Podcast Summary
Battery Metals: A Limiting Factor for EV Adoption: The rising prices of battery metals, such as lithium, cobalt, and nickel, could become a bottleneck for EV adoption. These metals are essential for battery chemistries and their supply may become a limiting factor for the battery revolution and the energy transition.
The prices of battery metals, particularly lithium, cobalt, and nickel, have seen significant increases in 2021 and continue to rise, causing concerns about becoming a bottleneck for electric vehicle (EV) adoption. These metals are crucial for battery chemistries, with copper, nickel, lithium, cobalt, and rare earth elements being the most important. The market value of companies with mining assets or new technologies to unlock these metals has skyrocketed. The supply of these metals may become a limiting factor for the battery revolution and the energy transition. The conversation around battery metals and their potential impact on the EV market is gaining mainstream attention, with auto OEMs securing supply deals and Elon Musk commenting on lithium prices. The next decade in climate tech is expected to see a lot of development in this area, as the demand for individual metals may be affected by changing battery cell chemistries. Kurt House, CEO and co-founder of Cobalt Metals, joins the episode to discuss the importance of these metals and the potential solutions to ensure a sustainable supply.
Copper and Lithium: Essential Elements in the Energy Transition: Copper, a key component in all electricity applications, needs significant new discoveries to meet the demands of electrification. Lithium, the anode material in lithium-ion batteries, experiences massive growth due to the electrification trend, necessitating new discoveries for energy storage.
Copper and lithium are crucial elements in the energy transition due to their essential roles in electricity applications and electric vehicles respectively. Copper, a $100 billion global market, acts as the principal electron carrier in all electricity applications, from EVs to wind turbines. The growing demand for electrification necessitates significant new discoveries of copper, estimated to be around $5 trillion, to meet the transition's demands. Lithium, the anode material in lithium-ion batteries, is remarkably better than other anode materials due to its lightweight and high electropositivity, making it an ideal choice for energy storage. While copper is a well-established market, lithium's existing market was much smaller before the rise of lithium-ion batteries. As a result, the growth trajectories for these elements differ significantly. Copper production currently stands at around 25 megatons a year and is projected to grow to 60 megatons by mid-century. In contrast, lithium's growth is driven primarily by the electrification trend, necessitating substantial new discoveries to meet the demands of the energy transition.
The Importance of Lithium and Other Elements in the Energy Transition: Lithium and essential elements like copper, nickel, and cobalt are crucial for the energy transition due to their use in batteries. Production of lithium needs to increase significantly to meet demand, and its value is estimated to be similar to copper. Nickel and cobalt are also essential for battery function and have growing demand.
The demand for lithium and certain other elements, like copper, is expected to grow exponentially due to the energy transition. While current production of lithium is only a small fraction of copper production, the need for lithium in batteries is crucial and virtually impossible to substitute with other materials. Lithium production needs to increase by a factor of 30 or more by mid-century to meet the demand for batteries. Interestingly, the total value of new lithium discoveries is estimated to be around the same order as copper, which has implications for market structure and incumbent companies. Nickel and cobalt, which are used in the cathodes of batteries, are also essential due to their ability to form a stable crystal structure with lithium and their electronegativity. These elements play a crucial role in the functioning of batteries, and their demand is expected to grow significantly as the world transitions to renewable energy sources.
Battery Performance vs Cost: Optimizing Cathode Materials: Battery chemistry optimization involves balancing performance and cost through the choice of cathode materials, such as NMC and LFP, with nickel offering cost savings but cobalt providing better performance.
The choice of materials in battery chemistry, specifically cathode materials, plays a crucial role in battery performance and cost. The current workhorses in cathode chemistry for batteries are NMC (nickel, manganese, cobalt) and LFP (lithium iron phosphate). Cobalt is preferred for its performance, but nickel is a more cost-effective alternative due to its more diversified and abundant supply. The price of cobalt is currently much higher than nickel, making it less economical for large-scale applications like electric vehicles (EVs). The battery chemistry in devices like smartphones, which have smaller batteries and lower costs, may not include nickel due to cost considerations. The battery design prioritizes performance over cost, and the addition of nickel to the battery would significantly increase the cost without a proportional increase in performance. Therefore, battery chemistry is optimized based on performance, cost, and the specific application.
