Minmetals Securities: Vanadium flow energy storage has clear long-term industrial opportunities, and future efforts should focus on three key indicators.

Minmetals Securities released a research report stating that, overall, vanadium flow energy storage has clear long-term industrial opportunities, but its commercialization process depends on whether three conditions can be fulfilled simultaneously: "long-duration demand, cost reduction, and resource expansion." Industrial development is more likely to evolve along the path of "pioneering breakthroughs in high-renewable-penetration regions such as the Northwest volume growth driven by technology and scale-based cost reduction nationwide diffusion of long-duration energy storage demand." In the future, close attention should be paid to the share of energy storage projects with durations of 6 hours or more, the gap between the LCOS of vanadium flow and that of lithium batteries, and progress in the large-scale development of green vanadium extraction from stone coal. These three indicators will jointly determine the pace at which vanadium flow energy storage achieves larger-scale development in the future. The main views of Minmetals Securities are as follows: The continued expansion of the global energy storage market, combined with the rising value of long-duration energy storage, opens up long-term growth space for all-vanadium flow batteries In 2025, global new-type energy storage newly added installed capacity was approximately 336.3GWh, and it is expected to reach 1,519.0GWh by 2035, with a compound growth rate of about 16.3% from 2025 to 2035. Although lithium-ion batteries still account for about 97.7% of cumulative new-type energy storage installed capacity, all-vanadium flow batteries, by virtue of advantages such as decoupling of power and capacity, intrinsic safety, long cycle life, and recyclable electrolyte, are better suited to large-scale, long-duration, high-frequency cycling energy storage scenarios. Their industrial opportunity is not comprehensive substitution of lithium batteries, but rather differentiated competition formed as energy storage duration continues to extend. One challenge is that long-duration energy storage demand has not yet been fully released, and the technical advantages of vanadium flow still lack a sufficiently large application scenario in the short term In 2025, China's wind and solar power generation accounted for 21.8%. In 2026H1, the average duration of newly added new-type energy storage projects was 2.69 hours, of which 2-4 hour projects accounted for 78%, while projects of 4 hours and above accounted for only 15%. Based on the national average, it is expected that the share of wind and solar power generation will be about 46% in 2045 and reach 62% in 2060, and the release of nationwide long-duration energy storage demand will remain relatively medium- to long-term. However, wind and solar penetration in northwestern regions such as Qinghai and Gansu has already exceeded 30%, and these regions are expected to take the lead in forming demand for energy storage of 4-8 hours or more, becoming an important breakthrough for vanadium flow to move from demonstration to commercialization. The second challenge is that initial investment remains significantly higher than that of lithium batteries, but whole-lifecycle economics are showing room for improvement At present, the EPC price of 4-hour vanadium flow energy storage is about 2.064 yuan/Wh, about 2.1 times the 0.971 yuan/Wh of lithium batteries in the same period; however, the 4-hour LCOS is about 0.504 yuan/kWh and 0.398 yuan/kWh respectively, and the gap is significantly smaller than the initial investment gap. Under a long-term cost reduction scenario, the 8-hour vanadium flow LCOS is about 0.190 yuan/kWh, while that of lithium batteries is 0.186 yuan/kWh, further narrowing the gap. This indicates that improving electrolyte utilization and stack power density, as well as advancing standardized and large-scale manufacturing, is expected to gradually bring vanadium flow into the cost-competitive range in long-duration scenarios. The third challenge is that vanadium resources are not scarce in a geological sense, but the existing low-cost supply system is difficult to match the potential incremental energy storage demand If vanadium flow accounts for 5%, 10%, and 20% of the global new-type energy storage market in 2035, the corresponding annual demand would be about 532,000 tons, 1.063 million tons, and 2.127 million tons, while the current global vanadium industry is still at the scale of hundreds of thousands of tons. China's existing low-cost vanadium supply mainly relies on vanadium slag as a steel by-product, and its increment is constrained by steel output; in contrast, vanadium-bearing stone coal resources are abundant and can be expanded independently, but in 2025 vanadium production from stone coal was only about 7,600 tons. Whether future green vanadium extraction technologies such as salt-free roasting-acid leaching, cascade oxidation roasting, and enhanced leaching can achieve low-cost industrialization will become the key to expanding the elasticity of vanadium supply. Risk warnings: 1) Long-duration energy storage demand release falls short of expectations; 2) The risk that vanadium flow energy storage reduces costs more slowly than other technology routes; 3) The risk of large fluctuations in vanadium resource prices; 4) The risk of imperfect project revenue mechanisms and business models.