Scarce minerals in the energy industry
Bottlenecks for a renewable energy future
Raw materials are vital for any economy. They are the building blocks of our modern standard of living, and essential for maintaining the modern economic supply chain. Fossil fuels and its derivatives, known as energy materials, have been in the spotlight for years as the driving force for economic development, but another concern is developing regarding metals, minerals and biotic materials. These materials are intrinsically embedded in everything that surrounds our society, as well as in the supply chain that transforms them. As our society consumes more and advances technologically, raw material bottlenecks present a challenge when minerals that are essential to the energy transition experience insufficient supply to meet demand, or competition from competing industries such as consumer electronics.
From smartphones to buildings, cars, and wind turbines, as we produce more and demand outpaces supply, some raw materials are shifting towards scarcity, exposing cracks in the production supply chain. This is reflected by their prices in global markets, and it can endanger the economic viability needed to further development and the world’s much-needed energy transition. There are many other reasons for the growing concern in this subject in recent years. Some specific of a particular material’s niche, for example, Indium supply is overwhelmingly consumed by the ever-growing production of flat TVs and touch screens. Others mineral supplies are strained by geopolitical tensions such as the US-China trade deals, which affect numerous raw materials. In its assessment about raw materials, Oakdene Hollins consultancy group mapped 54 elements by their supply risk and economic importance, with many of them already inside an endangered zone (Chapman et al., 2013):
As a relatively small continent in area with low natural mineral reserves, and with high levels of development, Europe is highly dependent on raw materials from third-party countries to sustain its businesses and the economy. Some of these nations own vast concentrations of specific resources, adding even more complexity to the supply equation (Chapman et al., 2013). The monopoly of minerals not only affected prices and relations but can develop to a modern-day type of colonialism, with countries strongly investing in acquiring reserves and mining infrastructure in more vulnerable countries to guarantee their market position (Mead, 2018). This article aims to identify and describe four minerals that will play a significant role in the European Union’s renewable energy transition and of these minerals, which will face the threat of scarcity in the medium to long term. Mineral scarcity could significantly delay the progress of the energy transition if supply chains are disrupted or geopolitical factors reduce supply.
The minerals targeted are cobalt, lithium, neodymium and indium. These minerals could face the most significant supply limitations in the medium to long term. These materials are used in a diverse range of renewable energy technologies and thus represent a threat for the industry as a whole and are not limited to any single technology.
Cobalt is a rare bluish-grey metal that is found deep in the Earth’s crust. It is a key material for electric vehicles, smartphones, PCs and many other electronic devices which depend on Li- ion batteries (High Energy Trading 2019). The need for this mineral principally comes from the Li- ion batteries manufacturers. The most common is lithium cobalt oxide (LiCoO2) cathode. (Wikipedia, 2019). A secondary need for cobalt arises if one or both among the electric vehicle industry or the wind power sector decide to change the type of magnets used in some of their components. Among the four main kinds of RE magnets, the most popular is the Neodymium (NdFeB) magnet. However, a substitute could be the permanent magnet of samarium cobalt (SmCo) (High Energy Trading 2019). Both the batteries and the magnets are vital components in sectors that are crucial to achieving the energy transition necessary to reduce GHG emissions. Therefore, it is essential to understand the availability of cobalt and the possibility to recycle or replace it. The primary industry that demands cobalt corresponds to the batteries manufacturers. Their production is entirely related to the electric vehicles industry, the smartphones and PCs manufacturers, and other electrical or electronic devices manufacturers. Furthermore, rare earth magnets manufacturers represent another sector that demands this resource directly. Later, the magnets will be sold to the electric vehicle and wind power industries. Finally, cobalt is also used in polyester, tires, superalloys, chemicals and ceramics, cemented carbides, and more (Global Energy Metals Corp, 2019). The global demand for cobalt has almost tripled in the last 5 years (High Energy Trading 2019). Moreover, it is forecasted that in 2025, the global market for cobalt for use in batteries will amount to 117,000 tons, with further 105,000 tons demanded other applications (Garside, 2019). In below's image, the forecasted demand for cobalt for the next years (taken from different sources) is shown.
Cobalt’s use in batteries applies particularly to the batteries for electric cars, which has transformed the demand for this metal and increased the price considerably. For example, in 2018, the price of cobalt experienced its highest volatility since 2008, but it was expected for 2019 that the prices should raise due to two factors. On the one hand, electric vehicles, which drive the majority of cobalt demand growth through lithium-ion battery demand, were set to see production growth of almost 40% that year, with more than 2.5-million vehicles to be produced. Meanwhile, in the supply side, the severe underinvestment in mining projects intensifies the increase in prices (Mining News Agency, 2019).
Although it seem like the short-medium term the demand for cobalt will increase considerably, there are some reasons to believe that in the long term it may decrease due to new improvements in the electric vehicle battery which will possibly be of other materials. For instance, lithium-iron-phosphate and lithium-titanate are battery types that can run EV powertrain applications and don’t require cobalt. Some other battery compositions depend on sodium, magnesium, and lithium-sulfur, with the advantage of being even cheaper than the lithium-ion batteries (High Energy Trading, 2019).
