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.
Posts from Mark Mills
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.
Among the many challenges facing the energy transition, one is particularly ominous: a lot of stuff will need to be produced, fabricated, and constructed to replace the hydrocarbon-based energy network that runs the world today. We’re talking wind turbines, solar arrays, energy storage batteries, electric vehicles, and all of the other infrastructure and components that will be needed to make the energy transition happen. Not only will all this stuff require a lot of concrete and steel, it also will demand huge quantities of specialty metals and minerals such as lithium, copper, chromium, neodymium, etc. It’s a fact that a decarbonized energy network is much more material intensive — that is, it takes a lot more total investment in minerals, metals, and construction materials to produce the same energy as comes from hydrocarbons. Further complicating things, the increased material needs will be front-end loaded. In today’s RBN blog, we discuss the materials-related challenges facing the energy transition.