Mark Mills: The energy transition delusion: inescapable mineral realities

this morning and uh thank you Tim and the skogun team for the pleasure of joining you in a Southern latitude uh at least south of where I grew up in Canada it's a pleasure to be where the sun sets so early I'm heading to Miami this afternoon uh as Siri said I'm going to talk about uh not investing per se but a macro a technological macro I I am involved in I am interested in Investments but having been trained and spent my early career as a physicist I tend to focus throughout my life whether it's in the public policy or in the investment World on underlying facts and phenomenologies if you like so the world is at uh people say this a lot at a pivot we it feels like we're at a pivot point the pivot in energy sense is in the direction of what everybody is talking about which is the energy transition and the key issue with the energy transition rhetoric and policies is not one about aspirations which I'm not going to talk about and not one about structural possibilities which are non-trivial but rather it's it's about minerals and Mining as Siri pointed out so my focus is almost entirely on that and in a sense and this is uh this is not naked uh adulation for Norway it's uh in a sense the the policies of the world are focused on trying to become Norwegian uh I have stolen the a famous Kennedy line it could be nine Berliner uh to translate it I think correctly into I want to be a Norwegian uh I mean Norway last year is I'm sure you all know had the uh the record in the world 80 percent of all new cars were electric that were purchased here a Norway gets uh 90 of electricity from Renewables against half of its primary energy from Renewables this is in essence the goal of the entire energy transition world that's in a nutshell where where the where the world thinks it must go or where it thinks it can go I mean Norway has some advantages so maybe perhaps obviously it's wealthy I mean it's uh 700 wealthier than the world average it's wealthier than America by a significant margin even even in even an economically challenging times I think it's about 30 to 40 percent wealthier per capita than America Norway also enjoys the benefit of exporting uh in dollar terms uh something on the order of twenty five thousand dollars per capita of oil and gas sales to the world uh this again in uh production terms is about 400 percent greater per capita than U.S oil and gas production and the US Remains the world's biggest absolute producer of oil and gas so those are advantage and the other Advantage I would point out which is just is in the underlying physics of energy is of course the the Renewables that Norway likes uh to use and is dominantly using have a particular Advantage the the Machinery Hydro dams last about four times longer than the Machinery of preference in the energy transition when melson solar arrays and they produce roughly four times more energy per dollar of capital invested so that 16-fold energy economics Advantage is a modest uh a modest leg up over the rest of the world's aspirations but that said this is the vision and to point to where I'm going to go the vision incorporates a fact built into the nature of the world we live in at the moment which is that every Norwegian that buys an electric vehicle has essentially purchased 20 to 30 barrels of oil equivalent of energy being consumed somewhere else and fully half of that energy content in fact is oil and the rest is almost entirely coal in natural gas so the single EV that is purchased in Norway and when it goes on the roads before it's seen its first electron move into its batteries has already consumed at least 25 barrels of oil equivalent of energy in hydrocarbons question about whether the world will become Norway or not is one of velocity and materials and by velocity I mean the world today is just a statistical fact that I we have to put this out since uh you probably all know this but it's you have one has to have this in one's head that the world today gets about three percent of its total energy Supply from wind and solar the preferred sources of energy in the energy transition essentially all the iea and Irena plans the World Bank all the all the energy transition aspirations uh pivot around wind solar and batteries 70 percent of the net new energy Supply in the forecasts uh in the next 20 years are to come from wind and solar mediated by batteries whether in cars or on on grids and in buildings so three percent well that's not nothing in the world as big as it is but just again it's a sense of whether or not we have made a transition as opposed to having an aspiration for a transition three percent is obviously not a transition in fact that's one-third as much energy as the world gets from burning wood the oldest source of energy other than uh muscle uh on the in the history of the human race still provides 350 percent more energy to the world than all the worlds wind turbines and solar arrays combined this would suggest that transitions are slow and difficult and expensive the world has spent something on the order of five trillion dollars in the last 15 years in direct spending and probably that much again in indirect spending to achieve a change that is not in fact in semantic terms a transition so the transition is really about the future and the scale to go from three percent let's say to 10 percent of world's energy from wind solar and batteries uh isn't also not a transition but it would be quite a remarkable accomplishment if you think about the state of the spending in the state of where the world is today a 300 percent increase in a very short time period and capital spending and physical infrastructure is quite quite remarkable and there's no shortage of money that's being allocated uh to making this transition uh happen in the at all if not uh trying to accelerate it this total Capital spending this is iea data in the green transition is on a tear to say the least I mean we're spending now something in our order of 800 billion dollars a year direct money and I dare say that the real numbers are higher because mandates have uh have a real cost to the economy mandates that is all over the Western World governments are requiring utilities and energy companies to make transitions that don't show up in direct spending but they show up in the real costs of the economy so there's no shortage of spending and and I I show you uh the conclusion from a very recent Electric Power Research Institute study which is a non-profit research group in the United States for the electric industry that looked at the structural issues with respect to the transition not the cost