"Mark Mills: The energy transition delusion: inescapable mineral realities" Summary

The Energy Transition: A Minerals and Mining Perspective

• The world is at a pivot point in energy, transitioning towards what is broadly termed the "energy transition."

• The core challenge of this energy transition lies not in aspirations or structural possibilities, but in the availability of minerals and mining resources.

• The aim of global energy policies is, in essence, to emulate Norway's success in renewable energy adoption.

  • In Norway, 80% of new car purchases were electric vehicles.

  • 90% of electricity comes from renewables.

  • Half of its primary energy is from renewables.

Norway's Advantages

• Norway is significantly wealthier than the global average (700% wealthier) and wealthier than America (30-40% per capita).

• It benefits from exporting approximately 25,000 per capita in oil and gas.

• Hydro dams, a primary renewable energy source in Norway, have a longer lifespan and produce more energy per dollar invested.

  • Machinery lasts four times longer than windmills and solar arrays.

  • They produce four times more energy per dollar of capital invested.

  • This results in a 16-fold energy economics advantage per unit of power.

Mineral Requirements for Energy Transition

• Building machines to replace combustion turbines requires significantly more minerals.

  • 3000\% more minerals to deliver the same unit of power.

• Electric vehicles need significantly more minerals and metals than conventional cars.

  • 400\% more minerals and metals to deliver the same vehicle.

Energy Delivered vs. Power

• Hydro dams operate more consistently than windmills and solar arrays.

  • Hydro dams produce energy more than 90\% of the time.

• Adjusting for energy delivered, the mineral requirements are even higher.

  • 2,000\% to 7,000\% increase to deliver the same energy service.

Implications of Increased Mineral Demand

• Organizations like the IEA and the Finnish Geological Survey have studied the implications of increased metal demand.

• There is a significant increase in demand for key minerals.

  • Cobalt is still relevant due to its energy density, even with attempts to minimize its use.

Magnitude of Increase in Metal Demand

• Changes in commodity markets are significant even at 5\% to 10\%. The energy transition demands a much greater shift.

• Demand increase ranges from 700\% to 4000\% in total metal supply.

• This would be the largest single increase in metal demand or supply in human history.

Mining Sector Possibilities

• The feasibility of the energy transition hinges on the mining sector's ability to increase production.

• The question is whether the world can increase metal production by 700\% to 7000\% in the next decade or two.

Total Material Extraction

• Humanity extracts, moves, and processes about 100 gigatons of materials annually.

  • This is a significant increase from 25 gigatons 50 years ago.

• The energy transition involves shifting from liquids and gases to solids, increasing the material extraction for energy supply.

• The future energy system could require material quantities equal to or greater than all other human activities combined, which may not be feasible.

Mining Realities

• The world is currently not mining enough materials to meet transition demands.

Copper Shortage

• Demand for copper from the energy transition exceeds the available supply.

• The world will face a copper shortage in the near future.

Consequences of Copper Shortage

• S&P study suggests that copper shortage could short circuit the energy transition.

• Copper is irreplaceable for electrical purposes, except for aluminum in high-voltage transmission lines.

Shortage Across Metals

• Similar shortages are expected in lithium, cobalt, nickel, and aluminum.

• The IEA estimates that hundreds of new mines are needed.

Time to Open New Mines

• The average time to find and open a new mine is about 16 years.

• Even with immediate investment, it will take over a decade to see new mines operational.

Investment in Mining

• Global mining investment is not meeting the required levels for expansion.

• Current investment is significantly lower than what is needed to meet the aspirations of the energy transition.

Geopolitical and Social Aspects of Mining

• Mining activities are concentrated in Sub-Saharan Africa, South America, and Asian nations.

• Expanding mining in these regions raises social, environmental, political, and economic challenges.

China's Role in Mineral Refining

• China is the world's largest refiner of energy minerals.

• China's market share in global energy minerals refining is more than double OPEC's market share in oil markets.

Inflationary Pressure on Metals

• Increased demand without sufficient supply will lead to inflation.

• The energy transition will put pressure on metals, causing them to reach historic price levels for an extended period.

Impact on Energy Transition Costs

• Rising metal prices will impact the cost of wind, solar, battery, and EV prices.

• The decline in the cost of energy transition machines has ended, and prices are rising.

Material Costs in Manufacturing

• Approximately 80\% of the cost of fabricating an electric battery is in the materials.

• For solar modules, about 80\% of the cost is the purchase price of materials.

• Wind turbines material cost is about 30\%.

Metal Composition in Electric Vehicles

• An electric vehicle requires a range of metals, including aluminum, steel, nickel, and cobalt.

• The cost of metals for a single EV was around $4,000 before inflation and has doubled to about $8,000.

• The input cost for metals in a conventional vehicle is less than half of an EV.

Carbon Dioxide Emissions

• Manufacturing electric vehicles consumes energy. The 20-25 barrels of oil equivalent of energy during manufacturing are almost entirely hydrocarbons globally.

Life Cycle Emissions

• Electric vehicles emit about 14 tons of CO_2 during manufacturing, compared to 5 tons for conventional vehicles.

• Net reduction in CO_2 emissions occurs after about 60,000 miles of driving with an electric vehicle in the European grid.

• The notion that it's a zero-emissions vehicle is a myth.

• Smaller Battery sizes reduce the associated emissions. But the grid which the electricity is derived from plays a crucial roll in overall emissions.

Battery Chemistry

• Changing battery chemistry does not significantly alter the quantities of materials required.

• A typical electric vehicle battery weighs about half a ton and requires about 250 tons of mined materials.

Technology Advancement

• The cycle from new chemistry to scaled industrial batteries takes decades, not years.

• Lithium chemistry was discovered in the mid-1970s but wasn't commercialized until the early 1990s, and large scale production took place almost 20 years later.

The Iron Law of Ore Grades

• Ore grades are declining, especially for high-value metals like copper and nickel.

• Lower ore grades mean more material must be mined to obtain the same amount of metal.

• Approximately, the typical copper ore grades are at 1\%, thus requiring a ton of ore to get 20 pounds of copper.

Energy Consumption and Ore Grades

• The energy consumed per pound of copper increases exponentially as ore grades decline.

• The exponential energy requirements cause significant challenges.

The Macro Aspirational Challenge

• The energy transition should focus on supplementing hydrocarbons and minimizing their use, rather than entirely replacing them.

• The transition should aim for economic efficiency, environmental tolerance, and affordability.

Global Energy Demand

• The world needs more energy every year, with few periods of absolute decrease in energy demand.

• Efficiencies increase demand by reducing costs, accelerating energy consumption.

Technology Trends

• A technological pivot is currently underway, promising economic boom with technology revolutions across information, material science, and machines.

• This requires more energy and diversified energy forms.

Energy Demand and Inventions

• Inventions drive energy demand like cars and computers.

• Robots eat too, they consume energy in manufacturing and in the operation.

• Stock pickers will thrive in this complicated future.