The Future of Clean Energy: Why Critical Minerals are Vital to Achieving the Global Energy Transition
Orginally posted on Medium.com
Introduction
The world is witnessing a rapid shift towards a cleaner and more sustainable energy future. As governments, corporations, and individuals recognize the urgent need to address the impacts of climate change, there is a growing demand for energy sources that are less carbon-intensive.
However, the transition to clean energy is not as simple as replacing fossil fuels with renewable sources such as wind, solar, and hydro. In order to power the clean energy revolution, we need a range of critical minerals that are essential for the generation, transmission, and storage of energy.
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What are Critical Minerals?
Critical minerals are natural minerals that are essential to the generation (uranium, silver, rare earth), transmission (copper) and storage of clean energy (lithium, nickel, manganese, cobalt, graphite).
Critical minerals are used in various applications such as electronics, renewable energy technologies, aerospace, and defence. They are in limited supply and have a high economic value.
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Why are Critical Minerals Important for the Clean Energy Transition?
Let’s take a look at critical minerals; what is driving the global clean energy transition and their significance in this energy revolution.
Generation of Clean Energy
Uranium — It is a critical mineral used in the generation of clean energy. Uranium is used as fuel in nuclear power plants to produce electricity, which is a low-carbon source of energy. The energy released from the nuclear reaction is harnessed and converted into electricity, which can then be transmitted to homes and businesses.
Silver — It is a critical mineral used in the generation of clean energy. Silver is a key component in photovoltaic cells, which are used to convert sunlight into electricity. Solar panels made with silver are more efficient and durable, which makes silver an essential component of clean energy generation.
Rare Earth Elements (REE) — These are critical minerals that are used in the production of wind turbines, electric motors, and other clean energy technologies. Rare earth elements provide the materials needed to produce high-performance, energy-efficient devices that are essential to the clean energy transition.
Transmission of Clean Energy
Copper — It is a critical mineral used in the transmission of clean energy. Copper is used in power cables, electrical transformers, and other electrical components that make it possible to transmit clean energy from its source to consumers. Copper is an excellent conductor of electricity and is resistant to corrosion, making it ideal for use in the energy sector.
Storage of Clean Energy
Lithium — It is a critical mineral used in the storage of clean energy. It is used in the production of lithium-ion batteries, which are widely used to store energy in electric vehicles, renewable energy systems, and stationary energy storage systems. Lithium-ion batteries are highly efficient and have a long life span, which makes them ideal for energy storage.
Nickel — It is a critical mineral used in the storage of clean energy. It is used in the production of nickel-manganese-cobalt (NMC) batteries, which are widely used in electric vehicles. NMC batteries provide a long driving range for electric vehicles and are highly efficient, making nickel an essential component of the clean energy transition.
Manganese — It is a critical mineral used in the storage of clean energy. It is used in the production of NMC batteries, which provide a long driving range for electric vehicles. Manganese is also used in other applications, such as the production of steel, making it a valuable mineral in the clean energy transition.
Cobalt — It is a critical mineral used in the storage of clean energy. It is used in the production of NMC batteries, providing stability and durability to the battery. Cobalt is also used in the production of superalloys and magnetic materials, which are essential components in the renewable energy and clean energy storage industries.
Graphite — It is a critical mineral used in the storage of clean energy. It is used in the production of anode materials for lithium-ion batteries. Graphite provides a stable and efficient anode material, which is essential for the performance of lithium-ion batteries. It is a critical component in the clean energy transition, helping to store energy from renewable sources so it can be used when needed.
The Investment Thesis for Critical Minerals
There are several reasons why investing in critical minerals is a smart move for investors who are interested in the clean energy transition.
Firstly, demand for these minerals is only going to increase as we move towards a cleaner energy future. International Energy Agency (IEA) predicts that the demand for critical minerals is set to soar as the world transitions to a low-carbon economy, with a projected growth rate of 5% per year for the next two decades.
In addition, the global shift towards electric mobility is driving the demand for critical minerals, as electric vehicles (EVs) require up to 10 times more minerals than conventional cars. A typical EV battery pack contains around 15 kg of lithium, 10 kg of cobalt, and 5 kg of nickel, all of which are critical minerals. The global EV market is projected to grow at an annual rate of 25% between 2020 and 2030, which will result in a massive demand for critical minerals.
The transition to clean energy will require a massive supply of critical minerals, but the current supply chain is not adequate to meet the demand. China currently dominates the global supply of critical minerals, accounting for around 80% of the world’s rare earth elements (REE) production. This puts the global supply chain at risk of disruption, as China has demonstrated its willingness to use its dominant position to gain geopolitical leverage. For example, during a dispute with Japan in 2010, China imposed an embargo on REE exports, causing a surge in prices and a scramble for alternative sources.
To mitigate this risk, many countries are now seeking to develop their own domestic sources of critical minerals. This includes the US, which has identified critical minerals as a strategic priority and has launched an initiative to develop a domestic supply chain. The European Union (EU) has also identified critical minerals as a key priority, with a focus on developing a sustainable and responsible supply chain.
Investing in the critical minerals market can provide significant returns for investors. As the world transitions to a low-carbon economy, the demand for critical minerals will continue to grow, which will result in higher prices and increased investment in exploration and development.
Companies that are involved in the extraction, processing, and manufacturing of critical minerals are well-positioned to benefit from this trend.
3 Ways to Invest in Critical Minerals
There are many ways that investors can take advantage of this investment opportunity presented by critical minerals:
Investing in Mining Companies — One of the most straightforward ways to invest in critical minerals is to invest in mining companies that specialize in the extraction and production of these minerals. These companies are well-positioned to benefit from the growing demand for critical minerals as the world shifts towards cleaner energy sources. There are several mining companies that produce these minerals, including BHP Group, Rio Tinto, and Vale.
Investing in Energy Technology Companies — Another way to invest in critical minerals is to invest in energy technology companies that use these minerals in their products. For instance, investing in companies that produce solar panels, wind turbines, or EVs would provide exposure to the demand for critical minerals such as silver, rare earth elements, and cobalt. There are several companies that produce clean energy technologies, including Tesla, First Solar, and Vestas Wind Systems.
Investing in Energy Transition Funds — A third way to invest in critical minerals is to invest in energy transition funds such as the Sprott Energy Transition Exchange-Traded Funds (ETFs). These ETFs provide exposure to a diverse range of energy transition companies, including those that produce critical minerals, as well as companies involved in the production of clean energy technologies.
The transition to clean energy is a critical step toward mitigating the effects of climate change, and critical minerals play a vital role in making this transition possible.
From the generation of nuclear energy to the storage of clean energy in batteries, critical minerals are essential to the future of clean energy.
As the world moves towards a more sustainable energy future, it is crucial that we understand the importance of critical minerals and ensure that we have a secure supply of these essential materials.
References:
U.S. Department of Energy. (2017). Critical Materials Strategy. https://energy.gov/sites/prod/files/2017/06/f34/CriticalMaterialsStrategy2017.pdf
World Nuclear Association. (2021). Nuclear Power in the World Today. https://world-nuclear.org/information-library/current-and-future-generation/nuclear-power-in-the-world-today.html
The International Energy Agency. (2020). Key World Energy Statistics. https://www.iea.org/reports/key-world-energy-statistics-2020
The National Renewable Energy Laboratory. (2021). Renewable Electricity Futures Study. https://www.nrel.gov/analysis/re_fut
