Rising demand for clean energy is driving growth in the critical minerals market. However, more work is needed to ensure diversified and sustainable mineral supplies, warns the International Energy Agency (IEA).

The market for minerals that help power electric vehicles (EVs), wind turbines, solar panels and other technologies key to the clean energy transition has doubled in size over the past five years, according to the IEA’s new critical minerals market report.

Published alongside a new online data explorer, the report shows that record deployment of clean energy technologies is propelling huge demand for minerals such as lithium, cobalt, nickel and copper. From 2017 to 2022, the energy sector was the main factor behind a tripling in overall demand for lithium, a 70% jump in demand for cobalt, and a 40% rise in demand for nickel. The market for energy transition minerals reached $320bn in 2022 and is set for continued rapid growth, moving it increasingly to centre stage for the global mining industry, says the IEA.

In response, investment in critical mineral development rose 30% last year, following a 20% increase in 2021. Among the different minerals, lithium saw the sharpest increase in investment, a jump of 50%, followed by copper and nickel. The strong growth in spending by companies on developing mineral supplies supports the affordability and speed of clean energy transitions, which will be heavily influenced by the availability of critical minerals.

‘At a pivotal moment for clean energy transitions worldwide, we are encouraged by the rapid growth in the market for critical minerals, which are crucial for the world to achieve its energy and climate goals,’ comments IEA Executive Director Fatih Birol. ‘Even so, major challenges remain. Much more needs to be done to ensure supply chains for critical minerals are secure and sustainable.’

If all planned critical mineral projects worldwide are realised, supply could be sufficient to support the national climate pledges announced by governments, according to the IEA’s analysis. However, the risk of project delays and technology-specific shortfalls ‘leave little room for complacency’ about the adequacy of supply. And more projects would in any case be needed by 2030 in a scenario that limits global warming to 1.5°C, warns the IEA.

Diversity of supply also remains a concern, with many new project announcements coming from already dominant countries, such as China. Countries are seeking to diversify mineral supplies with a wave of new policies that aim to ensure adequate and sustainable mineral supplies. Such initiatives include the European Union’s Critical Raw Materials (CRM) Act, the US Inflation Reduction Act (IRA), Australia’s Critical Minerals Strategy and Canada’s Critical Minerals Strategy, among others.

The IEA’s critical minerals policy tracker identifies nearly 200 policies and regulations across the globe, with over 100 of these enacted in the past few years. Many of these interventions have implications for trade and investment, and some have included restrictions on import or export. Among resource-rich countries, Indonesia, Namibia and Zimbabwe have introduced measures to ban the export of unprocessed mineral ore. Globally, export restrictions on critical raw materials have seen a fivefold increase since 2009, notes the IEA.

New energy economy emerging faster than many think
Meanwhile, although rapid progress of key clean energy technologies shows the new energy economy is ‘emerging faster than many think’, momentum in solar, EVs and heat pumps ‘needs to expand quickly across more countries and to other parts of the energy system to move the world closer to net zero by 2050’, says the IEA in its latest report tracking clean energy progress.

The analysis reveals significant gains in the past year. Electric car sales reached a record high of more than 10mn in 2022, a nearly tenfold increase in just five years. Renewable electricity capacity additions rose to 340 GW. As a result, renewables now account for 30% of global electricity generation. Investment in clean energy reached a record $1.6tn in 2022, an increase of almost 15% from 2021, ‘demonstrating continued confidence in energy transitions even in an uncertain economic climate’, says the IEA.

The transition to clean energy is occurring at different speeds across regions and sectors, however. For example, nearly 95% of global electric car sales in 2022 took place in China, the US and Europe. ‘Stronger international cooperation is needed to spread progress on electric cars and other key technologies to all regions, particularly emerging and developing economies,’ notes the IEA.

Clean energy deployment is also occurring faster in some parts of the energy system – such as electricity generation and passenger cars – where costs have fallen and technologies are already relatively mature. Meanwhile, rapid innovation is still needed to bring to market clean technologies for parts of the energy system where emissions are harder to tackle, such as heavy industry and long-distance transport.

While progress can be observed across all of the 50-plus components of the energy system evaluated in the report, the majority are ‘not yet on a path consistent with net zero emissions by 2050’, it warns. ‘Stronger policy support and greater investment are needed across a wide range of different technologies, in all regions of the world, to enable a broader and faster shift towards clean energy to keep net zero emissions by 2050 within reach,’ concludes the IEA.

Extracted from Energy Institute website, read more here

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