Happy new year, 2023! (I know I’m a bit late. Only when I went on vacation did I realize how tired I had been. I took a good break and am fully ready for this exciting year. Remember to take care of yourself!💚)
It’s amazing to see so many new Survivaltech.club readers - we are now +2200 deeptech climate innovation enthusiasts. Welcome!
💰 I made my first angel investment in a deeptech climate startup!
More on my first investment later. If you are a deeptech climate startup looking for a well-connected and climate + deeptech knowledgable angel, hit me up.
💚The energy transition loves rocks
The energy transition from fossil fuels to clean and renewable power-generating technologies is on its way. This transition is surprisingly very metals-intensive.
A typical EV requires 6x more mineral inputs than a conventional internal combustion engine car does. An EV’s lithium-ion batteries require lithium, cobalt, and nickel, while its electric motor needs copper and rare earth elements like neodymium.
Similarly, clean power-generating technologies, like wind power and solar PV, require more minerals to produce one energy unit than fossil fuel-based technologies. An onshore wind plant takes in 9x more mineral resources than a natural gas-fueled power plant. This analysis doesn’t even consider the massive use of steel when building solar and wind plants.
If the world aims to reach net zero by 2050, clean energy technologies will require 6x more mineral inputs in 2040 compared to 2020! That’s over 40 Mt of minerals.
📉The risk of mineral shortage and delay in the energy transition
As the energy transition accelerates and dramatically grows the demand for several minerals, the risk of mineral shortages arises.
IEA states that “today’s supply and investment plans are geared to a world of more gradual, insufficient action on climate change”.
The below graph shows how today’s supply and investments are not inline to limit the global warming below 2°C. The red line (SDS) shows the demand for a certain mineral in the IEA Sustainable Development Scenario that is inline with the Paris Agreement. The yellow line shows a gradual implementation of energy technologies, insufficient for tackling the climate crisis.
🌎Critical minerals and their use in climate tech
There are five minerals that are regarded as critical:
Rare earth elements (REEs)
To understand why these minerals are essential for the energy transition, let’s briefly see their use cases in climate technologies.
Copper is the workhorse of the energy transition.
Alongside aluminum, copper is widely used in wires and cables in the electricity network. The electricity network, in turn, must be expanded rapidly during the following decades, as more renewable power generation is built and more energy end usage like transporation and heating are electrified.
Copper is also a key element of electric motors used in EVs and generators used in wind turbines.
2. Lithium, 3. Cobalt, 4. Nickel
Lithium, cobalt, and nickel are all battery metals. They are a lithium-ion battery’s active cathode materials. [If you are new to the world of batteries, check out this intro video to lithium-ion batteries.]
It is noteworthy that different cathode chemistries use different amounts of these minerals. Thus, the future demand for these battery metals may vary depending on the lithium-ion battery chemistries.
For example, nickel manganese cobalt oxide (NMC) 111 lithium-ion batteries use 8x more cobalt but half of the nickel that nickel cobalt aluminum oxide (NCA+) batteries use. Some cathode chemistries like lithium iron phosphate (LFP) don’t require either or cobalt, but 50% more copper than NMC batteries.
Cathode chemistry is moving toward nickel-rich chemistries away from cobalt-rich ones. Some of the reasons for this expected shift are cobalt’s volatile prices and the supply chain’s ethical concerns.
5. Rare earth elements (REEs)
REEs are a group of 17 metals and include elements, such as neodymium, praseodymium, dysprosium, and terbium.
The most important use case of REEs is permanent magnets. Permanent magnets are used in electric motors in EVs and generators in wind turbines. REEs are also used in catalytic converters of conventional cars to remove pollutants.
🪨Characteristics of critical minerals
What makes copper, lithium, cobalt, nickel, and REEs critical? Why aren’t we worried about the availability of steel, which solar and wind plants also need?
The answer lies in three characteristics of critical minerals:
A massive future ramp-up of production
Geographically concentrated production
Declining quality of natural resources
Note that not all of these characteristics apply to all critical minerals.
1. A massive future ramp-up of production
The production of the most critical minerals needs to be increased drastically over the coming decades.
The demand for lithium is expected to grow by 42x between 2020 and 2040. The demand for other battery metals, cobalt and nickel, is also forecasted to increase by 21x and 19x, respectively.
The production of critical minerals is more geographically concentrated than that of fossil fuels.
This concentrated production of critical minerals raises geopolitical concerns.
China holds a strong position in the production of critical minerals. It controls the production of REEs with a nearly 90% share and has a high share of processing other energy transition metals, such as lithium and cobalt. China has already used its power as a key critical mineral producer. In 2010, China halted all its rare earth exports to Japan.
Another clear dependency is found in cobalt. The Democratic Republic of the Congo (DRC) accounts for around 70% of cobalt extraction.
Critical minerals will likely become the next oil - a natural resource fundamental for powering societies and causing geopolitical tension.
3. Declining quality of natural resources
Copper resources are adequate but suffer from the declining quality of ore.
For example, the ore quality in Chile declined by 30% during the past 15 years. Chile has the highest share of copper extraction. Extracting copper from lower-quality ore requires more energy and creates more waste.
🚀The role of startups in ensuring sufficient energy transition metals
While exploring energy transition metals and related challenges, I discovered four ways in which startups can ensure that critical minerals are available for the energy transition:
1. Increase the supply of critical minerals from new resources