Tell It Like It Is, Part 3 - Sourcing Energy-Transition Metals and Minerals in a Not-so-friendly World

Since the first OPEC oil embargo nearly a half-century ago — and more recently with Russia’s invasion of Ukraine — energy producers and consumers alike have learned important lessons about the significance of energy commodity sourcing. It all comes down to this, really: (1) know what you’ll need going forward; (2) diversify your sources of supply, focusing on suppliers who are reliable and friendly; and (3) don’t screw up by becoming overly dependent on suppliers who could prove to be sketchy. For decades, the industry’s focus was on oil and gas — which is still critical, as Europe knows all too well. But as policymakers attempt to transition to renewables and electrification, a whole new set of commodity-supply concerns is coming to the fore. In today’s RBN blog, we discuss the challenges associated with securing the key materials required to build the machinery of 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 about wind turbines, solar arrays, energy storage facilities, electric vehicles (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 unprecedented quantities of metals and minerals such as copper, nickel, aluminum, lithium, chromium, and neodymium. It’s a fact that a decarbonized energy network is far more material intensive — that is, it takes a far greater investment in minerals, metals, and construction materials to produce the same energy as from hydrocarbons.

In Part 2, we looked at how the unprecedented rise in demand for key metals and minerals is already inflating commodity prices for everything, and also consequently leading to more expensive wind turbines, solar modules and batteries. How high and for how long those prices go up will depend largely on whether the policies promoting a transition to lower-carbon energy sources continue and, if so, whether the world’s miners and mineral refiners can expand production fast enough.

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