Swift growth in energy transitions necessitates increased mineral supply investments
The demand for minerals essential for clean energy technologies is increasing as the global energy mix is transitioning to cleaner and sustainable resources. The basis for the global economy is also moving from fossil fuels to minerals.
Critical minerals like lithium, cobalt, nickel, rare earth, graphite, copper and zinc have high value in the present times. Intermittency challenges of renewable energy resources can be solved using battery storage technologies at utility-scale, which require critical minerals at a large scale.
Transitions to clean energy technologies will drive an accelerated demand for the minerals, with the energy sector representing its primary force.
The global demand for critical minerals is set to rise by 400-600 per cent over the next several decades. The demand for lithium and graphite, which are used in electric vehicle (EV) batteries, will increase by as much as 4,000 per cent, the United States said February 22, 2022.
The category of minerals used may vary based on its technological applications.
Lithium, nickel, cobalt, manganese and graphite are necessary for a battery’s performance and energy density. Rare earth elements (REE), on the other hand, are essential for permanent magnets and are important for wind turbines and EV motors.
Electricity systems require large quantities of copper and aluminium, with copper being the mainstay in all electricity-based technologies. The demand for rare earth elements could be three to seven times above current levels by 2040 worldwide, according to the global forum International Energy Agency (IEA).
Organisations and ministries are rushing to begin manufacturing, transportation and processing of raw materials from critical minerals. This is being done to meet the increasing need to reduce greenhouse gas emissions and climate change through renewable energy.
Nations with large deposits of critical minerals are working on new investment plans and strategies to augment the advantages of such minerals for their people, economy and national security. The energy systems generated using clean energy technologies differ vastly from those generated using traditional hydrocarbons.
Setting up a solar photovoltaic plant, wind farms and electric vehicles require more mineral quantity than a fossil fuel-based power plant. An onshore wind power plant needs nine times the minerals than a gas-fired power plant, found an IEA report.
As nations continuously try to lower greenhouse gas emissions, they must ensure that the power systems remain secure and reliable. Minerals provide disparate issues; however, their increasing importance in a low-carbon economy necessitates policymakers to consider potential new vulnerabilities.
Minerals deployed in clean energy
Raw materials are important when deciding the cost of the renewable energy technologies required in the energy transition. A higher price of the minerals would mean an increased cost of the technology.
For example, doubling the cost of lithium would enhance the cost of the battery by around 6 per cent. Copper and aluminium comprise almost 20 per cent of the electricity grid cost. The increased price due to a constrained supply would significantly affect the grid cost.
Compared to conventional fuel supply, the supply chain for clean energy can be tangled. Further, the supply chain and raw materials for clean energy technology are location-based. This is true for manufacturing the infrastructure required in clean energy technologies.
Lithium, cobalt and REE are produced in the top three nations that control three-fourths of the world’s output. About 70 per cent of the global production of platinum and cobalt is controlled by South Africa and the Democratic Republic of Congo.
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About 60 per cent of the REE production in 2019 was by China. The concentration of the minerals supply is quite high for processing and refining operations, which is a cause for concern for organisations manufacturing solar panels, wind turbines and batteries.
Recycling rates of metals
Minerals can be recycled repeatedly if the proper infrastructure and technology are in place. However, recycling does not remove the necessity for repeated investment in the primary supply of minerals. However, it can significantly reduce the emphasis on the primary supply when demand increases.
Indicative supply chains of oil and gas and selected clean energy technologies
With the energy transition gaining momentum, the security of mineral supply holds an important place in the energy security discussion as well as in national security and in the context of comprehensive national power.
Swift growth in the energy transitions necessitates increased mineral supply investments to keep pace with the demand trajectory.
Policy interventions involving measures encouraging and incentivising new mineral supply project development and access to critical mineral markets would help organisations make informed investment decisions.
India plans to bring out a policy framework and time-bound action plan for the country’s exploration, processing, use and recycling of critical minerals — an essential step towards self-sufficiency across several sectors and energy transition.
The Union Ministry of Mines has created a joint venture company, namely Khanij Bidesh India Ltd (KABIL), with participating interests of National Aluminium Company, HCL Technologies Ltd and Mineral Exploration Corporation Ltd. Its aim is to ensure the nation’s mineral security and self-reliance in critical and strategic minerals.
KABIL is mandated to identify and acquire overseas mineral assets of critical and strategic nature, such as lithium, cobalt, etc. This initiative aimed to give importance to self-reliant India campaign, Atmanirbhar Bharat, will cater to the requirements of crucial sectors such as e-mobility, renewable energy, medicine, aerospace, aviation, etc.
India is exploring partnerships with countries such as Australia, Argentina, Bolivia and Chile endowed with critical and strategic minerals. Hard rock formations as in Australia contain lithium and cobalt and brine in the huge tract of SALARs or salt-flats as in Latin American countries have lithium.
A government-to-government memorandum of understanding was signed between India and Australia for cooperation in mining and processing of critical and strategic minerals.
Tackling environmental and social causes surrounding mineral development is crucial such as the mining and processing emissions, waste and water management and worker safety.
Analysis of the mineral supply chain and development of national, regional and global regulatory frameworks and regimes can be an important instrument to identify and mitigate the challenges and vulnerabilities, thereby improving transparency and sustainability of clean energy transitions.
Appropriate conventions under the United Nations, such as the United Nations Framework Convention on Critical Minerals, could be considered for the global governance of critical minerals enduring affordability, accessibility and sustainability of critical minerals.
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