― By Martín Navarro
Exploring the Critical Minerals Landscape in the Clean Energy Era
Clean energy systems, whether in the form of wind turbines, solar panels, or electric vehicles, have a voracious appetite for minerals. In comparison to their fossil fuel-based counterparts, renewable technologies typically require significantly more minerals. For instance;
- Electric cars need 6 times more minerals than traditional gas-powered vehicles, and
- Offshore wind farms demand a staggering 13 times more minerals than gas-fired power plants.
This surge in demand has led to a 50% increase in mineral demand since 2010. Different clean energy technologies rely on specific minerals. Lithium and cobalt are essential for batteries, rare earth elements power wind turbines and EV motors, while copper and aluminum play a crucial role in electricity networks. While these minerals are indispensable for the energy transition, concerns about price volatility, supply security, and geopolitical risks have come to the forefront.
The Monopoly Problem
In 2013, the Chinese Government introduced the Belt and Road Initiative (BRI), an ambitious plan to create two new trade routes linking China with the global community. Beyond its focus on infrastructure development, the BRI is a strategic endeavor aimed at cultivating an expanded and interconnected market for China, enhancing its economic and political influence, and fostering an environment conducive to a high-tech economy.
China’s involvement extends to countries of geopolitical significance, strategically positioned locations, or abundant natural resources. To date, China has provided an impressive $900 billion in loans to 151 lower-income nations across the world, primarily to support the construction of essential infrastructure such as highways, bridges, hydroelectric dams, and related projects. Through this, China has effectively gained dominance over the mineral supply chains in numerous nations.
While extracting minerals is the initial stage, the subsequent refining or processing is crucial to transform ore into the minerals required for batteries, not just for electric vehicles (EVs) but also for various other products. China is a dominant force in this processing stage, handling over half of the minerals essential for EV batteries and various other applications. As the demand for EV components rises, and geo-political tensions rise over the Ukraine war, there is a growing concern about increased reliance on China’s refining infrastructure.
This has been a focal point for geo-political discourse over the past few years and continues to highlight significant weaknesses in the US global ambitions.
Onshoring and Recycling Solutions
To ensure a stable and secure supply of critical minerals, nations are racing to strengthen their supply chains for clean energy technologies.
- US in defense mode — putting money to work in areas of technological innovation and subsidies to drive defensibility.
As access to critical minerals becomes challenging, alternative strategies are being pursued by the US to maintain global competitiveness. The Inflation Reduction Act (IRA) is one such method to enable the US government to subsidies and fund innovation to help secure stable supply chains through onshoring and friend-shoring.
On top of government-led financing, venture capitalists are increasingly acknowledging the need for these minerals to fuel the energy transition, spanning from lithium for electric vehicle batteries to copper for grid upgrades. Notably, 2023 has witnessed heightened dealmaking, surpassing last year’s figures despite a more restrained fundraising landscape. For instance, mining companies have secured over $550 million in VC funding this year, compared to the $508 million raised in the initial three quarters of the previous year.
- European Union is exploring all options
It is currently the battle ground. While much of the EU appears aligned with the United States, France has demonstrated a willingness to engage China in these discussions. Diplomats, experts, and industry leaders concur that while Europe may achieve some level of supply chain diversification, it cannot attain its climate objectives without collaborating with China.
On the recycling side, compared to 2020, capacities have increased by more than 100,000 t/a with the commissioning of 13 major recycling facilities. Another 16 plants are planned and will bring further capacity gains.
Recycling will be crucial in the EU and the US due to limited local resources. Globally, 80+ companies, including 50+ startups, have attracted over $2.7 billion in the last six years from investors like automakers and mining giants. EV batteries can last over 10 years, and there’s potential for 40% of new EV battery materials to be recycled by 2040. Read more on the topic.
Resource Nationalism on the Rise
As China secures critical resources worldwide and the US strives for onshore independence through innovation and subsidies, resource-rich regions across the globe are reclaiming control over their abundant resources, positioning themselves strategically within the energy transition.
Resource nationalism is gaining ground in up to 34 countries, particularly in Latin America and Africa, significantly impacting the mining industries. Governments in these regions are employing various tactics, from non-renewing contracts to nationalization, affecting resource-rich sectors. For example, Chile, a major lithium producer, recently announced plans to nationalize its lithium industry, reflecting a global trend. The high demand for critical minerals driven by the energy transition further fuels resource nationalism.
This is an important way to break reliance on China but is several years away from actualization. Additionally, US and EU will likely have to build better bridges to these nations in the coming years to secure that supply chain.
Conclusion
The global shift toward clean energy relies heavily on critical minerals, with renewables demanding significantly more resources than fossil fuels. China’s Belt and Road Initiative (BRI) has positioned it as a dominant player in mineral supply chains, complicating global dynamics.
