Clean Energy Demand Sees Unprecedented Growth in Critical Minerals Market

In its first annual market review, the International Energy Agency (IEA), found the market for minerals that help power electric vehicles, wind turbines, solar panels, and other clean energy transition technologies has doubled in size over the past five years.

According to the IEAs Critical Minerals Market Review 2023 report, however, more work is needed to ensure the continuance of a diversified and sustainable supply of critical minerals to support energy transition.

The review shows that record deployment of clean energy technologies is propelling huge demand for minerals such as lithium, cobalt, nickel, and copper. From 2017 to 2022, the energy sector was the main factor behind a tripling in overall demand for lithium, a 70% jump in demand for cobalt, and a 40% rise in demand for nickel.

The market for energy transition minerals reached US$320 billion in 2022 and is set for continued rapid growth, moving it increasingly to centre stage for the global mining industry. In response, investment in critical mineral development rose 30% last year, following a 20% increase in 2021.

Among the different minerals, lithium saw the sharpest increase in investment, a jump of 50%, followed by copper and nickel. The strong growth in spending by companies on developing mineral supplies supports the affordability and speed of clean energy transitions, which will be heavily influenced by the availability of critical minerals.

Mixed Environmental Progress

If all planned critical mineral projects worldwide are realised, supply could be sufficient to support the national climate pledges announced by governments, according to the IEA’s analysis. However, the risk of project delays and technology-specific shortfalls leaves little room for complacency about the adequacy of supply. And more projects would in any case be needed by 2030 in a scenario that limits global warming to 1.5 °C.

Diversity of supply also remains a concern, with many new project announcements coming from already dominant countries. Compared with three years ago, the share of the top three critical mineral producers in 2022 either remained unchanged or increased further, especially for nickel and cobalt.

Additionally, environmental, social, and governance (ESG) practices are making mixed progress. Companies are making headway in community investment, worker safety, and gender balance. However, greenhouse gas emissions remain high, with roughly the same amount emitted per tonne of mineral output every year. Water withdrawals almost doubled from 2018 to 2021.

“At a pivotal moment for clean energy transitions worldwide, we are encouraged by the rapid growth in the market for critical minerals, which are crucial for the world to achieve its energy and climate goals,” said IEA Executive Director Fatih Birol.

“Even so, major challenges remain. Much more needs to be done to ensure supply chains for critical minerals are secure and sustainable,” Birol added.