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Securing raw material supply is critical to the green transition 

Securing raw material supply is critical to the green transition 
Aug 7, 2023

Many European governments are prioritizing the green transition as climate impacts increase and intensify across the continent. But, for this to happen in a sustainable fashion, governments and industry need to also consider the raw materials that will be required to create these new technologies. The green transition will be material intensive—in some ways even more so than continuing to depend on fossil fuels for our energy. However, material intensity should not deter pursuit of the green transition.

The implications of this challenge are clear. Decisions need to be made now to identify where these materials will come from and to help ensure that the increased extraction required is done in an environmentally, socially, and ethically responsible way. Let’s look at the quantities of raw materials that are required for the green transition, and the challenges that we face in terms of their extraction and supply.

Which raw materials are required for the technologies needed for the green transition?

Data from the International Energy Agency (IEA) shows that, like-for-like, electricity produced from renewable sources is more material intensive than fossil fuel generation. This is broken down in the graph below, which shows how much material is required in kilograms per MW of electrical generation from each energy source.

There are two main areas requiring raw materials that governments and industry need to source:

  1. The materials required to make the actual technologies. For example, silicon is an essential element of building solar panel technology. For wind, manufacturers require considerable amounts of zinc to protect the turbine blades from corrosion.
  2. The materials required for supporting and integrating the technology into the grid. Here, sourcing vast quantities of copper is the main challenge. Any electricity generation requires copper to make the connections between energy sources and the grid infrastructure. Renewables present a particular challenge in terms of grid connections. They require more materials because the energy sources are distributed—meaning many more small points of connection for them to operate. Contrast this with a gas power plant where one grid connection is sufficient. In some cases, renewable generation may also be more remote from the consumers themselves—for example, if the energy source is offshore wind.

These raw materials have applications far beyond green technologies alone. Materials such as lithium, cobalt, and rare earth elements are also an important requirement for the manufacture of other technologies, such as mobile phones. However, the number of materials needed for these technologies is considerably smaller than that required for green technologies.

Meeting existing demand already requires double the current amount of these raw materials. In order to meet net zero by 2050, governments and industry will need six times more material. The graph below shows the increased demand for raw materials required to meet the clean energy goals of different climate mitigation strategies, compared to 2020.

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What are the implications of not securing materials for the green transition?

Up to now, many European policymakers have focused on the clear benefits of reducing our reliance on fossil fuels and how this will mitigate climate change. However, if the raw materials required for the green transition aren’t sourced responsibly, there could be many negative impacts, from environmental pollution and biodiversity losses, to carbon emissions from plant and soil disruption. There are also significant ethical and human rights concerns around extracting materials such as cobalt through mining. These include worries about a lack of regulations, corruption, and human rights violations. Extraction can be done sustainably and ethically—it just requires planning and discussion.

Policymakers have realized the limitations in supplies of certain materials. Some, such as zinc and silicon, are less of an immediate concern. But, for materials such as lithium, cobalt, and rare earth elements, there is a significant challenge around supply. Supplies of these elements present a particular challenge, both in terms of their extraction and their refinement, with China currently having a near total monopoly on rare earth refinement. Considerable investment will be required to ensure that these materials are fairly available to all.

There is, of course, also a serious geopolitical angle to consider. The 20th century world was driven by the race to find and control oil supplies. But the geopolitics of the future will be centered on securing supplies of critical raw materials such as lithium, cobalt, and rare earth elements. Some countries, most notably China, have a head start in this area. Their early investments and control over the supply of these materials are raising concerns in the West. As Russia’s invasion of Ukraine brought the need to secure fresh supply chains for oil and gas, similarly, all governments are now focusing on their supply chains for all critical energy materials. Today, energy self-sufficiency and source diversification are hot topics, as they seek to safeguard against future disruption.

Currently, regions such as Europe are attempting to find their own “unique selling point” in order to secure sufficient supplies—in Europe’s case, by becoming a leading heat pump manufacturer. The EU is also gaining ground on China in the EV market. Solar PV is dominated by China and most battery production is led by East Asia, with some in the U.S. and to a lesser extent, the EU. Despite efforts to develop manufacturing capabilities, challenges remain with regards to upstream activities, such as wind power. While much of the manufacturing for offshore wind is in Europe, the most crucial parts rely on magnets made with rare earth elements from China.

What is currently being done to secure these critical raw materials?

Governments are slowly realizing the challenge that securing the raw materials required for a green transition represents. Broadly speaking, policymakers are looking at three avenues:

  1. Improving mining processes to extract more materials in an environmentally friendly way. The idea is to secure and diversify supply chains of raw materials in certain areas. There is also a focus on developing more mining in Europe, rather than looking to other continents for extraction.
  2. Promoting circular economy principles. These emphasize the need for the recovery and reuse of materials, as well as extending product lifetimes. There is uncertainty around what to do with old offshore wind farm blades and how to process them sustainably. The EU is currently looking at putting mechanisms in place to recycle and recuperate valuable materials such as the rare earth magnets from existing products and technologies.
  3. Using fewer critical materials. Since these raw materials are expensive, one option that markets are currently exploring is to simply use fewer of them. One example is the battery market developing new technologies that do not use cobalt. Indeed, many of the EV batteries coming out today are based on lithium iron phosphate chemistry, which uses no cobalt.

Circular economy efforts are currently focused on recuperating materials from products, like electronics, that contain valuable materials like gold and silver. Developing the recycling industry will allow for economies of scale to make the processes more economical.

Securing raw materials supply is essential to achieving net zero

Different governments are at varying stages of meeting the challenge of securing supply chains. China has been following policies of securing supply for many years, including contracts with African and Latin American countries. Europe is now following suit.

With governments and manufacturers now realizing the shortfall, considerable investment and targeted policy making will be required to secure new sources of supply. The graph below compares the growth in demand for selected minerals between a sustainable development scenario and currently stated policy.

These graphs show the investment required by region if governments and industry are to meet the net zero initiative.

Meeting this challenge in a planned and proactive way will be critical to the success of the green transition, requiring input and insights of experts. The IEA makes six recommendations for how best to tackle this challenge. In brief, these are:

  1. Ensure adequate investment in diversified sources of new supply.
  2. Promote technological 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.

To accomplish this will require all stakeholders to research and invest in addressing this challenge as soon as possible. It will also demand partnership, collaboration, and creativity.