Global Energy big shift towards Renewable Energy
Historically, every big shift in global energy resources like the wood transition to coal or to oil has brought a plethora of geopolitical ramifications. Besides the technological changes, or just because of technological changes, new players representing energy resource-rich nations have emerged.
Renewable energy transition will make no exception. In a world heavier on renewables, we will have new commodities dictating the energy market trends. In this new scenario, the solar, wind, geothermal and hydro will be produced and consumed local to a region and the majority of it local to a country. They will not become profitable exports. The new commodity vehicle will be made from rare-earth metals and other minerals found deep underground. This will become relevant and it will control the energy market after the tipping point of renewable energy changes will occur.
The renewable Energy tipping point
The tipping point will be brought by technologies slashing the costs of wind and solar farms. Those technologies make it inevitable that clean energy will become more economical than fossil fuels for utilities in most of the places. Technologies will reduce considerably the real estate of solar farms and allow wind turbines to reach a much bigger blade span.
These technologies will make use of rare-earth metals on a broader scale. For example, indium and cobalt -- neither is technically a rare-earth metal, but they are still relatively hard to come by -- are essential for making solar panels and batteries. That will allow the electrical power to be sold wholesale at market value.
In the near future, a new list of countries will join the group of geopolitical deal makers. China provides approximately half of the indium consumed globally today, whereas the Democratic Republic of the Congo is the source of more than half the world’s cobalt. The big producers of lithium, another material essential for the production of batteries, are Argentina, Australia, Chile, and China. Yet Bolivia’s large untapped reserves of lithium could catapult it into this league in the future. Tellurium is not a rare-earth mineral, but it is another key component of solar panels. The U.S. has imported most of this material from Canada but relies to some extent on Belgium, China, and the Philippines.
The tipping point is estimated to be complete between 2040 and 2045. In anticipation, some economies have already passed bills requiring utility companies to operate only using renewable energy. The California State Senate has passed a bill to commit the state to use 100 percent renewable energy by 2045.
Renewable Energy two steps transition
Bloomberg New Energy Finance founder Michael Liebreich estimated that clean energy will reap 86 percent of the $10.2 trillion likely to be invested in power generation by 2040. In his view, the tipping point will come into two steps. “The first is when new wind and solar become cheaper than anything else,” Liebreich said. That will come between 2025 and 2030 - earlier in more developed countries. At that time it will be cheaper to build a new PV plant than a coal-fired power generator. He estimates will be 2025 in Japan and 2030 in India.
The second phase will come when the price to operate coal and gas energy plants will become more costly as to build and commission new solar or wind-based power plants. That will stretch over a longer period of time, based on the fact energy costs vary widely from country to country, and there are differences in the spectrum of resources used to generate energy like nuclear (France) or hydro (Brazil). But some of the countries will reach the second tipping point way sooner. That specific point in time may arrive in the middle of the next decade in both Germany and China.
At that moment the rare-earth metals and minerals will become a hot geopolitical subject and a powerful influencer in commercial and political relations.