimed ‌ ‌n promoting the VRFB sector of the sustainable energy storage solution sector by creating and implementing an environmentally friendly policy framework. Source: https://dpe.gov.za/about/ The purpose of the consultation was ‌ to understanding various policy interventions in line with the operations of the dtic to reduce the environmental Key Focus Area impacts associated with the transport and logistics services in mining and industries‌and to understand the challenges faced by the renewable energy ‌ n social s DPE was consulted o ‌ afeguards considering its involvement in the job creation and skills development sector. The primary objective of Consultation sector in South Africa in terms of transmission loss, energy storage, and key constraints‌ . Furthermore, the consultation aimed to understand the key from an environmental standpoint was to gain insight ‌ ‌ tate-owned enterprises (SOE) in the ‌ into the presence of S vanadium market and their provisions and steps made by the government and department ‌ toward meeting energy demands in South Africa (focusing on the growth of renewable Key Focus Area (Environment) key concerns. energy resources) with due consideration of environmental degradation alongside increased energy production and mineral exploitation. of Consultation (Environment) In addition, the consultation aimed to understand the key challenges faced in trading batteries‌and battery parts and the regulatory p ‌ rovisions for ‌ egarding sustainability or the circular economy and upcoming The consultation also aimed to understand the policy interventions r battery assembling units with respect to international conventions and the revised Preferential Procurement Policy Framework Act (PPPFA) regulations investments ‌relating to VRFB. (focusing on Vanadium Redox Flow Battery). Consultation Summary Consultation Summary Providing insight ‌ into the dtic’s role in the mineral sector, the representative from the dtic specified that the department provides support to ‌ OE involved in the diamond mining industry. The DPE representatives further specified The DPE specified that, at present, there is only one S Consultation to guiding the investor in various investors in establishing the industrial facilities within the dtic -facilitated SEZs. While their involvement is limited ‌ that they are not aware of any environmental and social concerns r ‌ egarding the vanadium mining industry that may affect investments in Summary ensuring regulatory compliance and mandatory compliances towards the regulations. The dtic further supports investors by facilitating stakeholder ‌ . However, there are issues relating to investments ‌ the sector‌ in coal mining, and there are no new coal mining investments in the pipeline. engagements and meetings with various government departments that will be impacted or will have an impact b ‌ ecause of the investment. ‌ The dtic also (Environment) supports investors ‌with outlining the regulatory permissions ‌ needed to obtain such as environmental authorization, water usage l ‌icenses, etc. It was noted that the DPE relies on national regulations and policies on environmental and social aspects and only monitors‌or provides With respect to the VRFB sector, the Industrial Development Corporation (IDC) has facilitated one such investment in the dtic -facilitated special oversight on compliance‌-related matters. economic zone (IDZ), where Bushveld is setting up a vanadium electrolyte manufacturing plant. With respect to promoting the investment in SEZs‌ , investors receive certain benefits, such as tax incentives. Consultation Summary Consultation ‌ ith respect to the plans to add VRFB to the power grid, Bushveld is interested in setting up VRFB through an ESKOM -based program. B W ‌ ased on the The aim of the consultation was to ‌gain insight into the deployment of energy storage technologies‌and identify risks and opportunities Summary ‌nformation available, one such testing program for ‌ limited i have been discontinued by the ESKOM, while the results installing energy storage batteries ‌ for VRFB batteries in the South African context. The objective of the consultation on social aspects was to identify risks, challenges and (Environment) or performance of that program are not known to the dtic. opportunities that are prevalent or likely to arise in the VRFB domain and its supply chain‌and in vanadium mining. From the consultation, we In terms of public sector procurement, VRFBs are not a designated product; however, a