Nations are responding by pursuing strategies to secure their mineral supply chains. The US focuses on innovation, subsidies, and defensibility, while the EU grapples with aligning with the US and engaging with China. Recycling is gaining importance as a sustainable solution.
However, resource nationalism is growing, with many countries asserting control over their resource-rich sectors, impacting mining industries. This trend is exacerbated by the increasing demand for critical minerals driven by the energy transition. Successfully addressing these challenges is crucial for a sustainable and secure clean energy future.
At the moment, it’s hard to see a successful green energy transition in the near term without continued global cooperation between China and the rest of the world. While recycling and innovation offer some hope to onshoring and securing some aspects of the supply chain, it’s unlikely to satisfy the near-term green energy needs.
Read more on the topic ⬇️
Why the European Union needs bold and broad strategies for critical minerals — International Energy Agency
Resilient Rare Earths: Pathways for the G20 — Observer Research Foundation
Onshoring and Friend-Shoring in U.S. — Center for Strategic and International Studies
A vicious cycle of rising resource nationalism — Mining
After Doling Out Huge Loans, China Is Now Bailing Out Countries — The New York Times
In case you missed it…
General Technologies 🚀
📢 Instacart’s IPO Signals a Changing Tide!
After a quiet two-year stretch in the IPO landscape, Instacart made waves with its trading debut, closing at $33.70 — a 12% rise from its opening.
So What?
This momentum reflects investor appetite for tech companies, but with a twist: Instacart’s market cap of $11.1 billion is notably below its 2021 private valuation.
The Broader Message?
Today’s investors aren’t just chasing growth; they’re heavily weighing profitability. With 1,400+ start-ups, valued at an aggregate of $4.9 trillion, lining up for public listings, we might be on the cusp of a new IPO era.
🚗 Exciting Breakthrough in Self-Driving Tech!
UK start-up Wayve, a Reference Capital company, introduces Lingo-1, a self-driving system that explains its actions in plain English, addressing AI transparency concerns.
Why is it a game changer?
Tom Leggett from Thatcham Research emphasizes that transparency is crucial for consumer trust in autonomous vehicles. Setting itself apart in the industry, Wayve employs a unique learning approach inspired by human driving behavior. Complementing this, Lingo-1 leverages recent advances in language models to achieve around 60% accuracy compared to human responses, and it continues to improve. Together, these innovations pave the way for a future of safer and more transparent self-driving experiences.
🤖 AI in Education: A Double-Edged Sword
The month of September is the back-to-school month. This year, it may be somewhat disrupted by ChatGPT. While Regina Barzilay, a faculty lead for AI at the MIT Jameel Clinic, points out that understanding AI is fast becoming a form of basic literacy, it’s essential to use it responsibly.
Key Takeaways for Parents:
1️⃣ AI is Not a Friend: Chatbots aren’t human confidantes. Be cautious with sensitive info.
2️⃣ Not a Search Engine: ChatGPT doesn’t replace Google. Verify its answers.
3️⃣ False Accusations: Know your school’s AI policy to contest wrongful cheating accusations.
4️⃣ Algorithm Traps: Be aware that recommendation algorithms can lead to harmful content.
5️⃣ Use AI Responsibly: Misuse can have legal repercussions.
6️⃣ AI’s Strengths: When used wisely, AI can be a valuable educational tool.
This article will empower parents to guide their children (and their selves ?) in navigating the AI-driven world safely and responsibly.
🎙️Chatbots aren’t always right. Researches call these faulty performances “hallucinations”. — Quartz
Sustainability 🌍
🌍 2023 Insight: Navigating the Climate Investment Landscape
According to a recent report published by Climate Tech VC, despite a ~40% drop in venture capital investment in climate tech during H1 2023, over 200 new climate-specific funds since Jan 2021 are adding capital to back climate solutions.
💡 Key Insights
· Total private climate assets under management (AUM) across these funds since 2021: $121B.
· Expected deployed capital from these funds since 2021: $30B.
· Dry powder ready for climate investments excluding management fees & infra funds: $33B.
· While 2023 saw fewer new funds and slightly smaller fund sizes, mega-funds (AUM $500M+) dominate, making up ~70% of total AUM.
✍️ The Dry Math
· AUM doesn’t directly translate to available capital.
· The timing and pace of investments vary.
- Conservative estimates suggest significant dry powder for climate tech.
📌 Key Takeaways
- VCs are now strategic with their investments.
- Corporate VCs are making a mark, emphasizing strategic over financial benefits.
- LPs await returns from existing commitments before making new ones.
- There’s a conspicuous gap in Series B+ investments as highlighted by Union Square Ventures.
🔮 What Lies Ahead?
- As early climate tech companies mature, expect more growth and private equity investments.
- Watch for infra funds exploring newer avenues.