Cobalt itself is not rare at all, ranking 32nd in global abundance among metals, but its criticality relies on the fact that it has become an increasingly valuable commodity due to its uses. The Democratic Republic of the Congo, with approximately 3.4 million metric tons in 2018 has the largest cobalt reserves in the world, accounting for nearly half of the world’s reserves (6.9 million metric tons). It is followed by Australia, which holds 1.2 million metric tons, representing a 17.4 % of the global reserves (Garside, 2019).
The monopoly of DR of Congo (DRC) posses problems beyond pricing. Their mining industry is infamous for its lack of human rights and child labour laws. Due to the inhumane treatment of underage miners in the African country among other factors, Tesla decided to source the cobalt for its new battery production (GigaFactory) from North America only. Moreover, the two big players in the automotive industry, General Motors and Ford, get their batteries from LG Chemicals, which joined the claim for humans right and are not going to use DRC-sourced cobalt anymore (High Energy Trading, 2019).
Lithium is a soft, silvery alkali metal, the lightest in the periodic table and has the highest electromechanical potential and energy density (Tohoku University, 2019). Lithium is a highly versatile metal. The most important use of this metal is in rechargeable batteries which can be present in mobile phones, laptops, digital cameras and electric vehicles. It can also be used in some non-rechargeable batteries (Perodic table and element description, 2018).
Lithium metal can serve to make alloys, to improve the strength and lighten other metals, such as aluminium and magnesium. A magnesium-lithium alloy is used for armour plating and Aluminum-lithium are used in aircraft, bicycle frames and high-speed trains (Pappas, 2018). Lithium is highly present in the industry. In the chemical sector, used in batteries, pharmaceuticals, lubricants, air treatment and aluminium smelting; for technical purposes, ranging from the making of glass, ceramics, aerospace, steel to iron castings, and in new markets, including electric vehicles, Li-Al alloys for aircraft and energy storage. (L.Dye, 2019).
This metal plays a fundamental role in the energy sector due to its use in batteries, being lithium-ion batteries the most known and present in the market. Since the early 1990s much work has been done on high-power rechargeable lithium storage batteries for electric vehicles and for power storage.
The principal industrial applications for lithium metal are in metallurgy, where the active element is used as a scavenger in the refining of ores and in the health sector for pharmaceutical applications, as it is extensively used in the production of other organic chemicals. (World Lithium, 2019). Similarly, as for cobalt, electric vehicles are driving the growth in demand for lithium, together with energy storage systems, and high-drain portable electronics. On the graph below we can see the forecast of the market and the supply of lithium for the upcoming years (Ellsmoor, 2019).
The dotted grey-line represents the forecast lithium demand following a top-down approach, estimating the amount of material needed by battery manufacturers. This way of forecasting demand can be biased and lead to an overestimation of the industry’s growth. Therefore, a bottom-up approach has been followed instead, considering consumer adoption rates, the changing pack size in vehicles, lithium content in chemistries and the real-world cell energy densities. Global lithium resource demand could reach 1 million metric tons LCE by 2025 (Lu, 2019).
The world has been estimated to contain 15 million tons of lithium reserves and 65 million tons of known resources. Next image shows the world’s reserves of 2018 by country.
As it can be observed in the graph, Chile, Australia, Argentina and China are leading. Australia was the largest lithium- producing country in the world in 2018, followed by Chile, who was the second- biggest with 16,000 metric tons (MT) but had the most significant reserves worldwide (Barrera, 2019).
Lithium’s price is challenging to estimate. The first rise in price was due to the potential of the metal in the manufacture of high-powered lithium-ion EV car batteries, capturing the attention of investors. Prices rapidly increased and peaked at a record over $25,000/mt in 2017, however, they have started to decrease. Due to suppliers’ race to bring on new production and refining capacity, Investment bank Morgan Stanley has forecasted prices could fall by a further 30% through to the end of 2025.
Neodymium magnets are part of the rare earth family of elements in the periodic table, neodymium belongs to the lanthanide series, has an atomic number of 60 and it is present in nature as mineral ores like monazite and bastnasite(‘Neodymium’, 2019). The alloy formed with iron and bohrium (Nd2Fe14B) is the strongest permanent magnet known to humanity so far, and for that reason, its applications can be seen throughout many sectors. From tiny technological devices and electric instruments to motors, these magnets have been important actors of technological development, especially in the energy sector. The magnetic power that Neodymium can produce is the driver of its application. Stronger magnets mean small technologies like smartphones or earplugs can stay small, while still strong and reliable. The magnetic strength also opens ways to produce more electricity while needing fewer parts (Isaak, 2018).
More and more technologies are depending on neodymium. From the device displaying this article to a luxurious electrical car, this rare earth is becoming irreplaceable (‘The Importance Of Neodymium Magnets In The Present World’, 2013).
