EU in green energy push to produce homegrown raw materials

As Europe seeks ways to end its need for Russian oil and gas, officials in Brussels hope some of the answers lie on home soil — or, rather, under it.

The European Commission wants to boost output of homegrown raw materials needed for green energy. Its plans, which are still in their infancy, would lower regulatory barriers to mining and production of critical materials such as lithium, cobalt and graphite, needed for wind farms, solar panels and electric vehicles.

Even before Russia’s war on Ukraine created the risk of a total shutdown of Russian gas exports to the EU, the commission — which wants to sharply increase renewables use — was sounding the alarm about the risks of being too reliant on imported raw materials.

By 2030, EU demand for rare earth materials for wind turbines will increase fivefold, according to the commission, but global supply is only projected to double. Demand for lithium is likely to be almost 60 times as high as current consumption by 2050, according to the EU’s Joint Research Centre. The need for cobalt and graphite could be nearly 15 times higher.

“Demand is increasing dramatically due to the digital and green transition of our society [but] we are too often almost entirely dependent on imports, while the geopolitics of supply chains are increasingly unstable,” said EU industry commissioner Thierry Breton.

This would require an “open debate” about more mining, processing, refining and recycling in Europe, Breton said. “We prefer to import from third countries and close our eyes on the environmental and social impact there, let alone the carbon footprint of importing. But mining in Europe does not have to be a dirty business.”

Efforts to unearth big reserves of lithium in Portugal suggest how difficult it will be for the EU to attain its goal, however.

A potential cornerstone of Europe’s green energy transition, the Barroso mine in northeastern Portugal was expected to begin producing lithium for electric vehicle batteries in 2020. But Savannah Resources, the London-listed owner, has been forced to push the start date back several times as it awaits environmental approval. In July Portugal’s regulator added a phase to the process, causing Savannah to reset its production launch again, this time to 2026.

Dale Ferguson, Savannah’s interim chief executive, says it is hardly surprising that environmental scrutiny in the EU is lengthier than in his native Australia or the US.

“You can’t compare a mine on the edge of a remote desert in Australia with a project in Europe,” he said.

Faced with hurdles like those in Portugal, which has not licensed a large mining project for 30 years, the commission is working on a proposed Raw Materials Act aimed at stimulating EU production.

Among the ideas are provisions to designate key strategic projects for accelerated permitting, creating a one-stop shop for project authorisations, or measures to speed up national legal processes when there are challenges. They draw on EU regulations that have expedited permitting for electricity infrastructure.

A 2021 JRC report said Europe’s potential resources were under-explored, with the lowest investment in mining activities of any big region. Data on the EU’s reserves is hazy.

Meanwhile, demand is growing. The EU target is for renewables to produce 32 per cent of the bloc’s energy by 2030, but that could increase to 40 per cent or even 45 per cent if the European Parliament gets its way in negotiations. In 2020, about 22 per cent of the EU’s power generation came from renewable sources, according to the commission.

Dries Acke, policy director at SolarPower Europe, said the industry body expected EU installations of photovoltaic cells to reach an all-time high of 34GW this year, up from 28GW in 2021. But he said supply of raw and processed materials would determine the availability of solar products.

Brussels has been working on plans to improve “circularity” of products, such as old mobile phone batteries, so their rare metals are reused. But Cillian Totterdell, climate and energy policy lead at consultancy FleishmanHillard, said the EU would also have to improve its import or extraction of fresh supply.

“It’s a huge issue securing resources,” he said. “We have not thought about this nearly enough. From an EU perspective it’s crazy that circularity has been the only answer, when more resources are needed than circularity can deliver in the short to medium term.”

As things stand, Europe produces less than 1 per cent of the world’s lithium ion cells compared with China’s 66 per cent, according to the JRC.

Still, not all EU governments believe large-scale homegrown production of critical raw materials is realistic or desirable. “We live in Europe, not China,” said one EU diplomat, pointing to the legal challenges and environmental opposition to mining projects. “There’s a question mark over the extent to which we can actually pull this off, and whether it’s not preferable to do this with countries [outside the EU] that we trust.” 

While Breton has been pushing hard to bolster domestic production — following a “strategic autonomy” agenda similar to those seen in areas including hydrogen and semiconductors — other commission officials emphasise the need for better trade links outside the EU.

Valdis Dombrovskis, EU trade commissioner, said in July that geopolitical pressures were “shifting our perspective on trade policy” and that the bloc needed to land more deals with “like-minded partners” to bolster its economic resilience. His goals include a deal with Chile — a key source of lithium — before the end of the year and an agreement with Australia in the first half of 2023.

Still, said Ferguson of Savannah Resources, the EU could not expect all the answers to come from overseas. “We need to get some of these projects through and into production as soon as we reasonably can,” he said.

Additional reporting by Andy Bounds in Brussels