Critical Minerals Strategy for the Energy Transition

Definition: What is a Critical Mineral?

Modern economies depend on countless raw materials. Many minerals have important uses, but because of their abundant supply, the functioning of markets or the ability to substitute them, they do not warrant the attention that others may deserve at this time. For the sake of focus, only some are defined as "critical".

Based on current knowledge of the world's mineral deposits, many critical minerals are scarce, geographically concentrated in a few countries, or extremely dispersed around the globe, such that they are rarely found in sufficient volumes to be exploited efficiently. Moreover, their extraction and transformation are difficult and highly polluting and often only under the control of a few actors (more about responsible mining here). As a result, their procurement is and will remain difficult, and value chains will remain easily disrupted.

Conversely, critical minerals are vital for new technologies in general as they possess unique qualities that make them irreplaceable, at least at this stage of technological development.

Therefore, in the foreseeable future, demand will increase and countries will have to compete for these resources. This will lead to further price increases, but may also encourage investors to reopen old mines or go for new exploration.

Read more about mine technology!

The Idea of Clean Energy

The world desperately searches for ways to switch to renewable sources of energy. International agreements, such as the Paris Agreement, try to limit global warming below 2 degrees Celsius above pre-industrial levels. Then comes the framework of tackling climate change, environmental degradation, and energy security, which underlines the fact that transition in energy is an imperative global need. It, therefore, has the core aim of reducing finite conventional fossil fuel use, increasing the production and consumption of energy in a sustainable manner, and mitigating environmental impacts from the energy sector.

By 2050, more than 86% of the global electricity supply is estimated to be derived from renewable energy sources, feeding into the electrification of road transport, heat, and the production of renewable hydrogen. This has created an enormous shift in demand for certain minerals now required across these new technologies, particularly in electric vehicles, solar photovoltaic cells, and wind machines.

For example, renewable energy systems require more mineral resources than their non-renewable systems. For instance, the construction of a solar plant requires four times more copper per unit of capacity than the construction of an ultra-modern fossil fuel plant. Additionally, other minerals used in the construction of solar photovoltaic panels include cadmium and silver. Demand for graphite, copper, and nickel, alongside other minerals, is going to push critical mineral demand nearly four times higher in 2040.

This transition is in line with the Paris Agreement's goals of promoting clean energy and reducing greenhouse gas emissions to meet global climate challenges and support sustainable development.

New Power for Energy Production  

Humans have evolved and progressed at the expense of our planet's natural resources as much as human resources of intelligence and creativity. Humanity has come to exist and thrive due to the human ability to harness not only our planet's flora, fauna, and soil but also minerals, chemical elements, and their compounds with fossil fuels deposited in our Earth's crust.

Gold and silver, initially shaped ornaments, began to turn into currencies with the birth and development of trade, thus becoming a means of payment in commercial transactions, imparting a huge boost to development. Likewise, all other discovered minerals, metals, or energy sources contributed to economic, technological, and social progress for mankind, sometimes even acting as triggers in industrial revolutions.

As on the one hand, they are essential to satisfy the primary needs of the population (heating, light, cooked food) and, on the other, they are indispensable for the vast majority of manufacturing and transport activities, fossil energy resources (coal, oil, natural gas) remain the axis around which the world economy is organised and functions, having a major impact both on the economic progress, standard of living and national security of countries and on their place in the global economy and hierarchies. They can also, as recent history shows, become powerful geopolitical and geostrategic instruments of coercion of countries lacking such resources by the nations that control them, the case of Russia in oil and gas being a clear example.

For centuries, fossil fuels have been the premises of progress, wealth and power, but also, as we have realised more recently, they have been one of the main causes of today's environmental damage through land, water and air pollution, the greenhouse effect and global warming leading to climate change and extreme events (floods, hurricanes, droughts, forest fires, etc.).

It is, therefore, increasingly clear and accepted that fossil energy resources have approached the end of their role in nation-building and economic, commercial, political, and geostrategic relations. In terms of energy needs, nations must completely rethink both their energy procurement and consumption.

