Why Electric Vehicle Strain Points to Virtual Power Plant Gains

Lofty EV sales projections currently being heaved by global automakers, coupled with a strained supply of lithium needed for batteries, portends a strong pivot to increased investment in virtual power plants now and in the years to come.

Auto execs from seemingly every corner of the globe now project that more than HALF of all new vehicles sold by 2030 will be all-electric. That’s less than 8 years from now! 

And while that’s most certainly welcome news for a rapidly warming planet, it may not be fully taking into account a dearth of new lithium discoveries, globally, as well as China’s stranglehold on the lithium processing market. 

At present, China controls an unrelenting 80% of the supply chain for electric vehicles and lithium-ion batteries and, therefore, energy storage in that space. 

Hence, in an EV market that’s projected to quadruple by the end of the current decade — there simply may not be enough lithium to go around. 

Ongoing supply chain disruptions across virtually all manufacturing sectors as a result of the pandemic are further underpinning those concerns. 

Daniel Morgan, a mining analyst at Barrenjoey, stated:

“The forecasts for the [lithium] deficit this year vary from 50,000 tonnes per annum out to 400,000 tonnes on a market that looks potentially to produce 450,000 tonnes a year. Anecdotally, we’re hearing stories of two very large battery makers in the market trying to source 150,000 tonnes [each] of lithium hydroxide this year. And with 450,000 tonnes of supply, it’s not going to happen.”

Adding further fuel to those supply concerns, the EU is planning to phase out all gas-powered vehicles by 2035 and, similarly, the UK is intent on placing an all-out ban on the sale of new combustion-engine cars by 2030. 

Thus, with EV sales in the US alone accounting for a paltry 5% of total vehicle sales — that projected herculean leap to 50% within the next 8 years may prove unattainable. 

Something’s gotta give… 

At present, we’re seeing a strong push by miners to find and develop new sources of lithium in places such as the Lithium Triangle of Chile, Argentina, and Bolivia, as well as right here in the United States. 

Yet, large-scale lithium deposits can pose an elongated time horizon to get through a lengthy permitting, exploration, and development process all the way through to actual metals production. 

The West has also been painfully slow in formulating a strategy for developing and maintaining a stable supply of critical metals, including lithium, as a means of mitigating an overreliance on an increasingly unpredictable Chinese regime. 

Plus, it’s literally anyone’s guess as to what other supply chain disruptions the EV industry will encounter in the coming years. 

A shortage of semiconductors has already caused Tesla to remove one of the electronic control units included in the steering racks of their Model 3 and Model Y cars to meet upcoming sales goals. 

And Ford recently announced the temporary halting or altering of production at four North American production plants as a result of a lingering chip shortage. 

All of this uncertainty has us eyeing wealth-building opportunities in a very different segment of the clean energy space: Virtual Power Plants or VPPs. 

The beauty of the VPP space is that the focus is not on the “raw materials” that make energy production possible. 

Conversely, it’s all about the “software” that controls the storage and distribution of energy, which effectively removes the mining equation as well as most of the supply chain concerns. 

What we’re referring to is a rapidly emerging cloud-based platform that accumulates the production capacities of distributed energy resources and then “enhances” those resources by allowing users to trade and sell stored power within the electricity market. 

Already, the global virtual power plant market is projected to grow from just under US$1 billion last year to US$6.5 billion in 2028 at a CAGR of 33%. 

It’s a nascent industry that we fully expect will have enormous positive wealth-building implications for those who position in the right companies early on. 

Russia’s invasion of Ukraine is casting an ever-darkening shadow on the world’s overreliance on fossil fuel sources from rogue nations. 

The VPP market, on the other hand, is a direct counterpoint to the fossil fuels industry as its growth is being driven primarily by investments in renewables such as wind, solar, hydro, and geothermal. 

And the longer-term growth prospects are nearly limitless as the VPP market is rapidly recognizing increased applications across the residential, commercial, and industrial markets. 

Whereas near-term goals for the global EV market may prove a tad out of reach due to raw material shortages and supply chain woes… the VPP market is well on track to meet or perhaps even exceed its projected growth initiatives in the green-energy revolution. 

Check out our exclusive research and precisely how we’re positioning for gains.

Mike Fagan

Mike Fagan
Editor, Daily Profit Cycle