On the edge of Death Valley, a major standoff over energy policy has ensued.
Environmentalists are staunchly opposed to the exploration of a rare commodity.
Proponents of the commodity’s production argue that extracting it from the ground will be essential to U.S. energy security and independence in the 21st century.
You might hear this debate and think: he’s talking about oil and natural gas, right?
Wrong. This commodity is the world’s lightest metal and the 25th most common element in the earth’s crust.
Yet, ironically, this metal could help achieve the very thing that these same environmentalists want.
A carbon-free future.
A few years ago, an Australian mining company targeted a vast Nevada treasure trove of lithium, a necessary component to batteries in electric vehicles (EVs).
Even though lithium is the critical component of battery technology for electric vehicles…
And even though the value of the U.S. lithium mine would be worth $1.265 billion and help the U.S. reduce its carbon footprint…
Environmentalists are pressing back.
They want to save a rare type of flower from extinction, an event they argue would happen if the Australian company constructs its new lithium mine.
The ongoing battle raises new questions about how and where the U.S. auto industry will access the necessary lithium to meet new mandates from the Biden administration.
Today, I want to explore a straightforward question. Is there enough lithium to go around?
The Battle Over Buckwheat
I wasn’t kidding when I said that a flower is at the center of debate in Nevada and its lithium mining future.
Roughly 40 years ago, people discovered a rare plant called Tiehm’s buckwheat. The fascination around the plant is that it has survived in this remote desert in extremely nutrient–deprived conditions.
As California and Washington state are phasing out gas–powered vehicles and Washington, D.C., is setting new mandates on the auto industry, this debate over a plant seems quite silly.
It’s only about five inches high, and it’s one of 80 different buckwheat species. It looks like a dandelion.
But environmentalists claim that this plant cannot grow anywhere else in the world. And they argue that mining lithium in Nevada would drive it to extinction.
According to the Center for Biological Diversity, a new lithium mine would affect the soil where this rare flower lives. The group argues that the mine would eliminate 60% of the plant’s habitat when phase one of the mine begins. It further contends that phase two of the mine would wipe out up to 90% of the plant’s habitat.
Conservationists are studying the plant to determine if it can be transplanted somewhere else to grow and thrive. However, research at the University of Nevada, Reno, suggests that the plant can only grow in this specific soil around the proposed mining site.
Here’s the kicker.
The Biden administration, under the Fish and Wildlife Service, has proposed a petition that would classify the plant under the Endangered Species Act.
If this plant is declared an endangered species, it will wipe out one of the few places we know in the United States to produce lithium.
The action would also fly directly in the face of a massive federal order by the Biden administration in recent weeks that will require more lithium than ever to reduce carbon emissions from gas-powered engines.
The Biden Administration Presses EV
This week, the U.S. Senate passed a $1.2 trillion bill that would dramatically increase spending for roads, bridges, electric charging stations, and other infrastructure. President Biden has pressed for infrastructure programs since his inauguration.
But there was another action in Washington that shows the Biden administration’s goal of changing the future of vehicle travel. The Biden administration signed an executive order that required half of the vehicles produced in the United States to be carbon-free by 2030.
It’s a highly ambitious goal. And it puts an incredible reliance on the supply chains necessary to create electric vehicles, hydrogen-powered engines, or any other source that doesn’t require gasoline, natural gas, or diesel fuels.
The average electric vehicle requires about 22 pounds of lithium.
So let’s do a back-of-the-envelope calculation right now. Imagine that U.S. customers buy 7 million electric vehicles in 2030. These vehicles alone would require 154 million pounds (nearly 70,000 tonnes) of lithium to produce.
Interestingly enough, that same mine in Nevada that faces the challenges ahead has 146.5 million tonnes of lithium and other metals needed to create batteries and other components, roughly 2,000 years’ worth of lithium—if the Biden administration doesn’t increase its original target of 7 million vehicles.
The Biden administration is aware of this. So, it’s curious that the same administration would file a petition for this flower’s classification as an endangered species just weeks after it released a national blueprint for lithium-ion batteries.
The White House released a report on June 8 that said the U.S. has structural weakness in the supply chains of semiconductors, electric vehicle batteries, pharmaceuticals, and critical minerals.
The report itself lists several ways that the U.S. can achieve greater domestic lithium production. That includes promoting more private investment in mining, recycling commodities, and training workers in the lithium supply chain.
Does it sound like the Biden administration will be fighting itself in court?
China Continues to Dominate the Lithium Battery Industry
The Biden administration is pushing the Department of Energy to prioritize new battery technology and research funding. This includes $200 million in the Department of Energy’s budget for 2022.
And while the Biden administration continues to throw money at the industry, it’s uncertain if its efforts will produce grand results. The U.S. solar manufacturing industry failed to achieve a wide market share. China’s industrial policies allowed its domestic producers to capture the bulk of the global market share in solar PV production.
The same thing is already happening in lithium battery technology. U.S. companies only produce around 10% of lithium-ion anodes needed for batteries. The nation has even less market share in the other critical components used in these batteries.
China, meanwhile, generates about 65% of the global supply of lithium-ion anodes and 40% of the critical cathodes and separation materials used in these batteries.
Where Will the U.S. Source Lithium?
The concerns about U.S. policies will require the nation to source lithium from other areas of the world. According to RK Equity, a New York lithium investment firm, the United States has only one active lithium mine today and will need at least 500,000 tonnes of lithium by 2030.
Nations like Argentina, Bolivia, and Chile have similar dry climates to Nevada and vast lithium-brine deposits used to source the commodity. Yet the world only produced 325,000 tonnes in 2020, RK Equity notes.
And while other minerals like zinc, potassium, and sodium may help introduce new battery technology, lithium will remain the dominant commodity for these EV batteries.
The key problem is that lithium prices could triple by the end of the decade, according to Rystad Energy. As a result, the company anticipates a “serious” commodity shortage in just six years (2027) unless we explore new mining in the future.
CNN reports that the world needs to mine 42 times more lithium than was produced in 2020 to meet climate targets from the Paris Agreement.
Rystad says that upward of 3.3 million vehicles could be delayed due to a shortage of lithium. That figure could increase to 9 million by 2028 and as high as 20 million by 2030.
It will be a tough challenge for U.S. companies to secure the needed lithium to mass-produce their batteries and meet these federal mandates. Court cases and battles over flowers won’t do the job.
So, we’ll need to look for the right companies and commodity funds to exploit this imbalance between expected supply and demand.
We’ll look for those opportunities very soon.