Demand for Critical Minerals Surges in the Energy Industry
According to the International Energy Agency (IEA), there is a growing demand for critical minerals essential for low and zero-emission technologies. The energy industry’s increasing needs are identified as a significant driver for this surge.
In a recent report by the Paris-based organization, it was revealed that between 2017 and 2022, there was a significant increase in demand for lithium (tripling), cobalt (70% jump), and nickel (40% rise).
The IEA’s report, titled Critical Minerals Market Review, attributes this increase primarily to the energy sector’s demand.
Investment in the development of critical minerals saw a 30% increase in 2022, building upon a 20% rise in 2021, according to the IEA.
The report further states that companies specializing in lithium development recorded a 50% increase in spending, followed by those focusing on copper and nickel. Notably, Chinese firms almost doubled their investment spending last year.
According to the IEA, renewable energy sources are projected to surpass coal and become the largest source of electricity generation by the mid-2020s.
Given the critical role that these minerals play in technologies such as wind turbines and electric vehicles (EVs), their importance cannot be overstated.
The IEA suggests that if all planned projects in the critical minerals sector are realized, there could be enough supply to meet governments’ climate pledges. However, challenges such as project delays and technology-specific shortages pose risks to the adequacy of supply.
To limit global warming to 1.5 degrees Celsius, a key goal of the Paris Agreement, more projects in the critical minerals sector will be required by the end of this decade, according to the IEA.
The market size for critical minerals crucial to the energy transition reached $320 billion in 2022, doubling over the past five years. Start-ups in this sector raised a record $1.6 billion last year.
The IEA attributes the unprecedented growth in the critical minerals markets to the significant deployment of technologies like batteries and solar PV.
The development of sites for critical mineral mining and processing holds geopolitical significance due to their crucial role in low and zero-emission technologies. According to the IEA’s analysis, China leads in graphite and rare earths extraction and lithium processing.
However, China remains heavily reliant on the Democratic Republic of the Congo for mined cobalt.
The IEA’s report highlights limited progress in diversifying supply sources in recent years, with some cases showing worsening situations.
While mining projects show signs of improvement, refining operations still face challenges. Incumbent regions, particularly China and Indonesia, dominate planned projects for lithium chemical plants and nickel refining facilities, respectively.
The sustainability of the critical minerals industry also requires attention. The IEA reveals that water withdrawals nearly doubled between 2018 and 2021, and greenhouse gas emissions remain high.
“At a pivotal moment for clean energy transitions worldwide, we are encouraged by the rapid growth in the market for critical minerals, which are crucial for the world to achieve its energy and climate goals,” said Fatih Birol, the IEA’s executive director. However, Birol emphasizes that more needs to be done to ensure secure and sustainable supply chains for critical minerals.
