How the clean energy transition exposes the world to new vulnerabilities

The copper, cobalt, lithium, nickel and rare earths powering clean tech are controlled by a handful of producer countries, causing supply chain insecurities
It also comes with rising environmental costs in mining, especially with degrading ores, and the need to deal with waste, such as that from electric vehicle batteries

David Dodwell

Published: 3:30am, 3 Sep, 2022

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As we begin the transition from fossil fuels towards clean energy, we are in danger of replacing the existential threat of global warming with a new and pernicious vulnerability. A cluster of minerals, such as copper, cobalt, lithium, nickel and rare earths, at the heart of clean technologies is poised to create pressure points – and a suite of challenges for protectionists and the increasingly powerful security community to wring their hands over.

This trade-off has been driven home by Russia’s cynical manipulation of natural gas supplies to Europe. As Europe struggles to reduce its reliance on Russian gas, it has been made painfully aware that the transition to non-fossil fuels could take a long time and lead to new areas of weakness.

A recent International Energy Agency report warned: “While oil is a single commodity with a large, liquid global market, there are multiple minerals now in play for the energy sector, each with its own complexities and supply dynamics.” It noted that an electric car will require six times the mineral inputs of a conventional car, while a wind farm will require nine times that of a gas-fired power plant.

Given that we need to at least triple wind and solar power by 2040 to meet zero-emissions targets, and to grow the global electric vehicle fleet at least 25-fold, a colossal increase in demand for “clean energy minerals” is implied.

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A 2020 World Bank report “Minerals for Climate Action” predicts that demand for graphite, lithium and cobalt is likely to rise by about 500 per cent by 2050, while demand for indium will be up 230 per cent and vanadium 190 per cent, with nickel doubling.

That means a huge shift in mining activity. The IEA says coal mining earns revenues of around US$430 billion a year – more than 10 times earnings from clean energy minerals. But the energy transition means these minerals will overtake coal revenues “well before 2040”, rising to about US$260 billion as coal earnings shrink to US$175 billion.

It also means a potentially unsustainable reliance on a small concentration of producers. Much of the West’s paranoia homes in on China, which dominates the mining, processing and consumption of many clean-energy minerals, but the vulnerability stretches far beyond.

China’s grip on minerals that power our future leaves US in the dust

Perhaps the most indispensable of clean-energy minerals – copper – may be less concentrated than many, but still 38 per cent originates in Chile and Peru. Indonesia accounts for 39 per cent of the world’s nickel. As for cobalt, the Democratic Republic of Congo provides 69 per cent of world supply and is home to 46 per cent of global reserves.

Compounding this, China processes around 70 per cent of the world’s cobalt, and is the biggest consumer.

About 60 per cent of rare earths, such as neodymium and dysprosium, indispensable for the motors at the heart of most electric vehicles, are sourced in China, with around 90 per cent processed there – which perhaps explains why many European and American motor manufacturers are in a cold sweat over long-term supply security.

That so many mineral resources are owned or controlled by governments, and by entities with opaque ownership structures, amplifies the supply-chain security concerns of many companies in the clean-energy minerals sector.

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For example, a working paper put out by the Washington-based Peterson Institute for International Economics, notes that about 57.9 per cent of cobalt output is produced by firms that are active and known, but that little is known about the rest.

Numerous other problems complicate the supply of clean-energy minerals. The first, according to the IEA, is that it takes on average 16.5 years from mineral discovery to commercial production: no matter how fierce the demand, the time needed to increase – and diversify – supply is painfully long.

Because cobalt, copper and nickel normally coexist, it has rarely proven profitable to mine cobalt without a significant cross-subsidy from copper. A fall in copper prices can result in a mining suspension for cobalt or nickel, even if demand remains strong.

A similar problem arises with rare earths: miners may be looking mainly for neodymium and dysprosium, but these are invariably mixed with a combination of up to 15 other rare earths, all of which have to be separated out and discarded, adding to processing costs and creating horrendous pollution.

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For copper, a particular problem is that after centuries of exploitation, ore quality is degrading. The IEA says Chile’s copper ore grade has fallen by 30 per cent over the past 15 years: more has to be mined to generate the same amount of copper, and processing costs have risen sharply.

Additionally, minerals such as copper and lithium are sourced in areas of the world suffering from extreme water stress ( Chile in particular), which means rising production comes at an increasingly severe environmental cost.

The World Bank identifies other acute environmental concerns. For example, a 200-megawatt solar farm could require 600,000 panels covering around 550 American football fields. It is also concerned about the long-term challenge of electric vehicle battery disposal.

The batteries powering the electric vehicles sold in 2019 are estimated to eventually generate 500,000 tonnes of unprocessed battery-pack waste. This will rise 50-fold by 2030 and 650-fold by 2040 – a wholly unprecedented waste disposal challenge. Clearly there will be a need for radical new recycling technology at the heart of our clean-energy future.

The transition to a net-zero mineral-intensive energy economy may be critical in solving our climate crisis but will bring potentially crippling vulnerabilities. There is no panacea.

David Dodwell is CEO of the trade policy and international relations consultancy Strategic Access, focused on developments and challenges facing the Asia-Pacific over the past four decades