7.1 The role of critical materials in the energy transition

7.1 THE ROLE OF CRITICAL MATERIALS IN THE ENERGY TRANSITION

The world is undergoing an unprecedented transformation to abate the detrimental impacts of climate change. The energy transition involves three pillars: energy efficiency, renewable energy generation and the mass electrification of end-use sectors. IRENA’s World Energy Transitions Outlook (WETO) outlines a pathway for the world to limit global temperature rise to 1.5°C and bring carbon dioxide (CO2) emissions to net zero by 2050.

IRENA’s 1.5°C Scenario proposes that renewables constitute 90% of the energy mix by 2050, a shift that would increase the installed capacity of renewables from 2 800 gigawatts (GW) in 2020 to 27 700 GW in 2050. Under this scenario, 80% of all road vehicles have to be electric by 2050. Such changes would result in a tripling of electricity demand in the next three decades, bringing about a plethora of challenges. Although the energy transition is necessary to reach global climate goals in a resilient and equitable manner, there is growing concern over the availability and accessibility of the minerals and metals required to do so (IRENA, 2021a).

Key technologies such as solar panels, wind turbines and batteries require critical materials such as nickel, copper, lithium, and rare earth elements (REEs). Concerns about future access to these materials, the difficulty of increasing supply rapidly enough to match demand, price increases and volatility, and geopolitical issues are mounting. These challenges should be analysed and taken into account in governments’ energy transition plans.

Plans for the energy transition must take critical materials into account so as to avoid unforeseen delays

Solutions to address each of these concerns exist and can be implemented through effective policy development and strategic planning. Recently, the prices of most critical materials rose, in most cases as a result of increased demand and limited supply. Ramping up supply to meet rapid demand increases is necessary. Addressing the risks surrounding supply now can reduce future supply risks (IRENA, 2019m).

As awareness of the issues surrounding critical materials rises, national agencies and the scientific community are increasingly allocating resources to R&D in this field. The European Commission (EC) launched its Action Plan on Critical Raw Materials in 2020. The plan considers current and future challenges to reduce the European Union’s dependency on other countries, diversify supply, and improve resource efficiency and circularity. The European Raw Materials Alliance brings together relevant stakeholders to increase EU resilience in REE and magnet value chains. It aims to expand to address other critical raw materials in the future. Other actions the European Union is contemplating include identifying mining and processing projects in the European Union that can be operational by 2025, involving Horizon Europe57 to support research and innovation for critical raw materials, and developing international partnerships to secure the supply of critical materials that are not found in the European Union (European Commission, 2020d). The European Commission’s Joint Research Centre is working towards obtaining a secure supply of critical materials through its Raw Materials Initiative and its European Innovation Partnership on Raw Materials. The European Commission launched the European Battery Alliance in 2017. Its industrial development project, EBA250, brings together more than 700 sectoral actors, with the objective of creating a strong pan-European battery industry. The European Commission’s Raw Materials Information System is a knowledge and information hub on critical materials for EC policies and services.

The US Department of Energy has two important research centres that address critical materials. The Critical Materials Institute, led by Ames Laboratory, seeks to accelerate innovative scientific and technological solutions for the secure supply of critical materials. The Argonne Laboratory designs tools for analysing material supply chains and develops economic and environmentally friendly battery recycling processes that can be widely adopted by the industrial sector (Argonne Laboratory, 2022; ReCell., 2022).

Many other countries operate their own agencies to assess the supply of critical materials. They include the Deutsche Rohstoffagentur, Geoscience Australia and the Geological Survey of Canada, among others. The reports of international organisations such as the World Bank and the International Energy Agency (IEA) have highlighted the implications of sustainable demand for technology on mining activities and the crucial role of critical materials in the energy transition. National agencies, international organisations, the scientific community and private companies are making headway in finding solutions to the critical material supply, but an international governance body for critical materials is needed.

This chapter shows how critical materials will be at the core of the energy transition. It highlights critical issues; shows how technological developments and innovation can reduce risks; and describes the main supply and demand trends, technology developments, supply challenges and strategies to mitigate the risks associated with critical materials in the energy transition.

57 Horizon Europe is the EU’s key funding programme for research and innovation. It addresses climate change, helps to achieve the UN’s Sustainable Development Goals and boosts the EU’s competitiveness and growth.