Elements crucial for renewable energy and electric vehicles have varying supply dynamics: Nickel and cobalt can replace pure cobalt in batteries, but demand specifications vary. Copper is widely used in electrical wiring, while aluminum is lighter for lightweight structures. Rare earth elements are less of a supply concern but have processing challenges and geopolitical tensions.
While certain elements like lithium, nickel, cobalt, and copper are crucial for the production of batteries and other renewable energy technologies, the supply dynamics of each differ. Nickel and cobalt, when blended, can perform nearly as well as pure cobalt batteries, but demand specifications vary. Copper, the third most conductive element, is widely used in electrical wiring, while aluminum, though less conductive, is lighter and used in lightweight structures like electric vehicles and planes. Rare earth elements, though called "rare," are less of a supply concern due to identified reserves, but processing challenges and geopolitical tensions make their extraction complex. Prices for lithium, nickel, and cobalt have surged in recent years due to increased demand for renewable energy and electric vehicles, with nickel seeing particularly wild price swings related to Russian production.
Norilsk's Nickel Production: Lowest Cost Despite High Demand: Norilsk's nickel production is the cheapest in the world due to large amounts of palladium co-production, but long-term demand for nickel requires a significant increase in production. Meanwhile, lithium market also faces potential crunch due to high demand from electric vehicles.
The Nickel production from Russia, specifically from the Norilsk complex in Siberia, is the lowest cost producer in the world, despite being the second largest producer behind Indonesia. Indonesia's high cost production comes from laterite deposits, which have high processing costs, around $15-$25 per kilogram. On the other hand, Norilsk's nickel production is so cheap that it could be argued to have negative costs due to the large amounts of palladium extracted from the same deposit, which pays for the nickel production even if someone would pay to take it away. However, recent events, such as the Russian invasion and the resulting LME shutdown, have caused nickel prices to spike. While prices may stabilize in the short term, the long-term demand for nickel, especially with the shift towards electric vehicles, requires a significant increase in production by a factor of 4 or 5 by mid-century. In contrast, the lithium market is also experiencing high demand due to the electric vehicle industry, and prices are expected to stay elevated in the long run due to constant demand pressure. The short term may see sufficient supply to meet demand, but the long-term outlook still suggests a potential lithium crunch and the need for new discoveries.
Lithium Production Growth from Brines May Slow Down: The high cost of producing lithium from brines and potential supply disruptions due to geopolitical issues may slow down the growth in lithium production.
The growth in lithium production, particularly from high concentration brines, may not continue at the same pace as in the past due to unique and costly production circumstances. Lithium deposits come in three main categories: brines, pegmatites, and clays. Brines, which are salty water containing dissolved lithium, have been the primary source of growth in recent years, with most of these deposits located at high elevations due to natural evaporation processes. However, producing lithium from high concentration brines is expensive because it requires processing large amounts of water. As a result, new supply from this source has slowed down, and there are concerns about potential supply disruptions due to geopolitical issues in countries like Chile. While clays, another type of deposit, contain large amounts of lithium, it is currently not economical to extract it on a large scale. Therefore, the energy transition may face challenges in keeping up with the demand for lithium at the same rate as before.
Lithium dominates battery anodes, but alternatives like sodium could be viable for grid storage and larger format transportation.: Lithium remains the best material for battery anodes in light-duty vehicles, personal electronics, and aircraft due to high energy density. However, sodium and other materials could be cost-effective alternatives for grid storage and larger format transportation.
Lithium is currently the best material for battery anodes due to its unique properties, and it will likely remain the dominant choice for light-duty vehicles, personal electronics, and aircraft where energy density is crucial. However, for grid storage and larger format transportation, other materials like sodium could be viable alternatives due to their lower cost and weight. On the cathode side, nickel and cobalt are currently the best performers, but iron phosphate, which is abundant, cheap, and widely used, is a strong contender for cost-effective batteries. The future of battery chemistry will depend on the balance between cost and performance for specific applications, and discoveries of new materials that can match or surpass the properties of lithium, nickel, and cobalt will be essential to meet future demand.
Advantages of Iron Phosphate Batteries: Iron phosphate batteries have long cycle life and stability, but their use in EVs results in decreased range, acceleration, and increased weight. Recycling used batteries is a promising solution for the circular economy, but may not meet future demand due to limitations of the fossil fuel economy.
