Winning the long-term energy storage market, vanadium batteries still need cost reduction

Ask AI · How can a new vanadium battery electrolyte preparation method break through cost bottlenecks?

Reporter Pan Juntao

After five years in the vanadium ore industry, Wang Zhenghua, chairman of Hunan Youli Energy Storage, has once again attracted investors interested in his company this year. For a long time before, investors were unwilling to get involved in the vanadium and vanadium flow battery industry chain. Hunan Youli Energy Storage has a vanadium mine in Xiangxi, Hunan, with metal reserves of 300,000 tons.

The reason investors have turned their attention back is that last year the company, together with Lanxiao Technology, developed a new vanadium flow battery electrolyte preparation method, which theoretically can effectively reduce the investment, production, and transportation costs of vanadium flow battery electrolytes. “Investors need to see the feasibility of cost reduction in vanadium flow batteries before they make a move. We provide at least one feasibility option.” Wang Zhenghua said.

Three years ago, vanadium flow batteries were regarded as a “star” in the energy storage battery sector. Many vanadium flow battery companies were able to secure large amounts of financing from well-known institutions in the early stages of their establishment.

According to the reporter’s statistics, vanadium flow battery companies with single-round financing exceeding 100 million yuan in 2023 included Rongke Energy Storage, Guorun Energy Storage, and Xingchen New Energy. Among them, Guorun Energy Storage and Xingchen New Energy were both established in 2021.

The market generally believes that vanadium flow batteries, which use vanadium as the electrolyte, have inherent safety, low maintenance costs, high residual value, and abundant resources. These features directly addressed the biggest pain points of lithium batteries at that time.

As the industry has developed, lithium batteries have been gradually filling their shortcomings—such as adding fire-fighting facilities in energy storage cabinets, smart operation and maintenance, and exploring and mining more lithium mines. Meanwhile, vanadium flow batteries have not yet achieved large-scale commercial deployment.

Data from the National Energy Administration shows that among newly added new-type energy storage installations in 2025, lithium-ion battery energy storage takes the lead, accounting for 96.1% of installed capacity. Energy storage technologies such as compressed-air energy storage, flow battery energy storage, and flywheel energy storage combined account for only 3.9%.

In 2026, a new opportunity is presented to vanadium flow batteries: long-duration energy storage.

In February this year, the National Development and Reform Commission and the National Energy Administration issued a new policy on capacity-based electricity prices, explicitly supporting the development of long-duration energy storage. In March 2025, the “Special Action Plan for Large-Scale Construction of New Energy Storage (2025–2027)” issued by the National Development and Reform Commission and the National Energy Administration also proposed that by 2027, the nationwide installed capacity of new-type energy storage would reach more than 180 million kW, and long-duration energy storage (more than 4 hours) would account for no less than 30%.

The policy clearly requires that long-duration energy storage (more than 4 hours) account for no less than 30%. However, the challenge of long-duration energy storage is that as storage duration increases, costs rise linearly. For lithium batteries, doubling the duration requires either expanding the number of cells or increasing the capacity of each cell, which places substantial pressure on system integration. In contrast, the structure of vanadium liquid flow batteries naturally decouples power and capacity: power depends on the stack, while capacity depends on the electrolyte, and the two are independent. In theory, extending the storage duration of vanadium liquid flow batteries only requires increasing the amount of electrolyte. The marginal capacity expansion cost is far lower than that of lithium batteries. The longer the storage duration, the more significant the cost advantage becomes.

But in real industrial practice, high production costs continue to trouble vanadium flow batteries, making how to reduce costs a key question the industry needs to answer. “Long-duration energy storage is a definite market, but vanadium flow batteries need to win the market by proving their strength.” Wang Zhenghua said.

Cost Headaches

The long-duration energy storage market is not dominated by vanadium flow batteries alone. Other technology routes such as lithium energy storage and compressed energy storage are also eager to try.

Haitian Energy Storage has launched a 4-hour long-duration energy storage system based on lithium iron phosphate, and some products can achieve long-duration energy storage of more than 8 hours. A relevant person from Haitian Energy Storage said that the capacity-based electricity price is calculated based on the local coal-fired unit capacity electricity price standard and converted according to peak capacity, which will directly benefit 4-hour and longer long-duration energy storage. In addition, the “peak-duration parameter” set by each province continues to guide the development of long-duration energy storage. As detailed implementation rules roll out across regions, the value of long-duration energy storage will be further highlighted, and promotion in the domestic market will be smoother. Haitian Energy Storage will seize policy opportunities, rely on mature long-duration lithium-based energy storage products and solutions, accelerate market expansion and project implementation, and promote large-scale and industrialized development of long-duration energy storage.

China State Energy is a company mainly focused on compressed-air energy storage. Its general manager, Ji Lu, said that compressed-air energy storage is physical energy storage, because the power equipment and energy equipment are decoupled. Therefore, long-duration energy storage can be achieved simply by adding space for the storage tank, and it can even support long-duration energy storage beyond 10 hours.

