The Messy Race for Batteries
Updated: Oct 6, 2022
Why the race for special earth minerals and metals should worry buyers and climate scientists.
Last month I posted a blog about the race to implement more EV charging stations around the world in support of the 16.5 billion electric vehicles on the road today. To say the EV and electric van industry is skyrocketing is an understatement. Bloomberg reported $4.8 billion in investment dollars had been pumped into the industry in 2022 alone. Propped up too, by huge government grants and funding - what’s not to like about this rush to clean energy?
Well, the battery is the short answer.
In most cases of e-vehicles and vans, a battery has replaced dirty fossil fuels to power the engine in electric, plug-in hybrid (PHEVs) and hybrid electric vehicles (HEVs). And a range of metals and minerals are needed to produce these seemingly “green” battery packs, including lithium-ion, nickel, cobalt, manganese and graphite. If we expand battery usage out to wind turbines, solar energy and electricity networks, we need to add copper and aluminium. In the past seven years, demand for these minerals has well surpassed numbers for consumer electronics (Economic Times).
“In a scenario that meets the Paris Agreement goals (as in the IEA Sustainable Development Scenario [SDS]), their share of total demand rises significantly over the next two decades to over 40% for copper and rare earth elements, 60-70% for nickel and cobalt, and almost 90% for lithium.”
Image source: https://www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitions/mineral-requirements-for-clean-energy-transitions
So before we dissect the challenges created from mining these elements, what makes the battery minerals so special? Well, they remove the carbon waste from burning fossil fuels, they mitigate geo-political vulnerabilities while avoiding the commodity oil price fluctuations (and consumer pump shock) so often felt this past year since the invasion of the Ukraine. And in the more sophisticated EV engineering models, the mileage per charge can be exceptional.
And the downside?
Well, there’s no dressing it up, it’s fairly hairy here:
1) Waste Production: While the use of batteries in vehicle manufacturing will lead to less fossil fuel carbon pollution, it has meant a huge upswing in minerals mining, which includes lithium. The process for extracting lithium, in this example, is itself extremely wasteful.
Stefan Nicola from Bloomberg Hyperdrive writes “The silvery-white metal generally comes from open-pit mines in Australia or from South America, where there are concerns about water waste and toxic materials released from massive evaporation pools. The raw materials are then shipped to Asia for processing. By the time the lithium ends up in European or American EVs, a lot of CO2 has been released into the atmosphere. There are efforts underway to mine lithium without emitting greenhouse gases, but those are still in their infancy.”
Scientists further caution against the celebration of moving away from fossil fuels to clean energy when many of the EV batteries are still so reliant on mined minerals, many of which are considered “rare earth” minerals that are not “renewables”.
2) Geopolitical Dependency The dependency on these special minerals is made exponentially harder by the fact that a mere three nations control over 75% of the current mined output (including the rare earth metals), with two of these countries being the Democratic Republic of Congo (DRC) and China.
The DRC has suffered years of civil war followed by decades of political unrest, corruption and ethnic conflicts making it a difficult partner for stable, long-term investing. And China continues to have troubled relationships with a number of G8 countries equally making for uncomfortable vulnerabilities among world leaders trying to pursue EV solutions at pace.
3) Human Slavery and Child Labour If you read my blog last month about the dramatic rise in modern slavery, you will know that laptops, computers and mobile phones are listed in the Top 20 products for being of high risk for modern slavery in their production. Why? Because there's widespread evidence that the cobalt used for batteries is being mined by children.
And the dependency on these minerals is particularly high in the DRC and China, two places with well-recorded human rights violations and the absence of comprehensive laws against forced labour/child labour and people trafficking, among other human rights crimes.
Image credit: Monusco/Sylvain Liechti, Flickr. CC-by-SA 2.0.
So where does this leave innovators? With a 16+ year lead-time to take a mineral vein from discovery to production, it’s difficult to build a strong, stable supply chain without accepting that price and market volatility will be par for the course. It would be naïve to think that the price of electric vehicles will go down as demand increases and manufactures become more efficient because the reliance on unstable partnerships for vital earth minerals will grow.
And what about the 2040 treaty? According to the IEA, demand for earth minerals is expected to double by 2040, which means the Net Zero carbon reductions in respect of the mining and transport of these minerals will have to quadruple to remain neutral and meet that target. Something very few people are talking about and even fewer seem to be measuring.
These uncertainties may pose challenges for miners and buyers alike. Government support and policy making will be key here in laying out the foundations for long-term stable and ethical supply arrangements while investing in new technologies that will support the heavy pressure to minimise the growing rise in mining carbon outputs.
Kelli Wilks is Management Consultant at Spring CPO where she advises clients on ESG priorities, procurement transformation, negotiation strategies, and supplier performance.