Journalist Markham Hislop interviews leading energy experts from around the world about the energy transition and climate change.
Welcome to episode 337 of the Energy Talks podcast. I'm energy journalist, Markham Hislop. In my energy transition presentation is a section on 3 scenarios about the pace of change in the global energy system. OPEC represents the slow transition narrative. The International Energy Agency illustrates the fast transition narrative, and the very fast scenario is based upon the work of Kingsmill Bond and his team at RMI, the Rocky Mountain Institute.
Markham:Today, I'll be talking to Dan Walther about the new RMI report, the battery mineral loop, which describes a new strategy to address the rising demand for battery mineral minerals. So welcome to the interview, Dan.
Daan:Thank you. Thanks for having me, Markham.
Markham:I'm I'm really excited about this because, the you know, I've been been interviewing Kingsmill for a long time back when he was at Carbon Tracker, and he's always been of the the very fast transition, argument. And I think that there is a very good case to be made that we're seeing that vision, that scenario playing out. The the, the transition's clearly, accelerated over the last 2 or 3 years for a whole variety of reasons. And because of your group's emphasis on s curves, and we'll maybe get into that in just a minute before we start talking about batteries, That tells us that once those technologies are past the inflection point, then they are on the hockey stick growth part of the curve, which means major disruption, major change, very large, very significant adoption, that sort of thing. And have I kind of summarized the position of, you know, you know, your team, accurately?
Daan:No. Entirely. I mean, it's it's in some way, we look at our work as kind of writing history in real time, looking at the trends that are happening today, comparing them to historical examples, and seeing how those played out and and what those larger, trends are in the system. So, yeah, very much so. I mean, it's, as we put it, there is no such thing as business as usual.
Daan:There's only s curve as usual.
Markham:I'm stealing that line, by the way. That's that's very good. I like that because I use the s curve a lot in my, in my journalism. Well, look. Let's talk about batteries because I have done a lot of interviews about batteries over the last 4 or 5 years.
Markham:And one of the things that strikes me most about this particular industry is the incredible, and I mean incredible innovation, in this, amongst the researchers, the scientists who work at often work at universities, amongst the startups, and the extent to which China, has not only dominated the, global manufacturer of batteries, I mean, they are, you know, they're CATL and BYD alone are over 50% of global, global production, and then there are other Chinese companies. But so what are we to how does that affect your view of where we're going with batteries over the next 5 or 10 years?
Daan:So batteries, I think, are really at a at a big inflection point at the moment. That's mainly driven due to passenger car. So batteries for the past, like, 100 years have basically been a little bit of a forgotten technology. I mean, I'm in New York City myself. We had a first sir a a a a first drive of electric vehicles lost in favor of, of diesel and gasoline because it wasn't energy dense enough to actually put batteries into cars.
Daan:And it was only in the eighties nineties by driven by consumer electronics that people started innovating on batteries and actually finding out that there's a huge solution space there to actually discover different chemical configurations to create new batteries. And I think that has really driven this this consumer electronics demand that's really driven innovation in batteries. And that has, I think, 2015, 2014, that's really when we see this hitting into the, into the EV sector. I mean, before that, we had our 1st generation of EVs. But 2014, 2015, we see it really taking up.
Daan:And that's just such huge block of demand that is being unlocked. And, really, across the world right now, we see that in most places across the world, the sticker price, like the purchase price of an EV is going to drop below that of an internal combustion engine car. That's going to drive an enormous amount of demand that's gonna be unlocked. And as we know, I mean, these price the prices of batteries fall in Reiner's, Wright's law. So for every doubling of battery capacity, we see that batteries fall in price by somewhere between I guess it's somewhere between 20, 25 percent, in terms of cost.
Daan:So it's a very rapid cost curve, decline. So and as this huge block of demand unlocks, batteries will come cheaper and cheaper. And it doesn't stop with cars. I mean, we already see vans picking up. There's some good news that we recently saw saw with heavy duty trucking both in China and Germany.
Daan:I've seen some numbers that it's really picking up. And who's to say where it goes next? I mean, people being long, struggling with how we decarbonize aviation and shipping, and we might very well see a large role for batteries in those sectors as well.
Markham:Let's talk about road transport for a moment because I I have a little hypothesis, and I wanna run this past you. So you talked about the energy density of gasoline and diesel, and those are essentially fixed. They can't they can't be altered. And the internal combustion engine, the theoretical efficiency is somewhere around 20 to 30% for for gasoline, and you can get, I think, diesel maybe up to 45% efficiency. So the combination of low efficiency, of the of the engine and high energy density of the fuel, made modern transportation, economic, and it's been getting better.
Markham:Oddly enough, the efficiency of the internal combustion engine has not improved significantly over the last 125 years. So there are the the chances of significant innovation there are very slim. Now on the other side, you have electric motors, which are very efficient, generally in the 85 to 90% range. I know Chevy used to claim that at peak efficiency was in the Bolt, EV, it was 97%. So, I mean, there were somewhere if we said somewhere around 90 to 95%, we would be pretty accurate, I think.
