This is a bit off topic, but since energy basically powers the modern world and is a major component of economic activity, the future of energy can potentially impact the stability of the financial system. There is no question that the world is moving towards what is often called a "clean energy" or "green energy" future where a variety of renewable energy sources will play an increasing role in world energy supply. Part of this trend will include an ongoing increase in the number of hybrid and electric vehicles which reduce or eliminate the use of an internal combustion engine.
Sometimes it seems like that there is a belief that these energy sources are "free" or involve no activities at all that may impact the environment. Obviously energy from the sun or the wind is "free" in one sense. But of course, to harness those energy sources, a lot materials are required to make things like batteries and components to help transmit the electricity, etc. Let's look at couple of well written articles that take a deeper dive into that.
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While solar energy from the sun and blowing winds are available sources of energy, there are some key components needed to harness their energy for practical use. These include a number of elements found in the earth that must be mined in significant quantities. Things like silver, lithium, cobalt, palladium, platinum, rhodium, etc. I found a couple of well written articles that dive into all this that I think readers might find worthwhile to read. Below are links to these articles with a few excerpts and some added comments.
"It’s no secret that Elon Musk has some revolutionary ideas.
And by most measures, he has been wildly successful. Tesla orders hit a record 97,000 vehicles globally in the third quarter (not to mention 250,000 preorders for the new CyberTruck). The stock has more than doubled since May 1. . . . ."
"But there’s something you may not know about Elon Musk. He won't admit it publicly. Neither will most “green” company CEOs. But it’s a reality for all of them. They desperately need silver.
The fact is, the growing green revolution requires the use of silver. Due to its unique chemical makeup, silver is one of the elements that, directly or indirectly, make green technologies what they are.
Whether you know it not, incorporating more green technologies and products into your life means you are, by default, using more silver. Ditto society as a whole.
Here’s where silver plays a key role in the green revolution . . . . ." click here to read the full article
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(editors note: I added underlines below for additional emphasis)
"Over the next two decades, the world’s ability to supply resources is going to be pressed to its limit, and no other market segment is going to be harder pressed than materials needed for the transition to automotive clean energy.
Over the past four years, I have become a student of these transitions and the metals markets that enable the same. I have become jaded with our global market analysts not doing more to scream and shout, and drawing attention to the obvious constraints that lie ahead in terms of resource limitations. Let me do my best to lay this out in an easy to digest fashion."
. . . .
"Battery Electrical Vehicles (BEV): Some forecasts have BEV sales climbing to 20M, 40M, or even 60M/year by 2040 or 2050. Jumping ahead in my analysis, the world will struggle to make 15M BEV’s, with lithium battery materials constraints. Nickel, lithium, cobalt, vanadium, and graphite are all shown to be in significant structural deficits by 2023/27 trying to make 3M to 5M BEV’s a year. With Lithium Battery densities achieving only 2x to 2.5x gains with foreseeable technologies like lithium-oxygen, how do we achieve 20M, 40M or 60M BEV’s a year with increased hybrids, too? We can’t without substantial expansion in low-cost mining. Mining exploration and investment won’t happen without significantly higher material prices. Higher prices take BEV’s from a near competitive cost position with gasoline to not cost effective. So net-net I don’t see a path to more than around 10M-15M BEV with reasonable lithium BEV battery costs to remain on par with gasoline."
. . . .
Critical Battery Material Market Constraints:
"Cobalt: Multiple analysts, and even Tesla supply chain people have highlighted the probable gap in overall global Cobalt production to meet the emerging BEV ramp. Here there is a dramatic need to expand the global portfolio of Cobalt mining projects. Currently per pound, Cobalt is the most expensive element used in lithium batteries. This is part of the drive to reduce the cobalt loadings is to effect cost."
. . . .
"Nickel: Multiple analysts have highlighted the probable gap in overall global Nickel production to meet the emerging BEV ramp. A solid lineup of mining projects are under consideration. However the projected structural deficits are alarming for Nickel. See the following analysis from Wood Makenzie. Closing this demand gap is a huge issue. Simply put, nickel prices need to continue to climb to get investment communities to increase exploration funding. The part of this equation that doesn’t make sense is the price of Nickel has a direct impact on the battery cost. As prices rise, so do battery costs."
. . . .
"Lithium: Investment in new lithium projects will be required to keep up with demand. Existing operational supply is in place to meet demand to 2021. For additional producers to meet the demands of the market in 2022, development would need to commence in 2019. Therefore without further investment in new projects there will be a supply shortage by 2022 where EV growth will accelerate as they reach cost parity with ICE vehicles Lithium supply chain requires further project developments to provide continuity of supply for EV’s."
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My added comments: The second article linked above appearing on Kitco.com is a very detailed deep dive into the whole issue of the problem of supply constraints on various essential elements we must have to actually implement the practical use of green sources of energy. I rarely see this part of the equation discussed in any way in most articles that talk about the future of green energy. What this article shows very clearly is that no matter what kind of "mandates" governments may attempt to implement requiring the use of green energy in vehicles, the reality is that society can only move in that direction at the speed that these essential elements can be mined out of the earth.
The author explains that this is the reason that reasonable future projections of the move towards fully electric vehicles (that we can take seriously) have to account for this. The article includes a future projection (see his chart below and in the linked article) which does show a continual gradual increase in the number of electric vehicles in the coming 30 years. But, even if demand for electric vehicles sky rocketed upwards very rapidly, we simply cannot produce them faster than we can mine these critical elements needed for them to work. And it will take a lot of mining activity to produce these elements as well which does have some environmental impact itself. Shortages of these key elements will also send their prices higher impacting the overall cost to the consumer.
It's one of the best in depth analysis I have seen on this topic so I wanted to share it with readers here.
(Source: Precious Metals Commodity Management LLC)
Chart Key:
FCEV - Fuel Cell Electric Vehicle
BEV - Battery Electric Vehicle
PHEV - Plug in Hybrid Electric Vehicle
Hybrids - Like the Toyota Prius, etc.
ICE - Internal Combustion Engine (note: he projects ICE's are still 2/3's of all new cars sold in 2030)
Click here to read this article which explains the chart above
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Added note: I ran across this interesting article if you want to see a contrarian view to the idea that the planet is headed towards doom and despair environmentally. It says we just lived through the best decade in human history and predicts things will get better going forward. The article takes the position that good news is not worthwhile news to most media outlets.
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Added note: I ran across this interesting article if you want to see a contrarian view to the idea that the planet is headed towards doom and despair environmentally. It says we just lived through the best decade in human history and predicts things will get better going forward. The article takes the position that good news is not worthwhile news to most media outlets.
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