Material Supply Constraints Threaten to Derail Climate Progress
Solar power is growing by leaps and bounds as the electric vehicle (EV) revolution surges forward in earnest. Great expectations for the prospect of a solar and EV future are being driven by the plummeting cost of essential components like solar panels and lithium-ion batteries. But that excitement just hit an unexpected speed bump – the cost of solar panels and EVs is increasing fast due to supply chain constraints and rising material costs.
Consider what’s happening with solar energy. After the cost of solar modules dropped 90% in just a decade, prices are on the rise. In the past year alone, prices jumped 18% due to a quadrupling cost of the polysilicon material used in production. Rising module prices are already delaying projects and constraining widespread solar deployments.
These near-term solar supply crunches are just a preview of the larger, decades-long challenges we face to transition to clean energy at the speed and scale that’s required. Fear is mounting that the deployment of crucial low-emission technologies could be just as imperiled by raw material constraints as it has been by decades of bad energy policy.
For EVs, the story is much the same. In the past few months, Tesla increased the price of two popular vehicle models five separate times thanks to supply chain challenges and rising material prices. Elon Musk, who has taken to Twitter in the past to beg for secure supplies of nickel, tweeted an explanation for the rising cost of electric cars, saying, "prices increasing due to major supply chain price pressure industry-wide. Raw materials especially."
And the challenges are industrywide. Volkswagen, the world’s second largest auto producer and another leader in EV deployment, has warned that it needs to get into the “raw materials business.” Speaking at a conference on the EV supply chain, VW executive Thomas Schmall said, “In the battery field, we now have to go deeper into the supply chain….The decisive factor in battery cells are the raw material costs; their share is around 80%. So, we have to take care of the materials right now.”
In a recent report on the role of critical minerals in the transition to clean energy, the International Energy Agency (IEA) warned that the need for raw materials in the energy sector could jump six-fold by 2040. For some key metals, particularly those found in batteries, demand will grow much faster. The need for Lithium could increase more than 40 times by 2040 even as nickel and cobalt demand could increase by 20-fold.
“Today’s mineral supply and investment plans fall short of what is needed to transform the energy sector, raising the risk of delayed or more expensive energy transitions,” the IEA said.
The IEA’s warning and the constraints already hitting the solar and auto sectors raise an obvious question: Is the U.S. doing enough to secure the critically important materials needed for domestic supply to meet soaring demand? The answer is a resounding “no.”
Despite having a vast domestic supply of the minerals necessary for American car companies to fully embrace clean energy technologies, the U.S. remains stuck in first gear. Even as countless studies warn about the danger faulty supply chains pose to a clean energy future, our dependence on foreign imports continues grow.
For the U.S. to get its act together, let alone step out and lead, we should adopt the recommendations of the IEA post haste. Setting ambitious technology deployment targets that provide greater certainty for investments in new production is crucial. So is making a renewed commitment to American competitiveness by streamlining our duplicative permitting process for mining projects and providing financing incentives to lower capital costs.
We can’t wait any longer to get our house in order. When it comes to the intelligent extraction and utilization of domestic minerals and materials, we must act now to support our economy and regain a competitive posture on the world stage. Failing to take this challenge seriously risks undercutting domestic and international emissions-reduction goals. Mining and materials policy and clean energy policy are inextricably linked. The sooner we embrace the urgency this moment requires, the better off we will be.
Thomas J. Madison Jr. is a transportation / infrastructure consultant who has served as administrator of the U.S. Federal Highway Administration, commissioner of the NYS Department of Transportation, and executive director/CEO of the NYS Thruway Authority & Canal Corporation.
Madison additionally served as transportation advisor to two NY governors and led efforts to procure, finance, and construct the $4 billion Tappan Zee Bridge replacement. He has held senior executive leadership positions at private consulting engineering firms and served as Executive Director of the Cornell University Program in Infrastructure Policy.