Co-authored by Robin Bedilion and Todd Gorgian of the EPRI Energy Systems and Climate Analysis Group.
Among many lessons learned, the pandemic highlighted the importance of a reliable supply chain. Receiving essential medical supplies, food, and other key goods became a challenge, and those global supply chain disruptions created some significant and unexpected obstacles. While time has passed, some of those same disruptions remain, including manufacturing and transportation bottlenecks. If not addressed soon, this could ripple well beyond the current disruptions, spilling over into efforts establishing a clean energy future.
Last month, the administration authorized use of the Defense Production Act to accelerate the domestic production of clean energy technologies. Demand for solar, wind, battery energy storage, and other clean energy generation is expected to drastically increase as the global energy sector continues to decarbonize. To meet this growing demand, the world needs resilient and sustainable global supply chains to support the clean energy transition.
The supply chain for clean energy technologies is complex, affected by myriad factors including material availability, manufacturing capabilities, geopolitical issues, and transportation logistics. Many of these issues raise concerns about reliable access to needed minerals, materials, and equipment at a reasonable cost. Countries will likely need to address supply chain challenges if society is to meet near- and long-term economy-wide clean energy targets.
EPRI highlighted these issues in a recently released white paper. We live in a global economy. While that helps to increase global competition, open new markets, and keep prices affordable, countries are also affected by the impact of global issues on sourcing and processing raw materials, procuring finished goods, and maintaining efficient supplier operations. It’s the butterfly effect: an issue in one part of the world can affect something in another part. Similar challenges can be seen in the clean energy space. Growing demand and supply chain obstacles for items like lithium ion batteries—the most common battery type used in both stationary battery energy storage units and electric vehicles (EVs)—can lead to concerns about short supply and availability.
As the white paper noted, deployment of battery EVs is expected to accelerate significantly to achieve decarbonization goals. For example, light duty EVs are projected to comprise 45 percent to 75 percent of new vehicle sales by 2030 compared to two percent in 2020 and four percent in 2021. More EVs mean a growing need for more EV batteries and motors. The mineral needs of lithium ion batteries vary considerably and typically include a combination of lithium, copper, nickel, cobalt, manganese, and graphite (see table). Many of these key materials are found only in a handful of countries, which could lead to potential future supply chain issues. Further, some EV motors also use rare earth elements (REEs), a group of metallic materials not all of which are actually “rare” in the Earth’s crust. While extraction of REEs is becoming less geographically concentrated in China, the country continues to dominate processing and refining; roughly 90 percent of REEs mined globally are sent to China.
Data source 6: Watari et al., Total material requirement for the global energy transition to 2050: A focus on transport and electricity. 2019.
To match the growing demand for EV batteries, Wood Mackenzie estimates that global manufacturing capacity of lithium ion batteries is expected to double between 2020 and this year and increase four-fold by 2030. China currently produces nearly three-quarters of global battery capacity, and the Asia Pacific region accounts for 81 percent. While manufacturing capacity is anticipated to increase in Europe and the U.S., China will still account for more than half of global battery manufacturing capacity in 2030.
It’s not just EVs. Solar photovoltaics (PV) and wind turbines have similar issues. While the key materials used in a solar PV power plant vary, crystalline silicon is the most common module technology. Crystalline silicon modules are comprised of silicon, copper, silver, and lead, which are mainly found and processed in several countries. Asia currently accounts for 90 percent of global PV module production, with China in particular dominating the PV manufacturing chain. Even with significant domestic manufacturing in the wind industry, some wind turbine components rely heavily on imports from countries in Europe and Asia, as well as from Mexico and Canada. As the International Energy Agency has noted, the overall clean energy transition means a shift from a fuel-intensive to a material-intensive energy system.
What can be done to help improve and strengthen clean energy supply chain resilience? Numerous potential opportunities have been identified, including:
• Diversifying sources, processing, and refining of raw materials and technology manufacturing facilities
• Decreasing the usage intensity of high-risk minerals
• Increasing recycling efforts to reduce the need for raw material extraction and processing
• Informing government efforts to shore up supply chain issues
• Collaborating globally to develop environmental and social standards for material extraction and manufacturing
Public and private sector collaboration and leadership is important to develop supply chains that can meet our current and anticipated future needs. This will ultimately support a timely, affordable, reliable, and responsible clean energy transition. To learn more, read the full white paper here: Understanding Generation and Storage Technology Supply Chain Risks and Needs to Support Electric Utility Sector Decarbonization (epri.com)