Home / Notes / Minerals for Renewable Energy

Minerals for Renewable Energy

Notes on the use of minerals in batteries and renewable energy technologies.

climate


It seems likely to me that a huge amount of growth in the next few decades will be driven by progress in the renewable energy sector. Technologies such as solar, wind and electric batteries all require a huge amount of minerals in order to develop these new materials. This seems to present a good investment opportunity, so I’m exploring which minerals are the most important for future technologies, how they are used and what order of magnitude of growth each mineral is likely to experience in terms of market share and return-on-investment.

The following is a ranked list of most-to-least[1] important battery minerals:

  1. Nickel
  2. Lithium
  3. Cobalt
  4. Copper

Electric Vehicle (EV) batteries within the auto sector were typically dominated by a nickel-cobalt-manganese (NCM) cathode chemistry of 1-1-1. Including more nickel to boost energy density and extend driving range, automakers shifted to 5-3-2 and 6-2-2 ratios. Now, a ratio of 8-1-1 is being considered, meaning there is a growing amount of demand for nickel in EV batteries.

Although cobalt can be said to be better than nickel ‘across the board’, it is more expensive ($80/kg vs $30/kg for nickel) and the supply is dominated by the Democratic Republic of Congo, where political instability is high and children are used as labour. This high geographical concentration of production and the associated human rights issues make nickel a better reputational choice and more stable mineral for future cathode chemistry.

Lithium outperforms the rest of the options as an anode material and is ‘remarkably better than the next-best material’. This next-best alternative is sodium, which produces less energy output and weighs three times as much. Sodium is likely to work ok in stationary applications but not in applications where size and weight are at a premium, such as electric vehicle batteries.

Demand for lithium is brand-new, as there was really no baseline market prior to its use in batteries. Current production of lithium is around 50ktpa and needs to go to around 2.5Mtpa—a requirement of 50x increase of production. Currently, the source of most lithium deposits is in the form of brines; salty, subsurface water which is pumped directly out of the ground and evaporated in a series of ponds to sequentially increase the concentration of lithium, until being processed in a chemical plant to produce lithium carbonate, lithium hydroxide, and lithium chloride[2].

Copper is the workhorse of modern energy technologies and exists in every electric motor (batteries are, simply put, copper wire around magnets). As opposed to lithium, demand for copper has existed for thousands of years. Current total mine production sits at around 25Mtpa and needs to grow to around 60Mtpa at current estimates—a 2.4x increase. This is dwarfed by the increase required by lithium but is still a meaningful amount given the magnitude of existing production levels.

  • Copper

    • Workhorse - in every electric motor (batteries are copper wire around magnets)
    • EVs require 3x mass of copper compared to combustion car
    • Principal electron carrier in all electricity applications
    • Need $5 trillion of new ‘discoveries’ of copper, to fully electrify light-duty vehicle fleet, not including renewable energy buildout and electricity distribution
    • Current total mine production is 25 mega tonnes per year. Needs to grow to 60 mega tonnes (25Mtpa → 60Mtpa) (needs to 2.4x)
    • 3rd most conductive material, outside of gold and silver (which are obviously not going to be used in electricity networks)

  • Lithium

    • Active anode material in batteries
    • Remarkably/shockingly better than the next-best anode material
      • Wants to give up it’s electrons & is super light
      • High free energy of reduction (electron leaves with a lot of energy)
      • Second-best anode material is sodium (less energy out and weighs 3x as much) - will work ok for stationary applications but not mobile applications like car batteries
    • Brand-new need
    • Had no baseline market as before batteries it was not really needed
    • Current production is 50ktpa, needs to go to 2.5Mtpa (needs to 50x)
    • Market opportunity for lithium discoveries is actually the same order of magnitude as copper
    • Confidence that Lithium price will stay elevated in the long run
    • Lot of growth in production due to high-concentration brines
    • 3 categories of Lithium deposits
      • Brines - salty water in subsurface which is pumped, separate lithium
        • Responsible for most growth in the last decade - predominantly south america (high concentration = 500-1000ppm)
        • All at high-concentration brines are at high elevations due to increased evaporation of groundwater
      • Pegmatite/hard rock - mining operation with high concentration of Lithium
      • Clay - rather than volcanic, these are highly weathered sediment rock. Not a source today, may be a source in the future but currently expensive to process.
    • Supply may be exceeding demand in the near- to medium-term

  • Nickel

    • A reasonable second for what Cobalt does best
    • For when electrons reach the cathode
    • Nickel and Cobalt really want to take electrons
    • Need to form stable crystal structure with Lithium
    • Indonesia (largest producer) produce from laterites so it is high-cost compared to Russia (second-largest producer)
      • Could argue Russia produce Nickel for a negative dollar amount, as the Palladium they mine alone could cover the cost of the Nickel. 15% of the world Nickel supply.
        • Remarkable geological deposit
        • Likely to be disrupted in the future due to geopolitical conflict
    • Nickel is ‘in the money’ for projects in the future

  • Cobalt

    • Better than Nickel across the board apart from:
      • Price -
        • cobalt $80/kg
        • nickel $30/kg
          • More existing supply of Nickel, cobalt is not diversified (almost all in Democratic Republic of Congo [DRC])
    • Used in iPhones but not in EVs, due to the amount required

  • Rare Earth Elements (REEs)

    • Set of materials that make powerful, permanent magnets work
    • Less of a supply challenge than the others
    • More of a geopolitical and environmental challenge
    • Sufficient amounts identified in reserve, no further discovery needed
      • A lot of reserves in China and Vietnam
      • Most processing is nasty and is done in countries that are not first-world

  • Aluminium

    • Long-distance transmission lines use aluminium because it’s cheaper than copper
    • 60% of the conductivity of copper

  • Discovery means finding the ‘source’ of minerals

    • Getting worse at exploration effectiveness, 6x worse than a generation ago meaning more $ spent per mineral discovered
      • Industry has chronically underinvested into discovery R&D

  • Importance ranked

    • Nickel
    • Lithium
    • Cobalt
    • Copper

Footnotes

  1. ^ Based on an episode from Catalyst Podcast: ‘The big rush for battery metals’
  2. ^ Wikipedia: Lithium