What Can End Users Do to Prepare for Renewable Technology Material Shortages?

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By Sam Torbet | 1Q 2024 | IN-7231

Besides high capital investments, material shortages for renewable technology is a concern for the future of renewable technology, as demands are quickly closing the gap on supply. End users must find ways to protect themselves to reduce the risk of their projects being delayed.

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A Reason for Renewable Technology's Slow Implementation

NEWS


It is undeniable that the world is moving toward green energy and technology to curb emissions and achieve net zero goals. The major concern for many people is the high capital costs at the start of any system and slow payback periods. As technology progresses and improvements are made during production, capital costs are expected to come down as markets mature. However, this may not be the case for renewable technology if raw materials become scarce and expensive to produce. What is the outlook for certain materials and how will they influence the market?

Raw Materials Potentially at Risk

IMPACT


The majority of critical materials are not physically scarce right now, but concerns about the supply chain and future increased demand is real and looms nearby. Some of the more relevant materials for battery storage include:

  • Lithium
  • Nickel
  • Cobalt
  • Graphite
  • Copper
  • Aluminum
  • Steel

Some of the above are also needed for solar Photovoltaics (PV) such as copper, aluminum, and steel, which also requires other materials such as silicon and silver.

Some highlight that the limitation of raw materials will slow production down to a point at which the demand far outweighs the supply and, in turn, slows the implementation of green energy. Sadly, this will result in enterprises and countries missing targets for net zero, unless targets shift.

A less drastic cause will be the unstable pricing of raw materials, which has already been seen with silver as global silver demand overtook global supply in 2021, leading to prices still being far more than 2020 pre-pandemic levels. These price hikes led to renewable technology costing more than expected and delaying other projects when choosing to wait for prices to stabilize.

What End Users Can Do to Protect Themselves from Material Shortage

RECOMMENDATIONS


There is very little that companies can do to protect themselves in the case of material shortages or supply issues. Instead, companies should ensure future plans and timelines toward net zero goals have an alternative plan in case of project delays.

  • PPAs: Power Purchase Agreements (PPAs) are evolving and are no longer just 10 to 15-year contracts. Shorter-term 2 to 3-year contracts, with some contracts even being as short as 6 months, allow companies to ensure meeting green targets if projects are delayed, while not being tied long term.
  • Diversify Renewable Energy and Assets: The typical advice given to mitigate risk is to diversify; in this case, diversify the renewable technology implemented at locations and where the energy is generated. For instance, instead of deploying a large number of solar PV panels to generate enough electricity on-site, reduce the number of panels, install a wind turbine, and consider the potential of battery storage. Individually, each component will be easier to install and has less risk of experiencing material shortages. Simultaneously, one system can be brought online to help offset costs, while the other system is still being brought online. Several hybrid systems exist, but they are normally based on low demand to help showcase their feasibility, such as the energy system for Scotland’s Regional Performance Centre for Sport located in Dundee using solar PV and a combined heat and power engine to deliver electricity to the complex. Many studies have demonstrated the economic value of hybrid systems.
  • Encourage a Circular Economy: As first-generation renewable systems come to an end, their parts and materials are undoubtably valuable and companies must be encouraged to recycle to reduce demand for raw materials. Initiatives and new processes such as Digital Product Passports (DPPs) allow for greater transparency for repairers, refurbishers, and recyclers, ensuring that components are reused at the highest value and efficiently. Second-life batteries have also begun to be used after their initial deployment by automotive industries, as seen with B2U Storage Solutions’ operation of a 25 Megawatt Hour (MWh) grid-scale storage system using 1,300 used batteries from various car manufacturers.

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