The great minerals scramble: how can we provide the materials needed for the energy transition?

The last few years have been especially challenging in many ways, and there is no doubt about the need for a new approach with the aim of achieving a more just, balanced, secure and sustainable future. Global climate goals have been set, and today we all know where the world needs to be in 2030. But are we going to be able to achieve this planned transformation?

What has become increasingly clear is that we are in grave danger of missing the targets for reducing temperatures and decarbonizing global systems by 2030. We also have to tackle even greater uncertainty in relation to the application of new/cleaner technologies – to do in large part with the availability of the critical minerals needed for the energy transition.

By 2050, renewable energy capacity must be tripled under the Stated Policies Scenario (STEPS) and can grow sixfold under the Sustainable Development Scenario. These efforts to deploy cleaner energy sources and infrastructure are directly linked to the ability to supply the materials used to make wind turbines, solar panels, electric vehicles and electrical grids.

According to the IEA, a typical electric car requires six times the mineral inputs of a conventional car, and an onshore wind plant requires nine times more mineral resources than a gas-fired plant. Since 2010, the average amount of minerals needed for a new unit of power generation capacity has increased by 50% as the share of renewables in new investment has risen.

Leading institutions of the world, ranging from international organizations to think-tanks, academia and others, have outlined the critical role of minerals for the energy transition. Forecasts show large relative increases in demand of up to nearly 500% for certain minerals, especially those concentrated in energy storage technologies.

Aware of an existing gap between the supply and demand of critical minerals, industries, governments and international organizations are already considering many responses to meet increasing demand, such as expanding existing mines, developing new ones, designing circular models and focusing on extraction efficiency, among others. Nevertheless, these solutions may not arrive promptly due to multiple factors, including the time needed to develop new projects, licensing restrictions, geopolitical volatility, access to capital and non-functional supply chains. Governments and regulators may need to act to avoid possible critical shortages in the metals markets.

The world needs a fast energy transition in order to reach the goals and projections defined worldwide. Three risks emerge in case we fail to close the imbalances between supply and demand of energy transition materials and from our efforts to close the existing gaps.

First, we would witness a backlash in adoption of renewable energy technologies and rising demand for fossil fuels. We’re already witnessing this reverse trend in Europe in response to gas shortages following the war in Ukraine.

Second, geopolitical tension will likely rise as countries compete to secure access to these critical minerals. We would see growing resource nationalism that reverberates in more restrictive trade and regulatory policies, limiting the access of materials to some countries and fragmenting the global economy.

Third, by increasing mining activity, we would consume more energy and water, generate more waste, thus creating higher environmental pressure on ecosystems, if the transition is not made in the most responsible way.

These developments would drive the price of raw materials and energy technologies up, with a direct impact on final consumers, delaying the energy transition even further. On a commercial level, failure to meet demand will also result in value destruction due to delayed deployment of clean technologies in various sectors and inability to capture value from high ESG valuations.

According to the International Energy Agency, to meet the goals of the Paris Agreement, sectors contributing to the green energy transition will be responsible for over 45% of total copper demand, 61% of nickel demand, 69% of cobalt demand, and a staggering 92% of lithium demand by 2040. This is a dramatic increase from the levels of 8-29% at the end of the last decade and will pose a huge challenge for the supply side of the market and includes lithium, cobalt, nickel, manganese and graphite, which are crucial for widely used high-performance lithium-ion batteries. Electricity transmission, distribution networks and renewable energy generation infrastructure will require significant amounts of copper and aluminium serving as the backbone for the energy transition.

By 2026, EVs will account for half of cobalt demand. Most EV producers plan to present new BEVs (battery electric vehicle) by the end of 2024. This aligns with the commitment of 18 out of the 20 largest auto-makers in the US to increase their EV product line-up; several of them committed to going 100% electric in the next few years.

These statistics further reiterate how critical minerals will put pressure on the energy transition. According to IEA, the risks to the reliability, affordability and sustainability of mineral supply are manageable, but they are also a reality. How policy-makers and companies respond will determine whether critical minerals are a vital enabler for clean energy transitions, or a bottleneck in the process.

A deeper understanding of the risks arising from the imbalance between supply and demand of critical minerals, as well as the implications of these risks, is necessary and certainly a first step towards action. We already know the importance of the mining and metals sector for the energy transition, but it is still necessary to think about strategies that unite the actions of the different sectors affected by the mineral gaps.

Preventing the challenging scenario already pointed out in many studies involves more than rethinking production processes, commissioning new mines and focusing on recycling materials. It is necessary to go beyond demand planning and act by defining strategies that are actually capable of dealing with risks. The time has come for a new approach, focused on building a coalition capable of facing challenges in an integrated, systematic and collaborative way.