issues but the structural issues and reach reach the conclusion that you can read the conclusion that it doesn't look like it's structurally possible to make the transition in the way imagined the typical response to that is we should spend more money and try harder which is not an unreasonable response in the face of structural concerns I I would I would Hazard the opinion that spending more money won't cause a structural issues to go away but that's not what I want to talk about what I want to talk about is the fact that what's interesting to me is that one particular study typical of most completely glosses over the underlying question of where does the where do the materials come from so let me let me turn specifically to this material and mineral issue for a very simple reason sort of locked into the reality of the world we live in there is no shortage of energy energy is not in short supply in the physics of the universe we live in energy is in fact an infinite supply energy for functional purposes all forms of energy are functionally in infinite Supply the challenge for Humanity has always been in figuring out how the systems work in nature designing machines that can extract Nature's natural energy sources and convert it into forms that are useful for humans at a price we can afford and price is principally economic but price also includes social environmental and geopolitical features these are all costs but they all distill ultimately to money and they all require machines one has to build machines all machines wear out it's the nature of the universe we're in probably the most enduring law of physics entropy we age things wear out this is true of all machines so batteries of solar arrays combustion turbines and cars so the wearing-up process means that you're always in this sort of sician Battle of building new machines finding new materials the iea deserves credit at the sort of structural staff level for doing some of the best frankly and most comprehensive work looking at the structural underlying engineering economic realities of really of any of the organizations that talk a lot about the energy translation it may not be the Top Line issue that the iaea talks about when fighting Byron speaks to the world he rarely talks about these issues he does sometimes but this data that I'm showing you in this graph comes from iea report this is the underlying single fact that's built into the energy physics of the machines and other principal Vector in the energy transition again wind solar batteries and electric cars the underlying fact that's important is the quantity of minerals needed per unit of power to build the machines and I've taken the whole basket of minerals which is not just copper and and I've made copper and everything else as opposed to Copper molybdenum and lithium neodymium you know manganese or so a suite of minerals aluminum essentially a basket of two dozen minerals that are essential to the building and construction of batteries and energy transition machines but if you just divide it into two buckets copper and everything else you get this picture to build a machine to replace combustion turbines uh what this shows you is that you need between one thousand and two thousand percent more minerals to deliver the same unit of power and you need some on the order 400 percent more minerals and metals to deliver the same vehicle so an electric vehicle requires 400 percent more metals and minerals to build it compared to a conventional uh car and this is in energy terms this is understating what's actually going on because as I said at the outset the advantage Hydro dams have over windmills and solar arrays is that they operate very differently obviously the hydro dams especially in Norway produce energy more than 90 of the time windmills and solar rays self-evidently do not so if you adjust this data for energy delivered as opposed to power the actual requirement to deliver the same unit of energy to society is a two thousand to seven thousand percent increase in the metals required to deliver the same mile of driving the same hour of heat the same amount of Illumination the same hour of compute time so this quantity of minerals required to deliver the same Energy Service to society as a consequence I mean if you go back upstream and again iea data they aren't alone in doing this the finished Geological Survey has done a similar work many other serious organizations and researchers have looked at the implications of the massive increase in metals needed per machine and look Upstream to how much more mining does that mean and well it means and this is this is a down selection into the uh a suite of five minerals that are obvious ones right Cobalt it's uh still a relevant metal despite despite the attempt to minimize Cobalt use Cobalt is pretty much in every single electronic device battery because it adds a feature of energy density it's critical it's still in most electric car batteries but there are options to Cobalt typically nickel and there are some other options but before we get to the options the key fact here that is Central to the question of how fast and how effective and how expensive and expensive again in every term economic geopolitical social environmental how expensive the energy transition will be with machines of a kind that are now being built is anchored entirely in this one slide the magnitude of increase in the amount of demand for metals and metals in the world put this at percentage terms because we talk about growth if you're in a business you talk about increasing Supply or demand depending which side of the equation you're on in the heavy industries by numbers like five or ten percent a movement in oil markets of five percentage points is massive I mean five percent loss of of demand or Supply if it's a five percent loss of Supply prices take off a five percent increase in Supply with demand not following it is a huge collapse in price so five and ten percentage points changes are huge in commodity markets this is a change in demand from seven hundred percent to on the order of four thousand percent in total supply of these metals and this this is the increase in demand and the increase in therefore Supply that will be required in the coming two decades not to um to put two of a two two fine or hyperbolic a point on this this is this this would if it were to be achievable it's the largest single increase in demand or supply of metals in all of human history it's never happened so in the title to my presentation when I put the question and used the provocative word delusion by delusion I don't mean people are delusional about their aspirations I think they're