The clean energy transition is already straining the world’s supply of critical minerals, and without more production, the decarbonization process could become slower and more expensive, according to a new report from the International Energy Agency (IEA).
As the world begins to eye a phase out of fossil fuels, the mining sector is becoming a lot more important. The IEA raised the alarm about the big roadblocks standing in the way of the energy transition.
Supply of critical minerals inadequate
The metals and mineral resources in question include lithium, cobalt, nickel, copper, aluminum, manganese and graphite, among others, all of which are used in some form in a variety of clean technologies, including solar, wind and batteries.
Since 2010, the average amount of minerals used to generate a unit of power has jumped 50 percent as solar and wind have scaled up. But with a long way to go to decarbonize electricity and transportation systems, a massive amount of new mining capacity is needed, according to the IEA.
The IEA said that to reach the 1.5 to 2-degree-Celsius target laid out in the Paris Agreement would mean a “quadrupling of mineral requirements for clean energy technologies by 2040.” To reach net-zero carbon emissions by mid-century would mean a six-fold increase by 2040.
“Meeting our climate change goals will turbocharge demand for mineral resources,” Fatih Birol, the head of the IEA, told Bloomberg. “Voluntary strategic stockpiling can in some cases help countries weather short-term supply disruptions.”
Lithium is one of the most important metals, with demand expected to rise 40 times over the next two decades. Cobalt demand could rise by between six and 30 times. Copper demand for power lines alone is expected to double.
The danger is that surging demand outpaces supply, resulting in a dramatic price increase, which would not only delay the energy transition but also make it much costlier. “Given the urgency of reducing emissions, this is a possibility that the world can ill afford,” the IEA said.
For example, a doubling of lithium or nickel prices would increase battery costs by 6 percent. If both lithium and nickel prices doubled at the same time, it would wipe out all of the anticipated cost reductions that the agency foresees in battery manufacturing in the years ahead.
One of the problems is that the mining capacity of these minerals is concentrated in a handful of countries, and the processing capabilities are also concentrated in just a few others. Many of the minerals are even more geographically concentrated than what is seen for oil and gas. The top three producing countries of lithium, cobalt, and rare earth elements account for over three quarters of global output. The Democratic Republic of the Congo accounts for roughly 70 percent of cobalt production, and China makes up 60 percent of rare earth elements production.
Even more staggering is China’s 90 percent market share for rare earths processing.
High prices would induce more supply, but the lead times for new projects is extensive. The IEA says that it can take an average of over 16 years to move mining projects “from discovery to first production.” As a result, if companies wait for the demand signals to appear before they greenlight new capacity, it could result in “a prolonged period of market tightness and price volatility.”
Urgent action on supply is needed
The agency called for more investment in supply, and more diversified sources of supply. “Policy
makers can take a variety of actions to encourage new supply projects,” the IEA said, but “the most important is to provide clear and strong signals about energy transitions.” If companies doubt the sincerity of the policy commitment to phase out fossil fuels in favor of clean energy, “they are likely to make investment decisions based on much more conservative expectations,” the agency said.
Cutting the use of metals in solar, wind, batteries and other clean technologies is also going to be an important strategy. Solar panels now use 40 to 50 percent less silver and silicon than they did ten years ago, for instance. Just as important is the need to develop strong recycling systems to relieve pressure on upstream supply.
Even as the world needs to accelerate the production of these critical minerals, new mining projects bring up a host of separate problems. Mining tends to be a dirty process, and it carries environmental risks. It also can affect Indigenous land, whether that is in the United States, or in South America.
But there is no denying the need for more mining capacity and the U.S. government is starting to pay attention to this emerging problem. The U.S. has only one active lithium mine, located in Nevada, despite having some of the world’s largest reserves.
With the Biden administration’s attempts to jump start a rapid decarbonization process, both political parties are now mulling reforms to the bedrock mining laws in the country, although the parties have different ideas about how to do that, as E&E News reports. But with the infrastructure package moving through Congress, and a palpable urgency to push for more renewables on the rise, there could be momentum for action on mining.
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