Critical minerals: a realistic assessment

Article by HE Haitham Al Ghais, OPEC Secretary General.
Monday, 1 July 2024

Sustainable energy pathways are vital for populations all over the world. With this in mind, we need to appreciate the real-world impacts of scenarios and policies aimed at ramping up renewables and electric vehicles (EVs). There are many elements that filter into this, a central one being the role played by critical minerals.

These minerals, such as copper, cobalt, silicon, nickel, lithium, graphite and rare earths underpin the development of renewables and EVs. The International Energy Agency (IEA) says that in its Net Zero Emissions (NZE) by 2050 Scenario, demand for critical minerals quadruples by 2040. It is a pace never seen before in history.

The purpose of highlighting this should in no way detract from the importance that OPEC attaches to the role of renewables and electrification in our energy future. Our Member Countries are investing heavily in renewables, in all stages of their supply chains, and participating in the development of EVs.

However, we do need to carefully consider the nature of such an expansion of critical mineral requirements. Is this kind of expansion truly feasible? What are the implications? How sustainable is it? And how important is oil and gas to the expansion of critical minerals, as well as renewables, EVs and grids.

In the mentioned IEA scenario, by 2040, copper demand rises by 50%, rare earths demand almost doubles, cobalt demand more than doubles, and nickel demand is close to tripling. These are nowhere near the largest increases either. Graphite demand grows almost four times, and lithium sees a nearly ninefold expansion by 2040, underlining its crucial role in batteries.

This will require the construction of a huge number of new mines. Back in 2022, the IEA said that by 2030 alone, the world would need to build 50 new lithium mines, 60 new nickel mines and 17 cobalt mines.

It should be borne in mind that, historically, critical supply chain projects, such as for these types of commodities, have had long development lead times, from discovery to first production. It begs the question: is such growth realistic? And what might the impact be if growth comes up short, and equally importantly, what if policymakers have also followed a path of no longer investing in new oil and gas projects?

The development of critical minerals involves invasive extraction and processing activities, underscoring the physical harshness of an electrified world. EVs, wind turbines, solar panels, as well as new grids, are all hungry for critical minerals. This is starkly highlighted when making comparisons.

An EV contains approximately 200 kg of minerals. For contrast, a conventional car uses around 34 kg. One megawatt of electricity produced by an offshore wind turbine requires around 15 tons of minerals, while the figure for solar is around seven tons. For natural gas, it is just over 1 ton.

Critical mineral mining is also an extremely energy intensive activity, and one that today runs on hydrocarbons. It could not function otherwise.

The use of coal and gas is vital in refining the minerals through various thermal and chemical processes. For instance, blending, to aid the removal of other metals, and in heating to high temperatures to produce more pure forms. Petroleum-based products are also used for excavators, bulldozers, dump trucks on site, as well as various forms of transportation to move minerals from supply to demand centres.

Here, it is also important to recall an earlier Secretary General’s Corner [COP28 on the horizon: focusing on a holistic approach to the energy system] that highlighted how the production of turbines, solar panels and EVs cannot be achieved without vital petroleum end-use products. The oil industry, renewables and EVs are not separate from each other. They do not work in silos.

Another key point is energy consumption. Mining activities could see more than a five-fold increase by mid-century, and one of the largest sources of new mineral demand, particularly for copper, is expected to come from the need for new electricity grid infrastructure, such as power lines and transformers. In a net-zero world highlighted by BloombergNEF (BNEF), the electricity grid would need to stretch to the sun – a distance of around 152 million kms.

Is it realistic to think renewables can meet the expected electricity expansion alone, particularly given the world has invested over $9.5 trillion in ‘transitioning’ over the past two decades, yet wind and solar still only supply just under 4% of the world’s energy, and EVs have a total global penetration rate of between 2% and 3%. Looking ahead, BNEF, in its recent New Energy Outlook report, states that its net-zero scenario would cost $250 trillion by 2050.

Policymakers are waking up to the mineral-intensity requirements of initial net-zero scenarios, and questions are being raised as to how easy it is to continually ramp up critical mineral production, exemplified by the fact that the percentage global investment increase in 2023, was at a lower level than in 2022.

Those that talk of critical minerals delivering the world a future of only renewables and EVs, are not providing a full picture. As OPEC continues to advocate, there are many future energy pathways for nations and peoples across the world, and we all need to be realistic about how these can be achieved.