Recent reports that China might ban exports of rare-earth refining technologies set off another round of worries about its near-stranglehold over the minerals critical to modern technology. It’s a threat that President Joe Biden’s administration needs to take seriously.
China’s leverage over the U.S. is real. Rare earths — a family of 17 elements with similar chemical properties — are integral to all manner of 21st-century products, from iPhones to electric vehicles to wind turbines. They’re especially crucial to advanced weapons systems: A single F-35 fighter jet requires more than 900 pounds of the stuff; a Virginia-class submarine, 10 times as much.
While rare earths aren’t especially rare — deposits are found all over the world, including in the U.S. — state-led industrial policies have helped Chinese companies gobble up market share since the mid-1980s. China now accounts for two-thirds of the world’s rare-earth mining, 85% of refining and 90% of production. By contrast, the U.S. has one operating mine and no commercial-scale processing capacity; it imports 80% of its rare-earth compounds and metals from China.
The U.S. can’t rely on the market alone to address this vulnerability. Opening new mining and processing operations is expensive and technically challenging, and China can always make the task harder by ramping up production and driving down prices to unprofitable levels. The Pentagon has recently stepped in, using the Defense Production Act to help fund new processing facilities in California and Texas, while stockpiling both raw minerals and feedstock for permanent magnets. The new projects will require continuing support. If successful, though, they should meet the U.S. military’s needs.
The more difficult question is how to address the risk to U.S. companies if China chokes off supply, as it did during a 2010 dispute with Japan. As the Biden administration proceeds with its 100-day review of vital U.S. supply chains, it should ensure that addressing this threat is a priority.
As a start, the U.S. would be wise to partner with European and Asian allies rather than trying to reshore the entire mine-to-magnet supply chain domestically. Given economic and environmental concerns, for instance, Australia and Canada may make more sense as sites for mining. Japan and South Korea already produce rare-earth compounds and alloys. Stitching together a geographically diverse supply chain spread among friendly nations would make the whole system more resilient to unexpected shocks. It would also help governments avoid wasteful subsidies on duplicated efforts.
At the same time, the U.S. should be looking for ways to reduce its overall demand for these minerals. Congress has allocated $800 million to rare-earth research and development over the next five years, which needs to be spent wisely. Beyond programs aimed at extracting rare earths from coal and coal ash, funds should be targeted at new methods of recycling the minerals from the tons of electronic waste produced every year, as well as the search for either man-made or natural substitutes for the elements themselves. Such efforts would position the U.S. at the cutting edge of the industry and, as basic research often does, give rise to new businesses.
The irony is that China could be one of the biggest customers. As it churns out more electric vehicles, wind turbines and other high-tech products, China’s demand for rare earths is set to grow dramatically; it’s expected to become a net importer by the middle of the decade. As the Biden administration addresses today’s vulnerabilities, it shouldn’t lose sight of tomorrow’s opportunities.
To contact the senior editor responsible for Bloomberg Opinion’s editorials: David Shipley at davidshipley@bloomberg.net .
The world’s lithium is either mined in Australia or from salt flats in the Andean regions of Argentina, Bolivia and Chile, operations that use large amounts of groundwater to pump out the brines, drawing down the water available to Indigenous farmers and herders. The water required for producing batteries has meant that manufacturing electric vehicles is about 50 percent more water intensive than traditional internal combustion engines. Deposits of rare earths, concentrated in China, often contain radioactive substances that can emit radioactive water and dust.
Salton Sea is key to CA's EV future, contains 1/3 of global lithium supply
A former resort town that is now an environmental blight, the Salton Sea could soon be reborn as a major source of lithium for electric vehicles. That’s what California has in mind for the shallow, landlocked lake in Imperial County.
“Right here in Southern California, we have the enormous opportunity to be a competitive player in the world lithium market,” California Assemblymember Eduardo Garcia said Wednesday, during the state legislature’s first select committee hearing on cultivating a local lithium economy.
What You Need To Know
The Salton Sea contains one of the world's largest supplies of lithium
The lithium is generated during geothermal energy production
The California Energy Commission says lithium is "the oil of the clean energy future"
The first commercial lithium recovery facility in the Salton Sea could start construction in 2024
The Salton Sea has the potential to meet 40% of global lithium demand, said Garcia, who authored AB 1657, the bill that established the Lithium Valley Commission within the California Energy Commission to explore strategies to develop the industry.
Lithium is a key component of the lithium-ion batteries that power electric vehicles — “the oil of the clean energy future,” as California Energy Commission Chairman David Hochschild said during the hearing.
Comprised of Salton Sea representatives, environmental groups, tribal nation spokespeople and state officials, the 14-member Lithium Valley Commission will issue a report on the viability of California lithium next year.
Ninety-five percent of the world’s lithium currently comes from Chile, Argentina, Australia and China, using environmentally destructive practices such as open pit mining and evaporation ponds.
“We’re very mindful going into this that extractive industries have had a very damaging impact on many communities around the world,” Hochschild said. “We can do it much better and differently in part because of the nature of this resource, which will allow for the greenest way to recover lithium that exists in the world.”
