How Copper Supply Shortages Are Affecting the Renewable Energy Industry

As the world shifts towards renewable energy sources, copper has become a vital component of the energy transition. However, the global supply of copper is facing significant challenges, which could potentially hinder the efforts to achieve net-zero emissions by the mid-2030s. In this blog post, we will explore the issue of copper supply shortages, including the impact of the energy transition on demand, potential solutions, and challenges facing the mining industry.

Impact of the Energy Transition on Copper Demand

According to S&P Global, copper demand looks set to double by the mid-2030s due to the rising demand for technologies necessary for the energy transition. These technologies, such as electric vehicles, wind turbines, solar panels, battery storage, and charging stations, tend to be far more copper-intensive than previous technologies in mobility and power generation. For instance, an electric vehicle requires more than three times as much copper as an internal combustion engine vehicle, and buses require at least ten times as much.

Supply Shortages and Possible Solutions

However, the global supply of copper is unlikely to keep up with this rising demand. According to mining experts, there are three possible sources of additional supply: new mines or expansion of existing mines, higher utilization of existing mines, and recycling. However, the shortfall in new copper supply has been building for a long time, with mining companies reluctant to invest in new copper mines and exploration since the 2008 financial crisis. Moreover, the lengthy permitting requirements and political unrest in countries such as Chile and Peru, which have some of the world's largest copper reserves, are holding back new copper capacity.

Challenges Facing the Mining Industry

The lack of new supply is compounded by the slow response of copper demand forecasts to the ever-accelerating energy transition promises. Furthermore, the extra copper required in vehicles is prior to the electrification inputs necessary to make charging ubiquitous, especially as China and India build out their grids. This demand source has the potential to increase as broad EV adoption will depend on more robust grids. Project approval for ESG reasons is another challenge facing the mining industry, as projects critical to the green energy transition are not getting approved. A decade of permitting is not going to help reduce the supply gap that companies see and it appears they want to control as many producing assets as possible when the rest of the world realizes the same thing.

Closing

In conclusion, the issue of copper supply shortages is a critical concern that could potentially hinder the efforts to achieve net-zero emissions by the mid-2030s. As demand for copper looks set to double, potential solutions include new mines, higher utilization of existing mines, and recycling. However, the challenges facing the mining industry, such as lengthy permitting requirements and political unrest, are significant. As individuals, companies, and governments look to reduce their carbon footprint and invest in renewable energy, it's essential to consider the issue of copper supply shortages and how to address this challenge.