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As Clean Energy Adoption Reaches “Tipping Point,” the Challenge of Untangling Critical Mineral Supply Chains Looms Larger than Ever

“Solar power, electric cars, grid-scale batteries, heat pumps—the world is crossing into a mass-adoption moment for green technologies,” writes Tom Randall for Bloomberg.  Citing Bloomberg research, he argues that “clean energy has a tipping point, and 87 countries have reached it.” 

The mass-adoption of green technologies, as followers of ARPN well know, requires drastically increased amounts of critical minerals, including the Rare Earths and mainstays such as copper, as well as, perhaps most notably, the so-called “battery criticals” lithium, cobalt, graphite, nickel and manganese — key  inputs for EV battery technology, which is at the heart of the green energy transition.

Randall writes that the U.S. has passed a “critical EV tipping point: 5% of new car sales powered only by batteries,”and argues that “[i]f the U.S follows the trend established by 18 countries that preceded it, a quarter of new car sales could be electric by the end of 2025.”

These emerging trend lines, along with the realization that supply chains for many metals and minerals leave us at the mercy of adversary nations like China who control much of the material supplies and processing capabilities, have prompted the Biden Administration and members of Congress to finally give the critical mineral supply chain conundrum ARPN and others have long warned of the attention it deserves.

Thus, in recent years, stakeholders began taking steps to strengthen domestic supply chains for critical minerals, with the supply chain chaos resulting from coronavirus pandemic and rising geopolitical tensions kicking these efforts into high gear in 2022.

Much of these efforts have focused on the rare earths and battery criticals, such as the March 2022 Presidential Determination to invoke the Defense Production Act for these materials, which grants the  federal government the authority to direct taxpayer funds to private companies for the extraction of said minerals.

However, untangling the supply chains is proving more difficult than some would have thought — and new sourcing requirements for the battery criticals contained in the energy provisions of the the recently passed Inflation Reduction Act may have added another layer of complications to an already challenging situation.

Earlier this summer, a RealClearInvestigations exposé discussed the alleged China connections of a domestic lithium extraction project in Nevada, where, as RealClear’s Steve Miller writes “a Chinese-dominated mining company has procured millions of dollars in American subsidies to extract lithium in the United States – but, given a dearth of U.S. processing capacity, the mineral is likely to be sent to China with no guarantee that the end product would return as batteries to power President Biden’s envisioned green economy.”   U.S. Senator Tom Cotton recently called for additional information from the Department of Energy regarding the alleged China connection of the project, which we  discussed here.

The Nevada project is is still in the permitting process, but similar scenarios have already unfolded elsewhere, such as in the case of rare earths magnets used in engine parts for F-35 fighter jets, where the U.S. Department of Defense has resorted to granting a waiver for sourcing requirements because at the current time acquisition of parts without Chinese components is not possible.  While the U.S.’s national security imperatives may make a rare earth waiver unavoidable, it should serve to turbo-charge domestic rare earth supply chain development to break the U.S. Armed Services’ Chinese rare earth dependency once and for all.

In the same vein, as Miller writes discussing the above-referenced project in Nevada, “critics say the scenario would increase U.S. energy dependence on a hostile power – one accused of using forced labor in the manufacture of both lithium batteries and solar panels – and undercuts the Biden administration’s emphasis on domestic sourcing of green energy,” experts have long warned that decoupling supply chains for lithium, for example represents a formidable challenge.

As Simon Moores, chief executive of Benchmark Mineral Intelligence argued in the wake of the passage of the Inflation Reduction Act, “[c]onsidering it takes seven years to build a mine and refining plant but only 24 months to build a battery plant, the best part of this decade is needed to establish an entirely new industry in the United States.”

Both assertions are accurate — yet, as we previously outlined:

“Senator Cotton’s point [regarding the Nevada project] that questions of foreign control deserve to be fully investigated before the U.S. Government confers funding seems unarguable. Government programs intended to alleviate worrisome foreign resource dependencies should not unwittingly strengthen those dependencies at the expense of the American taxpayer – and American national security.”

As clean energy adoption reaches a “tipping point,” this is all the more reason for stakeholders to place an even stronger emphasis on formulating and implementing a comprehensive “all-of-the-above” strategy for domestic critical mineral resource supply chain security — today.