number of materials associated with the battery are designated understand that: and will be subject to trade regulations and guidelines. In South Africa, State-owned ‌ ‌ with the National enterprises (SOEs) are a mandate for social and economic development. They are aligned ‌ government is promoting the localization of resources available in South Africa and creating promising job markets, and there is an intention to The ‌ Development Plan (NDP) of South Africa. have a specific window in terms of localization. For energy storage solutions and battery development, dtic DMRE and IDC are working ‌ with primary localizing battery development, energy storage solutions, and other renewable projects‌ minerals to spar ‌ vanadium. . This also includes a focus on ‌ Currently, there are no SOEs involved in vanadium mining. Consultation ‌n terms of circularity, dtic is ‌ I is not focusing specifically on the VRFB market or such products. With reference to reviewing circularity policies, but it ‌ Summary SOEs need to comply with all necessary legislative prescripts that come from various departments for policies across the various recycling facilities, as a government entity, there is no recycling unit for the battery market, but there are some private players i ‌nvolved in the recycling (Social) departments. of lead batteries, and a policy ‌ to this effect has been created by the department of environment specifying the process for recycling and the rationale for it. ensures that companies adhere to business activities incorporating the socioeconomic objectives outlined in the national policies in the DPE ‌ ‌ onitors them closely. country and m Consultation Summary Accelerating ‌ with the SDGs skills development is part of SOEs for local employment opportunities. Broadly, these objectives are aligned ‌ The aim of the consultation was to ‌ associated with gain insight into the deployment of energy storage technologies‌and identify risks and opportunities ‌ relevant to the country’s context. ‌ VRFB batteries in the South African context. The objective of the consultation on social aspects was to identify risks, challenges, and opportunities that are prevalent or likely to arise in the VRFB domain and its supply chain‌and in vanadium mining. SOEs have their own hiring processes. DPE aims to ensure that SOEs have the right personnel overall (from a skills perspective, rather than a ‌ In the vanadium mining sector and in VRFB usage in industry storage solutions, it ‌ was revealed that dtic does not have a role in direct mining. demographic ‌one). ‌ are handed by DMRE. The stakeholders indicated that mining-related concerns ‌ Consultation Policy interventions ‌ ‌ fall within the purview of dtic. generally do not ‌ Summary ‌ ‌ bout establishing “manufacturing facilities.”‌ dtic facilitates various stakeholder engagements of the mining companies once they make decisions a (Social) The dtic engages in energy sector investments in South Africa and oversees the full value chain of the investment lifecycle, including those in the SEZ in specific areas . ‌ ould not provide specific responses to the questions on ‌ The dtic c social aspects. The ‌ ‌ fall under the DMRE’s mandate. stakeholders indicated that the socially relevant aspects ‌ 176 Vanadium battery storage report Vanadium battery storage report 177 Appendix H: Summary of Stakeholder Consultation 5. Council for Scientific and Industrial Research (CSIR) 6. Bushveld Vanadium Date of Date of August 1 June 29 (Environmental) July 13 (Social) Consultation Consultation Category of Category of Government Stakeholder Private Sector Market Player Stakeholder Stakeholder ‌ rganization that conducts research, “The Council for Scientific and Industrial Research (CSIR) is a leading scientific and technology research o “Bushveld Minerals is a low-cost, vertically integrated primary vanadium producer. It is one of only three operating primary vanadium producers, owning localizes, and diffuses technologies to accelerate socio economic prosperity in South Africa. The o develops, ‌ ‌ rganization’s work contributes to industrial ‌ four operating primary vanadium processing facilities. two of the world’s ‌ development and supports a capable state. In 2021, the Company produced more than 3,592 mtV, representing approximately three per cent of the global vanadium market. With a diversified About CSIR The CSIR undertakes directed, multidisciplinary research and technological innovation that contributes to the improved quality of life