Mining for a decarbonised world - Part 2
The transition to a low-carbon future depends upon our ability to acquire the minerals and metals necessary to produce clean energy technologies. These technologies – including solar cells, wind turbines, battery storage and electrified transport such as electric vehicles – are far more mineral intensive than their traditional fossil fuel-powered counterparts. Mass adoption of clean energy technologies will require an enormous increase in the extraction and refining of iron (steel), lithium, nickel, copper, aluminium, cobalt and graphite, and will likely shape the supply and demand for critical minerals for the foreseeable future.
We must consider the entire supply chain when assessing the impacts of low-carbon technologies and a rapid increase in material extraction. Challenges include ‘embodied carbon’ (the carbon required for the extraction, refining, production and distribution of materials), and environmental concerns such as water scarcity and biodiversity effects, and the impact on the communities in which these mines operate.
Our view is that a tremendous amount of these key materials is required for the successful decarbonisation of the world, but what’s less obvious is whether the current mining supply chain is capable of extracting them in a reliable, ethical and sustainable manner.
Mineral demand of clean energy technologies
The charts below provide insight into the share of mineral demand through 2050 under a 2 degrees scenario (2DS) for clean energy technologies such as wind and solar which are expected to make up 56% of global generation by 2050, as well as batteries for EVs and energy storage.
Chart 1: Share of Mineral Demand through to 2050 - Solar PV
Chart 2: Share of Mineral Demand through to 2050 - Batteries
Chart 3: Share of Mineral Demand through to 2050 - Wind Turbines
Given the mineral intensity of these clean energy technologies, we have identified the key issues in the supply chain and lifecycle of the materials:
1) Availability of resource (nickel)
2) Provision to mine ethically and sustainably (cobalt, nickel and lithium)
3) Capacity to turn the raw materials into their finished product in an environmentally sustainable manner (iron ore, aluminium, and graphite)
4) Recycling rates and end-of-life use
Availability of resource
Current and forecast trends in EV battery technology suggest that high nickel content battery chemistries will continue to dominate demand, with over 80% total market share by 2030 forecast by McKinsey. Demand for nickel is forecast to almost double by 2030, and a major challenge facing the market is whether this demand can be met in a reliable, sustainable and environmentally sound manner.
Given its scarcity, the increasing demand for high-quality nickel (or displaced supply) to serve the battery market will be met by nickel laterite projects, which require a more complex, chemical and carbon intensive process. Further complicating matters, there are also concerns over whether the quality of the nickel produced from these mines will be suitable for battery storage technology. Additionally, the current mining supply chain consolidates ore from different mines for processing into final product, making it difficult for the end consumer to assess the sustainability and ethical credentials of the finished product.
We think that sustainable and ethical nickel supply is one of the key road blocks in decarbonising the world, and so investing in this space has the potential to unlock tremendous environmental and social value
Provision to mine ethically and sustainably
Many nickel laterite mines use open cut surface mining processes that demand a vast footprint. (Laterite refers to a soil layer rich in iron oxide typically found in tropical and subtropical rainforests.) Extracting nickel from laterite requires extensive energy, and utilises a leaching process that can pollute the surrounding environment with heavy metals and negatively impact biodiversity.
The mining of cobalt and lithium – both critical battery materials – faces serious ethical and environmental challenges. Democratic Republic of Congo (DRC) is the largest global miner of cobalt, an essential element in EV batteries, and accounts for roughly two thirds of global production. Recent investigations into the supply chain have found human rights abuses including the use of child labour, unsafe working conditions, exploitation and violence in many of the smaller scale mining operations.
There are two predominant methods of extracting lithium; the first uses vast quantities of water to pump a mineral rich brine to the surface for evaporation, and the second utilises a chemical separation process. Perversely, the water intensive process is often used in extremely water scarce environments, such as the large deposits in South America’s salt flats, while the chemical separation process has resulted in severe environmental impacts in the form of soil and water contamination.
Capacity to process and refine materials in an environmentally sustainable manner
The key materials that are heavily energy dependent during the refining process are aluminium for solar cells, steel for wind turbines, and the nickel and graphite that require intensive processing in order to be made into battery ready materials.
As the Batteries chart above demonstrates, graphite (53.8%) represents the majority of the mineral demand, being the primary material used in a lithium ion battery anode. The production of synthetic graphite uses oil refining by-products, and the refining of both synthetic and natural graphite is extremely energy intensive, contributing significantly to the overall embedded emissions of the battery. There can be large differences in embedded emissions depending on where battery materials are produced, due to the energy mix used for production. As an example, almost all anode material is currently made in China, Japan and South Korea, where the energy generation mix is heavily fossil-fuel dependent. Additionally the production of synthetic graphite can use chemical purification, as is often the case in China, which can have substantial environmental impacts if the chemicals aren’t neutralised, resulting in soil and water pollution.
Aluminium’s largest impact on the environment is its energy intensive process and the emissions and effluent (such as bauxite residue, a highly toxic sludge) created during the processing of alumina to finished product. With the sheer amount of electricity required to produce one tonne of aluminium – almost 10x that of steel – the decarbonisation of the energy supply is vital to achieving more sustainable processing.
Similarly, the conversion of iron ore to steel is highly carbon intensive and responsible for approximately 7% of global greenhouse emissions. Given that a large portion of future global energy generation is expected to come from wind power, and steel is the largest input by weight into wind turbines, a more sustainable form of steel production is imperative. Many of the global mining companies are cognisant of this, and there is currently a great deal of research being conducted into ‘green steel’ that replaces coal in the steel-making process with hydrogen sourced from renewable energy sources.
Ultimately our ability to process and refine these materials in an environmentally sustainable manner will be heavily influenced by increasing the presence of renewables in the energy generation mix, cost competitiveness, and technological advances such as hydrogen production that utilise renewable energy sources.
Recycling rates and end-of-life use
While it is likely that bulk materials such as steel and aluminium, as well as specialised battery materials such as nickel and graphite, will continue to rely on significant amounts of embedded carbon, there is significant scope to redistribute these through recycling. Currently steel and aluminium have high recycling rates, and for battery materials it is more likely that EV batteries (which will make up the bulk of the market) will find a secondary life beyond the vehicle market as stationary energy storage and continue to be a valuable and useful commodity.
While much of the previous decade was spent talking about climate action, there are signs that the coming decade will deliver a material response. Several of the largest emitting countries have announced net zero targets by 2050/2060, and their roadmap for achieving this is currently dominated by the transition to a decarbonised energy supply and the electrification of transport. Our view is that the mineral intensity of this transition should not be overlooked and that we must properly understand and assess the risks along the entire supply chain from extraction and processing to end-of-life applications and recycling.
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