{"id":99488,"date":"2022-06-15T11:06:53","date_gmt":"2022-06-15T11:06:53","guid":{"rendered":"https:\/\/alj.com\/?post_type=spotlight-fadyjameel&p=99488"},"modified":"2022-08-17T10:51:38","modified_gmt":"2022-08-17T10:51:38","slug":"mission-critical-we-need-fewer-fossil-fuels-and-more-critical-minerals","status":"publish","type":"spotlight-fadyjameel","link":"https:\/\/alj.com\/en\/spotlight-by-fady-jameel\/mission-critical-we-need-fewer-fossil-fuels-and-more-critical-minerals\/","title":{"rendered":"Mission critical: we need fewer fossil fuels, and more critical minerals"},"content":{"rendered":"

Without doubt, the transition to green energy is vital to reduce our consumption of fossil fuels and the harmful emissions they generate.\u00a0 But through our enthusiasm for this transition, are we in danger of simply substituting one problem \u2013 global warming \u2013 for another \u2013 a rapid decline in the availability of critical rare minerals?<\/p>\n

Take a typical electric vehicle (EV) \u2013 it requires six times the mineral inputs of a conventional car, while an onshore wind plant requires nine times more mineral resources than a gas-fired power plant.[1]<\/sup><\/a>\u00a0 How truly sustainable is that?\u00a0<\/p>\n

Green energy essentials<\/h2>\n

As we reduce our reliance on fossil fuels in the transition to clean energy, we\u2019re also becoming increasingly reliant on other less abundant and finite resources on our planet: so-called \u2018critical minerals\u2019 that are vital to produce much of the technology on which the energy transition relies.\u00a0 Some of the increasingly important applications for critical minerals include:<\/p>\n

    \n
  1. Lithium, nickel, cobalt, manganese, and graphite<\/strong>\u2014crucial to battery performance, longevity, and energy density.<\/li>\n
  2. Rare earth elements <\/strong>\u2013 essential for the permanent magnets in wind turbines and EV motors.<\/li>\n
  3. Copper and aluminum \u2013 <\/strong>used extensively in electricity networks, with copper being a cornerstone for all electricity-related technologies.<\/li>\n<\/ol>\n

    Some of these, like copper and nickel, are, let\u2019s say, relatively<\/em> large-volume commodities.\u00a0 Others, like the rare earth minerals (the clue\u2019s in the name) tellurium and neodymium, are quite niche.\u00a0 The challenge is, how do we dramatically ramp up the supply of critical minerals in a way that is not only environmentally sustainable, but which also minimizes the impact on communities and the environment itself?<\/p>\n

    \"\"<\/p>\n

    Which sectors are driving demand for critical minerals?<\/h2>\n

    Renewable energy<\/h3>\n

    Wind and solar power need far more minerals to generate the same amount of electricity as fossil fuel technology.\u00a0 One terawatt-hour of electricity from solar and wind consumes 300% and 200% more metals, respectively, compared to a gas-fired power plant[2]<\/sup><\/a> but provide power with zero or negligible carbon emissions.<\/p>\n

    \"\"<\/p>\n

    This didn’t use to be much of an issue.\u00a0 Before 2010, the energy sector only consumed a fraction of the total supply of critical minerals.\u00a0 Now, as the transition to renewables accelerates, green energy accounts for a much larger proportion \u2013 with the average amount of minerals increasing by 50% per unit of power generation.[3]<\/sup><\/a>\u00a0<\/p>\n

    To meet the Paris climate goals, we could see a tripling of mineral demand from the renewable energy sector by 2020, led predominantly by wind and solar,[4]<\/sup><\/a> (although geothermal, hydropower, green hydrogen, and nuclear power also have significant requirements for various critical minerals[5]<\/sup><\/a>).<\/p>\n

    Road transport<\/h3>\n

    EVs also use a lot of critical minerals.\u00a0 Producing battery or fuel-cell EVs \u2013 a relatively new technology \u2013 is more materials-intensive than building an internal combustion engine (ICE) vehicle,[6]<\/sup><\/a> – technology that is over a century old.\u00a0 In a climate-driven scenario, mineral demand for EVs and battery storage will grow at least thirty times by 2040.[7]<\/sup><\/a>\u00a0 Lithium demand alone increases by over 40 times, and graphite, cobalt, and nickel demand will increase by around 20\u201325 times.\u00a0 Copper will also double as more electricity networks are rolled out to power the vehicles.[8]<\/sup><\/a>\u00a0 Of course, the rise of EVs will also put pressure on green energy generation, which in turn increases that sector\u2019s own use of critical minerals.<\/p>\n

