IEA predicts a dramatic rise in mineral demand for clean energy transition
The shift to a clean energy economy including power grids and electric vehicles is set to drive a huge increase in the requirements for minerals such as copper, nickel, cobalt, lithium and rare earth elements, according to a new report from the International Energy Agency (IEA).
In its report, “The Role of Critical Minerals in Clean Energy Transitions” the IEA says production of these minerals must be ramped up over the next decade to meet the demand for the transition to clean energy.
The report focuses on the importance of nickel, cobalt, lithium, copper and rare earth elements.
In the Executive Summary of the report, the IEA outlined how much the need for these materials could increase going forward.
“The shift to a clean energy system is set to drive a huge increase in the requirements for these minerals, meaning that the energy sector is emerging as a major force in mineral markets,” IEA writes. “Until the mid-2010s, for most minerals, the energy sector represented a small part of total demand. However, as energy transitions gather pace, clean energy technologies are becoming the fastest-growing segment of demand. In a scenario that meets the Paris Agreement goals (as in the IEA Sustainable Development Scenario [SDS]), their share of total demand rises significantly over the next two decades to over 40 percent for copper and rare earth elements, 60-70 percent for nickel and cobalt, and almost 90 percent for lithium. EVs and battery storage have already displaced consumer electronics to become the largest consumer of lithium and are set to take over from stainless steel as the largest end user of nickel by 2040.
“As countries accelerate their efforts to reduce emissions, they also need to make sure that energy systems remain resilient and secure. Today’s international energy security mechanisms are designed to provide insurance against the risks of disruptions or price spikes in hydrocarbons supply, oil in particular,” said IEA. “Minerals offer a different and distinct set of challenges, but their rising importance in a decarbonising energy system requires energy policy makers to expand their horizons and consider potential new vulnerabilities. Concerns about price volatility and security of supply do not disappear in an electrified, renewables-rich energy system.”
Around the world, governments are laying out targets to cut emissions and increase renewable energy installations, with a number aiming to use wind and solar energy as a crucial tool in their pivot away from fossil fuels. The reality on the ground shows that for many countries, any such move will be a significant challenge requiring a huge amount of change.
IEA highlighted a number of potential challenges including supply chains described as being “complex and sometimes opaque;” the high concentration of materials in a small number of countries; tougher environmental and social standards being expected of producers; and a drop in the quality of available deposits.
“Today, the data shows a looming mismatch between the world’s strengthened climate ambitions and the availability of critical minerals that are essential to realizing those ambitions,” Fatih Birol, the IEA’s executive director, said in a statement.
“The challenges are not insurmountable, but governments must give clear signals about how they plan to turn their climate pledges into action,” Birol added.
“By acting now and acting together, they can significantly reduce the risks of price volatility and supply disruptions,” he said.
Birol went on to state that the potential vulnerabilities could, if not addressed, “make global progress toward a clean energy future slower and more costly.” This would in turn hamper global efforts to tackle climate change, he claimed.
The IEA’s report makes six key recommendations for what it describes as a “new, comprehensive approach to mineral security.”
1. Ensure adequate investment in diversified sources of new supply.
2. Promote technology innovation at all points along the value chain.
3. Scale up recycling.
4. Enhance supply chain resilience and market transparency.
5. Mainstream higher environmental, social and governance standards.
6. Strengthen international collaboration between producers and consumers