Markham:But there you the the balance on the other side is, low energy density of batteries as you as you pointed out, but energy density is rising at at least 7% a year, at least, and has now got to the point where the combination of the higher energy density batteries combined with the electric motor are more economic than the internal combustion combined with the high energy density of the of the fuel of gasoline and diesel. But there's only one variable of those 4 that can change, and that's batteries. And the I think that what we're seeing is just the tip of the spear in terms of innovation. I mean, I was reading every day, My inbox is full of emails about this battery company coming out with a 1,000,000 mile battery. It's gonna last a a 1000000 miles, and this one's coming out with a a range of a 1000 kilometers, and then next year, it'll be 1500 kilometers and solid state.
Markham:I mean, it's insane how fast this industry is changing. So if batteries and electric motors are now more, they are lower cost per unit of work done than an internal combustion engine, and that's only going to improve. The s curve tells us that they are going to push the internal combustion out of engine out of the marketplace very rapidly over the next 10 years.
Daan:I full I fully agree. 1 of the I've for nice ways to conceptualize just just how interesting the battery space is compared to hydrocarbons is that you just look at the periodic table, and it's it's hydrocarbon. So it's it's carbon carbon atoms connected with hydrogen atoms. That's basically your innovation space. And then you start looking at batteries and you have lithium.
Daan:You have nickel. You have cobalt. You have all these other elements in the pure periodic table with all of these different chemical properties that you can start playing around with. And I I always find that a very helpful way to understand just why it's so much bigger, the battery space, in terms of innovation potential and number of permutations that you can try to to to innovate and so much bigger than indeed as you point out the internal combustion engine, which has basically been a stagnant technology for for decades, if not if not a century already. Change is happening incredibly fast in in this space, and I think we're only gonna see an acceleration.
Daan:The s curve is going fast. And let's not forget one thing. It's s curve as usual. On top of that, of course, it's a technology transition with a deadline that we're on. And people realize that there is this deadline.
Daan:And I think there is there is a part of the story or today we're talking about the steep part of the s curve uptake. There's, of course, in the s curve also that part when it starts to flatten off, that's typically towards, you know, the end of the uptake, something that a discussion that you and I might have in a decade from now of, like, is this going to flatten off the EV sales, s curve? And I think they're actually there's an interesting, effect there that we might see is that, actually, once the majority of people buy EVs, it won't be that controversial to put an ice band in place. And so we'll actually see many more of these bands. And because we're on a deadline, we might actually see the s curve being much closer to an exponential curve that very rapidly goes to a 100% rather than that the system will allow the last sort of stragglers in the system, the late movers to, you know, decide for another decade or so they still wanna buy diesel cars.
Daan:That becomes politically much easier to do, of course, in the decade or 2 from now than it is today. But I think this is one of the things that we might see is that it might even go much faster, especially on the tail end of the transition. We'd act might actually be underestimating how easy it becomes to push out fossils out once the majority of it is already out of your system.
Markham:I I have a bit of a controversial view in that, and I mean by that climate activists often beat me up over this. I argue that in fact, now that these technologies, have reached the their inflection point and are on the growth part of the curve, climate policy, this is now not about climate change. It's about how quickly the energy transition progresses, and climate policy is really determinant of pace. All the technologies that we really need, we have them here. We're scaling them up.
Markham:We're deploying them at different rates, of course, or, you know, different parts around the world. But now it's just how fast will we do it? Will it be slow? Will it be fast? Will it be very fast?
Markham:And, that then plays into your report about the mineral loop because the there's been a a fair amount of suggestion, particularly in some of the in news media, that what will happen, is we'll run into critical mineral shortages, and that will inhibit our deployment of batteries, and it will drive up the cost of batteries, And your report, in fact, argues that that's not going to be the case. Maybe just give us an overview of the argument.
Daan:So at the core of the of our argument lies the argument that battery minerals are not the new oil. That's the main conception that we have in society. We think we have a single use commodity economy. So if a technology consumes a certain fewer commodity, it must be going through this linear loop where more of that technology means we need to mine more and therefore, the entire sector needs to expand across the whole value chain. Now that's very that's not true.
Daan:Oil, you buy once, you burn once, and then you lose it. Minerals, you can recycle and reuse. Technologies, you can extend the lifetime. I mean, you can burn a barrel of oil, but you can hardly extend that burn. But you can use minerals in a battery and let that battery live for longer and actually get much more use out of it.
Daan:So that makes battery minerals inherently different than oil, and that makes that offers the opportunity to us to actually set up a completely different economic system on how we power our transport system. And we're seeing this happening already today. Were it not for the powers of recycling and efficiency gains and chemistry changes, our demand for nickel and cobalt will be more than twice as much today as it is now. And these are just, like, just the improvements that happened over a couple of years, really half demands for Cabalt and Nickel today compared to what it would have been. And for lithium, you see comparable figures lithium demand at least being 50, 60% higher, today it would have been today than without those those measures implemented.
