The newest source of the alarm bells echoing throughout the renewables industry? Spiking critical mineral and metal prices.
According to a new report from the International Energy Agency, a maelstrom of rising demand and tattered supply chains have caused prices for the materials needed for clean energy technologies to soar in the last year. And this increase has only accelerated since 2022 began.While nickel has been the poster child for extreme price increases, the new data shows it has some company. Most dramatic is the case of lithium, which has seen prices increase 738% between January 2021 and March of this year. Prices for cobalt have more than doubled (a 156% increase). And these spikes come after the prices of both more than doubled in 2021 alone.
Meanwhile, prices of copper, nickel and aluminum rose by roughly 25% to 40% in 2021, and have continued to increase so far this year.
“For most minerals and metals that are vital to the clean energy transition, the price increases since 2021 exceed by a wide margin the largest annual increases seen in the 2010s,” IEA analyst Tae-Yoon Kim noted in a Wednesday report.
Indeed, these jumps come against a backdrop of relatively stable prices over the last decade that have allowed the renewable industry to flourish. In the 2010s, for instance, the average annual price increases for all the minerals were modest: 1% for aluminum at the low end, and 13% for lithium at the high.
Clean energy technology prices have actually fallen steadily throughout the last decade, as both innovation and economies of scale have made building things like solar PV cells and batteries more efficient while the cost of raw materials only ticked up slightly. But the IEA said that trend could reverse course, as demand increases and critical materials become pricier.
The demand shock has been compounded by the supply challenges presented by Russia’s invasion of Ukraine, which has caused many countries to reassess how much they want to rely on Russian resources. While plans to phase out Russian oil imports have grabbed headlines, the country is also a major supplier of critical minerals.
Russia is among the top producers of nickel, cobalt and graphite, all of which are used to make batteries. It’s the top producer of palladium, used in catalytic converters, as well as of enriched uranium needed to keep nuclear power plants running. In fact, Russia produces 45% of the world’s enriched uranium, which has led the U.S. to scramble to find alternative sources.
As Kim explained, “the country’s increasing international isolation puts additional pressure on already tight markets.” Recent turmoil in nickel markets especially, he wrote, represented “a wake-up call regarding the importance of diversified supply sources.” Getting to those new supply sources, however, presents its own problem. Global supply chains remain a mess, and not just for critical minerals.
The timing could not be worse. These are materials that will be crucial to expanding the use of renewable energy in the coming decades, and especially to electrify transportation and homes alike. But higher prices mean it is harder to make the economic case for the energy transition, even if all other systems are a go.