of South vanadium product portfolio serving the needs of the steel, energy and chemical sectors, the Company participates in the entire vanadium value chain Africans.” About through its two main pillars: Bushveld Vanadium, which mines and processes vanadium ore; and Bushveld Energy, an energy storage solutions provider. Source: https://www.csir.co.za/csir-brief Bushveld ‌ nnualized steady state production run rate of between Bushveld Vanadium is targeting to materially grow its vanadium production and achieve an a Vanadium ‌ tV per annum and 5,400 m 5,000 m ‌ tV per annum by the end of 2022. Growth plans to 8,000 ‌ mtV per annum will be pursued, subject to funding and The consultation with CSIR ‌ focused on three broad areas: market conditions. (1) S ‌ treamlining the legislative requirements ‌ for safeguarding in the environment, while ‌ the establishment and operation of the energy storage facility, Bushveld Energy is focused on developing and promoting the role of vanadium in the growing global energy storage market through the advancement of energy storage solution to the existing power generation facility and VRFB assembling facility. vanadium-based energy storage systems, specifically Vanadium Redox Flow Batteries (“VRFBs”).” Key Focus Area (2) Understanding the policies and technical interventions around battery recycling and reuse with a focus on g ‌ aining insight ‌ into the number of battery Source: https://www.bushveldminerals.com/company-profile/ of Consultation ; technological research around the recycling of VRFB‌ recycling units processing in SA‌ ; the disposal mechanism ‌ for battery waste, electronic waste, and (Environment) electrical waste‌ of extended producer responsibility (EPR)‌ ; the implementation ‌ ; recycling and the reuse potential of waste generated from mining and ‌ f VRFB production and ‌ The primary objective of this consultation was to understand the process o The focus areas understand material flow analysis. ‌ ore processing. during the consultation were: (3) Understanding the ecological sensitives of vanadium‌ -rich regions of SA, i.e., Limpopo province, Mpumalanga province, Gauteng province and ‌ rocess flow emissions, i.e., air emissions associated with the VRFB value chain (Mining process (Magnetite Ore and Vanadium Ore), Industrial Process‌ P — Northwest province and g into critically polluted areas in the region. ‌ aining insight ‌ V2O5 production, V Electrolyte Production, VRFB Battery Assembling) Key Focus Area ‌ Applicable regulatory clearance for establishing industrial setup associated with the VRFB value chain in SA‌ Consultation Summary of Consultation ‌ Estimated waste generation and its quantum spread across the lifecycle of VRFB manufacturing and usage‌ indicated that they are currently not involved in research ‌ The representative of CSIR ‌ about VRFBs, but they envision incorporating something ‌ similar to (Environment) ‌ odium sulfur batteries and i VRFBs as part of their outdoor testing facility. The CSIR was approached by multiple companies to look at s ‌s, therefore, now Potential to recycle waste generated from various processes ‌ as part of an outdoor testing facility. considering sodium sulfur batteries ‌ Involvement of hazardous material and activities involving manual handling of chemicals ‌ ‌ egarding energy storage solutions, the CSIR is looking at developing cathode material for batteries and they are also setting up a testing facility for Li- R ion and l ‌ ‌ead-acid batteries. By the end of 2022, they ‌ intend to establish a small-scale unit around ‌ this. ‌ The outdoor facilities for testing larger batteries ‌ materials, including energy ‌ Resourcing and usage of raw ‌ utilization and water usage‌ are still in the conceptual stage and are ‌planned for the future. Supply chain emissions and associated emissions ‌ The CSIR also conveyed that the only work ‌on vanadium flow ‌ batteries done by the CSIR ‌ focused on the battery chemistry, which ‌had been done a long ago, and they are not sure ‌ time ‌ about the availability of findings around ‌this subject. Furthermore, no recent work ‌has been done ‌ on vanadium or ‌VRFBs The representative of Bushveld specified that their input in the VRFB value chain is i ‌n vanadium ore extraction and ore to production processes. Their by the CSIR team. main mining and processing facilities, Bushveld Vametco, are in Brits, South Africa. ‌ead-acid batteries, which ‌ As far as the CSIR understands, there are no policies related to energy storage, but