Daan:And so going forward, if we just follow that line, if we just say, if we continue to implement these these measures that we're already seeing happening today, you actually get to peak mineral demand, peak mined mineral demand in a decade from now. At that point, the recycle the recycled batteries that are coming vehicles. And so you get a peak in demand and after that peak, a rapid decline. And if we do our jobs well and we really push towards, battery circularity, you can even reach net zero mineral demand by 2050.
Markham:It's fascinating to me, because I've been watching the the battery space for a while now, that as there was concern about, shortages of nickel, manganese, manganese, and and cobalt, engineers began to engineer them out of the batteries. And then you had lithium iron phosphate, and now you've got sodium, ion, is very promising. You get zinc ion for, for stationary storage. You've got all kinds of different, chemistries, and it appears that the the battery market will eventually fracture. You'll have very specific chemistries for very specific applications, and depending on cost and and weight and and what have you, the energy density required, I guess.
Markham:So, it seems to me that the, this idea that lithium NMC batteries are going to be the you know, that is the battery space going forward is just not the case, And that has big implications for how what volume of minerals we need and what volume of minerals we'll be able to recycle for future
Daan:batteries. Entirely right. And it's a fraction of what we need in oil today. It's a 125,000,000 tons of minerals that we need to reach sort of this self sufficiency where the recycling loop can can can power itself. 125,000,000 tons, that is about 17 times less, than the amount of oil that we extract from the earth every year to power the transport system.
Daan:It's 125,000,000 tons one off. It's also cheaper. It's about 20 times cheaper to actually get the minerals out of the ground than it is to pump up oil. Again, a huge difference in both cost and weight, and in general, in complexity of of setting up the system. It's it's one of those things where I think it's quite interesting that we're currently in a in a in an energy transition debate whether minerals, like, how much they might slow down electric fuels and how much of a Achilles' heel it is.
Daan:But the more you actually look into this topic, the more you start realizing it's not the Achilles' heel. It's actually the biggest benefit of batteries. It is the biggest boom of batteries that they are made out of these minerals that you can recycle. And one may say even in some way, the fact that over the past years years to come, there are, selective scarcities appearing might actually also drive innovation. If it were not for the concerns around cobalt in, the mines in Africa, and there were not concerns around nickel and lithium shortages, would there actually be an incentive to develop cheaper sodium batteries or other chemistries?
Daan:Maybe not. And so necessity is the mother of invention, of course. And then so to some extent, these mineral shortages might also be sparking a higher level of innovation that we would actually be seeing in the battery space than if they were not there.
Markham:Now your report, proposes 6 key solutions. Maybe you could go over those for me.
Daan:Yes. So mining is not the only way that we can service, mineral our our mineral demand. There are 6 solutions that are, alternative to that. So first and foremost, we can change the battery chemistries just like switch for instance from MSE to LFP kind of, batteries. That changes the mineral demand per battery.
Daan:You can also make the batteries themselves more energy dense. So just pack more energy per kilogram in there that you just necessarily, like, immediately need less, mineral weight to build a battery. You can recycle the mineral contents, at the end of life of a battery. But way before that, you can actually make sure that you extend the lifetime better maintenance. 2nd use after the EV application of an eve of a of a battery.
Daan:Maybe you put it on the grids and have it balance the grid for a couple of years before you retire them. Doesn't stop there. There are 2 more big efficiency levers. You can improve the vehicle efficiency. Actually, rightsizing a vehicle, smaller vehicles, vehicles that have better less drag, less friction, can largely improve you than you need to pack a smaller battery per vehicle.
Daan:And so overall, you need less mineral demand. And finally, just overall mobility efficiency. It's a big topic with doubling down on energy efficiency at the moment. If your mobility sector is more efficient, as in I will, for instance, go for more buses rather than for cars in my society and have the same transport service, now I only need to buy one slightly larger battery for a bus rather than all these individual batteries for cars can also significantly reduce demand. So these 6 together are really what drives, in our report, what drives the reduction in mining demand.
Daan:Recycling, the third one is really the capstone. That's really the essential one to get right because we've been without recycling, you'll never get a loop. But the other ones are absolutely essential, and there's a huge potential in these other 5 to really significantly reduce mineral amounts.
Markham:Yeah. I I hear this all the time on social media from the the oil bros and the the opponents of electric vehicles that recycling, it doesn't make any sense. And in fact, 3, 4 years ago, I began I did a couple of interviews with Li Cycle out of Ontario, which has become one of the big North American battery recycling companies. And, they're talking about 95% recycling. They've already raised considerable.
Markham:Last time I looked, it was 615,000,000. It's probably more than that now. And, and and they're not the only one. There are are plenty of other, battery recycling companies, and some of them are complaining they can't get enough, raw material. There aren't enough batteries produced yet.
Markham:So isn't that ironic?
