What impact will India’s “clean energy” shift have on its mining economy?
A bird’s-eye view of Bhadla Solar Park, Rajasthan. Source: Google Earth
This article first appeared on the Lights on newsletter and has been republished here with permission.
Despite what we often hear, the energy transition is not as easy as building solar panels and wind turbines everywhere. It requires an overhaul of some of the key systems that underpin our economy, minerals being one of them.
In a new report, the International Energy Agency (IEA) make the point which and how many mineral resources we will need to decarbonise the world’s energy architecture. I spoke with Jagabanta Ningthoujam, manager at RMI-India, specializing in electricity, batteries and hydrogen. Formerly associated with the World Bank’s Climate Smart Mining Facility, he discusses the global race to access minerals from an Indian perspective.
Why does the energy transition need minerals? Which minerals in particular?
Jagabanta Ningthoujam: Building everything requires materials. Energy infrastructure is not unique – it was true for fossil fuel technologies and it is true for clean technologies. What is different though, are the types of metals and minerals needed and the impact that this transition will have.
Traditional fossil fuel technologies for power generation primarily require metals such as iron and steel, copper, aluminum and chromium. While clean energy technologies like solar, wind, and energy storage also need these metals, they also require many more technology-specific metals and minerals. According to the “sub-technology” solar photovoltaic energy needs metals and minerals like cadmium, indium, selenium, silicon, tellurium and tin. The manufacture of wind turbines requires dysprosium and neodymium for the turbine magnets. These are some of what we call “rare earth metals” – not because they are “rare” on Earth, but because it is very unusual to find them in pure form. Rare earth metals are also used in magnets for electric vehicle motors.
The second aspect is related to the volume of materials required for a clean energy transition. To produce the same GWh of electricity, solar or wind power needs much higher installed capacity than comparable coal or gas-fired power plants, simply because of the low rate of use of variable renewables. Solar and wind can only occur at certain times of the day – the wind does not blow all the time; the sun is not shining all the time. Coal and gas can be burned all day. Thus, the material intensity of generating the same amount of energy is higher.
If you combine the two aspects on the scale required for a successful transition to clean energy, in accordance with the 1.5 degree Celsius goal, you are looking for a huge demand for all kinds of metals and materials. minerals, and not just for rare earths.
India is undergoing a rapid transition to renewables, and other countries like Pakistan and Bangladesh are also looking to decarbonize their energy systems. Does South Asia Have Enough Minerals? And if not, how can they get them?
When it comes to base metals like iron and steel, lead, aluminum (bauxite), cadmium, chromium, manganese and zinc, India has vast resources, capacities and capabilities. ‘a mining story. But India’s rare earth deposits remain untapped, we mainly depend on China for imports. Few would know that India actually has the fifth largest deposit of rare earths in the world, higher than Australia, the traditional mining nation. India and South Asia, however, lack other critical metals like nickel, cobalt, and lithium (crucial for batteries).
When a country does not have the resources to transition, it inevitably becomes dependent on international trade.
But there are ways to reduce the risk. The obvious strategy, and a lesson learned from the oil and gas industry, relates to the ownership of assets and equity in mines in producing countries. Another way is to be part of the metal refining and processing value chain. Many resource-rich countries may not in fact have the right industrial base to process minerals. Finally, India must play its role in ensuring a transparent and rules-based global environment for international trade.
India currently lacks the capacity to source all of the minerals it needs to meet its renewable energy targets. It currently imports most of China because its manufacturing sector is not developed. But what happens when domestic manufacturing starts to ramp up?
If you are an importing country, of course there are inevitable risks to energy security and the supply chain. The main difference between fossil fuels and clean energy is that the risk is not the costs of running and operating the asset (e.g. oil and gas which are fuels), but the manufacturing, l ‘installation, ownership and capital cost of assets and infrastructure (such as electric vehicles, batteries and plant equipment). This means that the impact of renewable energy prices on the value chain and the economy is less volatile than that of oil. But it is more concentrated, which means that the impact on the individual industry is higher.
Among other mitigation strategies, efficiency and the circular economy are essential. If we reduce car ownership and switch to public transport, even with the EV transition, the impact on the upstream metal will also be reduced. Likewise, recycling also ensures that many of these metals are recovered and reused, essentially creating another source of domestic supply for some of these metals.
Let’s talk about the race to secure supply chains around the world. Which countries have the upper hand here? And what are the challenges of this new order?
The usual suspects, namely China, the United States and the EU, with a strategic and industrial interest in the history of the energy transition, are all involved in the race to secure metals and minerals. It is not a surprise. And to the knowledge of all and as underlined in the IEA Report also, China has the upper hand.
The challenge, of course, is to ensure that monopoly control over metals and its value chain does not occur. This is especially important for metals which are highly concentrated and in politically difficult geographic areas. Cobalt, for example, is highly concentrated in the Democratic Republic of the Congo, a country little known for its good governance. Countries must try to avoid the mistakes of the oil age.
Does the future of the energy transition lie squarely in more mining? Or will the new technology use alternative materials?
Mining is inevitable. An alternative material only means alternative, does not mean less. For example, we could switch from NMC batteries, which are cobalt-intensive, to cobalt-free chemicals like LTO or LFP. But this only increases the demand for other metals and minerals, instead of cobalt. It really doesn’t mean less need for mining, just less need for cobalt extraction.
The emphasis must really be placed on alternatives to increasing consumption – efficiency, optimization, mode changes – which can help to alter the growth in demand, and on a circular economy approach guaranteeing the recyclability of materials. It is also essential that mining be ‘climate smart’. I borrow this sentence from my previous brief passage with the World Bank’s “Climate-Smart Mining” initiative. This includes, among others, making mining less intensive and less carbon efficient, ensuring adequate environmental governance and regulatory framework, low carbon supply chain management, reducing the risks of investment in low carbon mining and more.
And what about recycling? Can any of these materials be salvaged and is India equipped to do so?
Yes, recycling will have to be a big part of metal recovery, especially for countries like India. But that doesn’t completely close the loop. Recycling can only recover a limited part of a metal and a mineral and that too at a cost. Even more metals and minerals will be needed.
India is very aware of the need for recycling. There is clear government interest and institutional knowledge, and there are private entities entering the recycling industry. Given the shortage of certain metals, India also sees this more in a game of security of supply. There is this concept of ‘urban mining’ as opposed to “recycling”, where recycling is seen as an alternative resource.
What are the opportunities for India in this changing scenario? Or would you say the country is in a weak spot and will likely stay at the bottom of this race?
Of course, if you don’t have resources within your borders, you will have to depend on international trade; It’s inevitable. This always carries risks for energy security and prices. But that doesn’t mean buyers don’t dictate the terms. Given the size of its energy and transport sector, India will always remain a major buyer of resources, whether it manufactures the products or simply uses them. Indian government and Indian companies must take advantage of this scale.
Second, lessons from our own journey with oil refining – we can still be part of a global value chain even where we don’t have the resource. Thirdly, we must not forget that we also have resources and strategic resources, like rare earths, which can certainly help us to be part of the value chain and to find better trading conditions in world trade. The challenge, of course, is to make sure that we allow our mining sector to get these resources off the ground economically.
Lights on is a newsletter that brings you the main stories and exclusive information on energy and climate change in South Asia. Lou Del Bello is a climate and energy journalist currently living in New Delhi. She has previously lived and reported in Italy, UK and Kenya. She tweets on @loudelbello.