By Professor Tina Soliman Hunter, Director, Centre for Energy and Natural Resources Innovation and Transformation, Macquarie University
As Australia, and the world, races to decarbonise our energy sources, the critical factor we need to be considering is the rare earth materials required for the manufacture of equipment like wind turbines and solar panels – and crucially, where these resources are located. Here, Professor Tina Soliman Hunter looks at the global reserves of critical minerals such as lithium, nickel, cobalt and more, and considers the impact this will have on Australia’s ability to decarbonise.
Critical energy minerals, as the name implies, are those minerals, generally found in small quantities, necessary for renewable energy generation such as wind and solar energy. As demonstrated in figure 1, the minerals required vary according to the technology and use, with lithium, nickel, cobalt, manganese, copper, and graphite crucial for battery performance and longevity, and energy density for the generation and transmission of electricity.
In addition, large volumes of copper and aluminium are required, with copper being the essential mineral for all electricity-related technologies. Rare earth elements (REEs) from the lanthanide series of metals, especially Neodymium and Samarium Cobalt, are essential for the permanent magnets integral to wind turbines and electric vehicle (EV) motors.
The energy transition has been likened to a new industrial revolution, one which instead of relying on coal necessitates access to critical minerals and REEs. However, unlike the bulk commodity coal, which is abundant, cheap to produce, and easily available, critical minerals are often found with other minerals thereby requiring intensive processing, which uses large volumes of water.
Global economic and technological changes have driven a long-term increase in the demand for critical minerals. According to the International Energy Agency’s (IEA) 2021 report The Role of Critical Minerals in Clean Energy Transitions, due to the increased share of renewables in new energy investments since 2010, the average amount of minerals required for a new power generation unit has increased by 50 per cent (IEA, 2021).
Global dependence on rarest minerals is expected to grow fivefold by the end of 2020s, and a sufficient supply of rare earth minerals and lithium is essential in the global transition to a green economy (IEA, 2021).
At present, most countries rely on critical minerals from China where, according to the European Union, over 90 per cent of REEs and 60 per cent of lithium are processed. The domination of one country in the market, and hence the reliance on China for the supply of critical minerals and REEs, has the potential to create market and geopolitical issues reminiscent of 20th century dependency on the Middle East for oil and gas.
In addition, there are geopolitical issues at play, demonstrated by souring trade relations between Australia and China since 2020, affecting exports and supply chains.
According to a 2022 study by the Brookings Institution, China dominates the critical mineral market: it refines 68 per cent of global nickel, 40 per cent of copper, 59 per cent of lithium and 73 per cent of cobalt (Brookings Institution, 2022, p6).
China also accounts for most of the global production of mineral-rich components for battery cells, including 70 per cent of cathodes, 85 per cent of anodes, 66 per cent of separators, and 62 per cent of electrolytes (Brookings Institution, 2022, p6).
Interestingly, as demonstrated in figure 2 below, even though China dominates REEs, it does not dominate all minerals – Australia and Chile together produce more than three quarters of the world’s lithium, and the Democratic Republic of the Congo dominates cobalt, producing more than 80 per cent globally (IEA, 2021, 21).
Increasingly, developed countries are looking to other jurisdictions for the supply of critical energy minerals, including Chile, Mexico, New Zealand, and Australia. The EU has indicated its need for autonomy in these critical energy minerals, as well as a desire for sustainable growth and development of these minerals.
Indeed, according to European Commission President Ursula von der Leyen: “Lithium and rare earths will soon be more important than oil and gas. Our demand for rare earths alone will increase fivefold by 2030.
We must avoid becoming dependent again, as we did with oil and gas. We will identify strategic projects all along the supply chain, from extraction to refining, from processing to recycling. And we will build up strategic reserves where supply is at risk.”
President von der Leyen clearly articulated a stark fact applicable to many nations as they embrace the energy transition: without secure and sustainable access to the necessary raw materials, any ambition to become climate neutral is at risk.
To address such risk, the EU has proposed the European Critical Raw Material Act 2022, designed to assist in increasing supplies of critical minerals such as lithium and REE through the development of raw material agencies, the development of more resilient supply chains, and the establishment of a strong and sustainable level playing field for all members states, with recycling and waste management as the centrepiece.
For Australia, critical mineral and REE policy development industry reform focuses on the upstream sector, seeking to support and develop the critical minerals sector through foreign investment, infrastructure and innovation. According to the IEA, Australia is the world’s largest producer of lithium and zirconium concentrate, and the fourth largest producer of REEs (IEA, 2021, p165).
Hence, Australia is well placed as a reliable supplier of critical minerals necessary for clean energy technologies. The 2019 Critical Minerals Strategy set out the Australian Government’s ambition to increase production of these minerals, while simultaneously fostering downstream processing and refining, and lowering production costs through innovation and infrastructure development.
Through its Critical Minerals Office, established in 2020, the Australian Government has been developing supply chains, assisting in financing critical mineral projects through the 2021 Resources Technology and Critical Minerals Processing Project (part of the Modern Manufacturing Initiative), and facilitating research in the area.
Building on previous initiatives, the 2022 Critical Minerals Strategy supports production and processing innovation and technology, with aspirations for Australia to be a global critical mineral supplier integral to international supply chains and technologies.
Such aspirations to shift market dominance away from China will be challenging given the greater cost in producing Australian REE and critical minerals, and challenges with the current Australian investment regime.
Given Australia’s endowments of critical minerals and REE, this is possible. It will, however, take a combination of investment reform, ongoing government facilitation and support, technological development, technical innovation, and ongoing consideration of environmental, social and governance challenges.