Daan:Very much so. Right? I mean, we're over capacity today. And if we look at the plant capacity in the pipeline mainly driven by China, but don't count out the west here either, we We just have an incredible overcapacity of battery recycling that we're building at the moment. People are anticipating this move.
Daan:They're seeing the opportunity here to actually compete with the miners or actually oftentimes, it is the miners themselves that take a stake in recycling because they wanna be hedged. So so change is happening, and it's happening really fast, almost faster than even in our fastest scenario of EV uptake. People are anticipating this move, and and there's a lot of money to be made to to get it right.
Markham:This is a related question, Dan, but it's one that I've been grappling with more and more lately because, I first ran across it with Noah Smith, the economics blogger. I was talking about it. There's an excellent, excellent blog on China that's written by a fellow named Kyle Chan. He's, dealt with it, and I've also read a number of speeches from American Biden administration officials. And to wit, that in fact, the biggest driver of, the US clean energy response to China is not economic.
Markham:It's not trade. It's not climate change and and emissions reductions. It's geopolitical posturing or positioning and national security. And, I refer often to a speech from Gina Raimondo, the secretary, of commerce, who said in a 2022 speech, she said, in with the 1st year of COVID, we woke up to just how vulnerable we were to Chinese supply chains, and there is no Chinese industry that is dominated quite like batteries. And what I find interesting, so the Americans are already I think there's, you know, like, a $100,000,000,000 that's been invested in, American battery plants just because of the inflation reduction act and more coming.
Markham:I mean, it's it's clearly the Americans wanna build their own supply chains, their own industries. But what fascinates me is that China isn't slowing down. Despite the fact that all this excess capacity that we go on and on about in the west, the Chinese talk about it. The that Jin Ji I never twist my poor little western tongue all over. Jin Jiua, news agency talks about it all the time, is they see this as they are the dominant player in this field.
Markham:It's a market issue. It's a profit issue, and the China is just gonna completely dominate the the world. And if it's not the US, it'll be the Europe and and, you know, emerging economies in Africa and Latin America. The dedication of these major players to innovation and scaling up capacity, what role does that play in your analysis?
Daan:So it's it's it's huge. Right? So China is also in the battery recycling space, but also in the scaling up of manufacturing across the value chain. China at the moment is driving the scale, and as we discussed, on the rights law, scale drives cost down. So China is is definitely leading there.
Daan:The west has woken up in some ways, we feel. It's it's been COVID. It's been Putin's base invasion of Ukraine. There are many wake up moments that have happened. There are many wake up moments that happened over the past over the past decade, I think.
Daan:The we're early on in the race. So there's there's clearly a race to the top going on at the moment. I and I agree with your observation that we get many questions on, like, how detrimental are trade tariffs and other things that you're seeing shaping in a market. And and, I mean, competition can drive innovation. Actually, it tends to drive innovation.
Daan:You don't want too much competition. Typically, you have sort of this inverted u shape where if you don't have enough competition, why innovate at all? Because you can just sit on rest on your laurels. If you have too much, you have no margins. And so there's kind of a sweet spot of competition.
Daan:And the way I look at it is that basically we've moved from a 2015, 2014 world where there was not enough competition and people weren't actually being ambitious enough and seeing this as a as a way to define your nation's export profile to a situation where we're now at sort of peak competition that is really accelerating growth and really driving fast. I guess policies like a 100% tariffs on EVs veer towards sort of the over overly competitive world. But at the moment, we're really at that sweet spot, and it's noticeable. I mean, I I share you observations early in this call of how many announcements you just see of new batteries coming out, new EV lines coming on. I think we're talking about dozens and dozens of new truck models that are coming online in China alone.
Daan:It's going very rapidly. The race isn't we're we're early in the race, though. So when we look for instance, battery recycling, there's an enormous amount of capacity that's being built up in China. But if you add all of that up and all the other plants in the world, we're only 10% into the total race. And it's it's the same way you look at battery manufacturing capacity.
Daan:We're probably somewhere around halfway into the race. And so that means we're basically in a situation where China has taken the first couple of laps in in Olympics given that's going on and I'm religiously watching swimming as a Dutchman.
Markham:We're
Daan:in the first couple of laps and China has clearly taken a couple of liters meters of lead. But, you know, this is not a 50 meter sprint. This is a 200 meter or 400 meter, race, and there's still plenty to go.
Markham:Ian, I don't know if it was in this report, Dan, but I know that I've read it in other RMI, publications, where you said exactly that, that we are in a race. China now leads, and we are predest disposition would be if we're behind, we need to run faster to catch up. And you have said, we oh, we don't need to run faster, we need to run smarter. And I would argue as an aside that there are some places, hello, Alberta, Canada, that are running dumber, not smarter, you know, doubling down on oil and gas and LNG and and hydrocarbons, basically. So how does one in the battery space run smarter?