suffering some modest modest delusion about what the possibilities are in the mining sector I mean the whole thing distills to mining is it possible can the world increase the production of these kinds of metals not by 10 or 20 percent not by fifty percent not by 200 percent but from 700 to 7 000 percent and in time frames that are that are meaningful which is in the next decade or two it if you think of this in the macro tonnage terms as opposed to uh in in terms of kilowatt hours or machines and look at the context of the total tonnage of all materials that Humanity extracts moves and processes to keep civilization running this is an oecd data series it it tells you something that's important again from an economic and environmental perspective the world all in all kinds of materials biomass food fuel construction materials has to extract move and process about 100 gigatons of materials a year this is a remarkable increase over the last 50 years from 25 gigatons for the planet this trend is not going down this TR this trend line has implications again across all domains of economics and environment geopolitics the thing I want to point you to is the energy part which is you can see the oil gas and coal and this is measured in tons terms what we're proposing to do with the energy transition is to shift majority of the world's energy Supply from liquids and gases to solids so measured in tons terms what that means is that you will increase the wedge that's in Gray by tenfold or put differently the energy system in the future is imagine the transition will require the extraction and movement of quantity materials equal to a greater than the quantities of materials that Humanity extracts moves and grows for all other purposes combined I don't think that's going to happen I mean this is not a statement of politics or a statement of aspiration or an objection to motivations it's just not going to happen the world's not capable of doing that with the technologies that exist today these are astonishing numbers we also know a lot about the minerals in metals world I think the Scoggin team is particularly expert at this I'm told I've had some very interesting conversations about travels into the into the into the fragile political and uh physical ecosystems where we do all this mining which I'll get to what we know a lot about mining we've been mining for a long time mining is the oldest industry full stop mining impact copper is the oldest mined metal and it predates written history we know a lot about mining what we do know is the world is not now mining enough materials nor is it planning to mine enough materials I'll pick just copper here but this and you you all probably have seen various photographs of the world's biggest copper mine in Chile it's a very very large very large mine you can you you can barely see the town that's at the edge of the the open pit in Chile so the world produces enough Metals right now to supply the transition machines uh for a very simple reason they constitute about three percent of the world's energy if we imagine tripling the share of the world's energy coming from wind solar and batteries we will necessarily have to at least triple the quantity of metals those machines require to be built we know for a fact this graph shows you the red line which is the demand that the energy transmission transition will put on copper we know that the supply lines which are the dark blue existing mines and the light blue lines which are all existing Minds plus all announced plans for expansion whether underway or uh or or are proposed put in simple or simplistic terms the world will be short copper in a year or two that they'll be physically less copper available in the world than the demands of the energy transition will place on it what happens in a world like that well I like s p did a big copper study if you haven't seen it I commend it I I think it's available for free from IHS s p uh they ask it at a very you know diplomatic gentle way you know will the shortage of copper Short Circuit the energy transition the question answers itself the copper is not as it turns out it's one of the metals it's not does not have a substitute it's not replaceable the only place copper for electrical purposes has a substitute is aluminum for high dis high voltage long distance transmission transmission lines it does not for electric vehicles so if you look across all the metal spaces you find similar graphs I'm not going to go through them all but you can pick every metal you can make lithium and Cobalt you can pick nickel aluminum there's a shortage of all the metals in the coming years the iea has pointed out the world will need hundreds of new mines to meet the materials demands of the energy transition and what they've also pointed out something that's beyond obvious to anybody that's worked in mining early in my career in my impetuous youth I worked for a mining company I never thought I'd come back to talking about mining again it was a gold uranium and silver Miner in the Northwest Territories of Canada on the Arctic Circle it's a maybe the only one in this room that's been the bottom of a seven thousand foot vertical Hard Rock shaft it's very dark and very hot at the bottom but uh it was very it was very interesting um I like mining I like miners I think we'll do a lot more Mining and the problem is the average is about 16 years to find and open a new mine globally if you think about this in very simple terms that means that if we tomorrow started investing net the necessary amount of capital and exploration efforts it'll be 16 years before the first mines that we need will be open you can do arithmetic on this this is a long way after the aspirations have kicked in to build the quantities of batteries when windmills and solar arrays that the world imagines outside of Norway and we also know a lot about how much money the world's mining industry is spending here this is wood McKenzie's graph they did a very nice job last year mapping out the historic Capital spending globally in top metal mines and the forecast the hash lines are the levels of investment that will be required in the next few years the dark colors are the levels of actual investment from the global mining industry we can distill this not dollars terms and billions of of US dollar terms but just in relative terms the world is not investing 90 of what's required or 50 percent of what's required by world I mean the world's miners they're not even investing 10 percent of what's required in global mining expansion to meet the aspirations to build the quantities of machines to have again the rest of the world follow Norway we also know