Compared with the above technology routes, the biggest shortcoming of vanadium flow batteries still lies in cost. The current cost of vanadium flow batteries is about 1.5 yuan/Wh to 1.7 yuan/Wh, while lithium iron phosphate energy storage systems are about 0.4 yuan/Wh to 0.5 yuan/Wh, meaning there is a large cost gap between the two.

Xingchen New Energy once provided a vanadium flow battery cost-reduction roadmap: by controlling vanadium raw material costs to 80,000 yuan per ton, reducing electrolyte prices to below 0.7 yuan/Wh, reducing system integration costs through large-scale procurement, and promoting innovation and iterative upgrades of stack materials. With these measures, it aims to bring the cost of vanadium flow battery energy storage systems down to below 1.5 yuan/Wh by 2027 and below 1 yuan/Wh by 2030. Xingchen New Energy was established in 2021 and focuses on the industrialization of vanadium flow batteries. Its current valuation is about 3 billion yuan, and it has production capacity of 2GW/8GWh.

Difficult Point: Cost Reduction at the Upstream

Vanadium is the main cost driver of vanadium liquid flow batteries, accounting for about 40% to 60% of total costs. The larger the vanadium flow battery, the more vanadium electrolyte it requires, but the vanadium price has remained high for a long time and has been difficult to bring down.

China has the world’s most abundant vanadium ore resources and is also one of the countries with the largest vanadium production. In Xiangxi alone, proven ore reserves already amount to 793 million tons, equivalent to about 6.37 million tons of vanadium pentoxide (V₂O₅). According to statistics from the China Vanadium-Titanium Industry Alliance, in 2024 China’s domestic vanadium production was about 165,000 tons (calculated as V₂O₅); since 2012, China’s share of global vanadium production has consistently stayed above 50%.

Global vanadium consumption overall is relatively small. Since 2012, consumption has fluctuated in the range of 120,000 to 180,000 tons, mainly used in the metallurgical sector—such as adding vanadium alloys during steel production—and vanadium slag can also be used in cement production.

In recent years, the domestic steel and real estate markets have declined, causing vanadium demand to shrink continuously and the vanadium price to trend downward. The financial reports of Vanadium Titanium Co., Ltd. (000629.SZ) show that in 2025 the average selling price of vanadium products (V₂O₅) was about 72,000 yuan per ton; in 2024 it was about 78,000 yuan per ton; and in 2023 it was about 104,000 yuan per ton.

Wang Zhenghua told Economic Observer that although the vanadium price has fallen, it is hard to drop significantly due to cost support. At the same time, with weak demand, prices also cannot rise sharply, so overall volatility is relatively high.

He believes that the current lowest point of the vanadium price may be the break-even line of Vanadium Titanium, while the highest point occurs when supply capacity is insufficient to meet actual market demand.

According to Wang Zhenghua, compared with lithium, vanadium is positioned later in the periodic table, with poorer reactivity. Generally, it needs to go through multiple processes—such as pyrometallurgy and hydrometallurgy—to be extracted successfully, with extremely high requirements for temperature ranges, time, and so on. Because vanadium ore has complex occurrence conditions, it cannot be beneficiated in the way metals like copper and gold can. Also, because its grade is generally low—around 1%—transportation costs are further increased.

Therefore, vanadium smelters can only be established within a cost radius of 100 to 200 kilometers from the mine. Within that radius, there must be industrial parks that meet industrial supporting and environmental regulatory requirements. Also, since vanadium smelting produces a huge amount of vanadium slag, large-scale building-material enterprises such as cement plants that can synergistically process tailings are also needed within that cost radius.

He believes that vanadium mining and smelting costs are high, and market demand is relatively small, so the overall industrial scale is small, and few people are willing to invest in vanadium mining. “If vanadium product prices are high and demand is good, capital would pour in one after another, and large funds would also enter. Right now, basically nobody is entering.” Wang Zhenghua said. Vanadium Titanium produces about 50,000 tons of vanadium each year, mainly sourced from vanadium-titanium magnetite, which is a byproduct of Panzhihua Iron and Steel Group’s steel production.

A 1GW vanadium flow battery requires about 8,500 tons of vanadium. If the vanadium price is 70,000 yuan per ton, and without considering the cost of processing primary vanadium into the electrolyte, then for 1GWh, the cost of primary vanadium raw material alone would be about 600 million yuan—corresponding to 0.6 yuan/Wh. This is equivalent to the overall quotation of a lithium iron phosphate energy storage battery system.

To reduce the cost of vanadium flow batteries and meet the market demand for long-duration energy storage, Wang Zhenghua suggests that it is necessary to develop high-quality, low-cost shale vanadium ore deposits. Only when vanadium ore production costs have clear room to decline will vanadium batteries gain competitiveness on costs.