Critical minerals bottlenecks could delay energy transition, Equinor warns

A growing risk of bottlenecks in the supply of critical minerals could delay the energy transition and lead to increased production of fossil fuels, according to a report from Norwegian oil and gas major Equinor.

The report noted that clean technologies such as solar, wind turbines and electric vehicles generally require more minerals to build than their fossil-based counterparts.

It cited International Energy Agency data to suggest that the average amount of minerals needed for a new unit of power generation capacity has increased by 50% since 2010.

“A typical electric car requires six times the mineral input of a conventional car and an onshore wind plant requires nine times more mineral resources than a gas-fired power plant per unit of output,” the report stated.

In Equinor’s own scenarios, demand for minerals doubles by the early 2030s compared with the average annual demand from 2016 to 2020 even on its less ambitious scenario for energy transition, dubbed 'Walls'.

On a more ambitious transition scenario, called 'Bridges', demand rises fourfold by 2030 but then peaks by 2035 and declines towards 2040, driven by mineral intensity improvements and a slowdown in new annual capacity additions.

Chinese domination

Equinor's report warned that the geographical concentration of the production, processing and refinement of critical minerals makes value chains more vulnerable to regulatory changes, trade restrictions and political instability.

Chinese domination of supply chains and any further escalation of geopolitical rivalry were see as possible risks to accessing minerals affordably and on the scale needed.

The report highlighted China’s control of 65% of cobalt processing, 60% of lithium processing and 40% of copper processing and 35% of nickel processing, as well as 85-90% of the processing operations that turn rare earth elements into metals and magnets.

“China’s dominance is of particular concern, especially given the current US-China rivalry,” the report noted.

Russia’s invasion of Ukraine has added extra pressure on mineral supply and prices as both countries are home to substantial amounts of reserves. In Russia’s case, the supply of grade 1 nickel, palladium and enriched uranium was highlighted as a particularly sensitive example of disruption to the supply of critical minerals.

Ukraine was described as a natural resource superpower, with 117 of the 120 most widely used minerals and metals, but noted that approximately 20% of the country’s resources are in territories occupied by Russia.

More ESG demands

The report also alerted governments and corporations to new challenges and increasing scrutiny on regulatory, ethical and reputational risks because the mining and processing of many critical minerals are linked with poor environmental, social and governance (ESG) standards.

The report also references social and governance issues that can be aggravated with pressures for lower cost mineral extraction, including human rights violations, child and forced labour and health and safety concerns.

Equinor’s report noted that “careful consideration of ESG risks must form an integral part of a sustainable energy transition and not least the sourcing of minerals needed to support it.”

In its assessment of risks, the report stated: “Tightening markets, ESG concerns and increased material and technology costs related to the supply of critical minerals, may lead to curtailed growth in renewables, increase the use of fossil fuels, reduce energy intensity improvements and ultimately slow down the energy transition.”

Response is coming

On the positive side, Equinor said the increased focus on mineral security is helping to highlight the need for diversification of supply, spurring innovation throughout the value chain and raising the profile of demands for better governance of environmental and just social standards.

It also noted that critical minerals and their role in the development of clean energy technology have been included in several recent policy initiatives, such as the US Inflation Reduction Act (IRA), the EU’s proposal for a European Critical Raw Materials Act and, China’s 14th Five-Year Energy Innovation Plan

Equinor called on governments to speed up permitting processes to attract the investments needed to support their energy transition ambitions, stressing that long lead times for new mining projects will impact the future availability of minerals.

The report cited calls by the Copper Development Association and for the US Geological Survey (USGS) to include it on its list of most critical minerals to allow for streamlined regulations and faster development of new supply sources to meet future demand.

The Equinor report was sceptical about a future role for deep-sea mining in the push for diversification saying is “not likely” to be a solution in the near term.

On the other hand, the report suggested that “improvements through increased recycling, new and improved mining and processing methods, innovation and better technologies may all play a part in the race to secure enough minerals for the future.”

In its conclusions, the report stated that “continued focus and spending on R&D will help balance mineral supply and demand and keep the energy transition on track”.