VSA Capital Market Movers – Invinity Energy Systems

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VSA Morning Transitional Energy Comment, 09/11/20

Invinity Energy Systems (LON:IES)

Invinity Energy Systems plc (IES LN) has announced that the European Marine Energy Centre (EMEC) has purchased a 1.8 MWh vanadium flow battery (VFB) system for delivery in 2021.

The Centre, established in 2003, is a hub of research for tidal power and has worked with clients including Alstom, E.ON and Kawasaki Heavy Industries. EMEC will use the system at their facility on the Isle of Eday, located in the Orkney Islands off the northeast coast of Scotland. The project announced today has received £1.8m of funding from the Scottish Government via Highlands and Islands Enterprise. Approximately two-thirds of the funding amount i.e. £1.2m, relates to the Invinity battery system, ancillary components and associated services.

The Companys’ VS3 vanadium flow battery system will smooth output from tidal electric generation and provide consistent power to EMEC’s hydrogen production plant. According to IES; combining tidal power, energy storage, and electrolyser technology is expected to create large amounts of hydrogen every year without emitting carbon at any stage of the process. This so-called ‘green’ hydrogen is seen as an important transformative fuel as the world moves to cut greenhouse gas emissions.
Invinity’s flow battery technology, according to the Company, was chosen for this application because of its ability to perform multiple cycles per day without degradation. In our view, the EMEC project may be a niche application but indicates that the VFB battery technology, is now attracting serious interest as an alternative to or alongside lithium battery systems; this to utilise VFB’s multi cycle, long duration capabilities in stationary storage applications.
IES has a number of stationary storage projects across the UK, including a utility-scale project known as “Energy Superhub Oxford” (ESO) being developed by Pivot Power, a subsidiary of EDF Renewables. The ESO system, now under construction, is to be used for a large scale EV charging network and comprises 48MW of Lithium batteries working in conjunction with 2MW of VFB storage.  
Alongside ESO, IES also has operations in California where energy transition, heatwave driven demand, wildfires and grid instability are all factors that are seeing the state publicly declare that it needs to substantially improve energy storage capacity. IES announced in October 2020, its participation in four separate energy storage projects funded by the California Energy Commission (CEC). IES is working to conclude final contracts with its project partners towards a 2021 delivery of the combined 7.8 MWh of Invinity’s VFBs. Once contractual terms are agreed, we can expect Invinity to provide an update.

Interims in September 2020 highlighted 204 Vanadium Flow Battery (VFB) units on order, 390 units at final stage of contract negotiation and identified upside of 996 units which the Company sees as a strong opportunity to close near term. This and today’s announced new orders, support of our estimated unit volume of 1,250 in 2021 and revenue of £21.2m.
IES is clearly working to accelerate commercial progress. We view the announcement today as a positive step forward in making VFB technology a compelling option for long duration, multi cycle, battery storage supporting the global transition to renewable energy generation.

We reiterate our Buy recommendation and target price of 269p/sh.

#Indicates VSA house stock.
All disclosures and supporting charts can be found in the PDF version.

Phil Smith, Equity Analyst, Alternative Energy | T: +44 (0)20 3617 5187 | E: [email protected]

VSA Capital Research | T: +44 (0)20 3005 5000 | E: [email protected]

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