Friday Facts: Efficient and Domestic Is the Name of the Game.

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Key takeaways:

The energy transition is a metals transition. Achieving net zero on any meaningful timeline requires solving for the mounting demand for critical minerals like lithium, cobalt, copper, nickel, graphite, REEs, aluminum, zinc, and PGEs that are integral to producing clean technologies like solar PVs, wind turbines, EVs, batteries, power lines, hydro, geothermal, nuclear, and hydrogen.

Mining mimics climate tech’s valleys of death. Scaling a successful mining project looks like the path to scaling a climate tech startup – but with even deeper Valleys of Death. Each step along the mining value chain requires 5+ years, millions of upfront investment, permitting and regulation challenges, and low probabilities of discovery.

Efficient and domestic will be the name of the game. The mines of the future must look vastly different from the mines of today. More ore deposits will need to be discovered, at a much higher success rate and with a lower cost profile. In order for the US to regain its grip on a domestic supply chain of critical minerals and reduce reliance on China, financing for exploration and project development must exponentially increase in tandem.

Don’t take digital optimization for granite. Mines today are less productive than they were a decade ago. Digital services and solutions that exist today (AI/ML, automation, robotics, IoT, sensors, drones, etc.) have the potential to reduce 1/3rd of mining emissions by 2030. More efficient and productive mines will also help reduce the massive 72 Gt of mineral waste the industry produces every year.

All stakeholders matter in thistransition. Almost all the copper and nickel, and most of the lithium and cobalt resources in the US are located within 35 miles of Native American reservations. In our relentless pursuit of critical minerals for climate tech, we need to remember to ensure this transition is sustainable and equitable.

Mining is ready for its breakthrough moment. If critical minerals are the unlock to the energy transition, innovation in mining is the key. In order to ensure a sustainable and scalable mining value chain, investment and innovation must accelerate.

Mining through the Valleys of Death
Climate Tech Newsletter, October 14, 2022

If you’re bullish on the energy transition, you’re bullish on mining. With every new battery pack and wind plant, it’s becoming more apparent that the energy transition is a metals transition.

Over a lifetime, an American born today will consume 2.96 million lbs. of minerals, metals, and fuels – a shocking mineral-intensity only exacerbated by the clean energy transition. Electric cars need 6x the mineral inputs of conventional cars. An offshore wind plant requires 13x more mineral resources than a similarly sized gas-fired plant. Critical minerals (lithium, cobalt, copper, nickel, graphite, REEs, aluminum, zinc, PGEs, etc.) are building blocks of most clean tech darlings that dominate the roadmap to net zero: solar PVs, wind turbines, EVs, batteries, power lines – even hydro, geothermal, nuclear, and hydrogen have a hefty appetite for critical minerals.

As consumer and industrial use cases for minerals become more technologically advanced (think: improved computer chips, more efficient solar panels, longer range EV batteries), mining and processing methods must keep pace with the increasing sophistication.

Solving for net zero means solving for minerals demand. Annual copper demand is set to balloon 53% by 2040 to 40 million metric tons (Mt) – a 14 Mt supply shortfall. Lithium supply will need to increase 5.9x to meet the 4 Mt demand by 2035. Other metals like cobalt, nickel, and graphite will likely experience similar growth profiles. Close to 300 new lithium, cobalt, nickel, and graphite mines would need to be up and running by 2035 to bridge the supply-demand gap.

To make matters more complicated, the availability and accessibility of these minerals are a function of geological accident. Mineral deposits are unevenly scattered globally with political instabilities and unforeseeable events like the pandemic already straining fragile global supply chains. Today the US imports >50% of its critical minerals and is 100% import-reliant on 13 of the 35 critical minerals that the Department of Interior has classified – with a near complete dependence on China for rare earth elements (REEs). A group of more than a dozen REEs make up high end magnets used in EVs, advanced weaponry, and electronics. Countries like the US and EU that net import critical minerals will be hard-pressed to secure strategic metals and minerals resources to build their planned climate technologies.

The Inflation Reduction Act (IRA) explicitly acknowledges this geopolitical complexity. IRA now requires at least 40% of the value of an EV battery’s applicable critical minerals to be extracted, recycled, or processed in the US or a country that’s party to a US free trade agreement. The minimum value requirement increases 10% each year (e.g., 80% in 2027 and beyond). EV batteries containing “any” critical mineral sourced from Russia and China entirely forgo the $3,750 tax credit. Cue US automakers scrambling to secure limited qualified supplies.

Rapidly increasing minerals supply will require pulling three levers at once:

  1. Scale – discover, plan, and build 300+ new mines as fast (and as sustainably) as possible. (Easier said than done. Implied in “building new mines” are manifold challenges from discovering the resource, project development, permitting, funding, and then construction.)
  2. Efficiency – increase the productivity of existing mines, for example with digital solutions, reusing and recycling mining waste.
  3. Innovation – leverage new technologies across the value chain to unlock net new sources and approaches. Mining needs to find its own “fracking” just as oil & gas did in the 2000s.