Daan:Yes. It's a it's a huge takeaway from us for from this report. So talking about battery, there are many ways in the battery space to run smarter. But the main one here is I think in battery minerals, and we covered that in in our latest piece. China is is dominating the battery mineral sector, and it's it's dominating all the upstream parts of it, especially.
Daan:Right? So it's really minerals. China is not only in their own country, also going out there in Africa, South America, making sure that they can procure the minerals that they need to provide themselves with, the minerals that they need. They they're I mean, if you listen to, cattle, they're announcing 2042 mineral independence of China. That's why they're building up so much recycling capacity is they're doing this as a one off mining spree to pull in the minerals and then keep it in China.
Daan:Now there's a big mistake that one can make now in the battery mineral, in the in the battery space, in the battery mineral space. Look at okay. We are have this competition to build up battery supply chains. Let's look at what China is doing and do more of that. So let's also do more mining.
Daan:Let's also set up more match battery manufacturing capacity. And that is you know, it's it's this old thing of, like, in an ice in an ice an ice hockey game, you don't need to skate towards where the puck is right now, but where the puck is going. And I think that is the big mistake that, we risk making in the west at the moment is that we're looking where China is right now. We say, let's outdo them in their own in their own game and build up manufacturing capacity and, you know, protectionist policy so we can set it up domestically. But actually, what is a much smarter policy is actually say, let's aim towards where this is going.
Daan:The future of battery minerals is not in the ground. It is on parking lots. Right? It's it's we'll mine the parking lots of America to actually get our our minerals out, and that's that's the value chain we should be setting up right now and aiming for. And I think that's that is a huge component of how the west can take a shortcut and should take a shortcuts towards not just an EV system, but a mineral independent EV system, is not just replicate what China has done, but think about what the next step is and compete and win all that.
Daan:And there's I mean, there's a lot of innovation coming out of Europe and the US on battery recycling. There's a lot of good regulation like the EU battery pass and other pieces in the in the US that are pushing the EV, recycling revolution. But I mean, we still, time and again, still see too much of an attitude I would say of the old commodity attitude. Their commodities are there as a single use thing, and there's needs to be a continuous stream, that he needs to be real that he needs to rely on whilst that is not necessarily the case in in in our circular future.
Markham:I I had, Arvind Ganeshyan, I think is was if I I'm probably mispronouncing his last name, but he's the CEO of 4th Power, an American, startup. And, their that company has developed a means by which they can store heat, generated from, from, renewables and then release it as light or capture the light from the, from this stored heat and generate electricity and do it very, very cost effectively so they can essentially have, like, 100 hour battery storage, and and that's going up. So I asked Arvind. I I we had this conversation about the the American innovation ecosystem versus China, and and could America leverage its, innovation? Because it's I think it's readily acknowledged that it's a world leader in this in this generally, in technologic basic science research and technology, and the commercialization of that technology once it's ready to leave the lab.
Markham:Could that be leveraged? And he said yes. And, of course, he would say that because, you know, that is essentially the model that his company has followed. And and but, I mean, this is a guy this is a guy that worked at Apple. He looked after you know, he was head of Apple's, oh, I forget one one of its divisions.
Markham:He worked in the Biden administration. You know, I mean, so the guy's got some chops. And and I'm curious what your take on it is. Does that give the United States an an opportunity to essentially go to where the you know, skate to and by the way, as a Canadian, I really appreciate that metaphor. So you just, you know, keep them coming.
Markham:And skate to where the puck is going in a way that China can't.
Daan:It's an inter I it's an interesting point, and I think it's it's something that China in some ways realized already a decade ago that they would bottom out if they wouldn't invest in fundamental science. And we are seeing at the moment. I mean, if you look at the number of energy, like, energy technology patents across the world, China I mean, 5, 6 years ago, they were still kind of insignificant or much smaller. Today, they lead. Right?
Daan:Most energy patents come from China. Most PhD thesis, like most quoted papers. The economists rate lately had a a good piece on this on, the actual basic research in China really picking up and going incredibly fast. So it is to some extent China has mitigated, has closed the gap to a large extent. It is it is very much, 15 years too late for us to think that America is still lee at the leading edge on all of these technologies.
Daan:So I think there is there's still a risk, a risk there. I mean, it does remain that America's free market is much more free and allows for much more much more diversity of new technologies to be deployed. So as a testing lab for new technologies, and we see this also with Chinese companies, they they like they like hearing from American testing sites, and they like hearing from what's happening in the west because it's just a little bit more free and open. And so once the west starts taking this seriously at a policy level, as seriously as China has taken over the past decade, investing in basic research even more than we're doing now, investing in a rollout even more than we're doing now, debottlenecking even more than we do now. I mean, there is no way that the west could stay behind on China, and I think there are very strong arguments to be made that they can accelerate faster than China, especially because China already the hardest bit, which is get the cost down to the levels where we are and the technology improves.
