The Road to Electrification

The world is moving towards a cleaner future, one where we will likely see electric vehicles (EVs) dominating our highways and city roads.

In turn, increasing EV adoption will inevitably increase the demand for battery metals, the critical ingredients of lithium-ion batteries. With governments tightening emission standards and some planning to ban gas-powered vehicles completely, securing the supply of these minerals is becoming increasingly important.

Europe—the largest market for EVs—is well on the way to electrification, but it faces one big speedbump: lithium supply. The above infographic from Rock Tech Lithium outlines the lithium supply chain and Europe’s lithium challenge on the road to large-scale EV adoption.

The Lithium Supply Chain

Before lithium makes it into EVs, miners extract it from the ground and downstream companies convert it from its raw form into lithium chemicals for batteries.

According to the USGS, there are 86 million tonnes of lithium resources worldwide, but the majority of production comes from a few regions.

Australia, Chile, and China collectively accounted for 88% of lithium supply in 2020. Australia, the largest producer, produces the majority of its lithium from hard-rock spodumene mines. In the Western Hemisphere, Chile is known for lithium evaporation ponds in the Salar de Atacama, its largest salt flat.

Refining lithium into battery-grade chemicals is just as important as resources in the ground. China, the third-largest lithium producer, also dominates the production of downstream chemicals—lithium carbonates and hydroxides—with over 80% of global refining capacity.

Due to concentrated mine production and China’s dominance in the supply chain, the rest of the world is dependent on imports from a few nations. Import reliance and the resulting lack of supply chain security are a cause for concern, especially as lithium demand rises.

Europe’s Rising Need for Lithium

The European Union (EU) aims to have at least 30 million electric cars on its roads by 2030. In addition, European countries have rolled out various incentives for EV adoption—from subsidies for manufacturers to tax benefits for buyers. Consequently, Europe is becoming a hub for EV and battery manufacturers.

In fact, the EU is expected to account for 18% of global battery manufacturing capacity by 2029, up from 6% in 2019. And this doesn’t account for the six new plants that Volkswagen is planning to build by 2030.

With a growing demand for EVs comes a rising need for lithium. According to the European Commission, relative to current supply levels, the EU will need 18 times more lithium by 2030 and 60 times more by 2050.

Without any large-scale domestic production, the EU is heavily reliant on lithium imports. This puts its supply security and sustainability at risk for the long term.

Tackling Europe’s Lithium Supply Challenge

In a bid to develop a domestic lithium-ion battery supply chain, the EU has taken up initiatives to support every stage, from sourcing raw materials to producing finished battery packs.

• The European Raw Materials Alliance (ERMA)
  The ERMA aims to develop a resilient supply chain for critical minerals by strengthening domestic raw material production.
• Financial support
  The EU is offering EUR6.1 billion (roughly $7.5 billion) in subsidies to develop the battery production supply chain.
• The European Battery Alliance
  A network of more than 600 participants from the battery value chain, aiming to build a strong and competitive European battery industry.

EVs are a key part of Europe’s push towards decarbonization, and mainstream EV adoption requires a sustainable supply of critical minerals like lithium.

Alongside these initiatives, developing new sources of both raw materials and refined products will play a key role in solving Europe’s lithium supply challenge.

Visualizing the Metals for Renewable Tech

The energy transition will be mineral intensive and create massive demand for all the metals in renewable tech. Electricity from renewable technology grew at the fastest rate in two decades in 2020, according to a report from the International Energy Agency (IEA).

Consequently, as the pace of the energy transition gains further momentum, the demand for metals will increase. But which ones?

As shown above, the graphic takes data from the World Bank’s Climate Smart Report outlines what metals each renewable technology will require and their overlapping uses.

All the Metals for Renewable Tech

According to the IEA, the number and amount metals used vary by technology. Lithium, nickel, cobalt, manganese and graphite are important for battery performance, durability, and energy density. Rare earth elements are in the permanent magnets that help spin wind turbines and EV motors.

In particular, a typical electric car requires six times the minerals of a conventional car, and an onshore wind farm requires nine times more minerals than a gas-fired power plant with a similar output. Electricity grids need massive amounts of copper and aluminum, with copper being a keystone for all electricity-related technologies.

Inevitably, more mining must happen to provide the minerals for a renewable energy transition. According to the IEA, reaching the goals of the Paris Agreement would quadruple mineral demand by 2040.

Limited Resources, High Prices

Eventually, a rapid increase in demand for minerals will create opportunities and challenges in meeting sustainability goals. There is a lack of investment in new mine supply which could substantially raise the costs of clean energy technologies.

In fact, the mining industry needs to invest $1.7 trillion over the next 15 years to supply enough metals for renewable tech, according to consultancy Wood Mackenzie.

However, the mining industry is not ready to support an accelerated energy transition. While there are a host of projects at varying stages of development, there are many risks that could increase supply constraints and price volatility:

• High geographical concentration of production
• Long project development lead times
• Declining resource quality
• Growing scrutiny of environmental and social performance
• Higher exposure to climate risks

In addition, some nations are in a better position than others to secure the metals they need for renewable technologies. Attaining these new sources will be vital and valuable for a clean energy future.