The shift to renewable energy sources and electrified transportation represents a megatrend, a global seismic shift in energy production, storage and consumption.
But dark clouds form, clouds reminiscent of another time.
The United States has turned the supply chain for that future over to offshore suppliers of the critical materials used in the megatrend’s workhorse, the lithium-ion battery. These include lithium from South America and Australia; cobalt, mainly from the Democratic Republic of the Congo; Nickel, copper, phosphate and manganese from countries where relations could deteriorate overnight. Nickel from Russia, for example, has disappeared from the market because of the country’s invasion of Ukraine.
Another concern is China’s role in processing these materials, many of which end up in Chinese-made batteries. Australian mines produce just under half of the world’s lithium supply, but most of it is exported directly to China for processing.
Another concern is that many mines that produce critical materials have been bought by the Chinese. China’s role in the global supply of essential goods is ubiquitous. Whether they come from Africa, South America or elsewhere in Asia, China is present.
As attendees heard at a virtual press conference I organized and moderated for the United States Energy Association last month, the relentless growth in demand for lithium-ion batteries has put severe pressure on the supply chain. Lithium-ion batteries owe their enormous demand to their low weight. There is currently no transportation alternative that offers the portability of these batteries.
But when it comes to useful storage of electricity where weight is not an obstacle, some technologies are in the wings. One, the flow of iron, is only being held back by domestic supply chain issues, according to Eric Dresselhuys, president of ESS Inc., a leader in long-term energy storage. This technology has other advantages, as the drawdown time is longer than the two to four hours of a lithium-ion battery. The drawdown is eight to 10 hours, and all components are domestic, according to Dresselhuys.
Another storage technology is the old replacement for starting cars: the lead-acid battery. John Howes, President of Redland Energy Group, points out that lead-acid has many advantages for stationary applications, one of the most important of which is that there is a complete recycling system – something that is still in its infancy with lithium-ion plugged. Obviously there are weight issues with lead-acid batteries and iron batteries, but these are not relevant to utility storage – vital for wind and solar power.
At the height of the energy crisis in the 1970s, I once asked the President of Gulf Oil over dinner if the oil industry had ever consulted with the auto industry about expected future demand for gasoline. His answer: “No.”
Out of curiosity, I looked into the topic and asked car manufacturers if they had ever asked petroleum companies if there was enough fuel for their cars. Detroit’s answer: “No.”
Both parties came with the expectation that the other would be there, playing their complementary roles: oil companies producing enough products to meet the demand of an ever-growing number of internal combustion engines.
These parties, with everything at stake, relied on the invisible hand of the market to care for each other in a synchronized symbiosis. With a few tricky spots, this has worked since the early days of the automobile.
Everything collapsed when a third and unexpected force shook the market: the Arab oil embargo. This not only caused an immediate shift in supply and demand, but also pointed to underlying resource issues.
The demand for lithium-ion batteries should keep up. In a recent study, McKinsey & Co. predicted stress, but there is hope that new lithium mining techniques may help alleviate the possible deficiency.
McKinsey sees a huge surge in demand this decade without allowing for disagreements among nations and geopolitical disruption.
The assumption was that there would be enough lithium-ion batteries to carry the charge. Now comes a reckoning, also triggered by a political action like the Arab oil embargo.
There hasn’t really been a replacement for oil, but there are many better technologies and innovative companies working hard to find alternative batteries. That’s going to take time.
In the short term, your electric vehicle can cost more than it should and it can be difficult to get hold of one.