there is policy related to l follows IEC D ‌ uring the process of ore extraction, ore is mined through open -cast mining methods, using drill and blast, as well as load and haul procedures to mine standards. the magnetite ore. The major waste generated in this process is waste rocks or overburden. The key environmental risks associated with this stage are Consultation open void areas, dumps, and the use of explosives, with the potential for groundwater contamination. Summary on recycling, the size of the required ventilation, the temperature of rooms, monitoring of gas In terms of lead-acid batteries, there is a regulation ‌ (Environment) produced, the type of flows needed, the spark resistant tools to be used in the storage facility, acid proof dentures, legislation around the safety licenses, such as Air Emission License, Integrated Water Usage L The applicability of various regulatory ‌ ‌ icense and Environmental Authorization, were provisions and the need ‌ to use p ‌ ersonal protective equipment (PPE) and access control, etc. The aim is to ensure that policies and l ‌egislation about the also confirmed during the consultation. address the chemistry behind the ‌ specific batteries will ‌ batteries. F ‌ urthermore, the representative of Bushveld Vanadium explained the process o ‌ f Vanadium Electrolyte Production (Vanadium Mining, Concentrate R ‌ egarding recycling, the representative of the CSIR informed the PwC team that there is a pre-established mechanism for the collection of spent lead Production, Extraction process, Recovery Process and Refinery Process) and specified the key input material requirements (such as water) and -acid batteries in the battery ‌ centers, where the used batteries can be ‌ deposited, and a new battery can be collected at a ‌ discounted price. From the emissions ‌and effluent generation associated ‌ with the entire process. The main inputs for concentration production are magnetite ore, raw water, and battery c ‌ enters, the recyclers (such as ‌ First National Battery) collect the spent battery. ‌ Furthermore, the disposal of batteries in the environment is ‌ not electricity, and the main outputs would be vanadium bearing magnetite and tailings. During the extraction process, the vanadium is extracted from the allowed; they must be collected and recycled after use ‌ according to the ‌Consumer Protection Act (section 59). With respect to recycling, companies like magnetite‌using a kilning/roasting/leaching process. The entire extraction process uses input material such as roasting agents, coal, LPG gas, wash First National operate under ISO 14001 (2004 EMS) for recycling. As of now, there is one for L ‌ i-ion and there is debate around that, National northern water, and acids‌ , while the outputs include scrubber sludge, emission of OFF gas from the kilning stacks, and calcine tailings as a waste or by-product standards for disposal of waste under government regulation 636 of 2018. There is a framework for secondary batteries, such as Li-ion, Ni-cadmium, in the leaching process. and Ni-metal hydride, that falls under this umbrella framework for heavy metal batteries. found the recycling for batteries. ‌ he major output during the recovery process ‌ T ‌nputs. Furthermore, most is off-gas, and this process requires water, softeners, and coal (for burning) as i The CSIR specified that they will not be able to provide input i ‌nto environmental pollution related to the VRFB sector as they are not involved in this is lost ‌ of the liquid used in this process ‌ through evaporation in the ‌sulfate plant to extract vanadium in a solid state. During the final stage (refinery), the . They referred to another division ‌ sector‌ that may have ‌ insight into waste generation‌and waste and water recycling solutions. The CSIR also informed main ‌inputs are LP gas proven air, starch binders, and water. the team that there are areas in South Africa where ‌ the threat ‌of water ‌ insecurity is high, but a direct link to the mining sector or vanadium mining Consultation Summary The representative of Bushveld also specified the pollution prevention measures implemented during the process of ‌vanadium electrolyte generation, sector cannot be ‌established. minimize SO2 and particulate matters and the provision of black houses for the boilers. such as the provision of a kilning off -gas scrubber system to ‌ (Environment) Consultation Summary The majority of water used during vanadium extraction is recycled water. Water is generally sourced