The push for vehicle electrification in the early part of the 21st Century initially came, not from concerns about climate change, but from concerns that the U.S. economy was becoming dangerously dependent upon a single natural resource (petroleum), the supply of which forces outside the United States could disrupt.  As vehicle electrification moves from theory to reality, it is important that the United States not repeat past mistakes and become dependent upon foreign supplies of strategic energy materials it does not control.

Although scientists keep working on alternatives, the best judgment of those involved in advanced battery technology is that for the next twenty to thirty years electric vehicles will rely for propulsion on lithium-ion batteries containing at least some amount of cobalt.  For those batteries to be manufactured domestically, manufacturers in the United States will need access to stable supplies of lithium, high grade nickel and cobalt.

Where lithium, high grade nickel and cobalt supplies come from today do not inspire comfort.  The vast majority of lithium comes from just two countries:  Chile and Australia.   Nickel is more widely available.  But the large majority of nickel is unsuitable for lithium-ion batteries.  Lithium-ion battery cathodes require high grade Class I nickel sulphides, which are much more limited.  The supply of nickel sulphides are expected to decline by 20% through 2021.  Cobalt, however, may be the real bottleneck.  Today, 60% of the world’s production and 50% of the world’s reserves of cobalt are located in the Democratic Republic of Congo (DRC), a notoriously unstable country.  The use of child labor in the DRC to mine cobalt is a source of continuing concern.

The expected growth of advanced battery demand over the next thirty years will stress all of these resources.  With that stress comes the possibility of supply disruption and associated price spikes.  The United States could be in for a replay of the Oil Shocks of the 1970’s and 1980’s.

An Energy Materials Shock, however, would be different than an Oil Shock.  The Oil Shocks of the 70’s and 80’s hit consumers directly, causing immediate economic pain and geopolitical consequences.  An Energy Materials Shock would probably not look like an Oil Shock.  An Energy Materials Shock, or the prospect of one, would hit business, not consumers.  Consumer can defer the purchase of a new electric vehicle if its price spikes.  But businesses must plan in real time to locate production in areas where long term access to stable and cost-competitive supplies is assured.

The real importance of the energy materials supply chain is that production of advanced batteries and the vehicles they power will ultimately be located in areas where the energy materials supply chain is stable.  Energy materials supply stability will determine nothing less than where the automobile industry of the 21st Century will be centered.  Nations that understand that are falling over themselves today to acquire long term access to lithium, nickel sulphides and cobalt supplies.  It is high time that the United States got into the game.

There are several ways that the United States can get into the game.  The first is by promoting the recycling of lithium-ion batteries, so that the energy materials contained in the batteries already in North America will stay here and be available to domestic lithium-ion battery manufacturers.  An NREL study recently concluded that by 2035 fully 60% of the cobalt needed for the manufacture of lithium-ion vehicle batteries in the United States could be sourced from domestically recycled battery materials.

But today lithium-ion battery recycling is not economic in the United States and many used batteries are either not recovered or exported as e-waste to other countries where the energy materials are recovered.  This needs to change.  The federal government should lower the cost of lithium-ion battery recycling by extending tax credits to lithium-ion battery recycling equipment and by prohibiting the export of e-waste that contains energy materials.  The new DOE ReCell Center and associated $5.5 million recycling prize is a good start.  But it represents an anemic response to a challenge that may cost the United States its long term leadership in automobile manufacturing and technology.  More needs to be done.

New domestic and regional production of lithium, high grade nickel and cobalt should also be strongly incented.  The United States must take a serious new look at regulations that have nearly killed mining for strategic and energy materials in the United States.  Canada has some of the most promising nickel and cobalt reserves in the world outside the DRC.  The United States needs to cooperate and coordinate with the Canadian government to ensure that those Canadian reserves are fully developed.

Finally, the United States must make sure that other nations do not tie up and deprive battery manufacturers who might locate in North America of foreign supplies of lithium, high grade nickel and cobalt.  The Strategic Petroleum Reserve provides a good model for how the United States government might approach the acquisition of energy materials and provide a degree of stability to the energy materials market in North America.  If battery manufacturers know that the United States has a reserve of energy materials that can be put on the market in the event of a shortage or price spike, those manufacturers might be far more comfortable locating plants in the United States.

It is high time for the U.S. government to take the energy materials supply chain seriously.  While an Energy Materials Shock might not have as immediate an impact on consumers as the Oil Shocks of the last century, the future of a good part of the United States’ manufacturing base may well depend upon assuring manufacturers that no such Energy Materials Shock will occur in North America.