Tuesday, 24 November 2020

Invinity Energy Storage - Portfolio Addition


Just as there are many ways to generate energy - wind, nuclear, coal. solar - so there are many ways to store the energy - lithium-ion batteries, pumped hydro, flow battery and hydrogen for example. In recent years there has been a move away from generating energy from fossil fuels due to climate change and a corresponding transition to cleaner solutions such as wind and solar. As the world increases capacity for these clean generation options, the costs of solar and wind have fallen which makes them the cheapest way for creating energy in many parts of the world. As costs fall, it follows that more and more capacity can be deployed which will create more energy than can be used at certain periods and this energy can be stored for use at a later time.

The reality is that renewable energy has arrived and will increasing dominate the world's energy requirements in the future as we retire coal, oil and natural gas (fossil fuels). However, these renewable forms of energy are inherently intermittent - the wind doesn't always blow and there is no sun at night so we will need to store excess energy when available in much greater volumes than is required at the time and the excess will be stored for use later.

Vandium Flow Battery

V-flow batteries are large, containerised operations which can store and discharge energy over long periods, typically 20 to 25 years. They offer unlimited options by merely by using larger storage tanks. Because of their size, they are not suited to vehicles but more for industrial and utility applications.

Most grid storage is currently pumped hydro but obviously there are constraints on where this can be deployed as it relies on gravity. As baseload energy from fossil fuels is phased out we will need reliable forms of storage to fill the gap. It is estimated that flow batteries could provide up to one third of all stored energy over the coming decade. Vanadium is more common in the Earth's crust than Lithium and we currently extract about twice as much V compared to Li.

Invinity

The company is a merger of redT (UK) and Avalon(Canada). The company aims to become a global leader in flow batteries and compete head-to-head with Li-ion batteries and provide energy storage solutions to decarbonise global energy to achieve net zero emissions by 2050.

The company has around 40 energy storage operations worldwide

Invinity Storage Solutions from Renewable Solar

Earlier this month the Company announced a 1.8 MWh deal with European Marine Energy for a project in Orkney to provide clean power from tidal energy combined with storage and green hydrogen. The project is due for delivery next year and will be a world-first.

The Company are involved with the Energy Superhub Oxford project which will demonstrate the key role played by flow batteries in the decarbonisation of the world's transport and electricity networks. The smart power network installed in Oxford will deliver flexible, reliable power to fast-track the roll-out of EVs. If all goes to plan the aim is to roll out this syten throughout the UK.

Results

According to the latest half-year results to end June 2020 (link via Investegate) the company increased revenues by 50% to £0.3m. Net assets increased from £12.6m at the end of 2019 to £38.7m.

"Without a viable alternative, project developers interested in large-scale energy storage have looked almost exclusively to lithium-ion systems, even when they aren't the optimum fit. Invinity's strategy is to make Invinity the commercially viable complement or alternative to lithium-ion batteries.

The Company has made significant commercial progress in the months following the merger as the June 2020 Trading Update detailed with over £1m of orders signed. Since then, Invinity's late stage project pipeline has continued to expand in terms of both project quality and scale. Thanks to the ongoing work of Invinity's transatlantic commercial team, the Company remains confident in its ability to close a significant number of these opportunities into confirmed orders over the coming months".

The company are focused on key markets in UK, West Coast US, S Africa and Australia.

Conclusion

The vanadium flow battery technology seems to be gaining traction as the limitations of Li-ion batteries becomes apparent and as the transition towards renewable energy drives the structural changes for storage solutions. There are environmental concerns in relation to the extraction of lithium in areas such as Tibet and Bolivia where local water supplies have been polluted as the mineral is mined from vast salt flats. Also the batteries can become unstable and burst into flame or explode.

As demand for renewable electricity surges, so too does the requirement for safe, sustainable storage solutions. The market for energy storage will become huge over the coming decade and beyond and hopefully provide opportunities for the likes of Invinity to take advantage.


Invinity Share Price YTD

This is a small AIM-listed company with big ambitions but has yet to turn its potential into profits. The share price has had a good run moving from 40p 6 months back to a high of 185p (currently) so there could well be some volatility and taking of profits and maybe better opportunities at lower prices down the line. However I have recently sold some of my ITM Power shares at 370p (purchase price 37p) so I can take a little more risk with this acquisition. The shares were purchased in my SIPP at 165p and I will add to my holding should there be any significant pull-back in the coming weeks. I hope the performance can match some of my other acquisitions this past year such as McPhy, Plug Power, Ceres etc.

To Invinity and Beyond... (With apologies to Buzz...I'll get my coat...)

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation... investing in smaller AIM-listed companies can be rewarding but is usually higher risk - always DYOR!

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