Whenever a presentation on raw materials is given, it quickly turns to China. The land of the rising sun has invested heavily in recent decades in the extraction and processing of raw materials needed to build solar panels, wind turbines and batteries. China dominates numerous supply chains, from mining in Africa to processing and manufacturing at home. The global energy transition has become dependent on Chinese supplies. This is particularly uncomfortable for the United States but also for Europe. In the geopolitical game for power and influence, China is 1-0 ahead.
“Geopolitics is at the centre stage again,” said Lucia van Geuns at the ChemistryNL summit Critical raw materials in the energy transition: a chemistry perspective. Van Geuns is strategic energy advisor at The Hague Centre for Strategic Studies (HCSS). “The supply of critical raw materials is of great strategic and economic importance. China has a monopoly on the supply of many raw materials. Europe wants to be the first continent to be climate neutral by 2050, but China has the industrial and technological leadership to do so.”
Is the supply of crucial raw materials like lithium, graphite, cobalt, nickel and many rare earth metals guaranteed? Or are we as dependent on China for raw materials as we were on Russia for natural gas?
Asterix and Obelix
At the ChemistryNL summit, around 150 entrepreneurs, scientists, experts and politicians gathered in The Hague to exchange views on these questions. And about the role the chemical sector can play in the supply of raw materials. Because if solar panels and batteries can be recycled and reused thanks to chemistry, the dependence on geopolitically troublesome countries decreases considerably.
That the availability of raw materials is of broad economic significance is slowly but surely starting to sink in. “With germanium and gallium, until recently we thought of something out of Asterix and Obelix,” said Chemistry NL director Jacqueline Vaessen in her introduction. “Now we realise how important critical raw materials are for the future of many industries.” Vaessen was referring to the export restriction announced by China on these raw materials, which few people had heard of before, but are crucial for the production of chips and solar panels.
Europe needs to step up geopolitically, Van Geuns argued. In a world where the United States is energy independent and China is assured of energy supplies and raw materials through partnerships and long-term contracts, Europe is lagging behind. “There are concerns about energy security. Europe needs to put its house in order, and diversify its energy supplies” Van Geuns said. That means, she says, that Europe should pursue a twin-track policy: developing more renewable energy and contracting gas from countries like Qatar. For gas supplies, Europe is reluctant to make long-term commitments because that would conflict with its ambition to be climate neutral by 2050. But dependence on the spot market makes Europe vulnerable to price shocks, several experts warned.
Securing raw materials
Both the US and Europe are trying to reduce their dependence on China. In the US, President Biden came up with the Inflation Reduction Act (IRA). Unlike its name suggests, it is a large-scale subsidy programme that lures companies to the US to build factories for computer chips, electric cars and batteries. Europe has the Net Zero Industry Act and the Critical Raw Materials Act. The goal is the same: secure the supply of raw materials and build green industrial production capacity. The European ambition is for at least 10 per cent of raw materials to come from its own mining, 40 per cent to be processed in the European Union and no country to supply more than 65 per cent of any given raw material.
“The IRA is an unprecedented commitment to the energy transition,” Van Geuns argued. Numerous participants in the discussion praised the simplicity of the US scheme. For companies, unlike European programmes, it would not be quit simple to claim government funding. “But even in the US, it takes a long time to get a permit,” Van Geuns nuanced. “Rebuilding industrial activities simply takes time.” Long-term strategies and partnerships are therefore crucial, she said.
Stepping stone to circular economy
René Kleijn, professor of resilient resource supply at Leiden University, also pointed out in his presentation that the energy transition is “actually a resource transition“. “In the current energy system, the world uses 17 gigatonnes of fossil fuels per year. In a sustainable energy system, there is no fossil inflow anymore, but to achieve that we need a huge amount of other raw materials, mainly metals. Once the transition is complete, the key is to maintain that metal supply and recycle it after use. But we got to have those raw materials first. That is the challenge.”
Setting up recycling is easier said than done, according to Kleijn. “We have to wait until all those solar panels have reached the end of their lifespan before we can really start reusing them. It is essential, however, that we start designing products that can be easily disassembled, otherwise recycling and reuse will be a pagan task and difficult to make profitable.” But if that succeeds, Kleijn says it will show that the energy transition has been the stepping stone to a circular economy.
Commodities is geopolitical
According to Kleijn, reusing raw materials contributes to what he calls resilient supply chains. “That doesn’t mean we should roll back globalisation. But it does mean that Europe should do more of its own mining and processing, and that we should build strategic reserves just as we did for oil and gas, and also enter into bilateral partnerships with countries in Africa and South America.” But, Kleijn warned, “That comes with a cost. But this is not just about economics. This is geopolitics.” The costs of deficits and vulnerability to geopolitical blackmail are many times higher.
Managing director Bernd Schäfer of EIT Raw Materials, an organization which promotes sustainable raw material chains in Europe, fully agreed with Kleijn. “The traditional procurement mantra has to change,” Schäfer said. “It’s not about lowest cost. It’s about avoiding shortages.”
