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Tell It Like It Is, Part 2 - Unseen Costs of the Energy Transition: Minerals and Metals

On March 24, 2022, in the wake of the still-unfolding crisis in Ukraine, “energy and climate ministers” from 40 countries convened in Paris for an International Energy Agency summit to send a “strong message of unity” regarding energy security and to issue a consensus on accelerating “clean energy transitions worldwide.” But there are already strong signals that accelerating the construction of solar and wind power systems, battery storage and electric vehicles (EVs) won’t be easy and won’t be cheap. One of the greatest challenges ahead is this: The minerals and metals that will be needed to build it all may not be available in the massive, almost unthinkable volumes that will be required. And the materials that will be available may cost a lot more — maybe even enough to force a scale-back of energy transition goals. There was already evidence of impending shortages and higher prices well before Ukraine was invaded by Russia. And the price inflation has worsened considerably since then, in part because Russia is a major supplier of many key commodities. In today’s RBN blog, we discuss the major cost challenges of pursuing the energy transition.

As we said in Part 1, shifting to lower-carbon sources of energy and modes of transportation will require a lot of stuff to be mined, refined, fabricated and constructed to replace the hydrocarbon-based energy networks that run the world today. We’re talking of wind turbines, solar arrays, energy storage facilities, EVs, and all of the other infrastructure and components that will need to be produced. Not only will all this stuff require staggering volumes of concrete and steel, it also will demand huge quantities of metals and minerals such as lithium, copper, nickel, chromium, neodymium, etc. It’s a fact that a decarbonized energy network is far more material intensive — that is, it takes much more investment in minerals, metals and construction materials to produce the same energy as from hydrocarbons.

It would be reasonable to wonder whether the events of recent months — especially Russia’s war on Ukraine, the resulting sanctions against Russia, and Europe’s struggle to regain its energy footing — will slow rather than accelerate the pace of energy transition investments. After all, the Biden administration, no friend to hydrocarbons in its first 14 months in office, and despite calling for a “double-down” on clean energy, promised Europe that the U.S. will help it keep the lights on by supplying more LNG (see Baby, I Got It). Also, parts of Asia have already turned to more coal (at least in the near-term) as Europe’s appetite for LNG drives gas prices higher making Asia’s gas-fired power too expensive. And while Tesla’s Elon Musk and JPMorgan Chase’s Jamie Dimon (among others) have recently called for a ramp-up in U.S. oil and gas production to improve global energy security, they remain firmly in the camp supporting energy transition goals. Add to this the recent report that Koch Industries, a well-known defender of hydrocarbons over the years, has invested more than $750 million in electric-battery companies and related ventures.

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