Clean-tech fallacies (Part I): 'Mineral intestity'
With clean technology 'mineral intensity' being so high how can the energy transition still make sense?
The exponential increase in demand for batteries, electric cars, solar panels and wind turbines is resulting in exponential growth in demand for the materials they are built with, particularly:
lithium
nickel
cobalt
graphite
manganese
According to the World Bank, the clean-energy transition will create a cumulative demand for 1.8 to 3.5 billion metric tons of minerals through to 2050. Supplies of these minerals will therefore need scaled up rapidly and responsibly to meet this need. Is this possible? And is it sustainable?
Source: Data from the World Bank
These look like big numbers – and in the context of current production some of them are. What is perhaps most shocking however, is that these new clean technologies are actually more mineral-intensive than the fossil-fuel based technologies they aim to replace. Yes, building a wind turbine requires more minerals per MWh of capacity than building a gas turbine and it takes more minerals per MWh of capacity to build a solar panel than a coal-fired power station.
Mineral intensity ≠ resource intensity
Why did I keep italicising the word ‘mineral’ above? Because in this context, this word is a red herring. Clean technology based energy systems are much cleaner and more sustainable than fossil fuel based energy systems, because despite being less mineral intensive, fossil fuel based systems are vastly more resource-intensive .
When discussing the overall resource-intensity of clean technology versus fossil-fuel technology, we need to remember this basic point: fossil fuels are not minerals. They are the organic remains of dead plants and animals. This is not a minor nuance when writing about the ‘high mineral intensity of clean-tech’. Because when factoring in the use of organic resources, conventional technologies are vastly more resource-intensive than clean technologies.
The natural resources needed to build the clean technology transition are dwarfed by the resources that are and would be consumed by fossil-fuel based economy
Source: Data from IEA and World Bank
Approximately 8 billion metric tons of oil and gas and 7.5 billion metric tons of coal have been produced and consumed each of the last few years. Assuming there is no energy transition and demand for fossil fuel grows by 1% per year, the world will burn through more than 500 billion metric tons of organic natural resources by 2050.
Put another way, if the World Bank’s forecasts are roughly correct, then the cumulative cleantech resources required would amount to just 0.35% of the fossil-fuel resources that we’ll need if we don’t make that transition. By weight, in the next 6 to 12 weeks alone, the world will burn through fossil fuels equivalent to the total natural resources that will be required by clean technology over the next 28 years!
Unlike organic resources, minerals can be recycled
Fossil fuels, once burned, are gone forever; the minerals in batteries, turbines and solar panels can usually be reclaimed and reused. Redwood Materials claims they can recycle “more than 95% of materials like nickel, cobalt, copper, aluminum, lithium and graphite in a lithium-ion battery”. PV solar panels and turbine blades can also be recycled, with ambitious targets having already been set by many countries. Wind turbine towers (essentially tubular steel towers) can also be ‘repowered’ with new blades and gear boxes.
Clean technologies are still early in their adoption cycle, most products (Electric vehicles, solar panels and blades for wind turbines) will remain in use for years. It won’t be until the mid-2030s that the industry reaches the point where high volumes of used electric vehicle batteries will begin feeding back into the supply chain. Demand for freshly mined minerals is therefore expected to be high over the next 10 to 15 years, but that will fall over time – and many companies are already scaling up recycling operations in preparation.
And to prove that this is not just wishful thinking, the US EPA reported in 2014 that lead acid batteries have a recycling rate of nearly 99%, making them the most recycled product in the US. This is a result of years of standardisation, experience and good regulation – all of which can be applied to the recycling Li-ion batteries. In short, the World Bank’s estimate of mineral demand might be far too high if an efficient circular economy of these commodities can be established.
A herring, red in colour
The ‘Mineral intensity’ fallacy
Whilst clean technology may use more minerals per MWh of capacity, it is clear that ‘mineral intensity’ is a red herring in the energy transition debate. Wind power, solar power, electric motors and batteries are fundamentally different types of technologies to fossil fuel power plants that burn through vast amounts of organic natural resources.
Clean technologies will need about 0.35% of the total natural resources of fossil fuels through 2050. Unlike fossil fuels, clean technology minerals are highly recyclable and resuable with recycling rates of over 90% generally achievable.
Focusing on the ‘mineral intensity’ of clean technology is myopic - perhaps deliberately so. In the short term, the world needs to extract and process more clean technology minerals, because these clean technologies are vastly less resource-intensive than the fossil-fuel based system we rely on today.
In Part II, I will be addressing the dreaded ‘energy density’ problem…
My views are my own and do not represent that of any company or other individual. This is not investment advice and should anyone to choose to use it as such, their capital will be at risk. The author may own shares in companies mentioned in the blog (but I don’t sell short). Share prices can fall as well as rise and readers should seek financial advice before investing in any investment themes or stocks mentioned in this blog. In short, I try my best to be right, but I’m often wrong.