Summary: Yes, decarbonisation of our economy is going to require a lot more of certain minerals. But, how much more, and how much will this cost? For this blog we start with what are the biggest investment needs. Estimating what new production we will need, and when, turns out to be more complicated than you might think. And the biggest barriers are likely to be political rather than financial.
Why this is important: We all know the numbers. According to the IEA, mineral demand for clean energy technologies will grow by up to 7x compared with current production. But what does this mean? Is this a realistic target or will supply chain blockages and price volatility act as a brake on sustainability and net zero targets ? While the growth rates might seem daunting, we need to remember history. With the right incentives, production can be scaled up rapidly.
The big theme: Decarbonising our energy system is going to be one our most material sustainability challenges. Along with new technologies such as electric vehicles, and renewable electricity generation, we are going to need to scale up new supply chains. In doing this we will often rely on countries or regions with whom we sometimes have a troubled political relationship.
Summary of a McKinsey report: Regulatory efficiency will be essential for the energy transition
- The International Energy Agency (IEA) estimates that renewable energy will need to account for at least 65 percent of global electricity generation by 2030. At the same time, industry will have to increase electricity demand (as a share of the total energy mix) to 35.0% in 2030, up from 28.5% in 2019. And electric vehicles (EVs) will need to account for anywhere from 35% to 95% of light-vehicle sales by 2030 (up from 8.3% in 2021).
- Crucially, this transition can’t happen without the availability of certain metals that are essential to battery electrification, including copper, lithium, nickel, cobalt, and some rare earth elements. Annual copper production (the foundation of electrification infrastructure) will need to increase by 11.5 million metric tons (45%) by 2031—equivalent to doubling production from the top four copper-producing countries. Demand for lithium, nickel, and cobalt (the core battery metals) is expected to increase by 8x, 2x, and 1.8x, respectively. And the availability of rare earth metals (a crucial components of electric motors) will need to double.