The technologies and some of the new equipment and facilities needed for this transition exist are in production, and some are already in use in sufficiently large quantities to achieve the necessary economies of scale to bring prices down and make them affordable to customers while remaining profitable for producers, without the need for subsidies.

However, the adoption of the new paradigm of clean energy and the global "green" economy poses new challenges. These are the raw materials needed to:

• Building new types of energy production equipment, such as photovoltaic panels for solar farms or turbines for wind farms.
• Manufacturing devices that can efficiently store and deliver electricity as needed (batteries for electric vehicles, but also larger energy storage devices that are part of grid systems).
• Producing and widely using new, non-polluting means of transport by land, water and air.

All this requires much larger quantities and a wider range of different raw materials, some of which were almost ignored, hardly used, and even discarded in the past but are essential and irreplaceable when implementing these new technologies. The minerals from which they are extracted are found in insufficient quantities and sometimes only in a few places on Earth, as they are often very difficult and polluting to extract and process, as they may be subject to a monopolistic regime or may be located in politically and economically unstable countries, they are prone to often disrupt the value chains of all new high-tech products and breakthrough technologies that depend on them and, as such, providing sufficient quantities of them will be a major challenge for the global energy transition. This is why they are considered critical mineral resources.

The most technologically developed countries of our time (the United States, the European Union, Japan, South Korea, Canada and Australia) have drawn up national lists of minerals considered critical from their specific point of view, which they periodically review and update in order to better control the availability of CMRs and to devise appropriate strategies to ensure that their high-tech industries are not hampered by insufficient access to these inputs. However, most of these critical mineral resources, many of the raw materials and even the final products made from them are currently controlled by China, a country known for its long-term approach in its strategies, which has already foreseen the issue and has a decades-long head start in implementing policies that put it in this favourable position, to the detriment of other players in world markets.

Critical Minerals Strategies: Nations as Examples

Japan

In the case of critical minerals security, there are a variety of potential strategies that could be used to reduce criticality from a supply risk perspective, but the environmental consequences of these strategies need to be assessed.

There are countries with a high dependence on imported materials, such as Japan, and they have examined various alternative resource supply strategies to improve resource security. As part of a critical minerals strategy, Japan has considered the use of deep ocean mining and recycling of end-of-life appliances as alternatives to the conventional import-oriented process.

Studies by the International Energy Agency show that deep sea mining processes consume more energy than conventional copper processing, but if combined with a recycling strategy, the total energy consumption as well as CO2 emissions are lower. Japan's optimal production mix in terms of energy consumption and CO2 emissions is based on a 70% supply from recycling and 30% from the deep ocean.

United Kingdom

Supply chains are considered a priority for the UK, and they need to be rendered more resilient and diversified with 'the vision to support future industries, deliver energy transition, and protect national security'. This strategy on critical minerals is aimed at securing supply chains and improving domestic capability in ways that will create new jobs, bring in wealth for its communities, attract investment, and play a leading role in addressing the global challenges with its international partners.

One strategic approach to maximise the value chains is when critical mineral production happens in the country in ways that create jobs/growth and protect communities and the natural environment through mining, refining, manufacturing, and recycling. This approach will also entail the country setting out its intention with other countries to strengthen trade and diplomatic relations while making the supply chains more diverse, transparent, accountable, and resilient.

TAG 2023's outcomes could be said to be very far into the future; thus, to drive home the message that this is truly a long-term strategy, the UK will consider, yearly, the criticality of minerals. This will become part of the various tasks that the newly established Critical Minerals Intelligence Centre, with the lead from the British Geological Survey, will carry out; such appraisal shall follow an independent, evidence-based process using a methodology agreed up in advance with the Department for Business, Energy and Industrial Strategy according to the British Governments' Secretary of State for Business, Energy and Industrial Strategy.

