FORESIGHT: Critical Material Challenges - Supply and Demand
Decision Analysis Services (DAS) is an independent professional services company. We provide professional services globally to clients within the Energy, Defence, Government, Health, and Transport sectors. We specialise in bridging the gap between strategy and operational execution.
At DAS, we have combined our expertise in risk management, futures thinking, supply and demand modelling, technology foresight, and critical materials to provide vital support to organisations involved in net-zero energy technologies and associated major projects. Our pioneering work is helping our clients to understand and manage critical material demand and supply risks and challenges.
Introduction
All products are created using essential raw materials and minerals. These minerals and materials could be mined many thousands of miles away from where the product is made. They are refined and processed, often in multiple facilities across different countries, through a complex global supply chain. Minerals and materials are deemed to be ‘critical’ if they have high economic vulnerability and high global supply risk. Commonly recognised critical minerals include lithium, nickel, cobalt, graphite, and rare earth elements.
Critical minerals and materials are vital to many modern technologies and are integral to our daily lives, whether it’s the nickel in our mobile phones, the lithium and graphite in electric vehicle batteries, the rare earth elements in MRI medical scanners, or the cobalt in aircraft superalloys. However, the speed of global technology progression, coupled with limited availability and uneven global distribution of critical materials, is placing strain on their supply chains. This, coupled with mounting uncertainty in the geopolitical landscape and increasingly rigorous requirements to ensure that minerals and materials are sourced sustainably, means there’s growing competition globally to secure sufficient long-term supply.
The Role of Critical Materials in Energy Transition
The clean energy transition has a particularly acute dependency on critical materials, which are essential for the manufacture of decarbonisation technologies. Clean energy technologies contain much greater quantities of critical minerals than fossil fuel alternatives. For instance, the mass of critical materials in electric cars (including graphite, nickel, manganese, cobalt, lithium) is around six times that of cars with internal combustion engines. Offshore and onshore wind, nuclear and solar photovoltaic technologies require between two and six times the mass of critical materials than in coal plants, per megawatt of electricity generated[i].
Alongside the development of clean energy technology, significant infrastructure investment is needed to meet the UK Government’s commitments to key environmental targets: 1) achieving national net zero by 2050 and 2) a fully decarbonised electricity system by 2030. However, the intense focus on the development and creation of energy transition technologies, such as wind turbines, solar farms and hydrogen, could result in the need for critical materials to develop net-zero infrastructure being overlooked.
The scale and complexity of the material demand required to achieve national and global energy transition goals remain uncertain. This substantial unknown poses a significant national and international threat as uncertainties in the demand, and challenges in the supply chain, could hinder the rollout of major projects, energy transition technologies and other critical national infrastructure.
The Importance of Supply and Demand Risk Foresight
A thorough understanding of the supply issues and future risks of critical minerals and materials, as well as prospective demand, is vital for governments, businesses and investors associated with critical material supply chains. Investors across the value chain, from mine to component manufacture, need demand certainty to attract and maintain investment. Businesses and governments require a comprehensive, whole-system analysis to establish sustainable supply pathways, guide investment and prioritisation decisions, and direct research and development into alternative materials and supply solutions.
This is highlighted by the UK Government’s Critical Minerals Strategy[ii], which emphasises the need to establish resilient supply chains and to understand the dependencies and future demand trends that could adversely influence the critical materials needed to deliver the UK’s industrial strategy.
Conclusions
Critical materials are essential to a wide range of the technologies that we rely on in our daily lives, whether related to energy transition, healthcare, defence, communication, or transport. In the context of rising geopolitical tensions, climate change and the rigorous requirements to ensure these materials are sourced sustainability. There is a growing need for investors, businesses, and governments to have clarity on future demand and supply risks.
At DAS, we leverage our pioneering foresight capabilities to provide an in-depth understanding of future global demand, and the associated supply chain risks to programmes, for critical minerals and materials. Expanding on techniques we've successfully used to support clients across the energy sector, we are uniquely positioned to transform the decision-making capabilities of organisations across critical mineral and material supply chains.