The new Lithium Rush

The new Lithium Rush

Blog #2 from our campaign "The Future of the Economy"

Being 100% honest, before Elon Musk’s comments on the importance of Lithium to produce electric vehicles, I had no idea about the significance and reliance of this material in EV production and subsequently in the global fight against climate change.


Indeed, Lithium is incredibly invaluable in order to transition to renewable sources of energy and fight climate change. Mainly, Lithium-ion batteries are responsible for storing large amounts of energy and powering EVs, smartphones, tablets and laptops. Lithium batteries are hugely coveted because they release renewable power steadily and reliably, plus they last longer, giving cars greater range without recharging, for instance. Thus, they technically also help to save other raw materials.

Ready? Set... Go!  

It is no surprise then, that car companies are rushing to grab hold of lithium sources. Elon Musk recently joked that Lithium prices have increased so much that it might be cheaper for Tesla to buy and operate a Lithium mine, than buy the raw material from current suppliers.  

 

Yet, the issue is not a lack of Lithium supply, but rather slow, inefficient and costly processes to extract and process it. 

In fact, the CEO and President of Volvo cars has also stated recently that they will be seeking to control their own lithium supply chain soon to be able to produce batteries without incurring extensive costs or supply chain delays. Even though they haven’t disclosed when or if they will be managing Lithium pit mines, they did pledge in March 2021 to become a fully EV manufacturer by 2030. This might speed up their plans to take control of the supply chain. 

Climate Solutions Always Create a Big Market 

According to the World Bank, we are going to need 5 times more lithium than it is currently mined to meet climate targets by 2050. As mentioned above, Lithium is a critical component in EV batteries, but the ion batteries are also used to store solar energy, for instance, way more efficiently than others. 

Unsurprisingly, the market for lithium-ion batteries is projected to grow from US$30 billion in 2017 to $100 billion in 2025. This presents a massive opportunity for mining companies to invest in Lithium sites but also in R&D, in order to figure out more efficient ways of extracting and processing the raw material. 

And Yet, There Is Always a Catch 

It wouldn’t all be sunshine and rainbows, right? You might have guessed it already, but Lithium mining is environmentally damaging (isn’t all mining, though?) Lithium mining especially requires a big expulsion of carbon into the atmosphere and uses up quite a lot of water and land. 

To be specific, Lithium can be sourced from hard rock mines, where the mineral is extracted and then roasted using fossil fuels, requiring tons of water and releasing approximately 15 tonnes of CO2 for every tonne of Lithium obtained. Lithium mining also requires large quantities of Cobalt. The mining of Cobalt has been repeatedly found to be environmentally damaging and not socially responsible, thus leading to more debate on whether it is right to continue mining practices. 

The difficulty is not the mining of Lithium per se but getting only the lithium out of the brine and/or water sources. And THAT takes up the most resources and energy. Oh, and also, the energy used to extract Lithium comes from fossil fuels. Thus, there is a big concern that the energy sector is extracting a material that will reduce our energy consumption, but in the process increases the amount of fossil fuels burnt to get the Lithium out in the first place. 

But We Can Always Find a Way to Make it Right... 

Despite this, recent efforts to find sustainable sources of lithium are being significantly positive. 

For car manufacturers, it means sticking to their ESG values and implementing them in their supply chain. For instance, Germany has been a powerhouse in car manufacturing for the past decades. Germany’s Rhine Valley also holds incredible supplies of Lithium and is conveniently located at the heart of Germany’s car manufacturing region. This can provide immense supply chain benefits and significantly reduce the amount of carbon emissions from international transportation of lithium to other car manufacturers.  

So, what’s next for Lithium around the world? 

In the UK 

Wheal Clifford, near Cornwall (UK), is home to some of the world’s highest grades of lithium in geothermal waters. There are 2 main sites under development: a deep geothermal plant to host zero-carbon Lithium extractions and a second shallower geothermal lithium site. Last year, the project received £4m in backing by the UK government and aims to provide processed Lithium to clients around the UK. 

Moreover, Trafigura, a commodity trader firm, is backing the UK lithium refinery project called Green Lithium, in an attempt to mine, process and sell lithium to customers across the EU. Last year, Green Lithium raised £1.6m in seed funding and has secured a £600k grant from the UK government. It hopes to have the refinery running at full capacity by 2024, having already produced its first battery grade lithium hydroxide, a product highly in demand by carmakers. 

In South America 

In Chile, plans to expand lithium mining have been roadblocked by politicians, citing social and environmental risks. Indeed, indigenous groups are fully against lithium mining, claiming that it poisons the land and water sources. Even though Chile and Argentina supply around 40% of the world’s lithium, these kinds of policies are hindering their potential to become global powerhouses and strong suppliers of Lithium. They are effectively missing out on billions of dollars. 

In the US... it gets interesting, 

Salton Sea, a lake in California, is the second largest geothermal field in the US, and could provide around 40% of global lithium demand.  

In fact, 3 companies are developing and implementing chemical processes to extract lithium in cleaner ways. There are already 11 geothermal power plants near the lake, 10 of which are owned by Berkshire Hathaway Renewables. 

Expansion and further investment could also mean an economic boon in the region, where mostly Mexican-American communities live in, facing high unemployment and poverty rates. Tax revenues extracted from the mines, no pun intended, would also benefit the local communities by building schools and public infrastructure.  

My take is that we should start investing more in R&D rather than open up new Lithium mines around the world. It remains clear that the issue is not supply, but rather efficiency of extraction and processing. The energy sector has a huge opportunity in their hands. But then again, when does it not? 

For now, the fight for climate change continues and everyone must make their peace with it. There must be an understanding that all clean technologies that are needed to fight against climate change, including wind turbines and solar panels, are very mineral intensive, meaning that in some capacity they will also be damaging to the environment. We will just need to find a balance that overall benefits green technology and reduces fossil fuel energy demand. 

Sources: 

https://www.bbc.com/future/article/20201124-how-geothermal-lithium-could-revolutionise-green-energy 

https://www.nature.com/articles/d41586-021-01735-z 

https://www.resilience.org/stories/2021-02-18/lithium-batteries-and-climate-change/ 

https://www.nytimes.com/2022/01/06/climate/lithium-chile.html 

https://www.cnbc.com/2022/05/04/the-salton-sea-could-produce-the-worlds-greenest-lithium.html