    \"\"<\/p>\n

    \"IEAAccording to a report from the International Energy Association (IEA<\/a>):<\/p>\n

    “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\u201370% for nickel and cobalt, and almost 90% for lithium.\u00a0 <\/em><\/p>\n

    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.”[9]<\/strong><\/sup><\/a><\/em><\/p>\n

    How do we manage the shift to a more minerals-intensive world?\u00a0<\/h2>\n

    Producers, policymakers, and consumers must factor in how increased mineral demand affects supply, sustainability, and social impact in the race to scale green energy.\u00a0<\/p>\n

    Supply considerations<\/h3>\n

    Experts at McKinsey state that “Net-zero commitments are outpacing the formation of supply chains, market mechanisms, financing models, and other solutions and structures needed to smooth the world’s decarbonization pathway.”[10]<\/strong><\/sup><\/a><\/em><\/p>\n

    The supply and investment of critical minerals are not yet ready to support the rapid transition to green energy as envisaged by the Paris targets and affirmed at COP26.\u00a0 This increases the risk of long (and expensive) delays.\u00a0 For example, although lithium and cobalt are expected to be surplus in the near term, expected production from existing mines and projects under construction will only supply around half of our requirements by 2030.\u00a0 Similarly, we’ll be missing 20% of our projected copper demand.[11]<\/sup><\/a>\u00a0 Meanwhile, materials like battery-grade nickel and key rare earth elements like neodymium and dysprosium could also hit bottlenecks in the years ahead.\u201d[12]<\/sup><\/a><\/p>\n

    Advances in extraction technologies may help to fill some of this gap by increasing supplies.\u00a0 Take lithium for example.\u00a0 Most of the world\u2019s lithium reserves are found in brines \u2013 natural saltwater deposits.\u00a0 The conventional process for extracting lithium from brines requires large evaporation ponds that are environmentally damaging, slow to start up, and vulnerable to weather.\u00a0 Not to mention destroying wildlife habitats.\u00a0 This conventional process suffers from low lithium recovery, low product purity, and is ineffective for most new brine discoveries with lower grades of lithium.\u00a0<\/p>\n

    A US-based start-up Lilac Solutions<\/a> \u2013 in which I\u2019m happy to say JIMCO <\/a>(the Jameel Investment Management Company) is an investor <\/a>\u2013 has developed a new efficient technology to extract lithium from brines without the need for these large evaporation ponds.\u00a0 Their technology protects the environment while accelerating project development, increasing recovery, and yielding a high-purity product.<\/p>\n

    As exciting as new technologies like this are, however, they are not a short-term solution, and much remains up in the air.\u00a0 For example, demand projections for cobalt demand vary wildly from 6\u201330 times higher.[13]<\/sup><\/a>\u00a0 It’s hard to gauge the impact of future innovations and economies of scale.\u00a0 But perhaps the biggest cause of fuzziness is lack of clarity or clear policy signals \u2013 this impedes demand and makes it harder for suppliers to lock in investment plans with confidence.\u00a0 With the right incentives, however, producers stand to make more money from low-carbon tech \u2013 and it\u2019s expected that we\u2019ll see more robust policies as governments make good on their commitments.<\/p>\n

    While accelerating the sustainable energy transformation to reduce emissions, we\u2019ll also need to make sure energy systems remain resilient and secure.\u00a0 Current systems are mainly designed for disruption in the supply of hydrocarbons \u2013 but we\u2019re going to see a lot of price volatility and disruption in mineral supply.\u00a0<\/em><\/p>\n

    Although prices have dropped by 90% over the last decade for producing lithium batteries, that means raw materials, rather than the technology, account for a more significant share of the cost.\u00a0 For example, raw materials now comprise 50%\u201370% of battery costs, up from 40%-50% just five years ago.\u00a0 Copper and aluminum are currently around 20% of total grid investment costs for electricity generation.[14]<\/sup><\/a>\u00a0 These factors make the energy and EV sectors particularly vulnerable to supply and price fluctuations.<\/p>\n

    \n

    Key issues impacting availability and price of critical minerals<\/h2>\n

    Minerals are found in fewer places than hydrocarbons<\/strong>\u00a0\u2013 the world’s top three producing nations control over three-quarters of the supply of lithium, cobalt, and rare earth minerals.\u00a0 For example, The Democratic Republic of the Congo (DRC) and China produced 70% and 60%, respectively, of the world’s cobalt in 2019.\u00a0 China has a major share of processing operations, which compounds the threat of supply disruptions.[15]<\/sup><\/a><\/p>\n

