Minerals and the clean-energy transition: the basics

Recently, there’s been a lot of talk in the energy world about
the minerals needed by clean-energy technologies and whether
mineral supply problems might pose a threat to the clean-energy
transition.


To hold warming beneath 1.5°C over pre-industrial levels, the
world must cut greenhouse gas emissions in half by 2030 and reach
net zero by 2050. To do that, it must radically ramp up
production of solar panels, wind turbines, batteries, electric
vehicles (EVs), electrolyzers for hydrogen, and power lines.


Those technologies are far more mineral-intensive than equivalent
fossil fuel technologies. “A typical electric car requires six
times the mineral inputs of a conventional car,” writes the
International Energy Agency (IEA), “and an onshore wind plant
requires nine times more mineral resources than a gas-fired plant
of the same capacity.” (The IEA report uses the word minerals to
refer to the entire mineral and metal value chain from mining to
processing operations, and I do the same here.)


Power transmission and distribution require aluminum and copper.
Batteries and EVs require cobalt, lithium, and nickel. Wind
turbines require rare earth elements. And so on.


In its encyclopedic 2021 report on the subject, IEA estimates
that “a concerted effort to reach the goals of the Paris
Agreement would mean a quadrupling of mineral requirements for
clean energy technologies by 2040. An even faster transition, to
hit net-zero globally by 2050, would require six times more
mineral inputs in 2040 than today.”


Some individual minerals will see particularly sharp jumps. The
World Bank says, “graphite and lithium demand are so high that
current production would need to ramp up by nearly 500 percent by
2050 under a [2 degree scenario] just to meet demand.”


A clean-energy transition sufficient to hit 1.5° will mean an
enormous rise in demand for these minerals.


This fact has been seized on by a variety of people to raise
questions about the speed and sustainability of the clean-energy
transition. Are we just trading one resource curse for another?


So I looked into it. It’s a complicated subject — each of these
minerals poses its own specific challenges, with its own specific
suppliers, supply lines, customers, and possible pain points.
There’s no neat single story here.


Nonetheless, I’ll try to summarize what I found, starting at the
end, with what I think are the key big-picture lessons. In the
next post, we’ll get into specific technologies and minerals.


The clean-energy transition will be an environmental boon


Yes, it is true that demand for minerals will rise and that
several of those minerals are currently produced in
environmentally and socially problematic ways. This is a real
problem — or rather, a whole nest of problems, which warrant
concern and concerted action.


That being said, it’s important to keep in mind that, even under
the grimmest environmental prognostications, the transition to
clean energy will be a boon for humans and ecosystems alike.


It will certainly involve lower greenhouse gas emissions. The
World Bank says that, under a 2 degree scenario, through 2050,
renewable energy and storage would contribute approximately 16
gigatons of carbon dioxide equivalent (GtCO2e) greenhouse gases,
“compared with almost 160 GtCO2e from coal and approximately 96
GtCO2e from gas.”


If the concern is material intensity, energy researcher Saul
Griffith has done some back-of-the-envelope calculations that put
the transition in perspective. Here’s what he told me:


Assigning all 328 million Americans equal share of our fossil
fuel use, every American burns 1.6 tons of coal, 1.5 tons of
natural gas, and 3.1 tons of oil every year. That becomes around
17 tons of carbon dioxide, none of which is captured. It is all
tossed like trash into the atmosphere.


The same US lifestyle could be achieved with around 110 pounds
each of wind turbines, solar modules, and batteries per person
per year, except that all of those are quite recyclable (and
getting more recyclable all the time) so there is reason to
believe it will amount to only 50-100 pounds per year of stuff
that winds up as trash.


That is a huge difference: 34,000 pounds of waste for our
lifestyles the old way versus 100 pounds the new, electrified
way.


These are only illustrative figures, but they show that the scale
of resource extraction in a decarbonized world will be vastly,
vastly smaller than what’s required to sustain a fossil-fueled
society. Close to 40 percent of all global shipping is devoted to
moving fossil fuels around, a gargantuan source of emissions (and
strain on the ocean) that clean energy will almost wipe out. In a
net-zero economy, there will be, on net, less digging, less
transporting, less burning, less polluting.


The fact is, fossil fuels are a wildly destructive and
inefficient way to power a society. Two thirds of the energy
embedded in them ends up wasted.


That inefficiency has been rendered invisible by fossil fuels’
ubiquity and the lack of alternatives. Now that alternatives are
coming into view, it’s clear that any shift away from mining,
drilling, transporting, and combusting fossil fuels will
dramatically ease human pressure on the biosphere and the
atmosphere.