Markham:I have a a keen interest in clean energy industrial policy, and I've interviewed a number of experts on this, like doctor Bentley Allen from Johns Hopkins. And, for a long time, the US, like, in the in from aft after the second World War up until about 1980 when, you know, with the election of Reagan and the triumph of the Milton Friedman School, you know, of of, minimal government, interference in in the economy and marketplaces. Between in the in that period, the US, had very strong industrial policy, And the government played a a big role directing and financing and funding and and, supporting, you know, technology development and and the app the basic research that went into it. We're seeing that we're seeing a return to that under the Biden administration, and I guess it's an open question as to whether it will continue if Trump wins. That's a bit open to the debate, so we'll see how that plays out.
Markham:But globally, I think we can say that there is a return to industrial policy, and China leads, in this. The Americans are catching up. The Europeans are catching up, and they'll they'll figure they used to know how to do they'll figure out how to do it again, And up in Canada, we're we're kind of, you know, no. We're we think we know how to do it. We don't know how to do it.
Markham:But that's grist for another conversation. So given what the, United States in particular, but even Europe can bring to the table around industrial policy, might that give the west another competitive advantage?
Daan:For sure. Definitely. And especially because and with the rise of industrial policy making, we also see a rise of more systemic thinking in general in in in energy policy making. I mean, again, participation of Ukraine opened up the eyes to people that it's not about sort of cost projections under BAU. What what you need to care about is how vol this fuel and when it peaks, how bad is it for your for your society?
Daan:How much at risk are you? And so how much more are you willing to pay to not be dependent on a highly volatile fuel? Turns out quite a lot now in Europe. And so we also see this awareness of that. We should be talking about these things as sort of externalities and tail end risk.
Daan:They should be integrated in the way that we take decisions. Battery minerals here are a good example again. Right? So when you actually look at recycling today versus mining, mining is much cheaper, or much cheaper. It it it can be highly competitive against recycling.
Daan:The newest recycling technologies can compete, but it's still a tricky business case to make if and only if you just look at acquiring minerals in isolation. Once you zoom out, you actually look at the systemic benefits that you can get out of a circular, more efficient, battery system. You actually see that these benefits are compounding on top of each other. You don't have the 5 or 6,000,000 deaths per year in air pollution. Most of that comes from from transport.
Daan:You don't get, these heavier vehicles, being harder to transport. More energy demands, more energy requirements, just generally more exposed. It's more expensive to run a diesel and gasoline car than it is to run an EV car. So, generally, there are these compounding benefits. And once you actually, as a policy maker, start those taking those benefits into account, it becomes quite clear that whilst the financial sort of what we define in the west currently is just the simple financial business case of these two options to each other, mining might win.
Daan:Once you start taking the broader scope into account, you actually see that from a society point of view, economic growth can be much faster. Welfare can grow much faster as well if you pick for the the the the loop option, the circularity option, versus, keeping our current system. And I think people are slowly waking up to that, and I think that's quite exciting because it's it's really what's in the at the core climate change is all about. Obviously, it's about realizing we can't emit too much CO 2, but but it's not as technocratic as that. It's realizing that all these things we've been labeling labeling as externalities to our economic system our internalities.
Daan:They're interlinked within our system, and we need to take them into account when we make policy. We can't just look at things in isolation. Everything needs to be seen as a part of the system. And I think that's quite exciting, and that's, I think, where we see a lot of policy coming from, both from China and the west is realizing all of these additional benefits that you can get from it.
Markham:I think that's one of the areas where Canada is going to lag. It certainly lags now with its industrial policy. The crit the critical mineral strategy that we have here is an example of that. So for instance, you know, the Biden administration started talking to the Canadian government a couple of years ago about critical minerals because we have a lot of it. We're a mining, country.
Markham:And, but that's only mining getting something out of the ground and getting it into, getting it off to be processed is just a very small part of the operation. And one of the things that China has taught us is that you still have to refine it and smelt it and process it in order to make battery metals out of it, And then the battery metals have to be made into battery cells, and then the battery cells have to be assembled into batteries. And so there's a lot of steps in that, which are currently dominated, by the Chinese, China supply chains, that could be moved into North America. And if I was the Canadian government, I'd be, yeah, I'd be organizing my miners to to start doing this right away, but then I'd be looking around and saying, okay now, which one of you clowns can can, process, lithium? Which one of you can turn nickel from man Northern Manitoba into, battery, grade, metals?
Markham:Which one of you can do? Let's get that investment going so that we get capture as much of the supply chain as we possibly can. It's it's it's getting back to this, what you said earlier about systemic thinking. And we are so far behind that, and I see that in our in the way we think about energy, and the way we think about minerals, the way we think about this technology, we're we're, like, a decade behind. We were like where the Americans were 10 years ago and where the Chinese were 20 to 30 years ago, and we're not alone in the world.
Markham:You can see those countries that have made the intellectual shift, the cultural shift, gives them an enormous advantage that it's hard to put your finger on, but when you know what you're looking for, you can see which ones countries have it and which ones don't. I think the US has it. I think the US what did Winston Churchill say about the Americans? They always do the wrong thing until, you know, finally, they're forced at the very end to do the right thing. Well, they now they're doing the right thing.
