California Sale Brings New Buyer Benefit.
One of VRB’s key target markets has been the telecommunications sector -- a billion dollar segment in and of itself! This segment needs a back-up facility as an integral part of doing business. In the U.S, they are required to have a minimum of three hours back-up in the event of a power failure.
The chief competitor in this segment is the traditional lead acid battery technology.
These smaller sized VRB-ESS’s are designed to replace conventional lead acid battery systems and address the problems associated with lead acids such as short lifetimes, maintenance requirements, poor efficiencies, reliability concerns and recycling costs.
All good stuff…and the VRB-ESS brings a very compelling new benefit set to the buyer’s table.
But the recent $300,000 sale in California may point to yet one more powerful selling point for this billion dollar market segment. The “mystery” customer has ordered a 20 kW system that can provide power for nine hours.
So why buy nine hours of storage if you’re only required to backup three?
This particular site is to the Sacramento area, where electricity at night is far less expensive than during peak periods. This sale is much more than just a “backup” facility; it represents a way to reduce their costs as the buyer can arbitrage their purchase of electricity. They will be able to charge their power needed to run their telcom at night when the rates are significantly cheaper and use that cheap power during the day when rates are higher.
A 3-hour system cost using lead-acid batteries today would cost some $85,000. Adding another six hours of lead-acid battery capacity would cost an additional $120,000, bringing total system cost to over $200,000.
But there would still be a problem. If one were to charge the lead batteries to capacity each night and discharge them completely during the day, the lifetime of the lead-acid cells would become greatly compromised along the lines of some 12 to 24 months.
That’s a big “no go” in terms of doubling your back-up facility to also provide power arbitrage.
The VRB system, on the other hand, can do this deep charge/discharge for maybe up to 15 years.
The VRB sale was priced at $300,000. Moreover, the operator can now buy their power at cheaper rates, which provide a cost savings that was obviously factored into the overall purchase price.
Not to mention (again) that vanadium is re-sellable at the end of the VRB-ESS’s life (representing some 40% of the total battery cost) while operators have to pay additional fees to have lead acid batteries disposed.
Speculating, 20 kW power demand for a cellular site meets the power demand of so-called concentrators -- hubs that provide backhaul for numerous cell towers. There are literally hundreds of these concentrators in California, so the math pertaining to the potential market is relatively straightforward.
Moreover, place like California are actively promoting and providing incentives for just such load shifting. This VRB sale included funding from the California Energy Commission (CEC), and the Sacramento Municipal Utility District (SMUD).
If we assume that the cellular operator is a national carrier (as rumored in the Sacramento sale), given the number of markets elsewhere in the U.S. where day/night arbitrage is possible, the potential market becomes even that much larger.
The California sale represents more than just the requirement for telcoms to have efficient back up power. It also provides a “tool” that can reduce business costs. And it provides a local government a way to shift electricity demand off peak times.
That’s a far more compelling case for VRB to make. A case its chief competitor cannot claim.
The cost of the VRB system in this sale is thought to be around $90,000. So a sale at $300K is a very nice margin thank you. More importantly, however, good margins could still obtained at a price levels of say $150K to $200K. I would look for prices to come down and, at those levels, “volume orders” to be entertained by national carriers.
The telcom segment is a massive market and a “company maker” in and of itself. |