Again — I can not emphasize enough — this is no reason to ignore
or gloss over the very real environmental impacts of mineral
mining, processing, and transport. Though overall environmental
pressure will ease in a clean-energy world, it will be
concentrated in new places, among people who may not necessarily
enjoy the benefits of the transition.


There are ugly and cruel ways to go about an energy transition,
and there are sustainable and equitable ways to go about it. I’m
strongly in favor of the latter and encourage everyone to do what
they can to bring that about.


Nonetheless, either way, the broader cause is environmentally
righteous.


These minerals are not rare and there’s no shortage of them


Another common misconception is that the clean-energy transition
could fall short because there simply isn’t enough of certain
minerals — this especially comes up around the somewhat
misleadingly named rare earth elements (REEs).


It’s not true. Known reserves of all these minerals, including
REEs, are much higher than demand, and “despite continued
production growth over the past decades, economically viable
reserves have been increasing for many energy transition
minerals,” IEA writes. Reserves will rise further with new
exploration and detection methods.


Currently, demand is forecast to grow much faster than supply. As
that happens, there are bound to be chokepoints and price
fluctuations.


But those stresses will be temporary, especially if policymakers
anticipate and prepare for them. New caches of minerals will be
found and recycling will increase in scope and effectiveness.
There will be supply problems, but there is no Supply Problem, no
global scarcity of any mineral that will put a hard limit on the
transition.


Minerals do pose risks to the transition


Temporary minerals shortages or disruptions could result in “more
expensive, delayed, or less efficient [energy] transitions,” IEA
says. Here’s how it summarizes the risks to the transition posed
by minerals supply:


(i) higher geographical concentration of production,


(ii) a mismatch between the pace of change in demand and the
typical project development timeline,


(iii) the effects of declining resource quality,


(iv) growing scrutiny of environmental and social performance of
production, and


(v) higher exposure to climate risk such as water stress, among
others.


None of these risks is prohibitive, but if they are not managed,
they could slow the transition. Let’s go through them one at a
time.


Geographical concentration


Production of the minerals needed by clean energy technologies is
currently more geographically concentrated than oil and gas
production.


No single producer dominates in oil and gas markets the way the
Democratic Republic of Congo (DRC) dominates cobalt, China
dominates graphite and REEs, and Australia dominates lithium.


Similarly, processing of these minerals — refining and preparing
them for industrial applications — is highly concentrated, but
mostly in one place: China, which processes around 40 percent of
copper and nickel, around 60 percent of lithium and cobalt, and
around 85 percent of REEs.


The US, like most developed countries, has become highly
import-dependent in minerals. According to a recent commentary
from scholars at the Colorado School of Mines’ Payne Institute
for Public Policy, “of the 35 critical minerals identified by the
US today, 14 had a 100% net import reliance in 2020, and 14
additional minerals have a net import reliance of greater than
50%.”


The risk of this concentration is not so much that any one
country will try to pull some kind of Bond-villain crippling of
the world economy, but simply that the fewer producers or
processors involved, the more it matters when any one of them
runs into regulatory changes, trade restrictions, or political
instability. When there’s a robust ecosystem of producers, one
country’s bumps can be absorbed. But when there’s only a handful,
any bump ripples out as rapid fluctuations in price.


These markets are relatively small, but will grow quickly under
decarbonization, so more and more countries will be vulnerable to
price fluctuations. In the oil and gas world, there are
energy-security measures in place, including strategic stockpiles
of some fuels, but there’s not much of that in place for
minerals, at least not yet. And markets for minerals are in many
cases much more opaque than markets for oil and gas, lacking a
shared set of metrics and transparent pricing.


At least through 2025, IEA does not expect the level of
concentration to change much.


Aggressive investment in alternative supplies can decrease
concentration eventually, but in the short term, solutions will
involve drawing producers into more transparent market
frameworks, pressuring them to improve social and environmental
performance, and developing some buffer reserves of critical
minerals.


Timing mismatch


Demand for minerals is already rising and will accelerate rapidly
in coming years. Unfortunately, exploration, discovery, and
exploitation of new mineral resources are marked by substantial
lead times, in some cases over 15 years.


“These long lead times raise questions about the ability of
supply to ramp up output if demand were to pick up rapidly,” IEA
writes. “If companies wait for deficits to emerge before
committing to new projects, this could lead to a prolonged period
of market tightness and price volatility.”


To keep up with demand, investors need to think ahead. And lead
times need to decline, which will involve substantial investment
and governance help from wealthy consumer nations to poorer
producing nations.