Markham:They finally figured it out. Kudos to the to the yanks. The Canadians are we're a bunch of stumble bums, and we're, you know, bumping around in the dark room smack you know, banging our heads against the the walls. But where are the Europeans on this? Have have they figured it out?
Daan:I think I think they're further ahead than the US at the moment. And even when we talk about regulation and policy, I mean, again, like, things like the u EU battery pass and, just the incentivization to recycle and think cleverly about the systemic benefits, I think that's a step ahead. I think the tricky thing is that at least what I'm seeing happening a lot in Europe compared to the US is that Europe believes that regulation will show us the way to Nirvana. Right? So it's it's everything is regulation based, which makes sure that the batteries that are getting built and the things that are being built out are probably best in class across the board.
Daan:And we see it also a lot with Chinese manufacturers. They're fascinated by still European manufacturing and manufacturing techniques and how they set up value chains and because it's a very holistic and good approach. But, of course, as always, regulation also stifles, and it can also make things harder for people. This is where the US, of course, excels is that I mean, there's a very low barrier, to entry for new players in in the US system, because the the regulatory burden is just much less. As an example, from a different sector, hydrogen in Europe and the US.
Daan:I think both the European and US policies on boosting green hydrogen are equally ambitious. But the US just says $3 per kilogram. We'll give it to you. Just just apply for this one, and we'll make sure you get it. In the EU, I think there's about probably 4 or 500 pages of regulation that you need to read through to fully find out exactly in your spot in Europe what you will get.
Daan:Bottom line, if you do the calculations, probably very close to $3 per kilogram as well. But the funny thing is is that in the US, it's it's much simpler. And I think this is where when we look at, for instance, battery minerals at at the moment, this is both the the advantage and the detriment of the EU at the moment. They're smarter in making targeted policies that are probably the smartest ones out there. Might they be sometimes too smart and therefore inhibiting the market?
Daan:I'm honestly not enough of an expert to make that judgment, but I've seen it in many sectors, in in the energy transition happen before.
Markham:That that's really funny because I I think of hydrogen in Canada. What what Canada would do, Canada would put a strategy in place, and and it would get some of the the players to the table, and then it would put together its programs, and and it would say, okay. Here's a fund, $5,000,000,000, $10,000,000,000, whatever it is. We'll just sit let the fund will just sit here until somebody comes forward and applies for that for that money. And we we hope that we've done enough organizing work that somebody will.
Markham:And and then when some that somebody comes along, we'll put them through the ringer and make them, you know, jump through a lot of hoops and and it's not even regulation. It it's just, you know, bureaucratic necessity to get gain access to the funds. Then I looked down south of the border, and when the, Department of Energy brought in its hydrogen strategy 2, 3 years ago, it was like there was this explosion of activity because everybody and his dog was creating a a hydrogen hub. Houston has a hydrogen hub, and they got a and they got a whole pile of unrelated actors. Like, I interviewed 1 of the fellows from it, and he and and he was, he was from the oil and gas industry.
Markham:He was a retired executive, and there were other members of the hydrogen hub that included universities and and but ones you'd never expect, ones that have to do with diversity, or handicap people or whatever it might be, and these were members of the hydrogen number. It was it was meant to be inclusive, and it is the the the, the word I'm looking for here, the dynamism the dynamism of that approach compared to this stifling approach we take in Canada, where, was just stark. And I think I understand what you're talking about in Europe, which is a little different in Canada. It's not the the same approach. But, boy, when the Americans decide to to do something, they light a fire under under their industries, and they unleashed something that very few, comp countries have.
Markham:Though I will say I will say if there's another country that can unleash that kind of dynamism, it's China.
Daan:Exactly. And I think that's what we've seen over the past 5, 6 years is we've all in Europe, at least, talking we here as a Dutchman again, we've all been looking west for the transition, but it came from the east. And I think this is this is still catching people a little bit by surprise, and you see it with, you know, very knee jerk, emotions like tariffs on EVs and things like that. But China has unlocked dynamism, but in a different way. Right?
Daan:Not this dynamism of, capitalist driven a million ideas. Only a few can make that $1,000,000,000 off it, but much more in a planned and organized way where China has just I mean, already a couple of years ago said their 3 biggest export products are going to be solar panels, EVs, and batteries. And that was just the plan, and we're gonna tender it out. I mean, there's a good reason why recycling capacity for battery minerals are now ramping up more than a decade earlier than the demand is actually coming in. That's just the Chinese government saying we need to be ready and we need to be the first.
Daan:And we'll pay any overcapacity in the meantime. We'll we'll be happy to subsidize. I mean, this is my interpretation. Right? I don't have any evidence for this, but it's my interpretation.
