The Energy Transition Has A Major Metals Problem

Yves here. We’ve run quite a few posts on the material requirements issues with green energy. Not only are many of them nasty to mine and dispose of, but building any new infrastructure, both immediate renewable energy requirements like EV charging stations and better grids, as well as mines to obtain the needed metals and minerals, have considerable energy costs and involve heavy use of carbon-spewing transportation and construction equipment. This post provides a high-level recap of some of these issues.

By Tsvetana Paraskova, a writer for with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. Originally published at OilPrice

  • As the global energy transition continues to accelerate, the demand for key battery metals is soaring and demand is struggling to keep up.
  • The inconvenient truth of the energy transition is that the industry at the top of the clean energy supply chain is a very carbon-intensive one.
  • President Biden, recognizing this reality, has added strategic and critical metals to the Defence Production Act of 1950.

The metals mining industry is at a crossroads. Key energy transition metals need trillions of U.S. dollars in investment if the world has any chance of advancing the transition to meet the Paris Agreement targets. At the same time, investors are backing out of carbon-intensive sectors, which metals mining undoubtedly is. Moreover, governments in developed nations with net-zero goals—including the U.S. Administration—want only “sustainable” new domestic mining to extract the minerals critical to support increased transportation electrification and renewable power generation aligned with their net-zero by 2050 targets.  Currently, demand for key battery metals, including lithium, graphite, cobalt, nickel, copper, manganese, and aluminum, is soaring, but supply is struggling to catch up.

Supply comes from mining—a very carbon-intensive industry—but policymakers and investors need to acknowledge that there is one dirty industry at the beginning of the clean energy supply chain. Until other forms of totally clean energy become available—if ever—metals and metal mining will power the energy transition.

Here’s where the dilemma for investors lies—they want Paris-aligned portfolios and have been reluctant to support a large carbon emitter like the metal mining industry. Yet, this industry needs support—including from bankers and investors—to raise capital to invest in new supplies of lithium and copper that will power the electric cars of environment-conscious investors.

Analysts, investors, and some of the biggest miners say that the mining business needs to change, as does the dialogue between investors and mining companies, and policymakers and miners, if supply is to catch up with demand and not stall the energy transition because of a lack of key metals.

Business Environment Needs To Encourage Higher Investments

“Obtaining adequate supplies of these vital transition resources will be severely hampered unless the mining business environment becomes more conducive to higher levels of investment,” Graham Kellas, Senior Vice President, Global Fiscal Research, and William Tankard, Principal Analyst, Copper Mine Costs, at Wood Mackenzie say.

“Ultimately, success relies on governments and investors agreeing clear, predictable, stable, progressive terms and then sticking to them,” Kellas and Tankard noted.

This vision could be overly optimistic, considering the lengthy and sometimes unproductive discussions about fiscal regimes between producers of those resources and governments holding the resources, WoodMac’s analysts say.

“But if the world is to have any hope of achieving COP26 goals, some energy transition fantasies must become reality,” they conclude.

U.S. Backs Domestic Battery Metals Mining 

Major developed economies are backing their metal mining industries to counter the Chinese dominance in key energy transition materials. Russia’s war in Ukraine has also led to concerns about a resource crunch in several key metals markets, including nickel and aluminum, considering that Russia is a major global supplier of both.

U.S. President Joe Biden included last month strategic and critical materials necessary for the clean energy transition—such as lithium, nickel, cobalt, graphite, and manganese for large-capacity batteries—in the Defense Production Act of 1950.

“The United States shall, to the extent consistent with the promotion of the national defense, secure the supply of such materials through environmentally responsible domestic mining and processing; recycling and reuse; and recovery from unconventional and secondary sources, such as mine waste,” President Biden saidin a memo to the Secretary of Defense.

The United States has acknowledged the need to move faster in securing key minerals domestically and from allies such as Australia; otherwise, America’s clean energy goals and hi-tech and automotive supply chains could depend on China.

Commenting on the Presidential action, Rich Nolan, President and CEO of the National Mining Association, said:

“We have abundant mineral resources here. What we need is policy to ensure we can produce them and build the secure, reliable supply chains we know we must have.”

Demand for those minerals in the United States and globally is soaring, and even a possible economic slowdown will not significantly derail that demand.

Even if a recession were to materialize in parts of the world—due to rampant inflation, Russia’s war in Ukraine, and rising interest rates—this would not give battery metals producers breathing space to bring on necessary supply in a timely manner, Julian Kettle, Senior Vice President, Vice Chair Metals and Mining, at Wood Mackenzie, saidthis week.

“Recessions are short-lived and, while demand can decline markedly, recovery can be quick, with absolute demand back to ‘normal’ in one to two years,” Kettle says.

Supply shortages could actually grow because of more problems in getting investment during an economic slowdown, he argues.

Investment Not Enough 

Investment as-is, without a recession, is insufficient to meet demand to the extent to help the world reach the Paris Agreement goals, the world’s biggest miner, BHP, and the top asset manager in the UK, Legal & General Investment Management (LGIM), said in a reportearlier this month.

