MIDAS SHARE TIPS: Batteries to store wind power can boost your funds

Wind power now accounts for almost a third of all UK electricity, outpacing any other source, including gas. Turbines have been built, capacity has increased and costs have fallen. But wind is unpredictable.

On quiet days there is not enough of it. On windy days, too much. This causes problems. When wind turbines generate more electricity than the grid can absorb or distribute, they are simply asked to stop producing. In the past two years alone, the process has cost around £1.5 billion and lost huge amounts of energy, enough to power more than a million homes, according to think tank Carbon Tracker.

This problem is getting worse every year, making renewable energy more expensive than it should be and delaying the UK’s path to a fossil-free future. Invinity energy systems may help to solve the problem. The company makes vanadium flow batteries, which are safe, last for years and can store electricity for hours.

Invinity shares are 35p and should increase significantly as the group rolls out its batteries not just here but around the world.

Today, lithium batteries dominate the market. They are used in phones, computers and electric cars and are known to be “energy dense” so they can store a lot of electricity for their size. But they are more suited to short bursts of power and they degrade within a few years. They are also highly flammable, so extreme care must be taken in how they are installed and maintained.

Vanadium flow batteries are made with an entirely different chemistry. Ideally suited to store and discharge large amounts of energy over many hours, they retain their power for decades and are not at risk of overheating and catching fire.

These batteries are also about 30 percent more expensive than their lithium counterparts. However, in 2021, Invinity entered into a joint venture with German engineering giant Siemens to develop a battery that was both cheaper and more effective than anything that came before it. The new kit, known as Mistral, is being tested in Canada and commercial sales are expected from next year.

Siemens chose Invinity for good reason: the company has already sold more vanadium flow batteries than any other operator and has assembled a world-class team based out of Bathgate in Scotland. The team has achieved results. The upfront cost for Mistral will be similar to lithium batteries, but the product will last much longer, significantly reducing the lifespan.

Brokers expect Mistral to boost Invinity’s growth. The figures for 2022 will be revealed this week and should show sales of around £3.6 million. This year, however, sales are expected to rise to £25m, more than doubling to £53m by 2024.

Chief executive Larry Zulch is plowing money into Invinity’s future, so the group is currently at a loss, but the outlook is good.

This year alone, there has been tremendous interest in Invinity’s products. The group already has a major project in Oxford and in April the government awarded Zulch an £11 million grant to build the largest vanadium flow battery outside Asia.

This should be delivered next year. Major projects are also underway in Australia, Canada and California, with more battery applications coming in soon.

Rising demand makes sense. When renewable energy is only a small part of a country’s total wealth, unpredictability can be managed. As wind and solar increasingly replace fossil fuels, the need for efficient storage increases in sync.

In the UK, estimates suggest that 46 gigawatts (46,000 megawatts) of battery energy storage will be needed by 2035, half of which is expected to come from so-called long-life products such as vanadium flow batteries. Today we only have 2.6 gigawatts of energy storage and the vast majority of that can only provide power for an hour or two.

The need is not limited to this country either. In the US, government subsidies are driving the growth of renewable energy installations, with a corresponding need for efficient storage. In California alone, policymakers admit they need to increase storage capacity eightfold by 2030 to meet their renewable energy goals. Canada and Australia are also investing in renewable energy, and interest is growing across Asia.

Invinity has a checkered past. The group was formed from a merger between US-based company Avalon and RedT, an AIM-listed producer of vanadium batteries that consistently disappointed. The merged company should be more successful. The technology is advanced, Zulch is a convenient operator and the demand for safe, reliable and resilient storage is growing rapidly.

Midas verdict: Supporting a loss-making company is never without risk, but Invinity now works hand-in-hand with tech powerhouse Siemens and has received support from around the world. At 35p, the shares should go far.

Traded on: GOAL Ticker: IES Contact: invinity.com or 020 4526 5789