Daan:We'll pay for all the overcapacity that you can't use because it's for us strategically as a nation important to to have this. And that's it's a different mindset than in the US, which is very often does not come from this idea of, like, it's systematically better, and therefore, we might fund this current inefficiency. But it is, very successful, and I think that's really the story. I think if I would summarize over the past 5 years, the energy transition is a new mindset, the Chinese mindset of of building out new technologies, and it's incredibly successful.
Markham:It is. And we're I we'll wrap up the interview with maybe a discussion of an important point, that comes out of the EV tariffs that the, the Biden administration applied. That's a 100% on Chinese EVs that that are imported into the US market. And then, of course, the EU had an investigation, and it brought in some of, tariffs, which are different for different manufacturers. I think they're around 25 to 37%, something like that.
Markham:So less than, they don't wanna poke the bear too hard with their stick. But here's the, here's the thing. I I think that the real prize here that that China is has its eye on and has had it for a long time is not the EU, it's not North America, it's the emerging economies. I think they you know, they'll take whatever they can get in the US, And if it's nothing, well, then it's nothing. But and they'll take what they can get in the EU.
Markham:But it's really Latin America and Africa and Asia and Central Asia. You know, it's it's those markets that they really covet because once they build the infrastructure through their belt and road initiative, once they have the the plants built, the ED plants, battery plants, once they have them in their orbit, it's very hard for, their competitors to pry them out of that orbit. And and I think I think in a way I made the argument that the Americans basically got snookered, You know? That they were they kinda took their eye off the ball because they're preoccupied with these, you know, their national security and their their military concerns. And meanwhile, China says, okay.
Markham:That's fine. We'll we'll we'll find another place for all that excess capacity, battery manufacturing capacity, and EV manufacturing capacity, and it won't be in your backyard. It'll be over here. And I don't know. What do you think of that?
Daan:No. I, we we see we see, we see very much the same. I think it's one of the interesting things where, again, where competition has helped over the past 5 years because the additional mega factories I mean, after the IRA was passed, repower. You, we saw a few dozen battery, factories being announced, mega factories or batteries in the Europe in Europe and the US. But at the same time, none of the manufacturing capacity that was planned in the US getting canceled.
Daan:There was no move towards Europe. There was just it was just additionality. There's going to be more overcapacity in the in the Chinese system, and that means that prices are going to fall. It's great for consumers, and it is especially great for the global south where we now currently see a lot of these materials ending up. For instance, a colleague of ours who lives on a on a Caribbean island, could now take his whole entire house off the grid.
Daan:It was solar panels and batteries to basically be able to get rid of his actual grid connection. And it cost him, like, 3 2, $3,000 for his entire home. Now once you start levelizing that money over the actual grid fees that he was paying and it's a Caribbean island with some storms, so as you have it sometimes a bit tricky and the grid can be kind of expensive in some places. It was just actually just just the grid cost that you had to pay on a monthly basis was more expensive than taking his house off the grid. And then, of course, all the energy would come on top on the other side.
Daan:And that is really where we see a a critical, I think, turnover point in the transition happening is that when disconnecting from the grid and just becoming self sufficient becomes possible, that is great for the west and for the idea that we have of becoming decentralized and democratizing energy. But for the global south, that's a much bigger boom. Because for the global south, that really means we don't need to first build a whole grid before we can benefit from transport, from electric cooking, from all of these other things. We can do this localized and in a modular way. We can do this not even neighborhood by neighborhood.
Daan:We can do this building by building, family by family. And that becomes a much easier way to actually roll out cleantech than it is to come in and say, like, listen. We're gonna build a huge refinery here. Then we need to have all of these refueling stations. And then after the refueling station, we need to have all these trucks drive the supply to them.
Daan:And so China is pushing this, but I think also global south is attracting this because they're desperately looking for energy to grow. And the value proposition of renewables is just so much better than that of fossil fuels that China doesn't even need to push that much. It just becomes inherently an economically clever decision to focus on the new rather than invest in the old.
Markham:Yeah. I think, I I argue that o, OPEC has, miss fundamentally misunderstands that process because OPEC argues that the global south, the non OECD economies, can't afford, the new energy technologies as the as China calls them, and that, therefore, they will stick with hydrocarbons. And and I I just don't see it happening. I think that the global south views the, new energy, you know, basically, the wind solar batteries, electric vehicles, vehicles, and and heat pumps as the as the bridge to wealth. This this is the way they get to have a, more of a, you know, a wealth, a higher income, lifestyle, a higher income economy.
Markham:And so which reminds me, I I I really need to get somebody from the global south on here to talk about that very thing. And I so I I think I will in the near future because this is a fascinating I think we've we've not paid enough attention to the the or maybe it's just me, but not enough attention to the potential in the global south. Well, look, Dan, this has been fascinating, and I don't think we can talk about batteries enough. You have advanced some very interesting ideas, kind of upending our view of, the role of minerals in the the battery, battery space. Thank you very much for coming on.
Daan:Thank you for having me. Thank you so much.