from open pits as sub seepage, from third parties —mostly untreated water not suitable for human consumption), and boreholes. Water is recovered using a return water dam d (municipalities‌ ‌ uring the The aim of the consultation was to ‌ gain insight into the deployment of energy storage technologies‌and identify risks and opportunities for VRFB process and is recirculated into the process. batteries in the South African context. The objective of the consultation on social aspects was to identify risks, challenges, and opportunities that are prevalent or likely to arise in the VRFB domain and its supply chain‌and in vanadium mining. The CSIR offered broad insights into the development As part of the current practice, the overburden or waste rock generated as part of the mining activity i is being used as ‌s not being used elsewhere, but ‌ challenges in South Africa. backfill into the pit‌and for post mining, i.e., mine closure activity‌ ‌ , while the calcine tailings generated as part of the extraction process are considered hazardous waste ‌ according to the waste classification (pH of 3 and ‌ sulfate concentration of 200). ‌ Therefore, this waste is disposed of in line with the 1. involved in research on vanadium or mining specifically. The CSIR is not involved in the VRFB sector, nor are they ‌ regulatory requirements (HDPE lined cells). ‌ Furthermore, the water from calcine ‌ through underdrainage seepages in HDPE -lined tailings is recovered ‌ Consultation seepage from calcine ‌ cells. All the ‌ tailings is recirculated into the process as wash water input. Since the water is of poor quality, it is recycled within the Summary 2. ‌ ector. As observed by the CSIR, there is a large segment of semi-skilled people who can benefit from engagement in the VRFB s extraction process. (Social) 3. There are a few incentives to promote gender equity. Bushveld is currently following a water management procedure to use the resource e ‌ fficiently, which includes circulation of reuse of water and ‌the 4. in homes will benefit large communities, with markets expected to grow exponentially Due to load shedding in South Africa, energy storage ‌ reduction of the amount of water required from external sources. The services also generate sewer effluent, and the water recovered ‌ from the sewer the CSIR referred to the World Bank report). until 2035 (‌ approximately 60% is recovered/recycled water and 10 % of the water is sourced from within the mining effluent is fed into the leaching process. Overall, ‌ area as part of the pollution bloom management program‌ . The source of such water is scavenger boreholes‌and abstract, polluted groundwater from 5. ‌ The CSIR observed that energy storage will not be affordable for all income groups‌because of the vast economic divide. For low-income within the mining area. ‌ about 30% of the water is lost during the process ‌ Furthermore, ‌ through evaporation. groups, energy storage is out of reach. The representative of Bushveld further conveyed that electrolyte production is new territory for them and i ‌ losely aligned with chemical ‌s more c 6. Africa has an employment rate of 30% and is hence very indicative of the energy storage battery space in South Africa. In terms of legislative requirements, there is a need ‌ engineering. ‌ licenses, atmospheric emission l for environmental authorization, water usage ‌ ‌icenses, and hazardous substance handling ‌ licenses. 178 Vanadium battery storage report Vanadium battery storage report 179 Appendix H: Summary of Stakeholder Consultation 6. Bushveld Vanadium 7. Largo Date of Date of June 29 (Environmental) July 13 (Social) ‌ 0 and September 10 August 3 Consultation Consultation Category of Category of Private Sector Market Player Private Sector Market Player Stakeholder Stakeholder Consultation Summary “Largo Inc. produces and supplies vanadium. The Company focuses on the production of VPURE™ and VPURE+™ products, which are sourced from one of the world’s highest-grade vanadium deposits at the Company’s Maracás Menchen Mine in Brazil. The company also offers renewable energy storage The aim of the consultation was to ‌ gain insight into the deployment of energy storage technologies‌and identify risks and opportunities for VRFB solutions through clean energy and vanadium redox flow battery systems. The Company is in the process of implementing a titanium dioxide pigment batteries in the South African context. The objective of the consultation on social aspects was to identify