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The Exponential View of Solar Energy

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The Exponential View of Solar Energy, and Why the Cost of Solar has Plummeted

exponential view of solar energy

The Exponential View of Solar Energy

The human brain is terrible at comprehending exponential growth.

Much like the power of compound interest is a magical force for investors, it is also possible for innovations and technological breakthroughs to build off each other in the physical world, creating a similar compounding effect.

In this chart, we look at how solar technology has surpassed all expectations from an economics perspective, including those initially set by the International Energy Agency (IEA). Then later, we’ll also look at a new set of predictions for solar energy economics over the next 30 years.

Solar Energy: The Technological Overachiever

Back in 2010, the cost of utility-scale solar power ranged between $0.25-$0.37 per kWh. This meant it was at least three times as expensive as fossil fuels, and that solar was highly cost-inefficient at the time.

Going forward, most organizations projected a linear path for whittling down the cost of solar.

The IEA, for example, forecast that the global cost of solar would drop to roughly $0.22 per kWh by 2020. In reality, however, the price dropped to about one-fifth of that at $0.04 per kWh.

YearActual (BNEF Global) - $ per kWh2010 Forecast (IEA) - $ per kWh
2010$0.28$0.36
2020$0.04$0.22
Change-85.7%-38.9%

Almost all industry forecasters, including the IEA itself, missed the exponential factors at play.

Wright’s Law

Ramez Naam, the co-chair for energy and the environment at Singularity University, points out in his blog that the exponential decrease in solar costs stem from Wright’s Law:

For most technologies, every doubling of cumulative scale of production will lead to a fixed percentage decline in cost of the technology.
-Wright’s Law

Professor Naam says this occurs through “learning-by-doing”, and more specifically:

  1. Innovation that improves the technology itself
  2. Innovation that reduces the amount of labor, time, energy, and materials needed to produce the tech

Put another way, the more solar panels we make and the more we install—the better we get at the whole process over time. And once we’re making thousands or millions of panels, the costs come down exponentially, much like with lithium-ion batteries.

The Future of Solar Costs

Over the years, Naam has taken his own stab at forecasting the cost of solar energy into the future, leveraging the idea of Wright’s Law.

Here’s what he sees coming, based on using a 30% learning rate* for solar:
Future cost of solar based on 30% learning rate Wright's Law

*The learning rate is the fixed percentage decline that occurs with every doubling of the scale of production.

Based on these projections, even the costliest of solar installations will be more economical than the cheapest of utility-scale fossil fuel plants. This means solar can basically go anywhere, and make sense from a cost perspective.

Underestimate Solar No More?

For fun, here’s a final look at how IEA projections have constantly underestimated solar installations, which are one of the key factors dictating the “learning rate” under Wright’s Law:

missed iea solar capacity forecasts

With solar energy costs plummeting to record lows and global installations continuing to ramp, it’s possible that solar forecasters may no longer forget about the exponential nature of solar production.

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Electrification

The World’s Largest Nickel Mining Companies

Nickel has emerged as an important battery metal, and these ten nickel mining companies are producing the nickel needed for EV batteries.

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The World’s Top 10 Nickel Mining Companies

As the world transitions towards electric vehicles and cleaner energy sources, nickel has emerged as an essential metal for this green revolution.

Needed for the manufacturing of electric vehicles, wind turbines, and nuclear power plants, nickel is also primarily used to make stainless steel alloys more resistant to corrosion and extreme temperatures.

Using data from Mining Intelligence, this graphic shows the top 10 companies by nickel production along with their market cap.

The Biggest Nickel Miners by Production in 2020

Nickel has long been an important mineral for batteries, plating, and steelmaking, but it was only recently added to the USGS’s proposed critical minerals list.

As countries and industries realize the importance of nickel for the development of sustainable technologies, nickel mining companies will be at the forefront of supplying the world with the nickel it needs.

The 850 kt of nickel mined by the top 10 nickel mining companies is worth around $17.3B, with both production and price expected to grow alongside nickel demand.

CompanyMarket CapProduction
Nornickel$48B236.0 kt
Vale$59B214.7 kt
Glencore$64B110.2 kt
BHP$134B80.0 kt
Anglo American$50B44.0 kt
South32$12B41.0 kt
Eramet$2B36.0 kt
IGO$5B30.0 kt
Terrafamen/a29.0 kt
MCC$5B29.0 kt

Source: Miningintelligence.com, Yahoo Finance

Nickel and palladium miner and smelter Nornickel leads the list with 236 kt of nickel produced in 2020, the majority coming from its Norilsk division of flagship assets in Russia.

With 46% of Nornickel’s energy mix sourced from renewable power, the company is pushing the development of carbon neutral nickel, starting with reducing carbon dioxide emissions by 60,000-70,000 tons in 2022.

Vale follows closely behind in production and in its carbon footprint goals. The Brazil-based company’s Long Harbour processing plant in Newfoundland and Labrador produces nickel with a carbon footprint about a third of the industry average–4.4 tonnes of CO2 equivalent per tonne of nickel compared to Nickel Institute’s average of 13 tonnes of CO2 equivalent.

With the top two companies producing more than half of the nickel produced by the top 10 miners, their efforts in decarbonization will pave the way for the nickel mining industry.