- Institutional LPs are increasingly keen on climate strategies.
🚀 The Final Verdict
While some challenges are inevitable, the significant capital on standby is a testament to the confidence in climate tech’s future. The data underscores a thriving and evolving sector. With the spotlight firmly on climate tech, it’s an exhilarating time for innovators, investors, and all stakeholders committed to a sustainable future.
🔋 Why Investors are Betting Big on Battery Recycling
Given the challenges associated with domestic mining of minerals such as nickel and lithium, battery recycling has assumed critical importance in the United States. This urgency is further accentuated by the country’s strategic efforts to reduce its reliance on Chinese battery production. As part of this initiative, major investors like BlackRock and Goldman Sachs Asset Management have been channeling significant investments into the battery recycling sector.
According to PitchBook.com, over the last six years, 80+ EV recycling companies, including 50 startups, attracted $2.7 billion in investments from automakers, battery makers, and mining giants like Glencore (GLEN.L).
💸 Largest US Rounds
- Nevada’s Redwood Materials founded by former Tesla co-founder and CTO JB Straubel has raised a $1 billion Series D, pushing its valuation over $5 billion. This comes a few months after receiving a $2 billion conditional loan from the U.S. Department of Energy.
- Ascend Elements, a battery-recycling startup, secured $480 million in grant from the Department of Energy as well as $542m in Series D funding.
🚧 Main Challenges
- Supply Gap: Surge in demand for battery metals like lithium, nickel, and copper. Potential solution lies in amplifying battery recycling efforts to meet this demand.
- Value Chain Paradox: Although the EV battery market is projected to skyrocket by 2030, the majority of these batteries won’t be ripe for recycling until 2035–2040 due to their 15–20 year lifespan, posing a potential supply vs. demand issue (McKinsey).
- Disassembly Issues: Disassembling EV batteries is difficult due to fire risks, diverse designs across car models, and manufacturers’ reluctance to standardize.
- Regulatory Inconsistencies: Battery recycling regulations are not uniform across U.S. states. While some states have mandates for brand owners, others have limited or no regulations at all.
- Environmental Responsibility: Both mining and recycling processes have environmental impacts that need addressing for a truly green solution.
🚀 Bright Outlook
- These investments align with incentives from the Inflation Reduction Act, which encourages the use of domestic material suppliers. Indeed, $192m were allocated by the Department of Energy to support battery recycling.
- As the number of batteries required grows, there will be an increasing need for efficient recycling processes to reclaim valuable metals and reduce waste. This sector could become a significant industry in its own right.
⬇️Read more on the topic
The IRA and the US Battery Supply Chain: Background and Key Drivers — Columbia University
Driving sustainability: the long road ahead for electric vehicles and their batteries — Kearney
Dead EV batteries turn to gold with US incentives — Reuters
Specific Chemistries and General Purposes — Voyager VC
Blockchain & Crypto 💸
📈 Market Update:
🏁 The race for crypto ETF filing has officially resumed after Grayscale’s recent win over SEC with Franklin Templeton, ARK Invest and NASDAQ filing during this past few weeks.
🤝 Solana has reinforced and showcased its status of prominent alternative Layer 1 through strategic partnerships with industry leaders such as VISA and Shopify, as well as with crypto native projects like MakerDAO.
✈️ Lufthansa Airlines has launched an NFT loyalty program on the Polygon blockchain, allowing customers to earn rewards for their loyalty and engagement with the airline.
👨⚖️ The Delaware Bankruptcy Court has approved the sale of FTX digital assets, allowing for the sale of digital assets in weekly batches, subject to varying limits and approvals.
🐰 Announcing the launch of Friend.tech, a decentralized social network powered by social tokens, has been reshaping social media by incentivizing user engagement and content creation.
🔎 Research:
📝 Delving into the concept of long-term staking within Proof-of-Stake (PoS) networks with Tushar Jain and Vishal Kankani from Multicoin Capital, offering valuable insights into the benefits and important considerations for both investors and participants in the cryptocurrency landscape.
📝 Gain valuable insights into DePIN network design with Shayon Sengupta and Tushar Jain from Multicoin Capital. Explore hardware, scaling, and token design in the evolving world of decentralized physical infrastructure networks.
📝Find out how way people work at crypto, covered in a compensation survey published by Pantera.
🎙️ Podcasts:
🎙️Erik Voorhees discusses the current status of crypto on a panel at Permissionless — Blockworks & Bankless
🎙️ Kyle Samani and Nick White: Are Modular or Monolithic Blockchains The End Game Design? — The Delphi Podcast
🎙️ Travis Kling: Binance Deep Dive From FTX Survivor — The Delphi Podcast
🎙️ ROLLUP: What Grayscale’s Win vs The SEC Means For The Next Bull Market — Bankless
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