something about the geopolitics and the social features if you like of mining the mining is elsewhere it's uh it's not largely in Europe the expansions are not in North America largely they're in sub-Saharan Africa and they're in South South America and the Asian Nations um I I happen to like trade I mean this may be an artifact of being from a country with like Norway smallest numbers of people on large quantities of resources so I'm I'm pro-trade I'm a trade Bowl I think the world should do these things but I think the world should not be naive about both the social and environmental problems that occur as we expand mining in these parts of the world nor the political and economic challenges in the geopolitics China is not the world's biggest minor they are the biggest refiner and when you measured in energy minerals terms again this is iea data China's share of refining when you must refine copper you must refine lithium you can't use lithium in its Elemental form in lithium batteries nor any of the metals and minerals in Elemental form they all require the very inconvenient very expensive and very environmentally challenged process of refining China has chosen to become the world's energy minerals refiner this was not a secret policy they announced it 20 years ago they announced it in their 10-year plan 10 years ago and today China enjoys a market share in global energy minerals refining that is more than double opec's market share in oil markets that was a a smart strategy I would I would offer it would but also has implications geopolitically and economically that it would be to put it diplomatically profoundly naive to think has no implications for the state of the world as we go forward it also has some implications economically at the macroeconomic level this this is an analysis that I'll show you one graph of many from international monetary fund uh paper that was done about a year ago The Economist there did something that I'm shocked at more more analysts have not done the economists at U.S Geological Survey have done a similar analysis and it's a very simple question that they asked as economists if the world chases more there's more demand for a product in the world can respond and Supply what will happen is inflation this is not complicated that's the textbook definition of inflation the question you would ask is how much inflation would we get what what's the range of inflationary pressure on Metals as the world chases the energy transition but the world's miners aren't able to supply the quantities of metals and they answered the question with the typical you can see the Pink Zone a graph depending on the assumptions you make the underlying fact is one prices don't go down they just don't go down if you have 16 years to add Supply on average a decade at best and you increase demand immediately which we are now doing with policies everywhere in the world you should expect prices to not only go up but to perhaps go up a lot in fact their principal conclusion which I replicate here is an important one I have in mind they've looked at a century of trailing data on Supply demand metrics for metals and they point out that the energy transition plans will put pressure on metals that will cause all metals to reach historic price levels for an unprecedented length of time they think it for about a decade so Metals then go from being just uh volatile and short time frames with being volatile over a much higher price space this should have an effect it will have an inflationary effect I mean first of all at this current level of abstraction the cost of metals in the world's economy is in the noise a few percent of the global GDP is consumed by the prices of metals but if you cause metal prices that go up two to three hundred percent or 400 percent or lithium's case a thousand percent you'll see a have a top line effect in global in global inflation so while I think inflation moderates this year I'm with the conventional wisdom on that I think that the moderation ends rather quickly in the next two or three years because of metals price inflation which the economists bizarrely are not modeling in the at the macroeconomic level it will also impact uh wind solar and battery and EV prices because they're made from this those Metals that's the whole demand pressure is coming from those Metals almost the entire increase that's been going on in the cost to build wind turbines solar modules and batteries is because of the increasing costs of the mineral inputs it is true that the supply chain disruptions are the great lockdowns and some modest comparatively supply chain disruptions from the ODS invasion of the Ukraine haven't had an impact too but they've been short-term this is this is a long-term phenomena roughly 70 80 of the cost of fabricating an electric battery today is in the purchase price of the materials eighty percent of the costs to make a solar module is in the purchase price of the materials not the energy costs but the purchase cost of the materials so if you and for by the wind term it's about 30 percent so if you increase the cost of the materials by two to three hundred percent you should expect to see a curve like this again this is iea data the vaunted continual decline in the cost of energy transmission machines ended and the prices are going up that's been acknowledged in iea and other areas now but what they're now putting in play is the forecast that after two or three more years of rising prices for electric vehicles batteries wind turbines and solar modules these are rising real prices governments can hide that rise with subsidies for a while but the real costs are going up they're forecasting it'll start the Curve will bend back down the question that I would ask is a rhetorical one that I think answers itself when I pose it on what basis on what possible basis are forecasters saying that metal prices are going to go down after they've been rising them and at the in the face of these kind of demand pressures I don't think they're going to go down but you know this is a bet that people are making this is the the basket of principal metals that go into making an electric vehicle every Tesla Hyundai or byd that's bought into into Norway the 20 the 20 to 25 barrels oil equivalent of energy that's associated with making that vehicle a lot of it is associated with extracting finding moving and processing the metals and minerals so when you look at the aluminum steel nickel and Cobalt and look at the cost to purchase them to make a single EV that cost per EV it was around four thousand dollars before metal price inflation really started to kick in and it doubled to about eight thousand dollars