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Despite what we often hear, the energy transition is not as simple as building solar panels and wind turbines everywhere. It requires an overhaul of some of the key systems underpinning our economy, minerals being one of them.
In a new report, the International Energy Agency (IEA) takes stock of which and how much mineral resources we'll need as we decarbonise the world's energy architecture. Today I speak with Jagabanta Ningthoujam, manager with RMI-India, who specialises on electricity, batteries and hydrogen. Formerly associated with the World Bank’s Climate Smart Mining Facility, he discusses the global race for mineral access through an Indian perspective.
Lights On: Why does the energy transition need minerals? What minerals in particular?
Jagabanta Ningthoujam: Building anything requires materials. Energy infrastructure is not unique – this was true for fossil fuel technologies and it is true for clean technologies. What is different though are the kind of metals and minerals required and the impact this transition will have.
Traditional fossil fuel technologies for electricity generation require mostly metals like iron and steel, copper, aluminum, and chromium. While clean energy technologies like solar, wind and energy storage need these metals too, they also require many more technology specific metals and minerals. Depending on the ‘sub-technology’, solar PV needs metals and minerals like cadmium, indium, selenium, silicon, tellurium, and tin. Making wind turbines requires dysprosium and neodymium for the turbine magnets. These are some of what we call “rare-earth metals” – not because they are “rare” on earth but because it is very unusual to find them in pure form. Rare-earth metals are also used in magnets for electric vehicle motors.
The second aspect is to do with the volume of materials required for clean energy transition. To generate the same GWh of electricity, solar or wind need a much higher installed capacity than comparable coal or gas plants, plainly because of the low utilization rate of variable renewable energy. Solar and wind can only generate during certain times of the day – wind doesn’t blow all the time; the sun doesn’t shine all the time. Coal and gas could be burnt all day. Thus, the material intensity of generating the same amount of energy is higher.
If you combine both aspects to the scale required for a successful clean energy transition, in line with the 1.5 degree Celsius target, you are looking at a tremendous demand for all sorts of metals and minerals, not just rare-earths.
India is undergoing a fast paced shift towards renewables, and other countries such as Pakistan and Bangladesh are also looking to decarbonise their energy systems. Does South Asia have enough minerals? And if not, how can they procure them?
When it comes to base metals like iron and steel, lead, aluminum (bauxite), cadmium, chromium, manganese and zinc, India does have ample resources, capability and history of mining. But India’s rare-earth deposits remain unexploited, we depend mostly on China for imports. Few would know that India actually has the fifth largest deposit of rare-earth in the world, higher than even Australia, the traditional mining nation. India and South Asia, however, lack other critical metals like nickel, cobalt, and lithium (crucial for batteries).
Where a country doesn’t have the resources needed for the transition, it becomes inevitably dependent on international trade.
But there are ways to reduce risks. The obvious strategy, and a lesson from the oil and gas industry, is to do with asset and equity ownership in mines in producing countries. Another way is to become part of the metal refining and processing value chain. Many resource rich countries may not actually have the right industrial base to process the ores. Lastly, India must play its part in ensuring a transparent, rule-based global environment for international trade.
India doesn't currently have the capacity to procure all the minerals it needs to meet its renewable goals. It currently imports most from China because its manufacturing sector is not developed. But what happens when domestic manufacturing starts to ramp up?
If you are an importing nation, of course there are inevitable energy security and supply chain risks. The main difference between fossil fuel and clean energy is that the risk is not to the operation and operating cost of the asset (for example oil and gas which are fuel), but to the manufacturing, installation, ownership and capital cost of the asset and infrastructure (such as EVs, batteries and plant equipment). This means that the price impact of renewables on the value chain and the economy is less volatile than that of oil. But it is more concentrated, which means that the impact on individual industry is higher.
Among other mitigation strategies, efficiency and circular economy are key. If we reduce car ownership and move to public transportation, even with the EV transition, the impact on upstream metal will also be reduced. Similarly, recycling also ensures that many of these metals are recovered and reused, in essence creating an alternate domestic source of supply for some of these metals.
Let's talk about the race to secure supply chains across the world. Which countries have the upper hand here? And what are the challenges involved in this new order?
The usual suspects, namely China, the US and the EU, with strategic and industrial interest in the energy transition story, are all involved in the race to secure metals and minerals. This is not a surprise. And to everyone’s common knowledge and as highlighted in the IEA report too, China has the upper hand.
The challenge, of course, is to ensure that a monopolistic control over the metals and its value chain doesn’t happen. This is particularly important for metals that are highly concentrated and in politically challenging geographies. Cobalt, for example, is highly concentrated in the Democratic Republic of Congo, a country not known for good governance. Countries must try to avoid the mistakes of the oil age.
Does the future of the energy transition lie squarely in more mining? Or will new technology use alternative materials?
Mining is inevitable. Alternate material only means alternate, doesn’t mean less. For example, one could transition from say NMC batteries, which are cobalt intensive, to non-cobalt chemistries like LTO, or LFP. But that only drives up the demand for other metals and minerals, in place of cobalt. It really doesn’t mean any less need for mining, just less need for cobalt mining.
The real focus must be placed on alternatives to increasing consumptions – efficiency, optimization, mode-shifts – which can help tamper the growth in demand, and to a circular economy approach that ensures recyclability of the materials. It’s also critical that where mining is happening it is “climate-smart”. I am borrowing this phrase from my previous short stint with the World Bank’s ‘Climate-Smart Mining’ initiative. This includes, out of many things, making mining less carbon intensive and efficient, ensuring adequate environmental governance and regulatory framework, low-carbon supply chain management, de-risking investment in low carbon mining and more.
And what about recycling? Can some of these materials be recovered and is India equipped to do so?
Yes, recycling will need to form a big part of metal recovery, especially for countries like India. But it doesn’t close the loop completely. Recycling can only recover a limited portion of a metal and mineral and that too at a cost. More metals and minerals will still be required.
India is very cognizant of the need for recycling. Government interest and institutional knowledge is clearly there and there are private entities embarking on becoming part of the recycling industry. Given the lack of certain metals, India also sees this more from a supply security play. There is this concept of “urban-mining” as opposed to “recycling” whereby recycling is seen as an alternate resource.
What are the opportunities for India in this changing scenario? Or would you say the country is in a weak spot and is most likely bound to stay at the bottom of this race?
Of course, if you don’t have resources within your borders you will have to depend on international trade; that’s inevitable. That always carries energy security and price risks. But that doesn’t mean that buyers do not dictate terms. Given the scale of its energy and transportation sector, India will always remain a major buyer of resources whether it is manufacturing the products or whether it’s just using them. Indian government and Indian firms need to leverage that scale.
Second, lessons from our own journey with oil refining - we can still be part of a global value chain even where we don’t have the resource. Third, we should not forget that we have resources and strategic ones too, like rare earths which can definitely help us become part of the value chain and strike better negotiating terms in the global trade. The challenge of course is to make sure we enable our mining sector to get those resources off the ground economically.
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