    Long lead times<\/strong>\u00a0\u2013 it takes an average of 16 years to move from discovery to production, limiting the ability to ramp up supply.<\/p>\n

    Declining resource quality<\/strong>\u00a0– it’s not all about quantity.\u00a0 For example, Chile’s average copper ore grade has declined by 30% in the past 15 years.\u00a0 Lower-grade sources require more energy and can produce more emissions.<\/p>\n

    ESG concerns<\/strong>\u00a0– it’s a good thing that businesses are starting to take environmental and social disruption more seriously in their operations.\u00a0 However, improving standards takes time and money, and therefore impacts supply.\u00a0 Likewise, the mining assets are increasingly exposed to climate risks, such as water stress, extreme heat, or flooding, affecting areas like Australia, China, and Africa.<\/p>\n<\/blockquote>\n

    How can we tackle this?\u00a0 Governments can support more geological surveys, streamline the permitting process and provide additional financing to help diversify supply sources.\u00a0 Regular market assessments, periodic stress tests, and voluntary strategic stockpiling will also help shore up supply.<\/p>\n

    \"\"<\/p>\n

    Finding ways to use fewer materials, and swap them out for others where possible, will also be key.\u00a0 We\u2019re making good progress in this area.\u00a0 For example, the amount of silver used in solar power is expected to be more than halved by 2028.[16]<\/sup><\/a>\u00a0 Production innovation can also increase supply, with emerging tech such as direct lithium extraction[17]<\/sup><\/a> and enhanced metal recovery[18]<\/sup><\/a> promising significant gains.<\/p>\n

    Sustainability and social impact considerations<\/h2>\n

    \"\"According to the World Bank<\/a>, “While the growing demand for minerals and metals provides economic opportunities for resource-rich developing countries and private sector entities alike, significant challenges will likely emerge if the climate-driven clean energy transition is not managed responsibly and sustainably.”[19]<\/strong><\/sup><\/a><\/em><\/p>\n

    Green energy is not yet entirely green or beneficial for all communities.\u00a0 Fortunately, sustainability and social impact can be improved through a combination of practical measures and high-level policies.\u00a0<\/p>\n

    \"\"<\/p>\n

    Firstly, renewable energy tech has a lower power capacity than fossil fuels and needs more materials to produce an equivalent amount of electricity.\u00a0 Using fewer materials and substituting others can help to alleviate the pressure on supply and lower associated emissions.<\/p>\n

    \"\"<\/p>\n

    In the case of EVs, there is some complex number crunching to do.\u00a0 Using a half-ton of aluminum adds six tons of CO2<\/sub> to the non-battery embodied emissions of an EV.[20]<\/sup><\/a>\u00a0 However, aluminum is lighter than steel and therefore reduces lifetime emissions in operation.\u00a0<\/p>\n

    Of course, EVs typically emit around half the greenhouse gas emissions of internal combustion engine cars, with the potential for a further 25% reduction with low-carbon electricity.\u00a0 Furthermore, fuel switching, and efficiency improvements can all reduce total emissions.[21]<\/sup><\/a>\u00a0 Producers need to balance the supply pressure alongside production and total lifetime emissions to figure out which is the most sustainable approach in each case.<\/p>\n

    Recycling will be essential to reduce supply pressure and minimize environmental impact.\u00a0 Bulk metals are already widely recycled, so producers are working on recycling transition metals like lithium and rare earth minerals.\u00a0 By 2030, recycled cobalt, nickel and lithium could make up 10%\u201320% of global demand, according to Ajay Kochhar, CEO, and co-founder of Canadian battery recycling company Li-Cycle Corp.[22]<\/sup><\/a><\/p>\n

    \"\"<\/p>\n

    It matters where and how we get minerals because some commodities have higher emissions depending on their source.\u00a0 We need to tackle the emissions from mining and processing across the board and improve waste and water management.\u00a0 We also need to ensure that mineral wealth helps local communities.\u00a0 The industry is noted for poor worker safety and human rights abuses, such as child labor and corruption.\u00a0 For example, the well-documented child labour issues surrounding cobalt extraction in the Democratic Republic of Congo.[23]<\/sup><\/a> \u00a0In a 2020 article on the role of justice in developing critical minerals, Professor Raphael J Heffron, Professor for Global Energy Law & Sustainability at the University of Dundee, states that, \u201cJustice in reality has only touched some parts of the mining sector.\u201d[24]<\/sup><\/a><\/p>\n

    An expert on the challenges of ensuring a just transition to a low carbon economy, Heffron divides justice into different categories, all of which need to be addressed:<\/p>\n