Have we got the minerals for a green future?
Ultra-high energy bills will put immense pressure on households this winter, while supply shortages raise the risk of blackouts across Europe amid a painful squeeze on natural gas supplies orchestrated by the Kremlin.
When looking for longer-term solutions to the ensuing crisis, governments have sold households the comforting tale of a greener future, characterised by a sharp ramp up in renewables which will reduce the West’s reliance on hostile overseas suppliers and drive down bills with low carbon domestic energy.
Downing Street has perhaps been the most ambitious in this respect, targeting a vast increase in offshore wind and solar power within the next decade and a half, alongside a “big new bet” on nuclear power that includes eight new reactors over the next eight years.
However, these long-term plans could be jeopardised by global surges in minerals and metals amid supply chain disruption, high demand and inflationary pressure.
This includes the key materials in the construction of batteries for energy storage, solar panels, and electric vehicles alongside the building of wind turbines.
The International Energy Agency warned earlier this year that hikes in the prices of copper, cobalt, lithium and nickel could reverse years of progress in reducing the price of clean energy technologies.
The situation is worsened by Russia’s role in the production of materials and minerals, with its key role in the lithium, aluminium and palladium markets.
This has put the West on alert, with the UK unveiling a critical minerals strategy -with the aim of creating supply chain alliances with friendly partners.
It has also waded into the supply scramble for critical minerals, with plans to build a new centre for analysis and research of key materials, announced last month.
Meanwhile, raw materials account for a growing share of the total cost of clean energy technologies.
For example, cathode materials – which are essential for lithium-ion batteries and include lithium, nickel, cobalt and manganese – made up less than five per cent of battery pack costs in the middle of the last decade when there were only a handful of battery gigafactories.
This share has risen to over 20 per cent today, with 300 gigafactories at different stages of planning and construction around the world.
James Ley, senior vice president at Rystad Energy told City A.M: “Energy metal prices have shot through the roof this year on the back of supply chain issues, under capacity in mining and high demand. Lithium’s feedstock alone has increased by 640 per cent since the same time last year. Recent inflationary pressure and the war in Ukraine has kept prices elevated and we do not anticipate a fall until late 2023.”
With such challenging headwinds on the horizon, governments will have to look at how to ensure the vital transition to renewables can be costed with the reality of such painful price rises.