MARIA BURKE
Demand for certain raw materials used in the renewables industry, such as nickel, lithium and rare earths, was already surging before the war in Ukraine. But bans on Russian imports have dramatically increased concerns over supply and Ukraine’s future as an alternative supplier hangs in the balance.
‘The war in Ukraine is having a significant impact on companies attempting to source raw materials in the renewables industries,’ says Massimo Gasparon, Director of the European Raw Materials Alliance (ERMA). ‘Currently, Europe gets little from Ukraine but is very dependent on Russian supplies of, for example, titanium, nickel and palladium.’
‘Supply was already disrupted [due to the pandemic and other factors], and my prediction is that this will happen more frequently,’ he continues. ‘All renewable industries have some critical raw materials at their core. For example, wind turbine motors need rare earths. The photovoltaic industry needs silicon, silver and indium. Each technology has weak points in their supply chains.’
At present, Europe still has limited levels of essential raw materials and is urgently looking at developing potential sources within Europe and the rest of the world, he says. For nickel, for example, other options include Indonesia, New Caledonia and Australia. But Gasparon warns there might be a supply gap for other materials. ‘Developing a mining project doesn’t happen quickly. From discovery to production can take ten years.’
The EU had identified Ukraine as one of the European countries with significant mining potential. In 2021, it signed a memorandum of understanding with Ukraine to support development of geological resources and help modernise processing capacities.
‘These potential supplies will be lost if Russia takes over certain regions of Ukraine,’ Gasparon notes. ‘Long-term projections of demand will be difficult to fulfil unless other sources are found. Potentially it is a problem if Ukraine is out of the picture as it is very well-endowed with geological resources.’
Ukraine looks particularly promising for lithium. ‘[It has] saline waters associated with hydrocarbon deposits, which could contain significant quantities of lithium,’ says Andrea Dini of the Institute of Geoscience and Geology in Pisa, Italy. ‘The Ukrainian Geological Survey has also discovered several areas in the central-eastern regions with lithium minerals such as spodumene. Global production of lithium by processing spodumene from pegmatite rock has overtaken production from saline fluids. Spodumene is good for producing lithium used in batteries and ceramics.’
Dini thinks that Ukraine could become one of the main lithium producers in Europe. ‘It’s hard to say if it could compete with the giant producers – Australia, Chile, China and Argentina. The 2021 agreement created the conditions for a more detailed exploration. Unfortunately, the war stopped this process.’
Meanwhile, Europe’s wind industry reports that the war has impacted the supply of several raw materials. Russia and Ukraine are major sources of steel, a key material in wind turbines, says Christoph Zipf, spokesperson for WindEurope. ‘Since the war, imports of finished steel into the EU have dropped by a fifth. Russia also exported aluminium, nickel and, to a lesser degree, other raw materials used in wind turbines. But it is the decreased supply of steel and aluminium that are the most problematic.’
The challenge is that, at least in the short- to medium-term, the war has led to disruptions in the supply chain and increased raw material prices. ‘Increased competition in sourcing materials adds additional costs for our manufacturers’, says Zipf. ‘Some companies have already announced that they will have to raise the prices for wind turbines.’ Consequently, both manufacturers and their customers are stepping away from deals. ‘Currently, it is difficult for companies to predict prices, which means that, if they are asked to make offers for delivery in four or five years from now, it’s difficult to predict their business case. This hesitation makes the faster delivery of renewables capacity an even greater challenge.’
Zipf notes that if all projects in ERMA’s pipeline of potential European sources of raw materials – Ukraine, Portugal, Scandinavia and the Balkan region – were implemented, by 2030, over half of the EU’s annually installed wind capacity could rely on EU-made rare earth magnets, and 20% of the EU’s nickel demand could be sourced domestically. ‘In that sense, the Russian invasion of Ukraine is a setback.’
In contrast, the impact on the solar industry has been less pronounced. ‘European Commission research shows that solar PV technology uses very few materials imported from the region: only 5% of raw materials used in European solar technologies come from Russia,’ says Naomi Chevillard, Head of Regulatory Affairs at SolarPower Europe. ‘Although the situation continues to develop, we wouldn’t necessarily expect the Russian war on Ukraine to directly impact solar supply chains.’
However, an indirect but significant impact of the Russian invasion is the political acknowledgement of renewables as a tool to ensure energy security, she says. ‘This has resulted in high-level commitment to support European solar supply chains, with EU Energy Commissioner Kadri Simson promising to “do whatever it takes” to rebuild the European PV manufacturing base.’
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