An energy system powered by clean energy technologies differs profoundly from one fuelled by traditional hydrocarbon resources.

One real challenge is the impact on this energy transition that critical minerals will bring. These are new, different, perhaps more complex challenges to energy security. The shift to clean energy systems will bring potential new vulnerabilities.

The minerals needed for clean energy have huge questions over the availability and reliability of supply. There are a high concentration of production, long project development lead times, the worry over declining resource quality and growing scrutiny over environmental, social performance and climate risks.

These issues throw an increasing spotlight on supply sources and how critical mineral security can have far-reaching consequences throughout the energy system as we pivot towards a clean energy transition.

A significant report provided by the IEA in May 2021, “The role of critical minerals in clean energy transitions“, offers an extensive review of this topic.

Summarizing many aspects from this IEA report

I want to summarize several points from the report here as critical mineral supply does really have an important part to play if we are going to achieve net-zero globally by 2050.

To achieve the Paris Agreement to stabilize the climate well below 2 C global temperature rise would mean a quadrupling of mineral requirements for clean energies by 2040. An even faster transition to hit net-zero globally by 2050 would require six times more mineral inputs in 2040 than today.

To quote from the IEA report :

“Which sectors do these increases come from? In climate-driven scenarios, mineral demand for EVs and battery storage use is a major force, growing at least thirty times to 2040. Lithium sees the fastest growth, with demand growing by over 40 times in the SDS by 2040, followed by graphite, cobalt and nickel (around 20-25 times).

The expansion of electricity networks means that copper demand for
power lines more than double over the same period.

The rise of low carbon power generation to meet climate goals also means a tripling of mineral demand from this sector by 2040. Wind takes the lead, bolstered by material-intensive offshore wind. Solar PV follows closely due to the sheer volume of capacity that is added.

Hydropower, biomass and nuclear make only minor contributions given their comparatively low mineral requirements. In other sectors, the rapid growth of hydrogen as an energy carrier underpins major growth in demand for nickel and zirconium for electrolysers (green hydrogen production) and platinum-group metals for fuel cells.”

As the IEA points out, demand trajectories are subject to large technology and policy uncertainties, but they analysed 11 alternative cases to understand the impacts.

Another significant point to consider here is the IEA’s report stated, “Today revenue from coal production is ten times larger than those from energy transition minerals. However, there is a rapid reversal of fortunes in a climate-driven scenario, as the combined revenues from energy transition minerals overtake those from coal well before 2040.”

So what are these critical minerals used by the different technologies we are deploying today or in the near future?

This report assesses the mineral requirements for a range of clean
energy technologies, including renewable power (solar photovoltaic
[PV], onshore and offshore wind, concentrating solar power, hydro,
geothermal and biomass), nuclear power, electricity networks
(transmission and distribution), electric vehicles, battery storage and
hydrogen (electrolysers and fuel cells).

The types of mineral resources used vary by technology. Lithium, nickel, cobalt, manganese and graphite are crucial to battery performance, longevity and energy density. Rare earth elements are essential for permanent magnets that are vital for wind turbines and EV motors. Electricity networks need a huge amount of copper and aluminium, with copper being a cornerstone for all electricity-related technologies.

The demand for critical minerals will rise rapidly.

According to the IEA in a scenario that meets the Paris Agreement goals, clean energy technologies’ share of total demand rises significantly over the next two decades to over 40% for copper and rare earth elements, 60- 70% for nickel and cobalt, and almost 90% for lithium. EVs and battery storage have already displaced consumer electronics to become the largest consumer of lithium and are set to take over from stainless steel as the largest end-user of nickel by 2040.

So the energy sector will emerge as a or will be a major force in mineral markets in the next decades.

The final cost structure of the finished product can be at risk

Raw materials are naturally a significant element in the cost structure of many of the clean energy technologies we plan to use

In Lithium-ion batteries, prices have significantly fallen in the last decade, but raw materials now account for 50-70% of total battery costs.

