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Perspective: Today, it’s gas. Tomorrow, lithium – Irina Slav


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These translations are done via Google Translate
by Irina Slave

The IEA’s Fatih Birol has been at it again. And when I say “at it”, I mean defending renewables and tirelessly repeating they had absolutely nothing to do with the European energy crisis. It was all Russia’s fault because how dare Gazprom, which obviously has no other clients but Europe, not supply gas above its contract obligations, especially when prices are so high?

I’m being excessively harsh. In fairness, this time Birol did mention the lower than usual wind output in Europe during much of the year but only to add that “wind and solar PV provided valuable contributions to meeting European electricity demand in the fourth quarter of 2021. Wind power generation increased by 3% and solar by 20% compared with the same period a year earlier.”

Indeed, data from electricityMap shows that Germany has been generating over half of its power from wind farms in recent weeks. Then how come electricity prices are still so high, one cannot help but ask.

It is becoming increasingly difficult to believe it is because of the 25% lower Gazprom volumes for the third quarter of the year: assuming (and I believe this is a safe assumption) that the fixed contracts European buyers have with the Russian state company cover usual demand during this period, supply should be pretty much enough since it has decidedly not been colder than usual. And let’s repeat that nobody, even Germany’s new government, has accused Gazprom of failing to supply contracted volumes.

At the same time, Norway is subsidising 80% of its citizens’ electricity bills. This is an interesting development in a country that sources almost 100% of its electricity from hydropower and also has ample supplies of natural gas. Could it be that Norway is exporting more electricity? Why yes, it could and it is. The Local reported earlier this month the Norwegian government was being pressured to increase financial aid for households facing sky-high electricity bills because of “high energy prices caused by low power stocks and high exports to the continent.”

Offering consumers, especially unhappy consumers a simple, easy to understand reason for their woes is a preferred approach by governments. It makes perfect sense — explaining something to millions of people with varying degrees of comprehension powers would be exhausting, time-consuming and, not least, quite possibly inconvenient as the truth tends to so often be. So out comes the simple explanation, preferably blaming an outside power for the problem and if that outside power is already being demonised in other respects as well, even better — the explanation becomes even simpler.

I recently saw a quote somewhere on social networks and this quote said that magicians and politicians have one thing in common and it is that they both seek to divert our attention from what they are actually doing. Current developments in Europe —and everything that has been coming from the IEA — are a brilliant example of this near-identical nature of politicians and magicians and of how when both magicians and politicians fail to distract us sufficiently the results are, from an observer’s point of view, hilarious.

Leaving Europe’s blame game aside, Birol said something with huge comedic — and tragic — potential in his latest release. It’s the conclusion of the article, which once again puts forward the argument that the more renewable power we have, the less we will rely on wayward outside suppliers.

Indeed, the self-sufficiency argument is the strongest one in favour of wind and solar. However, it is nowhere near strong enough to offset the intermittency problem, which is why battery storage began to be mentioned in some dissections of the crisis. Here’s how Birol ends his article:

In my view, today’s situation underlines the fact that energy systems face significant risks if they rely too much on one supplier for a key element. Today, it is natural gas; tomorrow, it could be something else, such as lithium. This is why I’m urging governments to act now to tackle today’s energy security challenges and those of the future.

GLJ
GLJ

I’ll let those following the metals market have a laugh. Ready? Okay. “It could be something else” is a quite delicate expression of a future certainty. Brussels appears to be waking up to the idea that the energy transition won’t happen with just millions of solar panels and thousands of wind mills. It will need battery storage because it’s the greenest (and green hydrogen but this is not a rant about green hydrogen).

Battery storage features, among other things, lithium, and Europe will need a lot of that to make its solar farms and wind parks reliable suppliers of energy. It will also need it t a time when demand for lithium is rising fast and steady because of the expected surge in EV demand — a surge graciously financed by these same European governments that are now planning for large-scale battery storage, or at least they are thinking about it really hard.

The global lithium supply is concentrated in just a handful of countries, notable among them Chile, Australia and, so very unfortunately for Europe, China. There are other deposits in other countries, too, but they are yet to be tapped, which means a lot of upfront investment and a few years until the project starts producing and that’s if there isn’t local opposition because we’ve all seen what the Serbs did with Rio Tinto’s lithium project: the company first pushed back the year of first production from the mine to 2027 and now the Serbian government has gone and revoked its licences.

But battery energy storage, like solar farms and wind parks, also needs a lot of other metals and minerals, and, as I’ve said before, ironically, Russia is among the countries quite rich in all these metals and minerals. Of course, it’s not the only one that’s rich in them, so Europe will definitely not need to rely on Russian copper for its journey to 100% renewable power systems. But here’s the catch: it will still need to rely on outside suppliers, because it does not have the local resources and it definitely does not have the support of the public for new mines.

These external suppliers, very much like Russia, may — and probably do — have their own national agenda that may happen to be at odds with the European agenda, making the security of metals and minerals supply a tiny little bit more unreliable than it could have been were they mined locally. And that’s the smaller problem, really, because we simply do not have the metals and minerals output we need for the energy transition.

What does this all mean, besides the obvious, which is that a lot of people in a position of power and influence have switched to automatic mode, repeating the same statements over and over again without the least concern about actual reality? See how the UN’s chief, Antonio Guterres is calling for the phase-out of coal power plants with zero regard for why this is impossible. Also, it’s odd why he addressed his call to a non-government organisation, namely the World Economic Forum but that’s obviously beside the point so I’ll drop it.

What this means is that if governments are determined to shove the energy transition down our throats, which they appear to be, it will come at a cost and it will be a high cost. There is virtually no metal or battery mineral that is in oversupply currently and shortages are looming on the horizon if we are to believe forecasters.

Emissions, meanwhile, are also getting more expensive meaning the products of emitters will also get even more expensive as they try to cope with higher emission costs and invest in lowering emissions. In the end, as some commentators on previous posts in this newsletter have said, we’ll have riots. All because our governments decided to ignore what’s realistically feasible and went for the perfection-itself-scenario for energy.



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