Two flow battery companies are about to complete a months-long effort to combine forces. It’s a rare instance of elective M&A in this challenging sector of the energy storage industry, where acquisitions often happen after a bankruptcy or insolvency.

North America’s Avalon Battery will absorb publicly traded British company RedT Energy through a reverse takeover, pending shareholder approval. Both companies have produced vanadium flow battery products and achieved initial commercial deployments; the move will pool resources in the new brand Invinity Energy Systems.

Both RedT and Avalon declined to comment on the transaction.

The goal, as described in a securities filing, is to create “the world’s leading vanadium flow battery company.” Given the state of the competition, that may well be achievable.

Lithium-ion batteries represent 99 percent of new grid storage capacity. But flow battery supporters have long argued that the technology beats lithium-ion on fire safety, cycle life and the customizability of power-to-energy ratios.

Widespread market uptake has so far eluded the sector, which ranges from cash-strapped startups to units embedded in blue chip companies like Lockheed Martin Energy and Sumitomo Electric Industries.

Avalon has made it further along than most: It claims 160 flow systems installed worldwide, while many flow competitors can only name a handful of operating projects, if they’ve commercialized a product at all. Avalon achieved this by exiting the bespoke phase and moving to factory production, where it produces turnkey systems en masse.

The Avalon battery gained an early ally in solar tracking company NEXTracker, which tapped the product for a combined solar tracker-plus-storage product.

Less fortuitously, vanadium, the active ingredient in this flow chemistry, has gone through dramatic ups and downs in price. The price spiked in 2018, threatening vanadium flow project economics, but has since declined. Partisans of cheaper flow chemistries, like those based on zinc or iron, like to point to vanadium pricing as a structural impediment to vanadium flow’s long term prospects.

Avalon responded to this supply chain risk by structuring an electrolyte rental, which reduces up-front costs by letting the flow battery customer use the material for the lifetime of the project, and then give it back.

RedT did some innovating of its own, according to a release from March 9. The company formed a jointly owned special purpose vehicle with Bushveld Minerals, a major vanadium mining company, to rent out 15 megawatt-hours’ worth of vanadium electrolyte to projects RedT develops. This arrangement will serve a 2 megawatt/5 megawatt-hour flow system RedT is supplying to the government-supported Energy Superhub Oxford Project.

RedT also partnered with Statkraft, the Norwegian renewables giant, to supply flow batteries for a fully financed solar-plus-storage project targeting commercial customers. Financiers remain leery of lithium-ion batteries, a well understood technology with limited track record of generating revenues; since flow batteries have even less history in the field, securing financing amounts to something of a coup.

But things weren’t all looking up for RedT. Even as deployments gained traction — 38 units delivered in 2018, for instance — the business was losing money, and risked running out of cash by November 2019 without additional investment. Earlier that year, the board calculated that RedT needed to raise £10 million to get to a place where it would generate cash, likely in late 2021.

After debuting on the London Stock Exchange in 2006, RedT’s share price fell dramatically over the next three years and has stayed low ever since, setting the stage for a change in ownership.

RedT got a $5 million loan from Bushveld in November, which will convert into shares of the new company. Bushveld’s direct involvement demonstrates an interest in supporting vanadium flow companies, which would generate additional demand for the mineral if they succeed and grow their market.

Previous investors will have a chance to buy additional shares of the newly merged company as well. All told, the forthcoming share offerings associated with the merger could raise up to £14.2 million, providing runway for fulfilling the commercial pipeline.