The new resource dependencies

The Volt

This article originally appeared on GigaOM Pro (subscription required):
When thinking about cleantech, I tend to think in terms of resources and supply constraints, meaning that when we switch from a fossil fuel like coal to a renewable resource like wind, I consider what natural resources we’re newly dependent on (unfortunately it’s more than just wind). The move to renewable energy has a lot of great advantages—reduced particulate matter from not burning hydrocarbons, more stable energy prices, energy security, and yes, slowing the accumulation of greenhouse gases driving climate change. But this week I’d like to take a look at five natural resources that will significantly impact the future development of renewable energy.
1) Rare earths: In a great piece in Foreign Affairs a couple weeks back, China analyst Damian Ma profiled China’s attempts to put government controlled pricing on rare earths, a group of 17 elements like lanthanum and cerium that are critical to manufacturing high tech products. Even though China only controls a third of global deposits, it supplies 90 percent of rare earths. Aware that one can’t even build an iPad without rare earths, Beijing has limited the export of rare earths in an attempt to force more manufacturing to move to China and to drive up global prices, a strategy that appears to be working. Importantly for cleantech, rare earths are essential for building EV batteries and the permanent magnets that drive wind turbines. On the bright side, China’s export controls are driving a revival in rare earth mining in Australia and the U.S.

Tesla Model S battery

2) Lithium: Whether you’re building the Tesla Roadster and you’re packing almost 7,000 laptop batteries together or you’ve got a smaller battery pack ala the Chevy Volt, you’re going to need lithium. The capability of storing energy is a central tenet of moving away from fossil fuels as an energy source, and lithium is the battery cathode material of choice right now, despite efforts from startups like Eos Energy Storage and Liquid Metal Battery to produce batteries from very common elements with zinc and sodium. Eighty percent of the world’s lithium deposits are in Argentina, Bolivia and Chile, and while there’s plenty of lithium such that it’s not a huge input cost, exponential demand growth combined with its strategic concentration in just a few countries, make it a resource whose price folks should pay attention to.
3) Platinum: One of the barriers to widespread hydrogen fuel cell adoption is the pricy element that catalyzes the reaction of hydrogen fuel with oxygen to emit water. Estimates vary with technology development and the price of platinum, which hovers above $1,400 an ounce today, but for a 100kw fuel cell that would power a small car, the platinum costs would be around three grand. That figure isn’t too far from what the entire internal combustion engine would cost in an inexpensive car. Numerous labs are working on alternatives to platinum catalysts, from nanoparticles with palladium cores to carbon mixed with iron and cobalt.
4) Polysilicon: The issue with polysilicon in the last five years isn’t scarcity but overabundance. It’s a key raw material for many solar photovoltaic panels and hit a low of $23.17 per kg this month after costing as much $475 in 2008 and even $52 last August. On a whole this has been helpful in driving down the cost of solar panels and helping increase solar installations, but it’s been a headache for the companies that invested in thin film solar technology like First Solar (s FSLR), which opted for cadmium-telluride, and Solyndra, which went long on copper-indium-galllium-selenide (CIGS) technology. When polysilicon prices plummeted, suddenly their panels got less price competitive. As new technologies compete for market share in the solar industry, the underlying availability and pricing of key raw materials will guide the market.
5) Natural Gas: The four hydrogen atoms bonded to one central carbon atom that comprise methane are plentiful right now, dipping below $2 per 1000 cubic feet in April for the first time since 2002. The success of all renewable energy is levered to the cost of fossil fuels, particularly in a decreasingly subsidized renewables environment. Cleantech investors consider this hydrocarbon pricing risk, meaning no matter how efficient your solar panel is, if fossil fuels get too cheap, you’re doomed. I’ve noted before that the wholesale shift of the U.S. energy economy to natural gas carries significant risk for all renewables sectors. The future viability of renewables may be less about the cost of oil than the cost of natural gas.
This list is likely to shift as the price of underlying raw materials changes and drives where investors, be it government funded ARPA-E or a cleantech fund, decide to place their bets on renewable energy technology. In the transition from fossil fuels to renewable energy generation, technology that incorporates abundant and inexpensive raw materials will have a distinct advantage.