a lot of that was uh steel double a steel increase the Steel part why fake May relax but the aluminum copper nickel those parts are not going to relax uh you might have in your head what what does this picture look like for a conventional vehicle uh you want one can have exactly the same graph the input cost for the metals are less than half for a conventional vehicle and and they don't use of course any of the other Suite of metals are under incredible pressure they use no lithium no Cobalt essentially no neodymium the entire motivation for this energy transition Is Anchored in carbon dioxide it it goes without saying so I want to throw out one other fact to have in in your head and this is an important one obviously is that in if it in the manufacturing in the of of electric vehicles in the acquisition of the materials and metals to make this one necessarily consumes energy the 25 to or more barrels of oil equivalent of energy to manufacture an EV are almost entirely in the form of hydrocarbons globally and that means it's carbon dioxide emissions elsewhere Volkswagen to their credit published this is a a one of the grass from the Volkswagen study published at their website where they're showing total life cycle carbon dioxide emissions that are associated with driving an electric SUV versus a diesel-powered SUV and what you see in their graph is the is the illustration not an energy terms but in carbon dioxide terms that when the electric vehicle shows up in your driveway it's already emitted uh about 14 tons of CO2 conventional vehicle is already emitted about five tons to manufacture it and then of course what you see is over the life of the vehicles that they both consume Fuel and emit carbon dioxide the battery one through the grid that it's using and this is the average European grid and of course the diesel one from the fuel what you see in this study is that using this model that is not until about 60 000 miles of driving that driving the electric Volkswagen in the European grid that you actually end up with a net reduction in CO2 and by the end of its life you've got a net net reduction about 20 20 is not nothing I just want to stipulate that's not zero so the mythology that it's a zero emissions vehicle is just a pure myth and eliminating all of the combustion turbines and all the coal use on the on the grids of the world may happen one day it's entirely possible to happen one day but it's not going to happen in the time frames of the operations of these vehicles so they're going to consume electricity in a fashion similar to this graph that's simply what's happening in the world not what's what's aspired to the problem with this graph by the way is that the the diesel line is fixed based on the physical chemistry of diesel and is it changing the electric line will change this is a small battery this battery and this model is half the size of the battery that 90 of Norwegians drive this is the battery that's in a typical Tesla or a typical byd is twice as big as this model which put differently means if you put your finger on where the CO2 emissions are to deliver that electric vehicle to Norway it's more like 25 tons now Norway on a hydroelectric grid that means that you do end up saving our missions over the life of the vehicle but not that much and what the big problem is that people will say well what we're going to do now is just change the chemistry we'll make we'll make well you just we'll just lithium iron phosphate we'll use lithium manganese phosphate we'll use different classes of chemistry you can change the classes of chemistry you can change the mineral soup so it doesn't have a material difference at the high level of abstraction on the quantities of materials required a typical electric vehicle battery with a without regard to the chemistry it uses weighs about half a Time requires about 250 tons of materials to be mined somewhere on the planet to make that battery it doesn't matter what classic chemicals you use and the idea that we will fix this problem by having new magic batteries batteries that are profoundly better than the batteries are using today is not a bad not a bad response that technology does get better technology will get better but it takes time uh I think it's important to have in your head two simple facts the lithium chemistry was discovered invented if you like in the mid-1970s you may all know this by Exxon chemist and was commercialized until by Sony until almost 20 years later in the early 1990s and of course famously it became possible as economies of scale and Manufacturing expertise improved almost 20 years later with the emergence of the first Tesla S sedan 2009 if I recall correctly so this is a very long cycle from new chemistry to at scale new classes of industrial batteries and the scale will be repeated there will be better ones 20 years from now 30 years from now but what we built today are the kinds of batteries we know how to build today the characteristics aren't like Iron Man's module in his back and his in his chest so we can fly in comic books you get energy velocities that look like computers in the real world the velocity of change in energy Industrial Systems takes decades not years last couple thoughts I'll leave you with uh in the uh in mining world is what I've I think others may have called it this but I uh facetiously call it the iron iron law of ore grades over all of history the grade of ore that we mined has been declining and especially for the the higher value metals like copper not iron ore as much but copper and nickel and molybdenum and magnesium and the orgrade I mean I assume you know what our grade is our grade is the percentage of the rock that you're mining that contains the thing you want so copper or grades are typically one percent that arithmetically means that you have to dig up a ton of ore to get to 20 pounds of copper and that doesn't count the tons of rock overburden that are in the way of the ore that you want to get to so you dig up tons of material to get to pounds of metal uh that has relevance that has relevance and cost that has relevance in environmental sense it also has to the point I made earlier at his relevance the carbon dioxide emissions and the energy consumed it means that the world is chasing larger quantities of metals from declining or grades or put obviously and simplistically is the larger quantities of metals are produced larger quantities of energy will be consumed to produce those metals to deliver to markets that increase in energy consumption as orgrades decline is non-linear it's another geological inconvenience in the physical chemistry of getting minerals out of ores it turns out