Australia

Critical minerals can have a central role in both Australia's economic sovereignty and the world's required transition to clean energy. With rich ore reserves, Australia has the potential to become a leading producer and exporter of processed critical minerals. According to the 2023 edition of Australia's Identified Mineral Resources report, in 2022, Australia remained the world's largest lithium producer, supplying 52 per cent of the global supply. Other than that, Australia was also one of the leading producers of cobalt, manganese ore, rare earth, rutile, tantalum, and zircon.

Critical minerals supply chains are vulnerable to trade disruptions because production is concentrated in a small number of countries outside Australia. The plan will promote domestic processing, which will enhance resilience in these supply chains and deliver the opportunity for local firms to advance their value chain.

The current budget advances the goals outlined in the Critical Minerals Strategy 2023–2030. This includes supporting Geoscience Australia in mapping the nation's natural resources, including those critical for the net zero transition and the Future Made in Australia initiative. It also involves establishing tax incentives to build sovereign capability in critical mineral processing, developing common user processing facilities to increase scale and efficiency, attracting investment to grow the critical mineral sector, and supporting trade partnerships to expand opportunities for Australian critical mineral products. Additionally, measures are being taken to safeguard critical minerals businesses against foreign interference (learn more about the mining industry of Australia).

See also: Peruvian mines

FAQ

What are the key mineral inputs essential for the transition to new energy technologies?

Aluminium, Chromium, Cobalt, Copper, Indium, Iron, Lead, Lithium, Manganese, Molybdenum, Nickel, Silver, Steel and Zinc.

How has the EU classified critical minerals?

• The EU has classified raw materials according to their supply risk as follows:
• Low: Lithium, Indium, Vanadium, Tungsten, Titanium, Gallium, Silicon and Hafnium.
• Moderate: Cobalt, Strontium, Platinum and Natural Graphite.
• High: Magnesium, Niobium, Germanium, Borate and Scandium.
• Very High: Rare Earth Elements

Which Latin American countries have best embraced the energy transition?

Brazil is the 12th best-prepared country in the world and the first in Latin America for the energy transition, according to the World Economic Forum (WEF).

Costa Rica is in second place in the region and ranks 30th globally.

If you are interested in South America, continue reading about mining in Bolivia.

TAKEAWAY

The need for an overall shift to clean sources of energy goes without saying. Climate change and the more extreme events in the forms of floods, hurricanes, droughts, and forest fires are more and more common.

Clean energy technologies require large quantities and a wide range of raw materials (critical minerals) that are essential and irreplaceable. Such critical minerals are found in insufficient quantities and sometimes only in a few places on Earth, are often very difficult and polluting to extract and process, and may be subject to a monopolistic regime or may be located in politically and economically unstable countries, so obtaining sufficient quantities of them will be a major challenge for the global energy transition.

Countries need to create strategies that consider all the different steps in the supply chain such as mining (extraction), processing, components and the final product, including recycling. They will need to create policies, partnerships and agreements, as well as prioritise re-industrialisation to reduce to some extent their dependence on a few actors that have maintained control of the supply chain.

Delve into one of our core topics:  Miner Safety

Sources: 

(1) https://www.gov.uk/government/publications/uk-critical-mineral-strategy/resilience-for-the-future-the-uks-critical-minerals-strategy

(2) https://www.iea.org/policies/16639-international-resource-strategy-national-stockpiling-system 

(3) https://www.industry.gov.au/news/investments-capitalise-australias-critical-minerals-and-global-clean-energy-transition

Author

Yeudiel Valdivia, VP Sales Safe Mining

Yeudiel Valdivia holds a Master’s degree in Engineering (Telecommunications) and a Bachelor of Electrical and Electronic Engineering. He spent most of his professional career in sales and business development for industry segments including mining. Yeudiel is fascinated by the positive impact of technology in people’s life and how people can work safer and under better conditions, he is interested in how technology can transform businesses making them more efficient, agile, and productive and its potential for the economy growth in countries and regions. Yeudiel writes mainly about the digitalization of industries, driven by advancements in technology enabling new business models.