Materials Shortage Will Not Stop The Energy Transition, If We Plan Ahead

The signs of climate change are everywhere. More and more countries have rallied under the banner of net zero carbon dioxide emissions by mid-century. To achieve this goal, the world needs an energy transition. The pathway outlined in IRENA’s World Energy Transitions Outlook: 1.5°C Pathway indicates that renewable power generation, energy efficiency and electrification of end-use sectors have a key role to play. This vision is echoed in other leading energy scenarios.

Some recent analyses have suggested that this implies a huge increase in minerals and metals demand. The European Joint Research Centre has focused on this topic for years, as has the German raw materials agency. In 2020, the World Bank issued a report on the mining implications of rising clean energy demand, and a more recent International Energy Agency study also highlighted the role of critical materials in the energy transition. Copper, silver and rare earth metals have received notable attention, but other materials such as graphite and titanium have also been mentioned in this context. The list of critical minerals and metals identified varies, as there is no generally accepted definition of criticality.

Copper, lithium and other strategic minerals and metals have experienced significant price increases in recent months. This has raised considerable interest from investors as well as from naysayers of the energy transition, who are now weighing in. The term “greenflation” has been introduced to describe rising prices for metals and minerals – such as copper, aluminium and lithium – that are essential to solar and wind power, electric cars and other renewable technologies. In their view, the current greenflationmeans that we are less likely to achieve our climate goals by limiting the worst effects of global warming.

We argue that such concerns are overblown:

• For many materials, the quantities required for the energy transition are not that significant compared to total consumption – energy applications constitute in many cases only a fraction of total use.
• Significant substitution potential exists in such new applications, but also for some existing applications.
• Recycling can reduce the need for primary production.
• The necessary resources exist – it is a matter of expanding the production volume.

This short paper elaborates the cases of copper and rare earth metals.

Key findings:

We should properly measure reserves, resources and demand impacts, accounting for innovation and all types of uses.

Clean electricity plays a central role in the energy transition, and we need to make the switch as soon as possible. Electricity must become the main source of final energy and the main feedstock for clean energy carriers such as hydrogen. Electric vehicles, heat pumps and green hydrogen for industry must become ubiquitous. But that requires copper, and it requires rare earth metals.

Supply risks must be managed properly.

Whereas advocates of the energy transition call for expanding the supply of minerals and materials, the mining industry is wary due to experience with past supply cycles. New mining activities must be managed properly, and concerns must be taken seriously.

Another type of supply risk relates to the geographical distribution of supply. Supply chains are being reviewed in light of vulnerabilities that have become visible in recent years and rising geopolitical tensions. There is a role for governments in managing this process, with a clear trade-off between cheap supply from abroad on one hand and geopolitical concerns on the other.

International governance must be enhanced for critical materials.

The energy transition is critical for the future of mankind. The risks associated with climate change dwarf those associated with critical materials supply, and the current discourse on materials scarcity as a showstopper is misleading. However, the attention being given to critical materials is warranted. The energy transition will affect minerals and metals consumption substantially. But the right policy frameworks and design decisions today can avoid scarcity problems in the future. The rapid expansion of electromobility in particular raises questions about materials scarcity, while renewable power generation and power grids contribute to a lesser degree. The rapid roll-out of electric vehicles and battery production witnessed today will certainly put a strain on minerals and metals supply in the years to come. But these problems can be resolved. The energy transition is here to stay and will create new economic opportunities.

Only a global approach to strategic minerals makes sense. Apart from national efforts – such as the US State Department’s Energy Resource Governance Initiative and the European raw materials alliance – there is a role for international agencies such as IRENA. As the world’s only energy transitions agency with truly global membership, IRENA is well placed to bring countries together on this topic, foster a higher level of transparency and facilitate the effective management of critical materials supply at the global level.

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