that this this is a graph for the energy consumed per pound of copper as orgrades decline so your x-axis's or grades going down this way and the y-axis is the energy consumed per pound of copper you can see that it is beyond obvious this is an exponential not a linear curve what or put differently when you're on the exponential part and we're at one percent or grade so if you can't see the bottom of the x-axis two percent the big the big bunching of little uh triangles of the mines of the world are all around the one percent as you go below one percent the energy consumed starts to go up exponentially this is a non-trivial problem it means that the future electric car the future solar module the future wind turbines carbon dioxide emissions and metal requirements are rising non-linear just to fabricate them so never mind whether they're available and what they cost just to fabricate them will require the world to consume fuels and emit carbon dioxide at levels that are frankly unprecedented in mining history we will solve those problems in due course but in the mining industry those problems get solved over decades not not in years so let me end with one last very high level come back to the the macro and the aspirational challenge that we have with an energy transition in my mind the energy transition is not one about replacing hydrocarbons quite frankly it's about supplementing them and minimizing their use and it's a good thing setting aside whether or not carbon dioxide emissions should be minimized and I'm not I'm not making a case whether that needs to be accelerated or decelerated it can't be accelerated as the point that I'm trying to make is that the reality is that we want to minimize it so we do want to have more windmills more solar arrays more nuclear power more it to use the the line that was used by former president United States we really do want all the above the transition that's required is to make the pursuit of all the above more economically efficient more environmentally tolerable and more economically affordable this is this is a much different challenge than the challenges being presented at the transition to world without hydrocarbons and it's going to be very different very difficult to achieve that because of this under lying reality that this is this is uh over one century of data again this is iea data of the year on year change in energy demand for the world now what what you can see is that the absolute percentage rate increase is declining but it's declining over a larger base so you all know what that means in investment terms 10 percent of the big number is much more than 20 on a small number so the percentage increases are decline but they're on a much bigger base the most important takeaway from this this trend line in the world is below the axis the periods of time and the frequency and the depth of declines in absolute demand for energy have evaporated the world needs more energy every year and there are very few periods in modern history for the last 50 to 70 years but there's been any absolute decrease in energy demand year on year this means put differently that the world's appetite for energy and energy minerals and for energy materials is going to increase not decrease in their usually for foreseeable future efficiencies don't change this we've been becoming more efficient for more than a century in fact we're becoming more efficient for centuries the efficiency metric increases demand because in economic terms efficiency reduces the cost of the thing that you're producing and since the world needs more energy this is absolute demand for Energy Efficiency will actually accelerate this phenomenology the last thing I'll leave you with is is uh this thought because my my book which I'm which I am obviously promoting by mentioning its fact but it's not the subject of my of my remarks my book up called the cloud Revolution is about the it's about energies in the book but about the broad technology trends that are underway in the world today I I'm convinced and I try to prove in my book that we're we are at a pivot in history we aren't had an energy pivot in history we are a technological pivot in history not unlike the one of the 1920s where the the magnitude of Nature and convergence of Technology revolutions across the domains of information Material Science and machines promises economic boom really unprecedented in history over the coming 50 years I think it's really quite encouraging quite remarkable but it will require more energy and more Diversified forms of energy we'll have to produce it in ways that we find acceptable uh or put distilled in the in the most simple terms if we're looking at how societies use energy as opposed to how science produce energy Engineers invent energy demands it's self-evident that there was no demand for energy for flying until the invention of the airplane there was no no demand for energy for cars so they mentioned of the car there's no demand for energy to make computers work until the invention of the computer and the proliferation of computing Global Computing today uses more energy than Global Aviation and the idea that we won't invent new reasons to consume energy in the future is not just naive it's not true so to give you just two examples the cloud is a phenomenology different than the internet subject for a whole a whole other a whole other speech but the net increase in demand to operate the infrastructure of the cloud is likely to increase the net increase in energy demand equal to what's already happened in Computing which is to put in an oil term something on the order four billion barrels of oil equivalent of net new energy demand to fuel Siri and the cloud so to speak not Siri in our as our host and similarly for robots and drones in fact I'll leave you with this one last thought the automation of the world through through through chat GPT which is virtual automation through actual mobile robots that can help in Minds helping manufacturing plants we're already helping already helping in warehouses they all consume energy robots are the most complicated Machines man has ever invented next to the car it will take minerals and materials to make them they will consume energy in their manufacturing and in their operation or to put it in the very simplistic terms you know robots eat too they will be hungry and they will consume energy we will supply it it will cause economic growth to rise and it will cause more of we'll call it chaos and to finish on the Note where I think Tim is right this will be the domain of stock Pickers not momentum traders in the future because this looks like a very complicated future for the energy