In the top of the Neodymium supply chain, one country dominates the market. China accounts for 80% of the global Neodymium supply ('The Importance Of Neodymium Magnets In The Present World’, 2013).
With the number of wind farms growing fast and the popularisation of electric vehicles, demand for this magnet is outstripping supply (Isaak, 2018). According to Isaak, from CNBC, “More than 80 per cent of the world’s neodymium is produced there [China]. In 2017 alone, China mined 105,000 metric tons of rare-earth metals, while the U.S. has only produced about 43,000 metric tons in the last 20 years combined.”. The importance -and danger- of this monopoly was perceived from 2010 to 2011 when a trade dispute between China and Japan made neodymium prices rise 400% in one year, and recently, with the US and China’s trade wars, where rare earths were exempted to avoid impact on North American tech industries.
Even though the primary demand of those magnets or magnet containing products are in Asia, Europe has still many dependencies on these materials. With more research into new recycling methods and more investment, the continent could become self-sufficient in the future.
Indium is overwhelmingly consumed in the consumer market for flat-screen electronics (56%) although with respect to the renewable energy industry its value lies in its use in thin-film photovoltaic applications such as copper-indium-gallium-diselenide (CIGS) solar panels (8%) which can be seen in the distribution of Indium demand in Figure 11 (Lokanc, Eggert, and Redlinger, 2015). Indium is used as a doping agent which will cause surfaces to be negatively charged and function as a semiconductor (Halbleiter, 2019). CIGS and thin-film photovoltaics are considered to be a renewable energy source with high potential despite requiring more research & development. Thin-film photovoltaics have a highly versatile range of applications which indicates an increase in future use once efficiencies have increased and production costs have decreased.
Primary Indium demand is expected to increase by 10% annually (Ciacci et al., 2019). These figures are highly dependent on CIGS manufacturing which requires over 23 tons of Indium per GW of capacity. Increasing Indium supplies is challenging because Indium cannot be individually mined, rather it is the byproduct of Zinc mining. Globally there are approximately 15,000 tons of Indium reserves, of which over two- thirds are located in China (Lokanc, Eggert, and Redlinger, 2015). Predictably, China produces over half of the global Indium supply while the remainder is produced primarily by Belgium, Canada, Japan, Peru and South Korea (Lokanc, Eggert, and Redlinger, 2015). This poses a mineral supply security concern if China were to ever restrict exports of Indium to the global marketplace. Without Zinc demand increasing significantly it will be difficult to scale primary Indium production. A promising alternative to scaling primary Indium extraction will be to use urban mining. In 2014 it was calculated that 62 tons of Indium were sent to landfills (Ciacci et al., 2019) while new acid-based recycling processes could extract 98% of the Indium content from LCD screens (Rocchetti, Amato, and Beolchini, 2016). Unfortunately, this recycling method is not yet economically feasible, although as the supply of Indium becomes more strained and demand increases, price increases could stimulate investment.
From a geopolitical point of view, it seems that the EU will be highly dependent on imports, the same as with fossil fuels. Therefore, the energy transition could be an excellent means of becoming energetically autonomous, but the raw material for the new technologies still need to come from abroad. Recycling may help to make broader use of the resource though it seems the methods are far from being convenient. This scarcity weakens the European position. In addition, a large portion of the critical materials are in China, increasing the power gap with the most populous country in the world. In the next year, the decisions taken in the Asian nation are going to be crucial for the energy transition. Moreover, the growing need for raw materials may create a shift in material demand which will develop new economic winners. As once before, some countries from the Middle East became rich only with their fossil fuels exports, now some developing nations like DR Congo, Chile, or Brazil can experience fast growth in the next years if they can manage their reserves and production adequately.
Finally, the ratio between the fossil and the REE reserves for each region will mark the rate of the transition. For instance, the Chinese have more than one motivation to keep the supply of REE low. From an economic point of view, it is convenient for them to ensure they will continue to make profit from their vast fossil reserves. The same may be the case for the USA. For the EU, a transition from one resource to other is easier, since the region does not hold significant reserves. Regarding sustainability, the energy transition mustn't also mean a change from one environmental bottleneck to the next one not only in environmental matters, but also social and economic issues. This concern opens an alternate debate on how sustainable is it to reduce GHG emissions with resources extracted using child labour. At the same time, the minerals used are each time more delicate regarding health issues, there are almost no sustainable proposals for their end-of-life management, and probably more energy is being consumed for the extraction, processing and distribution of the new raw materials and technologies that contain them. Finally, humans are in a hurry and we may follow misguided paths, so up to some extent, it looks like there are many compromise decisions in the decarbonisation process. The transition may be at the expense of other controversial aspects, but the focus should be in avoiding that this and next generations do not arrive at a similar tipping point in the upcoming years. Promising alternatives for current challenges already exist with better technology and less raw materials or different ones, but the solution to the equation lies in how to implement new technologies in a sustainable way