Today, we’re continuing our New Year’s tradition of “future-gazing” with our second power trend of 2023.
To recap, our other two are “Old Energy Still Shines” and The Sleeping Dragon; you can find details on the former here, and we’ll cover the latter on Tuesday.
But let’s not waste time…
Here’s the story on our second power trend: “greenflation.”
2023 Power Trend No. 2: “Greenflation” – Battery Metal Rush 2.0
The term “greenflation” popped up in the English vernacular a couple of years ago to describe the soaring costs of renewable energy technologies.
Typically, greenflation refers narrowly to the soaring costs of the battery metals that make these technologies possible.
But this new phenomenon isn’t all bad, assuming you’re on the selling side of the transaction rather than the buying.
In other words, I’d rather be the company selling battery metals to an electric vehicle (EV) manufacturer than the manufacturer scrambling to source economical supplies of those metals.
Because, with a few exceptions, renewable energy is metal-intensive energy.
All four of the key renewable energy components – solar panels, wind turbines, lithium-ion batteries, and EV charging units – require vastly greater quantities of battery metals than the legacy technologies they aim to replace.
- The average solar power project, for example, requires about five times more copper per megawatt (MW) of capacity than a conventional fossil fuel plant. Offshore wind farms demand about 10 times more.
- In raw numbers, a single 13-MW offshore wind turbine requires a stunning 275,000 pounds of copper. That’s about how much copper you’d find in 600 average American homes.
- The average plug-in EV requires about 200 pounds of copper, which is nearly four times what a comparable internal combustion vehicle requires. Depending on the exact battery chemistry, these vehicles also contain about 50 pounds of nickel, along with meaningful quantities of manganese, aluminum, lithium, and graphite.
Therefore, as EVs, solar panels, and windmills spread out across the globe, metal demand from these technologies will explode.
To get a better feel for the scope of the battery metal rush underway, let’s take a peek at some of the newest growth forecasts for the major renewable energy technologies…
Renewable Energy Catches Fire
During the past few months, those forecasts have picked up two significant tailwinds…
- First, the Russian invasion of Ukraine underscored the urgency to boost energy independence as quickly and comprehensively as possible. Many nice-to-have projects have become must-haves.
- Secondly, newly passed legislation in the U.S., Canada, and Europe is funneling multibillion-dollar grants and incentives toward renewable energy initiatives of all kinds.
Thanks to these tailwinds, industry analysts are erasing their old growth forecasts and replacing them with ever-higher guesses.
In the solar industry, for example, the researchers at Bloomberg New Energy Finance (BNEF) predicted one year ago that yearly solar photovoltaic installations would hit 236 GW in 2023 and increase to 334 GW by 2030.
But you can forget all that now…
The newest forecast from BNEF, published earlier this month, boosts the estimates for 2023 and 2030 by 34% and 53%, respectively. If this updated forecast comes to pass, the world will install twice as much solar power capacity this year as it did in 2020.
The wind industry is not booming as spectacularly as solar, but it is picking up momentum.
Global wind installations in 2022 topped 100 GW for the first time ever, and the Global Wind Energy Council expects more than 110 GW of new installations each year until 2026.
BNEF holds a similarly optimistic outlook. Its newest forecast calls for annual wind capacity installations to trend toward 160 GW by 2030. Incidentally, that forecast is significantly higher than what the BNEF team was expecting one year ago.
It’s Not Just Tesla’s World Anymore
Ditto the predictions for global EV sales.
Year after year, industry experts have been upping their growth projections. Recent forecasts from the Boston Consulting Group (BCG) provide an enlightening case study.
From 2018 to 2022, the esteemed consulting firm issued a series of forecasts that predicted global EV market share in 2030. The BCG’s 2018 forecast, for example, predicted EVs would capture a 21% share of global car sales by 2030.
But over the course of the next four years, the BCG issued successive revisions that ultimately boosted its forecast for 2030 EV market share to 53% – or more than double what the research group had predicted in 2018.
These growth numbers are rocketing higher because the world’s auto manufacturers are finally transforming their EV dreams into reality.
Tesla Inc. (TSLA) no longer has the EV market to itself. Around the world, dozens of new EV models are hitting showroom floors every year.
Clearly, the adoption rates for EVs and other leading renewable energy technologies will continue to accelerate. That’s the history of adoption rates for new technologies.
The Bare Necessities
In 1985, AT&T Inc. (T) commissioned research firm McKinsey & Co. to predict how many Americans would be using cellphones by 2000. The McKinsey folks got to work crunching numbers, devising formulas and modeling scenarios to arrive at a specific number: 900,000.
Yes, they predicted just 900,000 Americans would be using cellphones by 2000. But that number wasn’t even close to the mark; McKinsey’s guess was off more than 100-fold.
The actual number was 109 million cellphone customers!
Adoption rates for breakthrough technologies always surprise to the upside. They often become commonplace “necessities” more rapidly than anyone can imagine at the outset.
The EV movement will be no different. This breakthrough technology will gain global popularity and market share much more rapidly than most folks are expecting today.
But even if the forecasts for future EV demand growth were to stop where they are right now, that would be enough growth to power huge metal demand over the next 30 years.
Regards,
Eric