supplies of the world thank you now we're going to bring in an ESD specialist to challenge you and he's been named a leading star under 30 by dargan snellings leave the newspaper and he's from the hometown of alingbro to Alum please welcome Sandra Miguel [Applause] all right Mark a leading star under 30. wow yeah am I a leading star over 30 I hope with that presentation I would definitely say so uh thank you very much for it it really turned out to be a reality check I would say um I think one of the key takeaways I have from your presentation is is how you talk about clean tech being a transition to solids from liquids and gas and as you point out there is a significant under Supply both in terms of the absolute volume the pace of that volume and the all quality of the of those materials and so with that in mind should investors prepare for a prolonged period of of uh restricted Supply and energy markets yeah I think we're we're in a uh a period of uh under investment on all energy markets so we you all probably know this you know Scoggin team knows this the world is under invested under invested in oil gas uh for the last uh pretty close to decade so uh even if you uh believe that we can achieve a peak in energy demand for oil and gas the supplies have to be replaced and there are not Investments or not the commands for it same is true for minerals so we're short we're short on uh midterm investment that is the the two to five year time frame in all energy markets which translates into a pretty bullish uh price impacts and energy commodities for I I suspect for a very long time uh unfortunately how long it lasts will be political not not it will relate more to politics than it will too that it will relate to what Engineers can accomplish because another topic I see you write about often is the role between technology and Society you touched on it on your final slide um curiously we had trucks EV trucks driving around Norway 100 years ago yeah um and given that the technology behind EVS is as old as the combustion engine why did we not stick with the cleaner option to begin with well first because they uh Engineers knew that the batteries weren't cleaner they were different from the very beginning so people who build batteries are I ran out of lithium battery company for a while uh as an interim CEO so I learned I learned more than I really wanted to ever learn about the physical supply chain and the suppliers and the problems in the battery industry Edison had a famous quote that some of you may have heard it gets it's a it's not apocryphal it's largely true it just said there are liars and then they're a battery salesman and so it's a version of The Mark Twain line about statistics uh they're not they're not cleaner they're different so that that's a so they you're making trade-offs which is true in all the engineering world it's true in all the energy world and the trade-offs are not irrelevant but they're but they are trade-offs so the nomenclature is is misleading uh the reason the internal combustion engine won is because it's better not because it's better everywhere and all the time uh I I think that we'll probably see a world or something on the order and I'll pick a number based on my research but let's just say 20 or 30 percent of all light duty Vehicles will be electric at some point roughly speaking which would be quite remarkable would be a massive growth than where we are of on the road one percent of all light duty vehicles are electric so that'd be a massive growth but it would impact Global oil Demand by about two percentage points so so what you have is a world where both are possible technologically a lot of combustion engines for a lot of things and a lot of electric uh motors for a lot of other things so I'm in that camp not so again I'm having trouble with this transition idea because the underlying energy economics and the physical realities don't support eliminating one but rather amplifying modifying and moderating one I must I was surprised when when we had our first conversation and how adamant you are that there is no such thing as an energy transition so I'd have to try to challenge you a bit on it I read an interesting factoid the other day which which said that Western uh countries needed one kilo of carbon dioxide to produce one unit of dollar GDP right China will use half and industrializing countries will do the same with a third of the CO2 input right so so how does this decoupling of emissions from economic value creation fit with with your belief that the idea of an energy energy transition is is diluted well again it's nomenclature matters so the uh what technology does is it creates economic value so you can accelerate economic value more than you accelerate the quantity of consumption of materials and energy we've been doing that for hundreds of years so you get more dollars for Less input of other materials or energy that's been going on for a long time it will continue but that's not a physical decoupling the apps that's why I use the oecd graph the physical quantities of materials we went from 25 gigatons of materials consumed globally to 100 gigatons of all materials but the GDP of the world so that's a four-fold increase in physical stuff the GDP of world over that time went up more than 12-fold so you have a decoupling in that sense but people think that means using less it's less per dollar it's beyond obvious a different thing one final question yeah I think we can do one final quick when you're after all the host of The Last Optimist podcast and so so in that Spirit what gives you the greatest optimism for the future of of humanity uh well it's hard to be an optimist these days I have to confess um that's why I'm the last one um first we're humans we're very good at technology human beings are wired to do technology that's what we've been inventing ways around keeping nature from killing us and ways to make life easier for for all of human history and I do think we're at a pivot point of accelerating our capacities in that so I'm optimistic about that and that will mean by the way that I do think and it's again a subject for another day we call compress the time needed to open new minds we will find ways to we already we already know technologically we can we can find minerals faster we can mine faster we can take uh dangerous labor out of mining for example so I know all these things are possible that weren't possible just 20 years ago so I'm very optimistic that we'll achieve many of the goals we want I'm just maybe a slightly less optimistic that will develop the political patience for how long it will actually take let's just say excellent [Applause]

