Energy Transition Proceeding Slowly Outside Power Sector

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The energy transition in the Electric Power Industry continues to briskly move forward, driven by efforts and investments around the world to lower carbon dioxide (CO2) emissions from electric generation. But in other areas, such as Metals & Minerals, Industrial Manufacturing (especially electric vehicles) and Oil & Gas Production, the energy transition is moving more slowly, a function of supply-and-demand fundamentals and investor hesitance.

In the early years of this decade, prices shot up for several transition-related minerals, such as lithium and copper, driven both by rising demand and concerns about whether the future supply of those minerals would meet future demand.

But demand has not risen as rapidly as some had forecast, leading to excess supply and lower prices, commented Joseph Govreau, Industrial Info Resources' vice president of research for Metals & Minerals.

"Right now, the world is oversupplied for battery minerals like lithium, cobalt and copper, and prices have dropped significantly after peaking in 2022," Govreau said in an interview. "Lithium prices have dropped about 80% since peaking, mainly due to a lot of supply coming online during the past two years and slower than expected demand growth." Copper prices dropped about 22% last year.

"This has fundamentally changed the market outlook for 2024," Govreau continued. "Lithium and nickel mining companies are scaling back operations, laying off employees and deferring capital expenditures, and we may see more of this as 2024 unfolds."

He said Albemarle Corporation (NYSE:ALB) (Charlotte, North Carolina), the world's largest lithium producer, recently announced it was laying off 4% of its staff, and delaying projects. That company's stock has fallen about 63% since its late-2022 high of about $325 per share. For more on Albemarle, see November 10, 2023, article - Albemarle Wrestles with Weakening Lithium Trends as Mines Ramp Up. Other lithium producers are scaling back plans and shuttering operations.

The world currently has 79 operational global lithium mines, and about 30 of them have come online in the last two years, according to Industrial Info's Global Market Intelligence (GMI) platform. "That's a lot of new capacity coming online in a relatively small market," Govreau said. "Plus, there's another 36 projects currently under construction and scheduled to come online by the end of 2027."

"It's a cyclical market, and now with supply exceeding demand it will take some unknown time for that balance out. Electric vehicle (EV) adoption in the U.S. will help, but I'm a little concerned about the disposition of the $72 billion in planned lithium mining projects that are we are tracking around the globe."

EV sales in the U.S. reached about 1.2 million units in 2023, about 7.6% of the new-vehicle market, said David Pickering, Industrial Info's vice president of research for the Industrial Manufacturing industry. That was more EV sales than some predicted, but less than EV enthusiasts had hoped. The Biden administration has a goal that 50% of new vehicle sales will be zero-emission vehicles by 2030.

"In the U.S., the problem has been that the pace of EV sales has slowed while hybrid sales have improved," Pickering said. "There remains a myriad of problems with the switch to EVs in the eyes of the U.S. consumer, principally the complete lack of a charging infrastructure in many parts of the U.S. This issue, and others, will need to be addressed in the coming years for the EV conversion to really boom."

Automakers have taken their foot off the EV accelerator in recent months, as slower-than-expected sales of EVs forces corporate leaders to pivot on spending plans. For more on that, see November 13, 2023, article - Automakers Slow EV Spending as Demand Lags Projections.

Pickering noted that the Biden administration has earmarked about $7.5 billion in federal funds to build a national EV charging network in the 2021 Bipartisan Infrastructure Investment and Jobs Act. But those dollars have been slow to trickle out.

Morgan Kwan, a director of energy transition research at Enverus (Austin, Texas), sees EV sales in the U.S. growing to 2 million units in 2024, about 13% of all new vehicles sold, and 2.2 million units in 2025, about 17% of all new vehicles sold.

She added that China and the U.S. are the countries that are moving the needle the most on EV sales. China, she noted, wants EVs to account for 100% of new vehicle sales by 2030.

Turning to the energy transition in the Oil Patch, Kwan said "2024 will be a year of action, and we expect increased investment. A lower interest-rate environment should bode well for the transition in power-adjacent technologies," such as direct air capture (DAC) of CO2 emissions, direct lithium extraction (DLE) and carbon capture, utilization and storage (CCUS).

Still, she said oil and gas investments in power-adjacent technologies "is in an early stage." She noted Exxon Mobil Corporation (NYSE:XOM) (Spring, Texas) last year acquired Denbury Corporation, a business built around CCUS. For more on that, see July 17, 2023, article - ExxonMobil to Acquire CCUS Firm Denbury for $4.9 Billion. ExxonMobil also is in the early stages of exploring DLE. Meanwhile, Occidental Petroleum Corporation (NYSE:OXY) (Houston, Texas) last year entered the DAC space. For more on that, see November 10, 2023, article - Occidental Has High Hopes for Direct Air Capture of Carbon Emissions.

Kwan said success by oil companies in power-adjacent technologies depends on securing multiple streams of revenue and benefits through stacking different technologies, such as DAC and CCUS, at sites.

However, many of these non-traditional energy transition investments are promoted by oil companies, which have invested far more in their core business of extracting and refining hydrocarbons. For example, last year, while heralding their low-carbon businesses, ExxonMobil and Chevron spent more than $112 billion buying Pioneer Natural Resources and Hess Corporation, respectively. For more on that, see November 9, 2023, article - Energy Transition Hits Some Inconvenient Economic Trends and October 25, 2023, article - Is Clean Energy Transition Really 'Unstoppable,' as IEA Asserts?

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).