“The energy transition will not happen without a massive increase in the supply of metals,” the report notes, adding that a “radical change to the world’s energy and land use systems is required: time is short and current rates of investment are insufficient to bring about the required change.”

Considering that the extraction of minerals is an emission-intensive process, investors have two key roles to play, according to the report: “engage constructively with the sector to help drive down operational emissions” and “help mobilise the capital that will be required to ensure affordable metal supply does not impede the race to Paris.”

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  1. PlutoniumKun

    There is nothing particularly new here – there has been at least a decades worth of angst and profiteering going on in the mining and commodity industry over the switch to renewables. Its gotta be remembered of course that this does not mean ‘extra’ mining. It means that we need different products. IC cars, thermal power plants natural gas turbine engines all require highly specialised mineral inputs and rare earths. Just different ones. We need more lithium, but less platinum, and lanthanum, more cobalt, less palladium. And of course, less oil and gas, more wind and sun.

    They key obstacle preventing more investment is that quite simply, the tech is moving too fast, so the mining industry doesn’t have the security of knowing the mix of elements needed. For example, one UK company claims to have developed the technology for ferrite only (i.e. rare earth free) wind turbine. If they’ve succeeded, then thats a major blow to the miners. Nobody quite knows what battery tech will look like in 10 years time its changing so far. Similarly with solar panels – there are entirely new designs coming on stream which will not use conventional silicon wafers – Perovskite panels for example, or the latest thin film panels.

  2. steven

    The biggest impediment to the rapid transition to renewable energy is the conspiracy between Tesla’s Elon Musk and the nation’s electrical utilities. Musk wants to continue using lithium and other resources critical for that transition to build his highly profitable PowerWalls and grid-scale batteries. If the reliability promises of electrical utilities are to be believed – and of course increasingly they are not – all the lithium going into those PowerWalls is a complete waste. The power companies want to buy grid-scale batteries, along with everything else their respective utility commissions will permit, to run up costs and hence profits as high as possible. As with solar, the electric utilities love storage – as long as they own it.

    Along with other battery technologies that don’t use nearly as many of the critically short resources required for EV battery production, there is a plethora of gravity-based storage technologies which don’t seem to have received sufficient attention. Because the facilities employing them would be owned by someone else or the public at large?

    Back to Musk. He has for some time opposed Tesla incorporating bidirectional charging (BC) – the ability to use the batteries of all those cars it is producing as ‘PowerWalls’. Tesla and other EV owners may have legitimate concerns about the impact of BC on the battery life of their taxpayer-subsidized, expensive EVs. Some studies suggest that intelligently implemented BC could actually extend battery life.

    Perhaps subsidies reflecting this possible impact may be required in addition to those EV purchasers already receive. But what needs to stop is the production of EVs without bidirectional charging capabilities. To paraphrase Keynes with respect to global warming, ‘in the short run we are all dead’.

    1. Susan the other

      Very interesting. Googled “gravity-based storage” to learn it is a very basic technology that can store potential energy (pressurized water) for up to 14 hours. It functions like a big piston. A rock piston which is contained in a big pressurized can and during peak passive production the excess energy can be used to pump pressurized water under the rock, raising it to the top of the can where it sits until the sun goes down and can then be used to generate electricity locally. And it’s cheap and reliable. Just think, when we get a teensy bit smarter we will be able to make time pistons and reverse entropy for a few hours. That’ll be cool.

  3. Mike Smitka

    Further to PlutoniumKun, uncertainty about future demand interacts with the long payback period for mines. Brine for lithium may be a bit different, but even there the big reserves in the Atacama (Bolivia, Chile, Argentina) are remote so require significant upfront investment in infrastructure.

    Hard rock – for lithium, spodumene – requires tedious surveying to define ore bodies, followed by planning on how best to access and remove ore. Only then can the infrastructure to (re)move the rock be designed and built. Ore must then be processed to concentrate the lithium component at the mine, which uses water. Permitting requirements make exploiting ore bodies near populations infeasible, so mines must build roads/train lines, electric power suppliers, and water handling. Development can also require building housing, particularly during the multi-year construction phase, repeat, multi-year. So with expenditure up front of revenue, those financing projects want assurance that prices will stay high throughout the 30-40 year payback period.

    In any case, developing new mineral sources won’t happen quickly, even if there were no environmental or NIMBY strictures. Already lithium battery prices are rising sufficient to force battery suppliers and then EV vehicle assemblers to raise prices (a battery pack alone remains more costly than an ICE powertrain). Since most EVs already are priced as premium vehicles, that places a ceiling on how many can be sold. I expect cost pressures to worsen in 2023-24, even with changing chemistry (eg, LiFePO4 or LFP batteries that don’t use cobalt or nickel are now used in over half of EVs, but that Li is the active electrochemical component so LFP chemistries don’t lessen lithium demand).