risks, challenges, and opportunities that are About Largo plant using feedstock sourced from its existing operations in addition to advancing its US-based clean energy division with its VCHARGE vanadium prevalent or likely to arise in the VRFB domain and its supply chain‌and in vanadium mining. batteries.” ‌ to which mining companies ‌ In the South African context, there are a few regulatory frameworks in the social space ‌ must adhere. Additionally, a large Source: https://www.largoinc.com/About-Us/Overview/default.aspx part of the frameworks ‌outline what companies can adhere to, what communities can and cannot expect from mining companies, and so on. ‌ LPs ‌ S according to Regulation 46 under the Mining Charter Act that companies need to comply with, including HR development, employment equity, key sectoral environmental concerns in processing ‌ The objective of the consultation was to understand the ‌ areas for this vanadium. The focus ‌ mine community development, ‌ management of down-scaling, and housing and living conditions. discussion included Occupational Health, Safety, Emissions, Effluent Discharge, Transportation of Raw Material (Vanadium) and Transportation of Final Product. ‌ ites the example of housing and living conditions‌ C aim to support the accessibility of affordable housing for employees‌ —in terms of legislation, mines ‌ , Key Focus Area but communities expect that mining companies ‌ with access to housing, which is not ‌ will assist entire communities ‌ in line with the legislation. to understand the ‌ The consultation also aimed ‌ major global concerns ‌about the VRFB market, such as international regulations/ treaties governing of Consultation the transboundary movement of V2O5, V-electrolyte, and VRFB‌ ‌ aterials and , as well as the key issues faced by Largo in the transportation of m According to the Charter, ‌companies are expected to contribute 1 percent of net profit after tax ‌‌ ‌ to community development initiatives. (Environment) transboundary movement (V2O5, V-electrolyte, VRFB‌ .). ‌ ‌ ccording to the Mining Charter 2018, the SLPs mines need to follow community development p Currently, a ‌ rograms. F ‌ urthermore, the consultation ‌ VRFBs and the key interventions ‌ sought to understand the GHG emissions associated with the production of ‌ for reducing ‌‌ There is a gap between communities’ expectations from mining companies in Over and above integrated development plan of municipalities (earlier GHG emissions i VRFBs. ‌nvolved in the production, transportation, and operation of ‌ between local ‌ ‌ onflict government and constituencies), companies need to have direct contact with communities about their needs, which often creates c between the local ‌government and communities. Companies are asked to ‌ approach local governments instead of communities (which is contrary to the In the beginning of stakeholder consultation, the representative of Largo specified that they would prefer to provide a written response to the legislation). questionnaire‌after discussing the questions with technical experts at their energy department and referring to their sustainability report. It was also Consultation ‌ oing so; therefore, the E&S data points related to the V- electrolyte and VRFB made clear that Largo is yet to deploy a battery and are in process of d ‌ ‌ ecuring more opportunities in the mining workforce. There are challenges in the VRFB and mining industry in terms of women s manufacturing a ‌ nd functioning are not readily available. Summary (Social) C —women in historically disadvantaged contexts, mines are not making technical and management r ‌ ites examples from their own operations‌ ‌ oles The representative of Largo ‌ ‌ emphasized the sourcing and supply of vanadium and its effect on the overall cost of ‌ VRFBs. Largo is currently a ‌ ttempting available to women. create a financial mechanism to reduce the cost of vanadium and‌ to ‌ VRFBs by 30% ‌ , thus, the cost of ‌ to 50%, expediting adaptation ‌ to VRFBs. Moreover, The social and economic dynamics of mine locations ‌‌ ‌ present challenges: women find it difficult to work ‌in the areas far north of Limpopo as it is remote the volatile nature of the vanadium market and its ever-changing pricing was put forth as one r ‌ eason for limited adaptation, ‌ in addition to the size of or very rural, and women cannot access certain basic amenities in the work environment. Most women prefer work opportunities in the urban areas. the battery, in the commercial space. To