The fact that Europe is coming up with legislation and targets shows that the raw materials issue is high on the political agenda, Schäfer argued. Several experts noted that it is good that there are ambitious targets, but that this does not make them achievable. “We support the targets,” Schäfer responded. “But to meet them we do need help. Permit procedures, for instance, need to te be faster. Is it easy to meet the targets? No. Is it achievable? That’s up to ourselves.”
According to Nienke Homan, president of the Dutch chemicals industry association VNCI, ambitious targets need to be followed up with ambitious government policies. “The raw materials transition is not yet part of the public debate,” Homan said. “People want climate policy, but they are not prepared to accept a mine or a factory in their backyard. So the transition also requires social change. That requires vision, political courage and leadership.”
Director Marcel Galjee of The Hydrogen Chemistry Company (HyCC), which builds plants for green hydrogen, was inspired by the US approach. “The IRA is not a climate law, the aim is to build a new economy. Decarbonising the economy is a collateral benefit.” Both businesses and citizens, he said, are best motivated by economic incentives.
According to chemist and Nobel Prize winner Ben Feringa, who played an inspiring role at the congress as a side-kick, Europe needs to pursue much more ambitious goals. Not with percentages, but with bold ideas. “Why don’t we try to overtake China? We need a different approach. If we are worried about the amount of copper we need for the energy transition, why don’t we rig up a big European programme to develop an alternative raw material. With chemistry, it can be done!”
The bold ambition advocated by Feringa captured the imagination of the conference visitors more than the official objectives of the European Commission. Other ideas for solutions emerged. “Less is often better,” Professor Kleijn said, for example. “Ask yourself: do you really need a car battery that allows you to drive 500 kilometres, when you only live 25 kilometres from work?” Strategy consultant Reinier Grimbergen of technology company TNO agreed: “We need to reduce resource use. For that, we need social innovation, because more consumption does not always mean more prosperity.”
The big question that hung over the conference: how are we going to take concrete steps to make it all happen? To make a start, a knowledge agenda was presented to Minister Micky Adriaansens of Economic Affairs and Climate. “The Netherlands has a good starting position,” Vaessen of Chemistry NL told the minister. “We have the port of Rotterdam, an innovative business community, and logistical links to Germany. Let’s run the gauntlet together with this knowledge agenda.”
“Critical raw materials are essential for the digital society and the energy transition,” Adriaansens responded. “Building on our knowledge base in chemistry is important. This will help us become a frontrunner in the circular economy. The material transition is not only technologically significant, it is of geopolitical importance,” the minister said. “Globalisation has brought us growth and prosperity. But if we are 80 or 90 per cent dependent on China for some raw materials, every step in the energy transition makes us not only more green, but also more red. We should not close the borders, but do more ourselves. We want companies to make the transition here, not somewhere else.”
‘Made in Europe’?
Despite the minister’s words, Grimbergen of TNO fears an opposite development. “China is saying: why do you want to buy our raw materials when you can also have the finished products? What does ‘made in Europe’ represent in the future?“, he asked himself. European wind turbine manufacturers are in financial dire straits. Will Europe soon source them more cheaply from China? For electrolysers to make green hydrogen goes the same. According to Galjee of HyCC, it’s not easy to come up with a positive business cases with Western-made devices. So will companies start ordering them from China?
What exactly are governments doing to reduce dependence on China if individual companies tend to choose the cheapest (Chinese) option? Will Europe, like America, put more restrictions on trade with China? There was no immediate answer to this during the conference.
But opportunities were also mentioned. Such as the initiative in Germany to extract lithium from brine mines. And at the congress, two Dutch innovations presented themselves on stage. First there was the company Elestor, which makes large so-called flow batteries that can store significant amounts of energy without scarce resources. The second innovative company was Battolyser, which makes battery systems that can also produce green hydrogen.
Schäfer of EIT Raw Materials stressed that the Dutch chemical sector is at the forefront of efficient and sustainable production processes. “The Netherlands is leading in the circular economy, and has a strong reputation with transport and storage.” Vaessen also underlined the role the Netherlands can play: “Our knowledge is of a high level thanks to universities and industry. We have a dynamic start-up scene. The port of Rotterdam can become the raw materials hub for Europe. That is the promise that Dutch chemistry holds. But a lot of work needs to be done. What we need is a political vision of what industry and chemistry should look like in 2030 and 2050. What is the ambition of the Dutch government?”
Nobel laureate Feringa tried to enthuse the new generation. “In chemistry you can work on today’s pressing societal issues. You are challenged to help create the world of tomorrow. How do we make ambitious young people think big so that they want to beat America?“, Feringa asked Schäfer. “Make it sexy,” was his answer. “If raw materials keep a dirty image, it will be difficult. Everyone wants to have a smartphone, but no one wants anything to do with raw materials. We need to turn that around,” Schäfer said. “Exactly,” Feringa responded. “It sounds better to say you are working on a new and sustainable future.”