Declining resource quality


In recent years, two trends have driven down the average resource
quality of many minerals: first, the known high-quality deposits
have been mined, and two, technological advances have allowed the
mining of ever-lower-quality resources.


“For example,” IEA writes, “the average copper ore grade in Chile
has decreased by 30% over the last 15 years.”


As resource quality declines, the emissions intensity of mining
rises, as does the amount of waste. Concerted action and
investment will be needed to counteract this trend.


ESG scrutiny


A growing chorus of consumers and investors is calling on the
mining sector to take action on its labor and environmental
standards and rising carbon intensity. They want companies to
disclose concrete plans on environmental, social, and governance
(ESG) issues.


This is a big deal in the sector, as the majority of production
of many key minerals now takes place in countries with low
governance scores and/or high emissions intensity.


This is something clean energy advocates have been loath to talk
about, but given the coming boom in minerals, silence is no
longer an option. The Payne commentary says, “reports have found
as many as 255,000 artisanal cobalt miners in the [Democratic
Republic of Congo], 35,000 of whom are children working in
exceedingly harsh and hazardous conditions to produce the
materials many people use in their $100,000 electric vehicles
(EVs) and other ‘clean’ technologies.”


Lithium, cadmium, and REEs are all produced in ways that damage
soil and water and release hazardous chemicals that threaten
miners and surrounding communities. ESG pressure from governments
and the private sector could have a salutary effect on social and
environmental performance, but it could also place upward
pressure on prices and additional burdens on small-scale
artisanal miners, which could pose political problems in some
countries.


Exposure to climate extremes


Production of clean-energy minerals is increasingly exposed to
climate extremes.


Lithium and copper are perhaps the two most important minerals in
an electrified world. Over half the world’s lithium production
takes place in areas under high water stress. In Chile, 80
percent of copper output comes from arid or water-stressed
regions.


Other producing regions like Africa, Australia, and China have
seen increased extreme heat and flooding. Expanding demand could
push production into even more vulnerable areas.


Anyway, those are the risks. In a later post, I’ll get into
strategies and policies that can help address those risks.


Minerals are the new geopolitics: like oil & gas, but not


Right now, clean energy is a fairly small source of demand for
the minerals discussed above, but its share is projected to grow
rapidly under a Paris-compliant scenario, to well over half of
global demand for lithium, cobalt, and nickel by 2040.


Just as clean energy will be more important to minerals markets
in coming years, so too will minerals be more important to clean
energy. The rapid deployment of technologies crucial to
decarbonization is going to depend on supply chains that are in
many cases dominated by one or a handful of countries, fed by
mines with low labor and environmental standards, exposed to
rising climate extremes, and vulnerable to political and economic
disruptions. All of those risks could slow the transition.


The race for minerals courts some of the same dangers that came
with oil and gas. Minerals will become crucial to the global
energy system and their distribution — both production and
consumption — will shape geopolitics. Unplanned supply
disruptions could have global consequences, just as with oil and
gas.


But it’s also important to remember that minerals are different
from oil and gas in crucial respects. The most important is that
fossil fuel technologies require continuous fuel input. If
there’s a disruption in oil markets, it is experienced by every
driver as an ongoing increase in gas and diesel prices.


Minerals are only essential to building of clean energy
technologies, not to operating them. They are a materials input,
not a fuel input. Supply disruptions or price fluctuations will
affect markets for the technologies, but they will not affect
existing users of those technologies. Solar energy from existing
panels will not get more expensive just because copper does. This
insulates minerals somewhat from the volatile consumer politics
of fossil fuels.


Secondly, every country in the world has an established
relationship to oil and gas — it’s a producer or it’s not — but
minerals and mineral markets are much more varied and dispersed.
Countries could consciously decide to become producers by
exploiting new reserves; they could invest in processing or
manufacturing; supply chains will shift and morph. “Individual
countries may have very different positions in the value chain
for each of the minerals,” IEA writes. This makes the geopolitics
of minerals more complicated than fossil fuel geopolitics.


As we’ll see in the next post, the exact course of minerals
markets is difficult to predict in advance, because there is
rapid development and innovation going on in clean energy.
Exactly what minerals will constitute the final balance in a
clean-energy world is unknowable at this stage.


But there are predictable stresses ahead and policymakers should
strive above all not to do what they’ve so often done with oil
and gas — namely, stumble blindly into crises that end up having
terrible economic and political consequences. The speed and
success of the clean-energy transition depend on a thoughtful and
cooperative approach to minerals supply.


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