Many of the features that characterise a clean energy system – the growing role of electricity in final consumption, rising contributions from renewables in electricity supply and the greater need for flexibility – all necessitate significant expansion of electricity grids.
The projected requirement for new transmission and distribution lines worldwide in the STEPS is 80% greater over the next decade than the expansion seen in the last ten years. In the SDS, the annual pace of grid expansion needs to more than double in the period to 2040. Around 50% of the increase in transmission lines and 35% of the increase in distribution network lines are attributable to the increase in renewables.
In addition to additional lines, there is scope to refurbish grids to strengthen the resiliency of electricity systems to climate change and extreme weather events. Refurbishment of electricity grids is also strongly linked to digitalisation, given the rising need for smart and flexible grids.
The huge expansion of electricity grids requires a large amount of minerals and metals. Copper and aluminium are the two main materials in wires and cables, with some also being used in transformers. Copper has long been the preferred choice for electricity grids due to its high electrical and thermal conductivity. However, copper is over three times heavier by weight than aluminium and is more costly.
Copper is widely used for underground and subsea cables where weight is not a major concern and superior technical properties (e.g. corrosion resistance, tensile strength) are required. By contrast, aluminium is commonly used for overhead lines given its weight advantage. In some instances, aluminium is also used for underground and subsea cables.
Annual copper demand for electricity grids grows from 5 Mt in 2020 to 7.5 Mt by 2040 in the STEPS and to nearly 10 Mt in the SDS. Aluminium demand increases at a similar annual pace, from 9 Mt in 2020 to 12.8 Mt in the STEPS and 16 Mt in the SDS by 2040.
Minerals account for a considerable share in total investment costs for grids. Using average prices over the past 10 years, copper and aluminium costs are estimated to represent around 14% and 6% of total grid investment respectively.
One option to reduce raw material costs is to switch from copper to more affordable aluminium. If aluminium takes a higher share in underground and subsea cables, copper demand could be reduced by 3.6 Mt (down by a third) in 2040 while raising aluminium demand by 5.8 Mt (up by over a third).
Another option is to adopt HVDC systems more widely, which uses one-third less metal compared to AC systems and are capable of transporting more electricity. A wider uptake of HVDC systems could reduce combined demand for copper and aluminium in 2040 by 4 Mt (or 15%) in the SDS.
Electric car sales worldwide climbed 40% in 2020 to around 3 million, reaching a market share of over 4%. As a result, more than 10 million electric cars are now on the road globally. In the SDS, electric car sales exceed 70 million in 2040, alongside the rapid electrification of light commercial vehicles, buses and freight trucks.
As of the end of 2020, around 15.5 GW of battery storage capacity were connected to electricity networks. After annual installations of battery storage technologies fell for the first time in nearly a decade in 2019, they rebounded by over 60% in 2020. In the SDS, global installation of utility-scale battery storage is set for a 25-fold increase between 2020 and 2040, with annual deployment reaching 105 GW by 2040. The largest markets for battery deployment in 2040 are India, the United States and China.
Lithium-ion batteries are often categorised by the chemistry of their cathodes, such as lithium iron phosphate (LFP), lithium nickel cobalt aluminium oxide (NCA) and lithium nickel manganese cobalt oxide (NMC). The different combination of minerals gives rise to significantly different battery characteristics.
As it has become evident that reducing cobalt content in the cathode and striving for higher energy density are key concerns for many manufacturers and countries, the base case scenario sees a shift away from cobalt-rich chemistries. While most heavy trucks are reliant on LFP batteries in the medium term, our base case also sees modest growth in the market share of LFP for cars due to its increasing use in China and entry-level models.
Significant improvements in energy density and further declines in battery prices will likely require technologies beyond liquid electrolyte-based lithium-ion batteries. Such a breakthrough is expected from the advent of lithium metal anode all solid-state batteries (ASSBs). The base case sees ASSB becoming commercially available by around 2030 and requiring another five years for manufacturing capacity to build up.
