Tell It Like It Is, Part 4 - What It Will Take to Make the Energy Transition Happen

When you boil it down, there are only two energy-related responses to Russia’s war on Ukraine. First, there’s a big push to find sources of crude oil, refined products, natural gas and NGLs to replace Russian supplies as quickly as possible. Second, governments on both sides of the Atlantic are scrambling to reaffirm and even expand commitments to lower-carbon energy sources to delink from Russian hydrocarbons as well as meet energy transition goals. Both raise the same question: How fast can the world bring online any new sources of energy on the scale needed? Policymakers would like to believe the answer can be found through the stroke of a legislative pen invoking aspirational language. No one doubts the power of that pen to create incentives or impediments. But the answer to that question is dictated by the realities of the physical world. In today’s RBN blog, we discuss the options for accelerating the availability of the minerals, metals and other materials needed to build the required machinery for the energy transition.

As we said in Part 1, all the favored energy-transition technologies — solar, wind and batteries — require a lot more stuff to be mined, refined, fabricated and constructed to replace the same amount of energy provided by the hydrocarbon-based energy infrastructures that power the world today. In many cases, we’re talking about an unprecedented 3x to 70x increase over today’s use of not only a wide array of metals such as copper, nickel, aluminum, lithium and neodymium, but also a 10x jump in the use of basic materials such as steel, glass and concrete.

In Part 2, we looked at how the unprecedented rise in demand for key metals and minerals is inflating input prices and reversing the decade-long trend of falling costs for wind turbines, solar modules, and batteries. Mineral inflation also collaterally impacts the costs for everything else made from those same elements. How high and for how long prices go up will depend largely on whether transition policies continue to create ever-rising mineral demands because, as we explored in Part 3, the world’s miners and mineral refiners do not have sufficient capacity in place or planned, either for basic metals like copper and nickel or for more exotic elements such as lithium, cobalt and rare earths. Furthermore, the suite of energy transition minerals comes from a far smaller number of nations than now supply world oil markets, and many major producers are in places either unstable or unfriendly to the U.S. [In fact, just a few days ago the International Energy Agency (IEA) released a report acknowledging the risk posed by China’s dominance in solar supply chains.]

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