Agency Calls for More Investments and Policy Support. High Concentration of Raw Material Supply Chains Remains a Risk.
A new report from the International Energy Agency (IEA) foresees significant challenges for global energy supply in the coming years. According to the report, geopolitical and regional conflicts pose considerable risks to energy security as well as to the targeted reduction of greenhouse gas emissions. Additionally, climate change itself, through extreme weather events, presents a growing threat to energy supply. At the same time, electricity demand is expected to rise sharply, partly due to heatwaves that increase the need for cooling systems and the expansion of Artificial Intelligence, which requires vast, energy-hungry data centers.
In this context, the agency calls for more robust political measures and investment, especially in power grids and energy storage, to enhance energy security and climate protection. Even though the global energy system is increasingly supported by clean energy sources and the demand for fossil fuels is expected to decline after 2030, this momentum needs to be further accelerated.
Supply Chains: High Regional Concentration at Least Until 2025
A key issue is the heavy concentration of supply chains for clean energy in just a few countries, especially China. China leads in the mining and processing of many of the critical minerals needed, as well as in production capacities for technologies such as batteries, photovoltaics, and wind power. The IEA sees measures like the U.S. Inflation Reduction Act and the EU Net Zero Industry Act as important steps in strengthening domestic supply chains. Despite many announced projects, however, the supply of certain raw materials, such as copper and lithium, is expected to grow more slowly than demand. One reason for this is the very long lead times in mining. Additionally, the currently low prices for many critical minerals dampen the “investment appetite,” threatening future supply diversification.
According to the agency, the regional distribution is unlikely to change significantly in the next ten years; by 2035, up to 75 percent of supply growth for refined copper, lithium, and cobalt will still come from today’s largest producers. For battery-grade graphite and nickel, the figure is even 90 percent, and market concentration remains very high for rare earth elements as well.
To the full report: World Energy Outlook 2024.
Photo: iStock/kflGALORE