In the SDS, battery demand from EVs grows by nearly 40 times between 2020 (160 GWh) and 2040 (6 200 GWh). Overall demand for minerals under the base case assumptions grows by 30 times between 2020 and 2040, from 400 kt to 11 800 kt. In the STEPS, battery demand from EVs grows just 11 times to nearly 1 800 GWh in 2040, with demand for minerals growing ninefold to around 3 500 kt in 2040.
In the SDS, nickel demand grows by 41 times to 3 300 kt, while cobalt increases by only 21 times, as cathode chemistries shift away from NMC 111 towards lower-cobalt chemistries (NMC 622 and NMC 811). Lithium demand grows by 43 times, while copper demand grows by 28 times.
Graphite demand grows 25 times from 140 kt in 2020 to over 3 500 kt in 2040. Silicon registers the largest relative growth, up over 460 times, as graphite anodes doped with silicon grow from a 1% share in 2020 to 15% in 2040. Demand for REEs grows 15 times to 35 kt in 2040.
We explore three alternative scenarios to assess how the demand outlook for various minerals could change under varying technology evolution trends.
A delayed shift to nickel-rich chemistries (and away from cobalt-rich chemistries) results in nearly 50% higher demand for cobalt and manganese in 2040 compared to the base case. Nickel demand is 5% lower in 2040 compared to the base case.
The faster uptake of lithium metal anodes and ASSB results in 22% higher lithium demand in 2040 compared to the base case, but also much lower demand for graphite (down 44%) and silicon (down 33%).
Moving rapidly towards a silicon-rich anode results in nearly three times as much silicon demand in 2030 compared to the base case, and a slight decrease in graphite demand (down 6%). By 2040 silicon demand is only 70% higher, owing to a higher adoption of silicon-rich anodes even in the base case.
Safe and cheaper LFP batteries for utility-scale storage are expected to dominate the overall battery storage market. The remaining demand is covered by the more expensive, but energy-dense, NMC 111 and NMC 532 used predominantly for home energy storage. The NMC variants transition towards NMC 622 and NMC 811 in a similar way to the market for EV batteries, albeit with a delay owing to the time needed for transfer of technology and sufficient reduction in prices. Vanadium flow batteries (VFBs) first become commercially suitable in 2030 with a small share, growing modestly to capture a wider market for storage applications in large renewables projects.
In the SDS, battery storage grows by 11 times between 2020 (37 GWh) and 2040 (420 GWh). Overall demand for minerals in the base case grows by 33 times between 2020 and 2040, from 26 kt to nearly 850 kt. Overall mineral demand outpaces battery demand growth, as the market share for LFP batteries is displaced by more mineral-intensive NMC chemistries. The largest relative growth is seen in nickel, which grows more than 140 times from 0.4 kt in 2020 to 57 kt in 2040. Cobalt demand increases by 70 times while manganese demand increases by 58 times.
For battery storage, we explore two alternative scenarios. A more rapid adoption of wall-mounted home energy storage would make size and thus energy density a prime concern, thereby pushing up the market share of NMC batteries. The rapid adoption of home energy storage with NMC chemistries results in 75% higher demand for nickel, manganese and cobalt in 2040 compared to the base case. A faster uptake of silicon-rich anodes also results in 20% greater demand for silicon compared to the base case in 2040.
If flow batteries achieve widespread commercialisation earlier than expected, then utility-scale storage technology could shift away from LFP batteries towards vanadium flow batteries. The early commercialisation of vanadium flow batteries results in 2.5 times more demand for vanadium compared to the base case in 2030 and 50% more demand in 2040. As a result of lower market shares for NMC chemistries, demand for nickel, cobalt and manganese are about 20% lower in 2040 compared to the base case.
The average cost of lithium-ion batteries has fallen dramatically over the past decade, reaching USD 137/kWh in 2020. Further cost reductions are necessary for EVs to achieve the adoption rates observed in the SDS. However, with major technological improvements achieved over the past decade, raw materials now account for the majority of total battery costs (50–70%), up from around 40–50% five years ago. Cathode (25–30%) and anode materials (8–12%) account for the largest shares.