The Need for Nickel in the Energy Transition

Alongside the decarbonization of the nickel mining process, nickel itself powers many of the technologies crucial to the energy transition. Vehicle electrification is highly dependent on nickel, with a single electric car requiring more than 87 pounds of nickel, making up almost 1/5th of all the metals required.

With a history of being used in nickel cadmium and nickel metal hydride batteries, nickel is now being increasingly used in lithium-ion batteries for its greater energy density and lower cost compared to cobalt. Alongside the increase in usage, not all nickel is suitable for lithium-ion battery production, as batteries require the rarer form of the metal’s deposits known as nickel sulphides.

The more common form of the metal, nickel laterites, are still useful in forming the alloys that make up the frames and various gears of wind turbines.

Nickel is also essential to nuclear power plants, making up nearly a quarter of the metals needed per megawatt generated.

The Future of Nickel Mining and Processing

With nickel in such high demand for batteries and cleaner energy infrastructure, it’s no wonder that global nickel demand is expected to outweigh supply by 2024. The scarcity of high grade nickel sulphide deposits and the carbon intensity to mine them has also incentivized the exploration of new methods of harvesting the metal.

Agro-mining uses plants known as hyperaccumulators to absorb metals found in the soil through their roots, resulting in their leaves containing up to 4% nickel in dry weight. These plants are then harvested and incinerated, with their ash processed to recover the nickel “bio-ore”.

Along with providing us with metals like nickel, lead, and cobalt through a less energy intensive process, agro-mining also helps decontaminate polluted soil.

While new processes like agro-mining won’t replace traditional mining, they’ll be a helpful step forward in closing the future nickel supply gap while helping reduce the carbon footprint of the nickel processing industry.

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Electrification

Visualizing the Natural Graphite Supply Problem

In 2020, China produced 59% of natural graphite and over 80% of battery anode material. Here’s a look at the graphite supply problem.

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natural graphite

Visualizing the Natural Graphite Supply Problem

Graphite is a critical mineral for lithium-ion batteries, and its battery demand is expected to grow ten-fold by 2030.

Meeting this increasing demand will require a higher supply of both natural graphite and its synthetic counterpart. However, graphite’s entire supply chain is heavily reliant on China, which makes it vulnerable to disruptions while creating environmental challenges.

This infographic from our sponsor Northern Graphite highlights China’s stronghold over the graphite supply chain and outlines the need for new natural graphite mines.

China’s Dominance in the Graphite Supply Chain

From mining natural graphite to manufacturing battery anodes, China dominates every stage of the graphite supply chain.

For example, in 2020, 59% of global natural graphite production came from China. Mozambique, the second-largest producer, churned out 120,000 tonnes—just one-fifth of Chinese production.

Country2020E production, tonnes% of total
China 🇨🇳650,00059.1%
Mozambique 🇲🇿120,00010.9%
Brazil 🇧🇷95,0008.6%
Madagascar 🇲🇬47,0004.3%
India 🇮🇳34,0003.1%
Russia 🇷🇺24,0002.2%
Ukraine 🇺🇦19,0001.7%
Norway 🇳🇴15,0001.4%
Pakistan 🇵🇰13,0001.2%
Canada 🇨🇦10,0000.9%
Rest of the World 🌎73,0006.6%
Total1,100,000100%

China’s massive output makes the other top nine countries look substantially smaller in terms of natural graphite production. Moreover, China also dominates the manufacturing of synthetic graphite and the conversion of graphite into anode material for batteries.

In 2018, China produced nearly 80% of all synthetic graphite, and in 2019, it was responsible for 86% of all battery anode material production. This dependence on graphite supply from China puts the supply chain at risk of political disruptions and makes it unsustainable for the long term.

Unsustainable Production: Natural Graphite vs Synthetic Graphite

The carbon footprint of manufacturing partly depends on the source of energy used in production.

Coal dominates China’s energy mix with a 58% share, followed by petroleum and other liquids. This increases the carbon footprint of all production and especially that of synthetic graphite, which involves energy-intensive heat treatment of petroleum coke.

Energy sourceType% of China's energy consumption (2019)
Coal Fossil fuel58%
Petroleum and other liquidsFossil fuel20%
Hydro Renewable8%
Natural gasFossil fuel8%
Other renewablesRenewable5%
NuclearNon-renewable2%
TotalN/A100%

Percentages may not add to 100% due to rounding.

One study found that producing one kg of synthetic graphite releases 4.9kg of carbon dioxide into the atmosphere, in addition to smaller amounts of sulfur oxide, nitrogen oxide, and particulate matter. While the carbon footprint of natural graphite is substantially smaller, it’s likely that China’s dependence on coal contributes to emissions from production.

Furthermore, concentrated production in China means that all this graphite travels long distances before reaching Western markets like the United States. These extensive shipping distances further exacerbate the risk of disruptions in the graphite supply chain.

The Need for New Sources

As the demand for graphite increases, developing a resilient graphite supply chain is crucial to the European Union and the U.S., both of which have declared graphite a critical mineral.

New graphite mines outside China will be key to meeting graphite’s rising demand and combating a potential supply deficit.

Northern Graphite is positioned to deliver natural graphite in a secure, sustainable, and transparent manner for the green economy.

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