address ‌ this issue, Largo has introduced the concept of physical vanadium as a separate company‌through which investors can invest ‌ in physical vanadium‌. This company is ‌ aligned with Largo clean energy and Largo Inc. ‌ , the customers of Largo will As a result‌ ‌ takeholders stated that Bushveld is still at the mining stage, but has not yet delved into the VRFB space. Not yet a VRFB operation phase. G S ‌ ender Consultation ‌ benefit as they ‌will not have to pay for the vanadium in the ‌VRFBs. ‌Furthermore, Largo provided ‌ insight into the surge in enquiries from Europe ‌ about sector, but only in the upcoming electrolyte plant in one of the provinces. diversity in the workforce is thus not yet applicable in the VRFB ‌ Summary for renewable energy storage solutions. Thus, Largo is looking to Europe and the U the need ‌ ‌ nited States as ‌ major drivers ‌of the VRFB market. I ‌n terms of human ‌resources and ‌ labor, the Employment Equity Act and Broad -Based Black Economic Empowerment (B-BEE) are mandates for (Environment) ‌ he representative of Largo ‌ T emphasized the reuse and recycling potential of vanadium after the battery life cycle‌ . Although there ‌ current are no ‌ workforce diversity. pilot studies are available‌ examples of this, ‌ . Largo is transporting vanadium flakes and powder and ‌ is planning to ship ‌its first electrolyte batch. Considering the toxic nature of vanadium‌ , shipping the electrolyte is difficult as it is heavier, so Largo i‌ntends to focus on mobile mixing operations so T ‌ndicated that more men ‌ ‌ he Integrated development Plans (IDPs) of the Madibeng municipality i baseline enter the workforce as migrant workers. The ‌ that powdered ‌ vanadium can be shipped. The transboundary movement of vanadium in electrolyte or powdered form h ‌ as some constraints related to study revealed social concerns such as teenage pregnancy‌and HIV prevalence, ‌among others. its movement, such as ‌ the need to be REACH certified‌and have ownership title documentation‌In light of the safety aspects of transportation, certain There are economic spin-offs ‌‌ ‌, such as more disposable income in Madibeng compared to 2011. taxes ‌apply. The availability of shipping containers, staff, ports, and parts ‌ for VRFBs are some of the major supply chain challenges. Health initiatives ‌ ‌ can have social impact. ‌ egarding GHG emissions, Largo has just ‌ R launched the Scope 1 and Scope 2 review of the VRFB business, while the representative was not sure A Largo about the overall coverage area of study emission review for VRFB has been picked up by Largo while its data points is not yet available. ‌ documentation, Bushveld/Vametco Alloys has provided a baseline study conducted in 2020 in its Vametco Alloys operation in Madibeng In terms of ‌ representative mentioned an existing study ‌ ‌ esk on the life cycle assessment of vanadium redox flow batteries, which is already considered part of the d aimed at improving its SLP. The study focuses on key socioeconomic indicators related to population and Municipality, Northwest province ‌ review and assessment study. demographics, community well-being, employment and income, employment and employability, access to infrastructure and related public services, economic development, and the impact of the COVID-19 Consultation Summary pandemic. The aim of the consultation was to ‌ gain insight into the deployment of energy storage technologies‌and identify risks and opportunities for VRFB Consultation batteries in the South African context. The objective of the consultation on social aspects was to identify risks, challenges, and opportunities that are Summary prevalent or likely to arise in the VRFB domain and its supply chain‌and in vanadium mining. (Social) The second consultation with Largo ‌ terms of their inclination in the social impacts. However, as was shared by the (September 10) proved useful in ‌ organization, Largo is yet to venture into the VRFB space and has not yet delved into the social impacts of ‌ ‌ VRFBs. vanadium mining or ‌ 180 Vanadium battery storage report Vanadium battery storage report 181 Appendix I: Appendix J: Roadmap—Key Activities required for Uptake of VRFB, Demand Creation Roadmap —Key Activities required for Uptake of VRFB, Supply Growth Activity Impact Timeline Activity Impact Timeline Government-led pilot projects to support the roll out of renewables to 1 vanadium Promoting investment in exploration of ‌ 2023 onwards 1 2023-2030 vanadium reserves & Growth of ‌ support