The world is heading towards a turbulent period of energy transition where constraints on the supply of critical materials are increasingly likely to slow progress, according to a new study.
US consultancy firm McKinsey & Co forecast shortages of critical minerals in both high and low-paced energy transition scenarios and found that access to materials will slow the delivery of wind turbines and solar panels while also restraining output of electric vehicles.
In the case of dysprosium, a rare-earth element used in many electric motors, there is a risk of falling in supply as much as 70%, according to the new McKinsey report.
For one of the higher volume minerals, nickel – used in lithium-ion batteries – is expected to fall between 10% and 20% behind demand by 2030, McKinsey found.
The report suggested that the approximately 500 cobalt, copper, lithium and nickel mines operating today will need to increase output by between 40% and 80% to meet demand for batteries.
McKinsey estimates that between $3tn and $4tn of investments in mining, smelting and refining are needed to meet the decrease in supply, with annual spending demands for $300-$400m some 50% higher than last decade.
”Because it typically takes five to 15 years—depending on the material, project characteristics, and regulatory environment—to develop new deposits from exploration to mining operations, temporary materials shortages could occur if demand growth outpaces initial industry expectations,” the report stated.
Geopolitical tensions were also evident this week when China retaliated against US-led restrictions on sales of semiconductor technology by restricting its own exports of gallium and germanium, metals used primarily in chipmaking and communications, but also relevant to the energy and automotive sectors.