HOUSTON – The ‘stranglehold’ of critical minerals which is just in the hands of very few producer-countries is seen as a major factor that will cause enormous strain and will drive up costs for the consumers of many countries traversing their pathway to energy transition.

In a plenary discussion at the recently concluded CERAWeek, Amos Hochstein, senior advisor to US President Joe Biden for Energy and Investment at the White House, has likened the high-stakes play for critical minerals production and refining process to the oil cartelization rising from the league of the Organization of the Petroleum Exporting Countries (OPEC) which wielded the scepter at markets during the energy crisis of the 1970s.

“We are facing enormous challenges today because we are at the precipice of energy transition. But we have to look at what does this mean on critical minerals - the supply chain for wind, solar, chips, EVs (electric vehicles) and batteries – all of these are suffering today, the beginning of what can become what OPEC was in the 1970s – so we have to manage this,” he stressed.

On this apparent intensifying ‘resource war,’ Hochstein expounded “there are things like graphite that 97% is just processed in one country.”

To date, China is the world’s top graphite producer and exporter and it is currently refining more than 90% of graphite globally – primarily those that are used in electric vehicles and battery nodes.

CERAWeek's plenary discussion on the impact of competition and rivalries on a multipolar world with White House Energy Advisor Amos Hochstein, European Commission Energy Commissioner Kadri Simson, Engie CEO Catherine MacGregor and S&P Global Senior Vice President Carlos Pascual.

The White House energy advisor further noted “if you look and go down the line of lithium, cobalt, copper and nickel – look at what’s happening in those markets, it’s not just a single supplier challenging the ability to receive that supply, but challenging to manipulate the market itself.”

He added “if you look at the prices of some of the metals and minerals from where they were last year and where they are today – it’s 75 to 80% rise - and these are not at all dynamics that reflect the fundamentals of a market, but rather the geopolitics of market.”

Hochstein thus cautioned “if we don’t pay attention to that now and take action, we will eventually suffer the consequences.”

Perceptively, he qualified that part of the misgiving in the energy transition lies in the fact that most, if not all players are “busy looking just at one side of the equation, and now we’re not focus on the comprehensive view – so we have to look at this.”

The ‘new gold rush’ for critical minerals, he emphasized, will be a formidable part of the energy security that most economies in the world have been hankering for – because it will be these resources that will fuel innovation – including fixes in the intermittency of renewables as well as on the green electrification of transportation and other industrial systems and processes being the main anchors of the global energy transition.

“Energy security today is far more critical than ever. And we’re losing that focus – we need to focus on far more important things if we want to be able to have energy transition. The embryo for the energy security challenge of the future is now, whatever we don’t do in the next 12-36 months will be lost. We’re already 20 years behind if you look at the numbers,” he reckoned.

Energy security is entwined with national security

In the case of Europe, Kadri Simson, commissioner for Energy of the European Commission (EC) asserted that the tough lesson they learned about energy security is not having control over their energy supply chain and the danger of over-dependence on a single foreign supplier.

Following the eruption of the Russia-Ukraine war in 2022, she highlighted that it became a deep discernment for most European countries that they will need to get out from the ‘manipulation’ that Russia had been exercising then on their major source of energy, which is gas.

“We have three main goals to design our energy landscape – affordability, security of supply and also decarbonization. But since Russia started to manipulate our energy markets, we’ve seen that the fight to green energy is also a fight to regain control for our energy systems,” she conveyed.

For the European countries to exit from emergency mode, Simson specified that they needed to step up on enforcements of energy efficiency measures, acted quickly to find replacement-supplier for their gas requirements, built liquefied natural gas (LNG) terminals in a very rapid pace and accelerated investments on renewable energy as well as on technological innovations.

“We started our governments to save energy, we started our private companies to install gas – to make sure that we can get through the winter season and also ‘flexibilized’ some of our systems. We had construction of very fast LNG terminals, and that allowed us to receive more gas from global markets – so we have exited from emergency mode; and whatever that we are aiming to achieve by 2030 are already being put in action across member states. Various investments are coming online in the years to come,” she narrated.

Additionally, Catherine MacGregor, chief executive officer of French multinational Engie, underscored that success cannot be attained in the energy transition phase if ‘unchecked greed’ of some business owners would reign - without them keeping in mind the moral obligation to make the resulting price of commodities affordable to the pockets or paychecks of consumers.

“If some people are making too much money, it probably means that energy transition is not going to work. We do need to create value for investors, but not too much - so sometimes, we need to work together in fighting this model,” she stated.

Nevertheless, she pointed out that while business keeps consumer affordability at the forefront, a delicate balance shall also be exercised for capital flow to thrive.

She cited that one dangerous experiment that happened in the RE sector had been that of offshore wind – with it facing uncertain future especially in the United States, due to array of factors such as rising interest rates, inflationary pressure as well as global supply chain predicaments.

“We have seen a lot of success in offshore wind; - a lot of projects that are being developed. But then everything stopped and we have a lot of examples here in the US, when suddenly the economics didn’t work anymore. When the economics didn’t work, private sector stops and nothing happens,” she said.

Moving on from that, she enthused that “while we made some mistakes as an industry – for example, not having the right index (for offshore wind) … it still takes full commitment for the energy transition to work. We need to pause for a while and make some assessments – but the extraordinary momentum that private sector can bring to this challenge has to be sustained.”