Given the importance of material costs in total battery costs, higher mineral prices could have a significant effect on achieving industry cost targets. For example, a doubling of lithium or nickel prices would induce a 6% increase in battery costs. If these events happen at the same time, the cost increase would eat up the anticipated learning effects associated with a doubling of capacity. It is therefore of paramount importance for governments and industry to work to ensure adequate supply of battery metals to mitigate any price increases, and the resulting challenges for clean electrification.
Over 90% of the EVs marketed today use permanent-magnet synchronous motors due to their high efficiency, compact size and high power density. However, their use of REEs such as neodymium, praseodymium, dysprosium and terbium – upwards of 1 kg per motor – raises concerns given the geographical concentration of raw material and processing in China, the lack of recycling pathways and high price fluctuations.
There are several pathways to reducing REE use in EV motors: (i) improving material efficiency in magnet production to obtain NdFeB magnets with less REE content but with similar performance; (ii) reducing the amount of NdFeB magnets in permanent-magnet synchronous motors; (iii) substituting permanent-magnet motors with REE-free motors.
Electrolyser capacity for low-carbon hydrogen production rises to around 1 400 GW in 2050 (in electricity input terms) in the SDS. Compared with today’s level of electrolyser manufacture – for which factory capacity is under 5 GW worldwide – this is a large increase and will require a corresponding scale up of mineral inputs.
Estimating mineral inputs for electrolysers is complicated by the different mineral intensities of the competing electrolyser designs. There is uncertainty about which of the three main types of electrolyser might dominate the market.
Alkaline electrolysers are currently the most widely used. They have low capital costs, partly because of their avoidance of precious metals, but current designs do require nickel in quantities of more than one tonne per MW. Reductions in nickel demand for alkaline electrolysers are expected, but nickel is not expected to be eliminated from future designs. However, even if alkaline electrolysers dominate the market, then nickel demand for electrolysers would remain much lower than that for batteries in the SDS. Proton exchange membrane (PEM) electrolsyers are more expensive today, but are already being deployed in large facilities as they are smaller and more flexible. While PEM uses more precious metals than alkaline – for example, around 0.3 kg of platinum per MW today – it is not expected to become a dominant source of platinum and iridium demand, even at the deployment levels in the SDS. Solid oxide electrolysers are at an earlier stage of development, though their higher efficiencies and reversibility make them a potentially attractive option. Like alkaline electrolysers, they currently use nickel, as well as rare earth elements like lanthanum, yttrium and zirconium.
Despite having a marginal impact on total energy demand for critical minerals in the SDS, the mineral requirements of electrolysers are a significant cost component and this could impact their competitiveness if mineral prices rise in response to demand, for example from batteries, fuel cells and other clean energy technologies.
While the automotive sector is set to become a dominant source of global demand for lithium, nickel and cobalt for EV batteries, it already leads demand for platinum and palladium for use in catalytic converters. For these so-called platinum group metals, a key issue is whether new demand from fuel cells will offset declining demand from internal combustion engine vehicles.
While fuel cells for converting hydrogen to electricity have been in production for many years, the introduction of commercial passenger FCEVs has spurred innovation to reduce the use of platinum to limit costs. For example, Toyota’s second-generation Mirai, released in 2020, uses over 80% less platinum per kW of output than the 2008 prototype and roughly a third less than the first-generation from 2014. If targets to reduce platinum loading per kW are met, demand for FCEVs in the SDS would grow platinum demand to just over 100 tonnes by 2040.
Catalytic converters represent around 40% of global platinum demand today, and are also the major source of demand for two other platinum group metals: rhodium and palladium. In the SDS, an increase in the coverage of emissions regulation to include all new cars by 2030, coupled with continued sales of internal combustion engine, especially hybrids, keeps demand for platinum group metals for use in catalytic converters above that for fuel cells by 2040.
This report considers a wide range of minerals and metals used in clean energy technologies, including chromium, copper, major battery metals (lithium, nickel, cobalt, manganese and graphite), molybdenum, platinum group metals, zinc, rare earth elements and others (see Annex A for the complete list). Steel and aluminium are not included in the scope for demand assessment, but aluminium use in electricity networks is exceptionally assessed given that the outlook for copper is closely linked with aluminium use in grid lines (see Introduction).
See Annex for methodologies and data sources.