  4. Anthony G Stegman

    “Renewable” energy is a fantasy. There is nothing renewable about solar, hydro, wind, or geothermal. None of these are limitless. The only hope for saving the planet are changes in how we describe “the good life”. Mass consumption and forever growth cannot be seen as “prosperity”. We all need to produce less, consume less, and shrink our material footprints. This applies mostly to wealthy regions of the world, but the less affluent also need to accept that they cannot achieve the same level of material consumption as the affluent.

    1. Susan the other

      If we started manufacturing everything with a requirement that all things need to have a long energy life that promotes recycling – so that we had very little waste in the end and even that “waste” had a useful purpose – that’d be good. Instead of manufacturing stuff to some expected obsolescence, we manufactured everything to be reduced and recycled into useful bi-products, in a long series of breaking down things into smaller useful components, and then in the end recaptured the basic elements – we’d then be effectively mining our own manufacturing. A virtuous cycle.

  5. Reaville doesn’t like renewables. Oh…shocked face. But rather than attack the messenger, let’s examine the “messaging” which leaves out the most important facts:

    Renewable mining intensity is at least 2 orders of magnitude less than fossil fuels: coal mining digs out 8 billion tons a year. On contrast, Lithium needed is estimated 800,000 tons/year. Figure out which one of these mining activities is more polluting. Double word score points if you figure out that continuing to use coal, and oil/nat gas poses an existential threat on top of their extremely high extractive pollution costs.

    Additionally, there are workarounds on rare metals and conflict minerals that are coming to the fore in the real world of production and factories. Sulfur and Iron Phosphate batteries continue to achieve power densities that make them useful for BEVs and stationary storage. There is no shortage of Sulfur and Iron. CATL is making both of these battery types now, and will get to scale production on Sulfur chemistries in the next 2-3 years. Notice that we’re not talking about lab miracles but actual production plans from CATL. There is similar work going on in magnets using reluctance motors.

    This post is a simply mind-blowingly incomplete discussion that seems to me more likely to originate from the fossil fuel complex sowing doubt than any first principles discussion.

    Wake up. This “renewable mining problem” is the same game plan as “the science is uncertain” in climate science. Watch “The Power of Big Oil” to understand how this operation functions. The PR firms and the API are working these forums hard to get control of your opinion. Don’t give in.

    In their attack, they telegraph their weakness: Renewables are a valid alternative to fossil fuels. There’s a reason that 95% of global new power generation is renewable. It works and we have to have it.

    1. Solarjay

      Yes this is another anti renewables hit piece as well as anti China.
      There are real issues with mining to be sure, however like for like is no comparison that renewables are way better.
      420 million gallons of oil per day!

      But if we are comparing all options of non carbon energy: wind, solar, geothermal, nuclear.
      Nuclear wins easily for the least materials needed to build, operate, least land mass to operate and operate over a 60 yr period.
      For renewables ( wind, solar) you will have to replace them 2-3 times + storage ( how many times replacement) + building massive transmission lines.

      I listened to a BBC podcast the other day about 2 new nuclear plants in England. Some smart people are doing the building design. Between #1 and # 2, they expect a 20-30% reduction in build time due to “Lego” building concepts. Going with 20% for #3,#4 that ends up being a dramatic cost reduction with some 60-75# less build time. They got pretty much everything right but 1 part. One interesting design is to now store the high temp heat which allows for a higher peak turbine than the heat source allows. Giving much more grid flexibility than just base load.

      I’m a solar guy, but I see the push back on transmission lines, solar and wind let alone batteries all over this country. I don’t see it happening. I could actually see the republicans push big loans for nuclear plants.

      As to the idea that we are going to use our vehicles as house hold batteries, possibly, the warranty would have to change to A kWh/kw throughput vs mileage. But I’m against big lithium batteries in vehicles, it’s a massive waste to have them sitting around 95% not being used. Utility scale, operated batteries are maintained and operated with dispatch ability that random vehicles cannot. But it’s the musk syndrome: must have bigger lithium batteries, of which he sells very few power walls, try getting one. Just another of his shell game marketing, he’s darn good at it mind you.

      Most people have 1 car. Having a high mileage hybrid with small battery fills most needs but allows all options. And has the least environmental foot print, vs of course the other non topic of driving less.

      I always think of the VW XL1 the car we should have ( ) especially compared to the 9000# hummer EV.

      As long as we don’t have all the options on the table we are not being serious, and since we don’t we aren’t.

  6. Gregory Etchason

    It seems if the government was smart, and apparently it isn’t,it would direct resources to electrifying
    the last 2 miles, over the road shipping( trucks and trains) and most importantly heavy equipment and mining specifically. OEMs are concentrating on the production of $100,000+ EVs only the wealthy will buy. This is typical prioritization that fails the environment.?

  7. ChuckTurds

    Funny the article doesn’t mention the biggest problem with renewables and EVs, we don’t have anywhere close to enough annual production of several critical metals to support what they are calling for. And new mines of meaningful size are getting harder to find, not easier. Metal prices could 10x and it wouldn’t matter. Demand needs to be sharply curbed. It is the only viable way forward. Shame that demand reduction is unacceptable for to our corporate rulers. Oh well, nice knowing you all.

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