Europe’s Renewable Energy and EV Future Needs Homegrown Cobalt Supply

- December 27th, 2018

Spain’s mineral-rich Iberian Peninsula may be key to Europe’s renewable energy and EV future.

Home to one of the region’s leading mining industries, Spain is well-positioned to supply energy and battery metals for Europe’s renewable energy and EV future.

Spain’s government is taking steps to decarbonize its economic future with the closing of most of the country’s major coal mines and an ambitious plan to source 100 percent of its energy needs from renewable technologies by 2050. By no means an outsider, Spain’s actions are a part of a larger movement toward a green economy sweeping across the European Union.

Europe, in many ways, is leading the world in the adoption of renewable energy, stationary battery storage and electric vehicles (EVs). The EU has decreed that 20 percent of energy should come from renewable sources by 2020 and 32 percent by 2030. Europe’s nations are supporting the establishment of large-scale domestic EV battery manufacturing capabilities to meet mandated carbon emissions cuts and transform mobility and transport for a new energy future.

This transformation will require substantial amounts of energy metals such as cobalt, which for now is mainly mined in the conflict-plagued Democratic Republic of Congo (DRC) and processed in China. According to a recent report by the European Commission’s Joint Research Centre, global cobalt demand will overtake annual production by 2025. In the face of competition from China for resources in Africa, the report’s authors suggest the EU should promote cobalt production within member states with cobalt resources, including Spain.

Spain encompasses close to 90 percent of the Iberian Peninsula, considered to be the most mineralized zone in the EU. The diversity of this geological landscape, including one of the world’s largest volcanic massive sulfide systems, has gifted the country with a wide range of important mineral resources such as cobalt, copper, zinc, iron, nickel, gold, and vanadium. Spain’s stable government, favorable tax structure and mining-friendly policies amongst other benefits are proving attractive to foreign investment and supporting a reawakening of the country’s mining sector.

Europe’s renewable energy and EV future

Spain’s transition to a more planet-friendly economy is already underway. In the first half of 2018, the country reportedly obtained 45.8 percent of its energy from renewable sources, up 8.5 percent from the same period last year. The country plans to install 3,000 MW of wind and solar power capacity annually for the next decade to help meet its goal of 100 percent renewable energy by 2050. As part of its decision to close most of its coal mines by the end of the year, the Spanish government has signed a 250 million euro agreement with trade unions to be invested in the country’s other main mining sectors over the next ten years as well as re-education to prepare coal miners for clean energy jobs.

Spain is supporting the growth of its EV industry through its Alternative Mobility Support Plan (Movalt) program. Under Movalt, Spain’s Ministry of Energy is providing 20 million euros in incentives for consumers to buy alternative fuel vehicles as well as another 15 million euros for the installation of EV charging infrastructure.

The region of Europe itself is becoming a global hotspot for the EV battery industry, with at least four battery manufacturing plants currently in production and more slated to come online in the coming years. Tesla (NASDAQ:TSLA) is in talks with the Netherlands and Germany over a possible site for its planned European Gigafactory and China’s CATL has also announced the possibility of a factory in Germany to provide batteries for BMW’s (ETR:BMW) electric models.

Furthering the shift to renewable energy, European utilities are increasingly investing in large-scale energy storage systems, says a new report by Wood Mackenzie Power & Renewables. In Spain, Siemens Gamesa recently tested a vanadium redox flow energy storage system to store energy generated from wind, solar and other renewable energy sources. “With the Redox-Flow technology commissioned at our La Plana test site, we are now active in all relevant storage technologies including Power-to-Heat and also battery storage systems,” says Antonio de la Torre, Siemens Gamesa’s chief technology officer. “Due to its scalable energy capacity the Vanadium redox battery is a highly promising option to support our advanced technology offers for isolated and grid-connected systems.”

Vanadium redox flow batteries (VRFB) can hold extensive amounts of energy, can be re-charged thousands of times without losing capacity and can allow large renewable energy projects to be integrated into electrical grids without the challenge of intermittent power. Although VRFB technology may be limited to the utility and manufacturing sectors, the massive scale of these global sectors could mean a significant increase in demand for vanadium. Roskill estimates that vanadium demand for VRFB markets could rise to 31,000 tons by 2025, up 3,100 percent from 2015 demand levels.

In recognition of their importance to making this new green economy possible, the EU recently named energy metals such as cobalt, graphite, rare earths and vanadium to its list of critical raw materials. Cobalt, primarily mined as a by-product of nickel and copper ores, is especially critical to cathode chemistry in the lithium-ion battery. EV battery manufacturers are increasingly looking for ways to secure solid supply chains outside of the DRC and closer to their own facilities to cut down on transport and logistical costs, as well as to heed to call of consumer demand for more ethically sourced materials.

Mining in Spain

Spain’s resource-rich Iberian Pyrite Belt is host to a number of metals important to a green energy future. In fact, this area is probably one of Europe’s oldest mining regions, dating back to 5,000 years. During the Industrial Revolution, Spain’s mining industry gave rise to the mining giant Rio Tinto (ASX:RIO,LSE:RIO,NYSE:RIO) and its namesake copper mine, named after the Rio Tinto river which runs red due to dissolved iron related to centuries old mining activity.

After decades of inactivity in the region, resource companies have begun to flock to the Iberian Peninsula, which still holds great potential for new discoveries. Canadian firm Atalaya Mining (TSX:AYM,LSE:ATYM) now owns the Rio Tinto copper mine which is slated to produce approximately 40,000 tonnes of copper ore for 2018. “The company’s financials are looking good as a result, with Atalaya reporting revenues of 42.8 million euros for Q3 2018 compared with 35.7 million at the same time last year — an increase of almost 20 percent,” reported Investing News Network.

As one of the EU’s main copper producers, Spain offers a favorable tax code, skilled workforce and some of the world’s best infrastructure including a top notch transportation network. The country’s federal and regional governments are highly supportive of the mining sector and open to foreign investment. The Fraser Institute 2017 Mining Survey ranked Spain as one of the top most attractive mining investment destinations in Europe, especially in terms of mining policy.

“We have found that both the Spanish and Canadian governments are working diligently together to promote Canadian investment into Spain’s somewhat untapped resource industry. An example of this collaboration is the partnerships between ICEX / Invest Spain — the government’s directorate in charge of building the economy through attractive foreign investment — and Canadian mining companies,” Patrick Morris, CEO of Primary Energy Metals (CSE:PRIM,FWB:1WZ:GR,OTCMKTS:PEMTF), told INN. Primary Energy has a portfolio of energy metals projects including two cobalt-copper-nickel-manganese projects in southern Spain and two vanadium properties in central Spain.

Looking forward

The renewable energy revolution will significantly increase the demand for energy metals such as cobalt in the European Union and globally. As the EU’s member states seek to further transition to a green energy economy, secure supplies of energy metals will be critical to this transformation. The push for developing more local supplies of these metals presents significant opportunities for resource companies and investors alike and will supply Europe’s renewable energy and EV future.

This article was written according to INN editorial standards to educate investors.

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