Increasingly obvious climate change, new technical breakthroughs, and the global pandemic are continuing to boost other trends upending old certitudes about energy supply, demand, distribution, and source.
Fossil fuel scarcity no longer spooks the energy market, and support for multi-sourced energy abundance is gaining ground. Two centuries of hydrocarbon fuel supremacy seem to be heading into the sunset, with competition from once-speculative alternatives now a market-moving reality. In 2020 alone, the world added 280 GW of renewable energy – equal to the electricity-generating capacity of Southeast Asia. Total world car sales declined last year as electric vehicle (EV) sales jumped by 40 percent, new models making a clean break from the internal combustion engine. An energy megatrend is unfolding around us.
While a residual Oil Age persists in fertilizer feedstock, lubricants, and specialist fuels, global market power is moving away from fossil fuel producers, whether they be companies or nations. Renewable energy is prompting the rapid growth of green (or greener) manufacturing, which relies on opaque supply chains to deliver the rare metals and minerals essential to renewable technologies.
Quickening strategic rivalry since 2010 adds new anxiety to somber market impact assessments of China’s hold on key materials. China now produces 70 percent of the world’s solar modules, makes over half its wind turbines, and dominates lithium-ion battery manufacture. According to Benchmark Minerals Intelligence, 148 lithium-ion battery ‘mega factories’ are being built or are already producing in China. By contrast, the U.S. has only ten such factories in the planning pipeline. The EV revolution may feel American-made, but it comes forged in Chinese factories.
New books are focusing on industrial policy and energy trends. Daniel Yergin (“The New Map: Energy, Climate and the Clash of Nations”) and Bill Gates (“How to Avoid a Climate Disaster”) have seized on the moment, while US congressional committees are generating well-researched testimony.
Of special note is Alexander Mirtchev, whose solid new book (“The Prologue: The Alternative Energy Megatrend in the Age of Great Power Competition“) traces the trajectory of energy in the global economy. Mirtchev shows how each earlier era has had a transformative effect, a powerful narrative leading straight to an examination of today’s Sino-American rivalry.
China’s energy advantage reflects its strength in procuring key minerals, from the mine up. Unlike the energy autonomy enabled by North America’s ‘shale revolution’ (i.e., oil and gas extracted from enormous shale deposits), China has focused on ‘green’ energy manufacturing, now seen as overtaking hydrocarbons. Beijing’s industrial policy has put the full weight of government support behind increasing China’s domestic and foreign grip on mining and mineral processing, particularly the materials and rare earth minerals vital to new technologies. That supply line dominance isn’t simply about profit; Mirtchev cites China’s restriction of rare-earth exports to the US, EU, and other Western allies as an early move for 21st century leadership.
The result? An unrivaled Chinese grasp on energy manufacturing, including roughly three-quarters of global lithium production and eighty percent of rare earth minerals’ supply. Chinese firms dominate wind and solar power manufacturing, and battery manufacturing. There is, of course, a counter-narrative: The Biden administration wants to bring back (‘re-shore’) mineral supply chains to North America and frames its climate, energy, and infrastructure plans around the generation of new jobs. Administration officials speak about a resumed U.S. research supremacy in developing a greener economy within American re-industrialization. That, too, carries risk. As Mirtchev notes, rare-earths are toxic during mining and processing, raising environmental concerns in an administration dedicated to bold environmental action.
The Biden White House has said very little about what mineral supply foundations the U.S. needs to stay in the game. There is no evading the problem. A new International Energy Agency report identifies specific mineral supplies which must exist in the coming years. Clean energy mineral requirements will double by 2040, with the demand surge for some specific materials and metals even steeper. Expect demand for lithium to increase 40 fold by the same year, with cobalt, graphite, and nickel similarly rising as much as 25 times.
A minerals shortage could become the worm in the apple of green re-industrialization. Although North America is minerals-rich, domestic procurement remains problematic. Current regulatory policy emerged in response to environmental hazards, at a time of greater confidence in unencumbered free trade and little concern about foreign monopolies. Changes in extraction technology and improved land stewardship should enable mining start-ups to become environmentally acceptable. Meanwhile, the demand explosion for these minerals strengthens China’s monopoly grip. For U.S. manufacturers, supply chain vulnerabilities have become a glaring weakness. As Mirtchev contends, the importance of supply chains – and who controls them – cannot be overstated in this new age of critical mineral-fueled growth.
Meanwhile, offshoring has left the U.S. with only one operational lithium mine, America’s only rare-earth mine has no choice but to ship its production to China for processing, and proposals for new copper, lithium, and nickel mines face predictable opposition. Bipartisan willingness to jumpstart domestic minerals production needs Administration leadership. It would be strange to trade our past dependence on the OPEC oil cartel (now eliminated by the shale revolution) for subservience to Chinese supply chains.
President Joe Biden sees a grand bargain in the coming energy transition, one which delivers jobs amid a revival of America’s industrial base. It may seem environmental treason, but without freer supply chains and more domestic resource extraction, the inexorable shift towards renewable power could result in China’s emergence as the unrivaled 21st-century energy superpower. Allowing America’s greatest rival to dominate the energy megatrend is not an option; we must act before it is too late.
