The U.S. Department of Energy has made its second major lithium discovery this year, both of which promise to make the country self-sufficient in the critical battery metal for decades. The DoE has discovered a massive lithium deposit beneath California’s Salton Sea, holding an estimated 18 million tons of lithium.
According to the DoE, with expected technology advances, the Salton Sea region’s total resources could produce more than 3,400 kilotons of lithium, worth up to $540 billion and enough to support over 375 million batteries for electric vehicles (EV)—more than the total number of vehicles currently on U.S. roads.
“Lithium is vital to decarbonizing the economy and meeting President Biden’s goals of 50% electric vehicle adoption by 2030,” said Jeff Marootian, Principal Deputy Assistant Secretary for Energy Efficiency and Renewable Energy.
“This report confirms the once-in-a-generation opportunity to build a domestic lithium industry at home while also expanding clean, flexible electricity generation. Using American innovation, we can lead the clean energy future, create jobs and a strong domestic supply chain, and boost our national energy security, ‘’ the DoE declared.
The DoE has acknowledged that the United States currently has limited capabilities to extract, refine, and produce domestically sourced lithium. Indeed, the country typically imports nearly half of the lithium it consumes, almost all coming from Chile and Argentina.
Much of the lithium imported into the U.S. is used in the manufacture of industrial products; however, a growing proportion is now going into the making of EV batteries. And, this proportion could skyrocket in the coming years, with U.S. battery capacity forecast to hit 620 GWh, up from just 38 GWh of capacity in 2021.
The Salton Sea lithium deposit appears to be a real goldmine. After all, the DoE has revealed its Known Geothermal Resource Area (KGRA) has about 400 megawatts (MW) of geothermal electricity-generation capacity currently installed but has the potential for up to 2,950 MW. The DoE notes that the combined subsurface geology and geothermal activity in the Salton Sea’s KGRA result in high concentrations of lithium, among the highest concentrations of lithium contained in geothermal brines across the globe.
Bad News For Lithium Bulls
The U.S. could soon become self-sufficient in lithium, thanks to an upcoming technology: direct lithium extraction (DLE).. DLE technologies aim to extract ~90% of lithium in brine water compared to 50% extraction rates using conventional ponds. Their biggest advantage is that they are capable of harvesting the metal in a matter of days, way faster than upwards of one year required to extract lithium carbonate from conventional evaporation ponds and open-pit mines. Direct lithium extraction also comes with an ESG/sustainability bonus because not only are DLE mines portable, but they are also able to recycle their fresh water and limit the use of hydrochloric acid.
Advancements in direct lithium extraction might be great news for the EV sector, but are, unfortunately, certainly not the kind of news lithium bulls will rejoice over.
As Tesla Inc. (NASDAQ:TSLA) CEO Elon Musk has correctly noted, lithium is a fairly common and abundant element, but its supply is currently hampered by slow and inefficient mining techniques. In fact, mining limitations are largely to blame for the crazy lithium boom/bust cycle we have witnessed over the past couple of years when lithium supply at first failed to keep up with heightened demand before prices came crashing down amid a deluge of fresh supply coming online. Lithium carbonate prices jumped more than tenfold from December 2020 before peaking at an all-time high of nearly CNY 600,000 ($84,015) per tonne in November 2022. Prices have since tumbled to CNY 97,500 ($13,650) per tonne.
Fastmarkets has forecasted that commercial-scale DLE projects could start coming online as soon as 2025 and could supply 13% of global lithium demand by 2030.
Overall, The DLE industry could bring in more than $10 billion in annual revenue within the next decade. One of the lithium bears, Goldman Sachs, has forecast that lithium carbonate supply will grow at a brisk 33% annual clip, considerably faster than lithium demand which is expected to only grow at 25% p.a. If this prediction turns out to be accurate, we can expect lithium carbonate to remain depressed in the foreseeable future.
“Our analysis suggests that DLE will widen, rather than steepen, the lithium brine cost curve with an average project likely sitting in the second or third cost quartile, according to Morgan Stanley.
“With resulting additional lithium supply we also see risk that DLE implementation could extend the size and duration of lithium market surpluses/reduce deficits vs. our base case SD balance (without a pull forward of demand with new supply), where ~20-40% of LatAm brine projects implementing DLE (recovery from ~50% to ~80%) could add ~70-140ktpa LCE from 2028+, increasing GSe global raw supply by 8%.’
By Alex Kimani for Oilprice.com
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