Known as Lithium Valley, the lithium in the Salton Sea is produced through a process called direct extraction and is integrated into the geothermal energy generation process, which uses steam from hot water reservoirs below the Earth’s surface to produce electricity. Part of a geothermal brine containing multiple types of minerals, the lithium is recovered using a closed-loop system powered with the renewable energy that geothermal generates.
Lithium extracted from geothermal brine generates 4% of the greenhouse gas emissions compared with lithium produced by Chinese pit mines, according to Controlled Thermal Resources, one of three companies currently developing geothermal lithium extraction technology in the Salton Sea area.
“The vision with Lithium Valley is to complete that full lithium ecosystem — to produce lithium at scale in an environmentally sensitive way, support electric vehicles and also energy storage,” Hochschild said.
California is the national leader in electric vehicle adoption, as well as production. More than 860,000 EVs have been sold in the state since they first came on the market a decade ago. They currently account for about half of all EV purchases in the U.S. — a number that is expected to grow exponentially following Gov. Gavin Newsom’s executive order last September mandating that 100% of new passenger vehicle sales in the state be zero emissions.
Thirty-four EV manufacturers also call the state home, including the Tesla factory in Fremont and the bus makers BYD and Proterra in SoCal. Last year, electric vehicles became the state’s No. 1 export.
In addition to powering vehicles, lithium batteries are also used to store the energy produced from renewable energy sources such as wind and solar. Hochschild said California will be increasing energy storage tenfold this year as it seeks to convert the state to 100% renewable energy by 2045.
In addition to its potential as a major source of lithium, the Salton Sea plays a key role in the state’s renewable energy goals. It is the site of 11 geothermal energy plants.
“It’s inevitable that we will depend on geothermal to get to 100% renewables by 2045,” said California Public Utilities Commissioner Martha Guzman Aceves, who is a member of the Lithium Valley Commission.
The state is eyeing geothermal as an equivalent, round-the-clock, energy-generating replacement for Diablo Canyon — the state’s last remaining nuclear plant that is scheduled to be retired in 2025. It is, however, more expensive. Generating income from geothermally-derived lithium could help bring down the cost.
“Building the lithium supply chain presents an imperative and an opportunity,” said Kaina Pereira, senior advisor on business development in the Governor’s Office of Business and Economic Development. “We must extrude and extract a lot of lithium. There is a current global contest on this emerging resource.”
With many car companies announcing plans to entirely phase out cars that run on gasoline by 2035, the rush is on for the lithium that will be necessary to make the batteries that will replace the fossil fuels used by internal combustion engines.
There could be a lithium supply crunch by 2023, according to Benchmark Mineral Intelligence, as the world rushes to adopt electric vehicles. More than 2 million tons of lithium will be needed every year to meet demand.
Lithium derived from the Salton Sea would not only help meet that demand but offer other key benefits, including reduced emissions from transporting materials.
Producing lithium locally eliminates the transportation constraints of mining lithium in foreign countries and shipping it to battery makers in Asia who then ship the batteries to EV makers in California. Producing and sourcing lithium close to where it will ultimately be used helps reduce the environmental footprint of its production.
“It’s not just about producing bags of environmentally friendly lithium,” said Controlled Thermal Resources CEO Rod Colwell. “It’s producing a whole sector of the environmentally friendly supply chain and removing 20 links from that supply chain.”
Co-locating the lithium supply with battery and EV manufacturing in a single area is a great opportunity, he said.
There are multiple benefits to the Salton Sea community as well: Reduced air pollution, better health and high-wage jobs.
Controlled Thermal Resources’ Hell’s Kitchen Lithium and Power Project in the Salton Sea area is capable of generating 1,100 megawatts of clean energy that could power as many as a million homes. It would also create 1,980 project jobs, 2,500 ancillary jobs and contribute $350+ million to the economy, according to the Imperial Valley Economic Development Corporation.
“We’re a community that has for decades been faced with unemployment levels comparable to an economic depression and battled decades-long environmental issues on both sides of our large county,” said Imperial County CEO Tony Rouhotas, Jr. “The southern end of the county is home to some of the most polluted rivers in North America, while on the northern end, the sea is evaporating, creating a fine dust that finds its way into the lungs of children and families living nearby.”
Lithium, Rouhotas said, is an opportunity to simultaneously improve public health and the area’s economic fortunes.
Berkshire Hathaway Energy, which operates 10 geothermal plants adjacent to the Salton Sea, is capable of producing 90,000 of the 300,000 tons of lithium produced each year globally, according to Jonathan Weisgall, the company’s vice president of government relations. The area has at least a 75-year supply of lithium, he said.
Berkshire Hathaway Energy recently received a $6 million grant from the California Energy Commission and $15 million from the U.S. Department of Energy to determine the technical and commercial feasibility of recovering lithium from the 50,000 gallons of geothermal brine it generates every minute while producing geothermal energy.
Its first demonstration plant could be running by January 2022 and its first commercial operation could begin construction in 2024.
“There’s a race right now for lithium,” Weisgall said. “If we can recover it, we could easily supply at least a quarter of the world’s demand.”
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