13/05/2022 - 10:00

EV supply slowed by the elements

13/05/2022 - 10:00

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Australia should move away from the business-as-usual approach to resources development, particularly regarding battery metals.

EV supply slowed by the elements
Getting the raw materials for EV batteries can be a drawn-out process. Photo: Stockphoto

The focus on emission reduction debate and policy development through adoption of electric vehicles too often focuses on the end use of the car rather than the full value chain.

This proffers an obvious explanation in that a car is what people see, touch, and feel: it’s the physical embodiment of efforts to reduce emissions.

Second is the physical charging infrastructure, which, again, provides a point of interaction and its availability, cost, and charging time factors into people’s purchasing decisions.

A distant third is how the car is made, with the specific critical and battery minerals required for the EV’s lithium-ion battery chief among them.

Not only do consumers think this way, but there has traditionally been a disconnect between upstream and downstream segments of the value chain.

While integration has improved and companies have learned more and more about each other’s businesses and pricing, ultimately there’s a learning curve to be had between those making a battery, refining chemicals, and providing the raw material.

It’s also proved easier to raise capital for a battery gigafactory than new mining and chemical refining production.

The former can be in operation within two years, with the latter taking as long as 10 years.

Once a new source of supply is available (normally small batches that require pilot mines and refining facilities), testing of the chemical can take well over a year.

This dynamic has been taking place for several years, but the urgency is rising as cost pressures bite.

On a recent earnings call, Tesla CEO Elon Musk regularly lamented lithium shortages and prices, indicated that this and other inflationary pressures had led to higher EV prices.

Lithium is not alone, with minerals across the spectrum attracting record prices and facing similar development constraints.

Often with the overarching rationale of supply chain diversification and sovereign capability, efforts are being made by the Australian government that will bring additional supply into the market.

This has included a recent $1.25 billion low-interest loan to Iluka Resources to develop the first rare earths separation facility in Australia, and smaller loans to graphite players EcoGraf and Renascor

Resources to support greater Australian participation on the anode component of the battery.

However, facilitating additional supply is a secondary focus of these initiatives, and it won’t address the problem of how long it takes to develop mining and chemical refining operations.

Just as there are policy settings and incentives for the adoption of EVs, so too should there be for the supply of minerals that create these cars.

Simply put: if the minerals don’t get to market, then there will be fewer EVs and they will cost more.

The energy transition will be delayed through falling supply to market or increasing costs deferring consumer decisions.

We should celebrate the role Australia has in this value chain that will decarbonise mobility rather than look down on it as an unsophisticated dig-and-ship model.

This is ultimately our comparative advantage and Australia has become a wealthy country because of it.

We are also steadily moving up the value chain and should be actively looking to bring on more supply and challenge the business-as-usual approach to resources development.

To date, there are few examples of the strategic importance of critical and battery minerals being reflected in the day-to-day approach of regulators.

While lead agency status does provide help in navigating project approvals, it doesn’t improve timeliness and often is not met with a sense of drive and urgency.

As more projects come online and get more complex through downstream activities, the regulatory system is at risk of slowing through volumes of requests and the additional considerations that come with chemical processing.

Industry absolutely needs to continue to meet high standards (it’s part of our value proposition), but there’s an unsavoury irony that government regulation can delay energy transition efforts as other parts of government seek to encourage it.

There should also be an even greater emphasis on investment in shared infrastructure such as ports, roads and rail, and power and water.

Investment in these areas is pivotal to reduce project costs and will help facilitate capital attraction.

Western Australia has always had strong public-private partnership as new and complex markets emerge; we’ve called them State Agreements.

This model will require updates, but ultimately the same conditions are here now as when used in the past.

Joe Doleschal-Ridnell is director at JDR Advisers, where he works with clients in mining, energy and industry

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