While iron phosphate batteries have a lower energy density compared to nickel or cobalt batteries, they offer significant advantages in terms of long cycle life and stability. However, the use of iron phosphate batteries in EVs results in a loss of range, acceleration, and increased weight. Recycling used batteries to extract minerals for new ones is an exciting prospect for the circular economy, but it may not meet the entire future demand due to the limitations of the fossil fuel economy, which cannot be circular in nature. The focus should be on the most effective use of resources and capital, rather than expensive and ineffective technologies like direct air capture.
Transitioning to a renewable energy economy with a focus on battery usage: Significant time and resources are required to transition to a renewable energy economy with a focus on battery usage due to current limitations of battery recycling and growing demand for new batteries. The shift to a circular economy where recycling plays a larger role will take around 50 years.
Transitioning to a renewable energy economy with a focus on battery usage will require significant time and resources due to the current limitations of battery recycling and the growing demand for new batteries. The batteries themselves do not come from the batteries but from other sources, and the process of recycling is not yet at a point where it can fully meet the demand. Additionally, the cost optimization of recycling is heavily influenced by commodity prices. The transition to a circular economy where recycling plays a larger role will take around 50 years. This shift is exciting as it represents a move away from an extractive economy, but it will come with challenges such as the need to mine more materials to meet current and future demand. Geopolitical considerations also come into play as countries like Russia and China are key players in the supply of certain minerals essential for batteries.
Challenges in sourcing key minerals for electric vehicle batteries: Despite potential for local production, challenges in transitioning to a circular economy and reliance on DRC for cobalt pose hurdles in sourcing key minerals for electric vehicle batteries.
While North America and Europe have the potential to increase domestic production of key minerals like nickel, cobalt, and lithium, the transition to a circular economy and the current reliance on countries like the Democratic Republic of Congo for cobalt pose challenges. The circular economy reduces dependence on imported materials, but during the transitionary period, sourcing materials from various countries is necessary. North America and other Western countries have significant potential for mining these minerals, with major developments in Arizona for copper and Australia for various minerals. However, the reliance on cobalt from the DRC, particularly due to human rights concerns and security of supply, is a significant challenge. As for future growth, discoveries of new mineral deposits will be crucial to filling the production pipeline after existing known deposits are developed.
Decline in exploration effectiveness in mining industry: Eroom's law results in fewer major mineral discoveries per exploration dollar spent, necessitating industry investment in R&D and new approaches to find elusive deposits for copper, lithium, nickel, and other essential minerals
The mining industry has been facing a decline in exploration effectiveness, which is making it increasingly difficult and expensive to discover new mineral deposits. This phenomenon, known as Eroom's law, has resulted in a significant decrease in the number of major mineral discoveries per dollar spent on exploration over the past 30 years. The easy-to-find deposits, such as outcrops and geochemical anomalies, have largely been exhausted. The industry's underinvestment in exploration and exploration technology has worsened the situation. Nickel, lithium, cobalt, and copper are crucial minerals, each with unique challenges and opportunities. Copper, with the largest existing market, and lithium, which will have the most impact in the near term due to the expansion of the electric vehicle industry, are prioritized. Nickel, though essential, faces challenges due to the high cost and local impacts of its laterite deposits. The industry is focusing on finding nickel sulfide deposits, which are lower cost and have less local impact, but are much harder to discover. Overall, the industry must invest heavily in R&D and new approaches to find these elusive deposits and meet the growing demand for these essential minerals.
Exploring climate change solutions with industry experts on The Postscript podcast: Listeners can tune in to The Postscript podcast to gain insights from climate change experts across various sectors and submit questions using #askcatalyst. The podcast is supported by Prelude Ventures and covers topics like advanced energy, food and agriculture, transportation, advanced materials, and advanced computing.
The Postscript podcast, hosted by Shail Khan, covers various topics related to climate change with industry experts. Listeners are encouraged to submit questions using the #askcatalyst hashtag on Twitter or LinkedIn, and to leave ratings and reviews or share episodes with friends. The podcast is supported by Prelude Ventures, a venture capital firm investing in entrepreneurs addressing climate change across sectors like advanced energy, food and agriculture, transportation and logistics, advanced materials and manufacturing, and advanced computing. To learn more about each episode's topic and guest, check the show notes on canarymedia.com. The podcast is produced by Daniel Waldorf, Dalvin Abouadji, and Steven Lacy, with mixing by Greg Villefranc and Sean Marquand, and features a theme song by Sean Marquand.
