Metals such as lithium, cobalt, nickel and copper play a vital role in the Net Zero energy transition. Accelerated change across the world means strategies are needed in relation to the supply chains that give access to these minerals and associated infrastructure for refining and processing.
Decarbonisation targets and energy sources
Continued deployment of renewable energy generation is vital if the UK is to achieve Net Zero targets. This will include a redoubling of efforts in wind and solar energy, increased development of fueled renewables, along with alternative technologies such as hydrogen power, electric vehicles, and nuclear power.
This transition, along with major geopolitical change in recent years, has increased the focus on how the UK will secure the supply chain for so called ‘critical minerals’, many of which play a key role in renewable energy plant construction, generation, and energy usage (for example in electric vehicles), especially in the face of increasing global demand. Consideration also needs to be given to the way such minerals are extracted, to ensure ESG forms an integral part of the chain from extraction to final end-user.
Impact of mineral shortages
The Critical Minerals Association has been lobbying government and raising awareness of these issues and the impact of shortages on critical minerals for the UK. It highlights the need for the UK to invest in extraction technologies, supply chains, refinery capacity and recycling facilities, along with promoting greater efforts on trade and ESG aspects. Relationships with other countries, exporters and suppliers can change and the UK should not rely on others to service all its needs in this area without proper planning ahead and assessing future supply and demand. The availability (or lack thereof) of different critical minerals represent different risks and opportunities to stakeholders both in the UK and abroad. Other countries are already moving to protect and enhance their respective positions and commentators have noted the UK is at risk of being left behind.
In respect of the supply of minerals for use in electric vehicle batteries, the UK’s Advanced Propulsion Centre (“APC”) recently reported that global demand by 2030 is estimated to more than double the forecasted demand for 2025. Demand for electric vehicle batteries by 2030 will exceed 2,900 GWh as 39 million battery-electric cars and vans are produced around the world.
 As demand outstrips supply we will likely see the price of minerals rising. The lithium market alone has seen a price increase of nearly 400% year-on-year as of May 2022 and it is likely that similar critical mineral markets will follow suit.
Such growth in electric vehicles will assist in the UK’s transition to Net Zero, but critical minerals such as lithium will be needed for this to happen. Whilst there is currently no reported material deficit in global lithium supplies, a modest deficit is anticipated in 2025, with this expected to widen by 2030 as demand continually increases. There is an evident risk that the production of lithium-ion batteries used in these vehicles could be stalled by a mineral supply gap.
It is therefore paramount that industries and governments prepare for and mitigate against mineral supply shortages in a world where minerals will continue to play an ever more crucial role.
The Critical Mineral Strategy
The Government’s Critical Mineral Strategy (the “Strategy”) seeks to address these issues and aims to put forward a structured plan to increase resilience of supply chains of critical minerals. The Strategy defines critical minerals as those minerals with a high economic vulnerability and global supply risk, and cites the volatility and interdependence of critical mineral supply on numerous external factors whilst also recognising that their “importance has taken on a new salience” as we “require large amounts of minerals that are currently only available in small quantities”.
In addition to the Strategy, through the newly created Critical Minerals Intelligence Centre (“CMIC”), led by the British Geological Survey, an annual evaluation of the criticality of minerals will be completed. At present, this sees minerals such as cobalt, lithium and vanadium classified as critical minerals, with minerals such as nickel and phosphates noted on CMIC’s “watchlist” for minerals with an increasing criticality. The Government will also regularly convene the Critical Mineral Expert Committee to adapt and monitor the delivery of the Strategy, as well as establishing a Critical Minerals Unit to interact with the minerals sector and its stakeholders to ensure the Strategy’s effectiveness. Investment in research and development will be vital, as universities and technology institutes will help pioneer technological advances in critical minerals.
For the UK to be successful in creating and securing a long-term supply of critical minerals, more supply chain stages must be developed within the UK to reduce vulnerability to external factors. In doing so, the UK will see dual benefits of increased security of supply in tandem with the generation of new jobs and opportunities in the minerals industry. The Strategy’s financial support, training incentives and updates to regulatory frameworks to boost capabilities in recycling, refinement and recovery of minerals will therefore be fundamental.
Although the UK is limited in the minerals that it can extract domestically, that should not stop the development of domestic capabilities and strengths in other areas of the supply chain, and businesses are seeking to respond to demand. Green Lithium Refining Limited has received government funding under the Automotive Transformation Fund as it continues to progress the development of Europe’s first large-scale lithium refinery in the UK. Cornish Lithium Limited has received investment through the government’s Getting Building Fund for construction of its geothermal lithium recovery pilot plant.
Creating the right conditions for private sector investment will be vital, as design and construction costs are significant and competition for funding in infrastructure is intense. The recent news concerning Britishvolt’s funding highlights the challenges that projects can face, whatever the case may be for such infrastructure.
Legal regulation may play a vital role in both encouraging domestic enterprise in the critical mineral supply chain, as well as ensuring our critical minerals meet required ethical and sustainable standards. It is anticipated that there will eventually be a need for a ‘certificate of origin’ type mechanism, similar to the existing REGO scheme for renewable energy. Such mechanism would reassure end-users of critical minerals that they were sourced responsibly and ethically. As the sector matures, it will be clearer to see what role regulation will play in providing clarity as to its ESG record and set sector-wide standards on the same.
As geopolitical factors have increased the vulnerability of our supply chains, industry will increasingly look to the Strategy and related mechanisms to bring stability and certainty. The UK is facing macroeconomic headwinds and the near-term prospect of recession, but by investing in this sector (in whatever form such investment might take), the longer-term outlook can be improved.
Whilst governments have made missteps in renewable energy investment at stages (the decision to ‘cut the green crap’ in 2013 has been mentioned in the news again recently), thankfully investment has been made and continues to be made in the UK renewable energy sector. Similar commitment to critical minerals, their sourcing, production and recycling as part of the ongoing energy transition is required. As is so often the case with critical infrastructure, the best time to build is ten years ago. The next best time is now.
This article was written by James Horton, Ross Howells and Kayla Urbanski.