Metal extraction is fundamental in the transition to green energy

Energy production is, once again, at the centre of the world’s economic focus. Countries are scrambling to meet ambitious targets established at the Paris Climate Agreement in 2015. The announcement by the US of more ambitions targets has also shone a more intense spotlight on the implications of a revitalised clean energy sector.

Mining is under increasing pressure to become more sustainable. Extraction of materials demands significant energy, labour and capital to find, mine and refine. Increasingly, these processes need to be using practices and methods that are sustainable.

Yet a net-zero world is dependent upon renewable energies to replace traditional power sources. Australia’s own transition to clean energy will rely on mined natural resources, critical in building the basic infrastructure needed to generate, store and transition to greener power. With a relatively small number of nations holding deposits, competition for these critical mineral resources will be high as governments seek green energy security.

KPMG’s recent, Resourcing the energy transition: Making the world go round report shows geopolitics may be a credible risk to the future supply chain for mined metals and minerals. Not only will extraction and production of these raw materials face increasing scrutiny from downstream industries, but investors and the public are more interested in ESG compliance.

There is a further risk that shortages of critical metals and minerals see them become ‘strategic resources’ increasing geopolitical challenges.

The Challenge

Mined materials enable the production of existing green technologies such as batteries, electric vehicles, solar panels, and wind turbines – and the development of new ones to address the urgency of climate change.

Our report also explains how the circular economy can help address these challenges. Re-using, recycling and repurposing metals and materials can contribute to surety of supply, and potentially reduce waste, pollution and carbon emissions by minimising the need for extraction.

Lithium

In 2020, the World Bank identified lithium as one of the top five metals that will see growing demand over the next generation. The light-silver material will be critical in the building of grid-scale energy storage facilities and green automotive technologies.

With production already skyrocketing in recent years – notably between 2017 and 2018 when demand nearly doubled –considerations around ensuring supply are important. Australia is the only developed nation in the top six world lithium producers.

The Circular Solution

Unlike the ‘old’ energy sector, there is potential for a circular solution through redesigning, re-using and recycling natural resources to contribute relieving the pressure on commodity suppliers to meet demand and support the rapid pace of the energy transition, transformation of related industries, and reduction in emissions.

The caveat is that it will only be achieved once global and national climate and energy transition policy works together with circular economy strategies to reduce critical metal risks and dependence.

Governments, investors, mineral producers, corporates and end users each have a part to play in the shift in energy mix and resource availability. A society keen to accelerate the energy transition must now prioritise working with the mining sector to help it deliver.

 

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