Channel: SKAGEN Fondene

Views: 564,430

Keywords:

Id: sgOEGKDVvsg

Length: 46min 49sec (2809 seconds)

Published: Mon Jan 16 2023

Reddit Comments

[u/JSwyft]

At 11:30 he discusses the levels of lithium, graphite, cobalt and nickel required. He then deals with them more specifically as a component of EVs at 26:30.

But I couldn't find any discussion about sodium batteries as I flicked through it. No discussion about raw materials can disregard sodium, a battery chemistry that needs none of the metals listed above. Even copper foil may be replaced with aluminium. They use hard carbon instead of graphite.

Hard carbon "is fundamentally different from that of graphite. First, hard carbon cannot be mined. Second, while synthetic graphite is produced via high-temperature graphitization of soft (graphitizable) carbon precursors such as pitch, hard carbon requires non-graphitizable precursors. This allows for the use of a variety of renewable resources, such as animal waste and sewage sludge [6], as well as coal and petroleum derivatives, which synthetic graphite production relies almost exclusively on. Producing hard carbon from more sustainable resources is currently more costly than utilizing fossil fuels derivatives. The former often requires more aggressive demineralization to yield sufficiently high carbon purity while the latter relies on the very supply chain that green energy solutions are meant to disrupt and ultimately phase out." Source. [disclaimer: I haven't verified this commentary]

Last year, the Chinese government mandated LFP chemistries for energy storage systems. I wouldn't be surprised to see them mandating sodium in ESSs some time in 2025.

This decade, I still consider sodium as a supplement to lithium and the traditional battery metals. But beyond that, the discussion about raw materials requirements looks to be much hazier than some might think now.

ICCSino have sodium at a penetration rate of 6.3% by 2026. Pretty speculative stuff, though the actual ESS/EV ratio looks similar to what I'd imagine for the first generations of sodium batteries.

[u/Actual-Ad-7931]

I'm curious to see how hydrogen will go getting into the mix... in 20 years. In Twiggy we trust !

[u/TheEmpyreanian]

Oh hey, look!

It's....government policy!

Think I made a meme about that one. For good solid reasons.