demand mine production 2 Development of new mines in Australia, SA , Russia, China, and Brazil 2023 onwards Supporting increased RE tendering: Government to initiate long-term offtake/tenders of Project ‌ 2 penetration through stationary 2023 onwards VRFB technology of sizeable capacity to ensure long-term price stability storage 3 VRFBs Tax incentives to promote production of ‌ 2023 Policy -based incentives (tax exemptions, special tariff, etc.) for VRFB to 3 2023-25 4 set up production facilities and ‌ Incentives to ‌ promote production growth 2024 increase customer demand Production growth throughout the Free trade zone to increase the commercial feasibility of exporting value chain Deploy VRFB as a potential replacement to diesel generators in microgrids 5 2023-2025 4 2025-30 vanadium electrolytes to end users for remote/isolated communities Promotion of VRFBs as a viable alternative technology solution Mapping of land and locations for setting up the manufacturing facilities to of VRFB vs Li-ion technology, Build stakeholder awareness on benefits ‌ 6 2024 5 2023 onwards promote VRFB production including emphasis on LCOE rather than upfront cost 6 Implement electrolyte leasing model 2023-2025 Conduct R&D on critical subcomponents-stack and electrolyte by working 7 Reducing upfront cost of VRFB 2023 onwards on cheaper alternatives system skills for Intergovernmental collaboration to transfer technology and ‌ 8 2023 onwards techno-commercial development of VRFB technology 182 Vanadium battery storage report Vanadium battery storage report 183 Appendix K: Appendix L: Roadmap —Key Activities required for Uptake of VRFB, Environment and Social Development Roadmap —Key Activities required for Uptake of VRFB, Regulatory Framework Activity Impact Timeline Activity Impact Timeline ‌ kills mapping aligned to market ‌ S needs and the demand for skills and jobs Introduce an investment promotion plan in accordance with the Draft 1 2022-2025 1 2022-2025 and preparation of ‌a skills development plan Increased e ‌ mployability of the local Exploration Strategy for the Mining Industry in South Africa Vanadium extraction and community in the VRFB ‌ value chain downstream beneficiation growth 2 a skills development plan Implementation of ‌ 2025-2030 Introduce vanadium beneficiation support mechanisms in terms of section 2 2022-2025 26 of the Minerals and Petroleum Resources development Act Social safeguard and community development plan focusing on gender 3 2022-2024 equality, Indigenous, and disadvantaged Develop a specific recycling/reuse regulatory regime aimed at reducing the Improved and equitable access to 3 2022-2025 impact of the vanadium value chain on the environment services ‌ everaging access to energy for enhanced social development outcomes L 4 2025-2030 particularly health, education, and economic development Guidelines on the identification of appropriate locations for BESS solutions 4 Regulating environmental impact 2022-2025 taking various factors into account Development of ‌industry-specific Waste Management Plans to facilitate 5 Guidelines for the dismantling of BESS equipment and the end of its service the concept of Extended Producer Responsibility (EPR) 2022-2024 5 2022-2025 life, including specific BESS end-of-life provisions Identifying the availability and capacity of recycling facilities to implement ‌ Minimizing waste generation and 6 2022-2024 Update IRP with increased renewable energy capacity provisions for wind the recycling and recovery measures at the post-consumer stage. the impact on the environment 6 2022-2025 and solar Energy regulations for VRFB Setting up procedures, processes to implement the recycling and recovery promotion Introduce a set of regulations under section 19 of the National Energy Act, 7 measures at the post-consumer stage (collection, transportation, storage, 2025-2030 7 2022-2025 aimed at promoting deployment of VRFB recycling, recovery, treatment, reuse, upcycling, and disposal) Note: Applies to the South African context Introduce tax incentives in Section 12 of the income tax associated with the 8 2022-2025 manufacturing, piloting, and deployment of VRFB Industrial regulations for growth of Introduce ‌free trade zones—SEZs are duty-free areas offering storage and VRFB 9 distribution facilities for value-adding activities within the Special Economic 2022-2025 Zone for subsequent export Note: Applies to the South African context 184 Vanadium battery storage report Vanadium battery storage report 185 Notes