For example, in a possible scenario, what if both lithium and nickel prices doubled around the same time? Then this double “whammy”  would offset the anticipated cost reductions of doubling battery production capacity gained from technology learning and anticipated economies of scale. That would have major implications on prices for EV’s.

An interesting fact is a typical electric car requires six times the mineral inputs of a conventional car. Equally, an onshore wind plant requires nine times more mineral resources than a gas-fired power plant raising potential vulnerability if the material supply has any pricing volatility and security of supplies.

Will the supplies be resilient and secure?

The reality is today that many of the energy transition minerals are more concentrated on a few countries than oil or natural gas supplies—that indicated real risks.

For lithium, cobalt, and rare earth elements, the worlds top three producing nations control well over three-quarters of global output. In some cases, this is one single country. The Democratic Republic of the Congo (DRC) and the People’s Republic of China (China) are responsible for 70% and 60% of global production of cobalt and rare earth elements, respectively, in 2019.

China has a very high concentration for processing operations and has global refining shares of 35% for nickel, 50-70% for lithium and cobalt, and nearly 90% for rare earth elements.

The Chinese companies have been making substantial investments in overseas assets in Australia, Chile, the DRC and Indonesia to make for even more critical mineral control.

The decline in resource quality is becoming a growing concern as well.

One example mentioned in the IEA report was Chile, where the average copper ore grade has declined by 30% over the past 15 years. This extracting the metal content of lower-grade ores requires more energy, exerting upward pressure on production costs, greenhouse gas emissions and waste volumes.

This impact from poorer quality will add growing scrutiny on environmental and social performance. Consumers and investors are continuing to source the minerals in sustainable and responsible produced ways. Will they?

Increased mining in already highly stressed parts of the world of climate issues will add to higher water stress levels. Some areas or regions in Australia, China and Africa have extreme heat, and flooding gives greater challenges in ensuring reliable and sustainable supplies.

Reliability, affordability and sustainability for minerals become important to manage.

The IEA regards the risks to the reliability, affordability and sustainability of mineral supplies are manageable, but this will require greater focusing on these critical minerals, collaborations and policy co-ordinations.

The suggestion of recognizing mineral security in similar ways to how the world monitors and manages oil security as this critical mineral threat can have far-reaching consequences throughout the energy system if not globally managed.

The big difference will not be seen as “spikes in pump prices” but in how minerals as essential components for infrastructure and our energy transition will make it more expensive and delay the pathway to net-zero even more than we see today.

Four critical aspects that need  greater research and development innovation and investment in the future:

1) The searches to diversify sources of critical mineral supply need speeding up. The US has identified current supply dependences, especially on China, as a national security risk. In Europe, this equally applies.

2) Technology innovation on production needs to focus on more efficient extraction of materials, managing mining in different ways and to make sure the application of mining techniques is up to date and effective.

3) Technology for clean energy solutions needs to search for material substitution and alternatives. Ones that can be perhaps more environmentally developed or take a more holistic approach to entire energy systems to minimise energy loss, using digital technologies to manage finite resources and reduce processing across the entire energy chain.

4) An absolute need to ramp up recycling. Waste management needs to become a higher focus as volumes increase, incentivizing consumers and producers to look at recycling products that have reached the end of their operating lives, reduce the effect of throw-away societies, building more efficient collection and sorting activities and invest in an R&D emphasis on new recycling technologies that move way-beyond the cottage industry approach  or simply dumping and ignoring material recycling so often found today

In conclusion- great work, IEA, with this report.

The report by the IEA in May 2021, “The role of critical minerals in clean energy transitions“, offers an extensive review of this topic and anyone interested, concerned or wish to understand issues that are critical to a successful energy transition should find time to read this report.

Mineral security will become a new variable in the energy transition, that is for sure.

 

 

*This summary has drawn from the report from the IEA as per the links shown. All rights reserved by IEA. The report reflects the views of the IEA Secretariat. The IEA makes no representation or warranty, express or implied, in respect of the publication’s contents