The shortage of raw materials affects the renewable energy industry

Many reports indicate that the era of cheap renewable energy is over, bringing a new wave of uncertainty to global energy markets that have been hit by one supply crisis after another. The continuing decline in the production costs of wind, solar and electric vehicle batteries has been described as the main driver of their increasing penetration and thus takeover of the global electricity grid. Until two years ago, no other scenario was on the table even though inflation was as much a reality then as it is now. Only now, it has become more clearly visible. At the recent Metals and Mining Conference in Riyadh, many attendees pointed out that the mining industry is no longer desirable to lenders because it is considered harmful to the environment. But now, it has become quite clear that without the mining industry, there can be no real energy transition. Solar panels, wind turbines, power transmission lines and electric vehicles rely on minerals in varying amounts. However, these quantities are already problematic. During the pandemic, supply chain disruptions - this is apparently one of the most common phrases used during the pandemic - have caused chaos across all industries, leading to significant shortages of raw materials, especially in metals, metals and polysilicon. Usually a shortage in supply leads to higher prices, and that's exactly what happened here as well. As a result, the costs of solar panels, wind turbines and electric vehicle batteries began to rise — a development that many renewable energy experts had not anticipated. In this aspect, Bloomberg reported last month that solar panel prices have risen more than 50 percent in the past 12 months alone. The agency's report indicated that wind turbine prices rose by 13 percent and battery prices were rising for the first time ever. With supply chain delays caused by the pandemic hurting everything from cars to microchips, rising renewable energy prices come as no surprise. But the disruptions in shipping operations and the shortage of goods come at a sensitive moment, especially for wind and solar energy. After years of rapid progress in technology and manufacturing, there are now fewer opportunities to cut costs without sacrificing profits. Instead of prices falling permanently, they will ebb and flow based on raw material costs and other market forces. In addition, rising interest rates threaten to increase the costs of wind and solar projects as central banks now seek to adopt a tighter monetary policy to rein in inflation. For energy markets struggling with the push for energy transition – at a time when we are witnessing power outages and extreme price volatility – clean energy price inflation is another key challenge. Already, policymakers accused of a rapid push toward wind and solar power as electrical grids become unstable are facing pressure to ensure that the entire energy system is more reliable — for example by pairing solar with batteries, or keeping older nuclear plants running longer. Of course, all of this could be considered a temporary glitch due to supply chain disruptions, and once these matters are dealt with, prices should return to normal. But unfortunately, this argument cannot hold up because all demand forecasts for these minerals are always upward, especially the minerals that are critical, because the energy transition depends on them. In other words, the world will need huge amounts of copper, lithium, nickel, manganese and cobalt, among others, to continue the energy transition. They cannot be supplied quickly to meet the growing demand. In recent years, the problem of lending to the mining industry combined with increased supply in some sectors of the mineral market has led to a decline in investments in new mine projects. This adds to an already existing problem of low quality materials. For example, the mining industry now needs to mine more ore to find the same amount of copper than it did 20 years ago. This means that extracting a ton of copper has become more expensive even without increased demand. With rising demand expectations, the outlook for copper and other important metals is decidedly bullish. But the bullish outlook for copper means higher prices for windmills and solar farms, as well as electric vehicles. That's not all, because there is also the problem of the new display. Certainly, banks are now more interested in investing in the mining industry, i.e. those important minerals and metals. But shareholders and governments insist that these minerals and metals are mined responsibly - that is, in compliance with certain environmental, social and governance (ESG) requirements. In this regard, a recent report issued by Metal Bulletin indicates that automakers are putting their metal suppliers through an audit to ensure that they have followed responsible mining operations. Which leads to the accumulation of these additional costs as well. Also that's not all, because supplies of new minerals and minerals will be vital to the energy transition. A major feature of the mining industry is long turnaround times, which there is no way around. It takes about a decade to transform a potential mineral deposit into a working mine, even with the latest technology. In short, then, the current trend of rising prices in renewable energy may be just the beginning of a broad rally that could last for decades. Economic