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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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The Energy Revolution Needs A $1 Trillion Investment In Key Metals

The energy transition will not be possible without the key metals used for storing electricity and for electrification of transport. Today’s technologies for low-carbon energy need lithium, nickel, cobalt, copper, and aluminum. The more renewable power sources and electric vehicles (EVs) rise, the more demand they will generate for those critical energy-transition metals.  Despite poor short-term fundamentals for most of those key minerals, the global push toward raising the share of renewable energy and EVs—including by ‘build back greener’ commitments in many economies, especially in Europe—will drive long-term demand growth for the key battery metals over the next decades.  

The growing demand for clean energy and transport electrification will need as much as $1 trillion in investment in lithium, nickel, cobalt, copper, and aluminum by 2035, according to Wood Mackenzie. In other words, the world will need nearly twice as much investment in critical energy-transition minerals over the next 15 years as it has invested over the past 15 years. 

If battery makers, clean energy developers, and EV manufacturers cannot source affordable and reliable volumes of the metals for boosting output, the energy transition could be slowed. 

Metal miners face short-term and long-term challenges to supplying the world with the minerals needed to accelerate the energy transition. 

Related: This $40 Billion Pipeline Project Risks Becoming A Stranded Asset

A short-term focus on profits, as well as current prices of some metals well below incentive levels to think of long-term investment in supply, constrain miners’ ability to decide to invest in production that could start in a decade.  

“Long-dated returns from investing in mining and processing sit uneasily against the need for certainty of regular dividend payments or the near-term gains that can be made from other popular asset classes. This severely hampers the ability of boards to undertake the necessary long-term decisions needed to develop the supply that high-growth energy transition-related commodities demand,” Julian Kettle, Wood Mackenzie Vice Chairman of Metals and Mining, said. 

Another major challenge for miners will be the increased environmental awareness and the calls for sustainably and, in some cases, ethically produced critical minerals. 

“The green agenda will have a profound impact on the way these companies extract and refine metals, with lower carbon operations an increasing priority,” Kettle wrote earlier this month. 

The green agenda narrative has become prominent in recent months among some of the primary customers of critical minerals. Tesla’s CEO Elon Musk, for example, asked miners on the Q2 earnings call in July to mine more nickel, preferably in an environmentally friendly way. 

Related: Why Natural Gas Is The Most Important Fuel Of the Next Decade

“Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way. So hopefully, this message goes out to all mining companies,” Musk said in July.

In September, Musk said on Tesla’s Battery Day that the EV maker would be moving into lithium extraction with rights over 10,000 acres of a lithium clay deposit in Nevada. Despite Musk’s claim that “there’s so much damn lithium on Earth it’s crazy,” analysts do not expect Tesla to be able to source all the lithium it would need for accelerating production. 

Growing volumes of lithium and other battery metals will be needed not only for Tesla’s expansion but also for all the 500 EV models that will be available globally by 2022, as BNEF has estimated, and all other EVs that will roll off the assembly lines of the world’s largest automakers and all EV manufacturers over the next decades. 

Energy storage expansion, expected to surge this decade, will also need a lot more of the critical battery minerals. 

Global production of minerals such as lithium, graphite, and cobalt could jump by 500 percent by 2050 to meet the growing demand for low-carbon technologies, the World Bank said in a report earlier this year. If the world wants to achieve a future of below 2-degrees-Celsius warming, it will need 3 billion tons of metals and minerals to deploy wind, solar and geothermal power, as well as energy storage, the bank said.  

Therefore, investment in critical metals is critical to the energy transition because, as WoodMac’s Kettle said, “Put simply, the energy transition starts and ends with metals.” 

By Tsvetana Paraskova for Oilprice.com

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