Investing in innovation will secure vital critical minerals for the energy transition – here's where to start

Rising demand for low-carbon technologies is escalating the need for critical minerals. These technologies require more minerals than their conventional counterparts, such as coal, oil and gas, and so the transition to renewable energy is driving substantial growth in demand for critical minerals. In fact, the energy transition could more than double the overall demand for critical minerals by 2030, according to the International Energy Agency.

To establish a secure global supply of critical minerals, materials markets must balance three priorities: availability, affordability and sustainability. This can be framed as the materials trilemma:

Collaborative action focused on the materials trilemma will secure a sustainable and affordable supply of critical minerals.

For example, transitioning new primary assets from exploration into production typically involves long lead times due to permitting, technical issues, and other challenges. Collaboration across the value chain and public sector engagement are vital to managing and reducing these lead times.

Boosting secondary (recycled) minerals supply would likewise necessitate collaborative action to increase available feedstock volumes, develop cost-effective recycling technologies, and raise end-of-life-recycling rates.

Innovation will be essential to navigating the materials trilemma. At scale, new technologies and innovative business models can reduce market tightness by ramping up supply or reducing demand.

Artificial intelligence (AI) is one example of an emerging technology that could support faster, more precise exploration and optimally efficient processing of critical minerals. Blockchain technology could enhance traceability in value chains to support supply, while new metal and battery recycling methods could maximize the recovery of high-quality materials.

New approaches to lowering environmental impacts in mineral production (such as closed-loop water recycling during processing) could also help address supply and demand issues. Reducing the quantity of constrained critical minerals needed for end-use energy technologies would also be beneficial, for example, by using sodium-ion batteries rather than lithium-ion batteries.

Private sector players that act now to address critical minerals supply and demand challenges in an environmentally and socially responsible manner could make vital contributions to advancing a just energy transition. While doing so, they also stand to capture the most value. For example, production process innovations that significantly reduce carbon emissions could create a green premium for critical minerals because consumers will want to buy more sustainably produced materials, raising prices.

However, investment is needed to develop, scale, and deploy innovations at the right pace. Both private and public sector actors have roles to play here.

Mining and processing companies and end-use technology manufacturers can research, develop and implement innovative processes and technologies in their own operations. They can also invest in innovative companies and market their creations for additional amplification.

For example, mining companies could boost value, efficiency, and sustainability with supply-side changes that allow them to use more low-grade ores, enhance productivity, and delay—or avoid—developing new mines. End-use technology manufacturers that reduce their reliance on critical minerals could become more resilient and better positioned to withstand potential issues within the mineral supply chain.

Financial institutions also have a role to play. Investors are essential to accelerating innovation because financing is required to develop and scale novel technologies. Venture capital (VC) and private equity firms, can also leverage their networks and expertise to help innovators scale rapidly.

Public sector investors with higher risk tolerance than their private sector counterparts can also make investments that could help attract additional private sector capital. This is especially relevant for early-stage innovations.

Finally, governments can help create an environment that supports innovation by implementing policy and funding measures to de-risk new technology development and encourage its deployment.

Key stakeholders can accelerate innovation in critical minerals to facilitate an orderly energy transition by taking several individual and collaborative actions.

Industry incumbents can review innovation pipelines and optimize resource allocation to scale high-impact innovations. This could include implementing innovations in-house and marketing them as new products.

These stakeholders could also build a stronger organizational culture of innovation by defining innovation as a strategic priority. This should also involve sourcing the right talent for R&D efforts and adapting processes to maximize the potential of new technologies.

Established organisations can identify innovative companies to invest in, including early-stage companies with novel technologies that could impact supply or demand for critical minerals. This could happen via a VC arm or through a merger or acquisition.

Startups could identify pain points throughout the value chain where innovation might help unlock the availability, affordability and sustainability of critical minerals. They can also determine how to access the funding needed to hyperscale innovative technology.

Finally, startups could establish an organizational structure that fosters company growth, identify potential customers for a value proposition, and deploy capital effectively to produce a product.

Investors and financiers have a role to play in terms of researching and understanding the growth potential and opportunities for investment within the critical-minerals landscape. This should cover the entire industry – from innovative cleantech startups to real mining assets.

Financial institutions can also define and implement plans to support critical-minerals companies in their existing portfolios to increase their profitability, scale their products and secure widespread deployment by industry incumbents.

Finally, the public sector could identify, evaluate and implement initiatives to de-risk investment, crowd in private sector capital, and boost deployment by industry. For example, this could be done via innovation accelerators or public-private demonstration programmes.

The Securing Minerals for the Energy Transition (SMET) initiative, led by the World Economic Forum with McKinsey & Company as its knowledge partner, is a global multi-stakeholder platform for coordinated action on the critical-minerals agenda.

Highlighting these key actions is part of SMET’s 2024 mission to raise awareness, convene actors and enable global collaboration on policy dialogue, investment mobilization and acceleration of innovation. If public and private organizations collaborate to find innovative ways to bolster supply and reconfigure demand for critical minerals, it could help support a faster and smoother energy transition for all.