High commodity prices could delay the energy transition, the IEA says

The International Energy Agency warns that high commodity prices could delay the transition to clean energy due to the amount of metal needed batteries, solar panels and wind turbines.

Achieving the goals of the Paris climate agreement would lead to a quadrupling of mineral demand by 2040, the IEA said. However, the lack of investment in new mines risks raising the costs of clean energy technology significantly, it said in a report released on Wednesday.

“Meeting climate targets will turbocharge the demand for critical minerals,” IEA chief executive Fatih Birol told the Financial Times. “It [the energy transition] it could definitely slow down as a result of rising costs. ”

Product prices – from lithium to lithium cobalt – they have gathered this year because of the increased demand for clean energy technology and because governments have expanded green stimulus packages. Electric car sales rose 41 percent last year, according to the IEA, with about 3 million sold worldwide.

“Enough to have enough electric cars, wind turbines, hydrogen, solar and batteries – for which we need critical minerals at affordable prices, otherwise it will be a huge obstacle to achieving our climate goals,” Birol said.

In the report, the set of raw materials used in batteries is expected to achieve the largest increase in demand. Lithium demand will grow more than 40 times if countries want to meet the goals of the Paris agreement, he said.

The IEA, created in the 1970s after the first Arab oil embargo to ensure the security of global oil supplies, said critical minerals have become key to countries ’energy security.

The IEA said the production of critical minerals needed for clean energy technologies was much more concentrated than in the oil market. The Democratic Republic of the Congo, for example, produces more than 60% of the world’s cobalt, which is a critical battery material.

“Concerns about price volatility and security of supply are not disappearing in a renewable energy-rich energy system,” he said.

Birol warned that higher commodity prices could outweigh the cost reductions achieved with increased production in clean technologies such as batteries. If the prices of lithium and nickel are doubled, the cost of producing lithium-ion batteries for electric vehicles will increase by 6%.

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Rising copper prices jo last week’s $ 10,000 over the past decade could add up to half a trillion dollars to the costs of achieving climate goals over the next two decades, Birol added.

However, investors do not invest enough in new mines. It takes an average of more than 16 years for a mining project to move from discovery to initial production, which means investments must now be made, the IEA wrote.

“Investors are still not convinced that governments are serious [about] achieving climate goals, “Birol said.” There is not enough clear and sufficiently clear signal about the speed and decision of the energy transition provided by politicians. ”