Demand for raw materials – today mainly driven by sectors such as electronics, aviation, defence, healthcare, steel and aluminium – is expected to grow by three and a half times by 2030, spurred by mineral-intensive renewables, batteries and electric vehicles, as well as metal-intensive grid infrastructure. According to an IEA report, between 2017 and 2022, the energy sector was already the main driver behind a tripling in overall demand for lithium and an increase in demand for cobalt and nickel by 70% and 40% respectively.
As demand soars and supplies tighten, the cost of raw materials will be more and more critical for clean energy technologies total costs. This gap can be especially observed for lithium, shows a report from the Energy Transition Commission. By 2030, demand for the mineral is expected to soar six-fold, resulting in a 30% higher demand than projected supply.
Bridging this gap is now becoming a priority for Europe, given its limited reserves of critical minerals and close to non-existent processing and refining capacity. Eurelectric discussed key pathways to building a resilient supply chain across the industry during its critical raw material session at Power Summit 2023.
Don’t put all your eggs in one basket, grow your own basket
A study conducted by IRENA shows that critical mineral reserves are not scarce across the globe. Yet the mining, processing and refining capacities are limited and highly concentrated by a few oligopolistic corporations, mostly based in China.
Right now, Europe has most if not all of its eggs in China’s basket. China has developed an ecosystem around mining, refining, processing raw materials as well as most of the equipment used for clean and renewable technologies. Today, 75% of EV batteries, 96% of solar wafers and 84% of offshore wind blades come from China.
“And we allowed that to happen, it’s a self-inflicted wound. We were not investing in an ecosystem to help diversify.” – explains Robert Chapman, Senior Vice-President at EPRI.
To reduce this dependence on China, both the EU and US should now focus on spreading risks, having alternatives in their supply chains while growing their own mining, processing and refining capacity. The good news is that Europe does not have to start from scratch.
The US Geological Service estimates that Europe is home to 7% of global lithium deposits, enough to cover 80% of its battery needs. The EU lithium mining and processing capacity, however, is very limited, with only a few promising exceptions.
“Projects to mine lithium from rocks are already developing in several parts of the European Union, such as in the Iberian Peninsula, Germany, Austria, Czech Republic and in the Nordic States” – explains Peter Handley, Head of Unit at the European Commission’s DG GROW.
Other projects are coming onstream in the Rhyne Valley to extract lithium from geothermal waters, from existent geothermal energy projects. With the right technology, lithium and other critical raw materials could also be extracted from sea water, in a similar manner as the one already in use to obtain magnesium.
Yet, building the necessary mining, processing and refining capacity at home requires getting the right investments case and eased permitting in place. The Commission’s Critical Raw Material Act, proposed in March, aims to answer these needs by setting new targets for the EU to be at least 10% self-sufficient in lithium extraction, 40% self-sufficient in its processing and refining and 15% self-sufficient in its recycling by 2030.
While growing mining capacities may raise sustainability and environmental concerns, these can be addressed by turning the field into a high-tech, clean tech-based sector. “Mining does not have to be fossil fuel intensive” – says Handley. Several projects in Europe are already showing that low-impact mining is possible thanks to frontier technologies such as remote mining, automated mining, no diesel vehicles, renewably powered machines, hydrogen trucks and energy storage.
Beyond growing its own basket, however, Europe must also make sure to spread its eggs to other more mineral-rich baskets. To this purpose, the EU is now tabling strategic partnerships with Latin America and Australia to diversify its supply chain.
Demand reduction is the safest basket
The surest way to reduce dependencies and supply chain risks, beyond diversification, is to reduce the very need for lithium, cobalt and nickel, for which innovation and recycling are paramount.
Several new battery technologies are currently being developed and some are ready to hit the market. Tesla, for instance, is working on an EV battery without the need for cobalt. This would drastically reduce supply chain risks, considering that 2/3rd of cobalt global supplies come from the Democratic Republic of Congo, whereas its refining and processing are almost entirely controlled by China.
Another example is provided by Form Energy which is coming up with an iron-based multi-day duration battery. As a cheaper version than lithium-ion batteries and with a longer duration, this technology yields promising results when it comes to reducing battery dependence on lithium.
At the same time, recycling will take on a key role in the industry going forward. “We only recycle about 5% of the batteries today” – says Chapman. Efforts to boost battery recycling have become dear to the EU, as the European Parliament’s environment committee recently asked to raise recycling targets from 15% to 25% of the bloc’s annual consumption by 2030 for several critical raw materials.
The untapped potential of recycling is further confirmed by the Energy Transition Commission which states that with extensive recycling and using less lithium in future batteries, the demand-supply gap could narrow from 30% to just 10%.
While the electricity supply chain is exposed to several vulnerabilities today, new solutions keep rising to strengthen the resilience of the industry. Scaling these solutions is what ultimately will enable or hamper the industry’s ability to drive the decarbonisation of the European economy. Let’s make sure we are fully equipped for the task.