How the US is navigating critical mineral challenges in the global energy transition

Here are the five things we learned from Helaina Matza on the energy transition policies in the US

The first episode of the Fast Forward podcast delves into the regulatory backdrop of critical minerals crucial for the global energy transition, shedding light on the intricacies of critical minerals infrastructure and outlining the collaborative efforts driving sustainable energy initiatives.

Hosted by Andrea Hotter, the episode features Helaina Matza, special coordinator for global infrastructure and investment at the US Department of State.

The key points covered in the discussion include:

  • The legislative initiatives pushing energy transition forward in the US
  • The intricacies of managing international projects in the global economy
  • What it takes to scale operations and secure financial support
  • The complexities in the relationship with foreign entities like China
  • Factors to keep a close eye on in the short-term

Listen to the full episode and subscribe to Fastmarkets’ Fast Forward podcast on SpotifyApple PodcastsAmazon Music or other podcast providers today.

Bipartisan Infrastructure Law (BIL) and the Inflation Reduction Act (IRA) are pushing forward energy transition in the US

In recent years, the US has seen significant legislative actions like the Bipartisan Infrastructure Law (BIL) and the Inflation Reduction Act (IRA).

The IRA aims to cut emissions by 40% by 2030, but its ultimate goal is to drive economic growth, create jobs and set a global standard for decarbonization and sustainable practices. It represents a landmark in legislative history, directing over $369 billion toward sustainable job creation across the supply chain. The BIL complements this with $97 billion in clean energy incentives through loans and grants from the Department of Energy (DOE). These initiatives have already created over 210,000 jobs, demonstrating significant impacts on employment and worker rights.

There is plenty of energy in the space around the electric vehicle (EV) revolution. Despite a minor deviation in EV deployment and sales trends in the US, the growth outlook is positive and supported by initiatives such as the DOE’s grant program, tax credits and other incentives for customers and manufacturers of batteries and EVs. With 30 gigafactories in development, the US is actively pursuing sustainable mobility and technological innovation.

Understanding the intricacies of the global economy is crucial to managing international projects

The US, in partnership with the G7, is leading a shift in its foreign economic policy with the Partnership for Global Infrastructure and Investment. This initiative aims to deploy $600 billion to address infrastructure gaps in emerging economies by 2027. The investment strategy covers a range of sectors, including clean energy, agriculture, digital access, healthcare and crucial physical infrastructure like ports and rail systems. It represents a move towards sustainable development, focusing on collaborative, value-driven engagement with the global south, aiming for mutual progress without imposing heavy debts.

However, recognizing the interconnectedness of the global economy is crucial. The key focus in the US lies in bolstering the domestic economy, generating new employment opportunities and transitioning towards decarbonized job sectors. The challenge is in scaling these innovations to a broader market on an international scale. Global cooperation is essential, not only with established allies like those in the G7 but also with nations in the global south. This is especially true in critical sectors like semiconductors and critical minerals for EV and clean energy sectors.

An example of this is the Lobito Corridor project.

Scaling operations and securing financial support requires strategic efforts with willing partners

The success of entering new markets depends on two main factors: the geological presence and the willingness of local partners. The latter is influenced by aspects like having a democratically led, transparent governance structure and its readiness to improve its investment environment. Both of these are crucial for attracting foreign direct investment (FDI).

Financing projects in emerging markets requires shifting investment from developed markets, which is a step that demands patience and strategic efforts. Leveraging concessional capital and partnerships with the US, EU and private sectors, alongside de-risking initiatives, can lower capital costs and boost confidence among financial partners. This model plays a crucial role in changing perceptions and encouraging investment in these markets.

The primary challenge in our line of work lies in scaling operations to address the vast scope of needs. Despite progress, current efforts don’t cover all areas that need this support, particularly where critical minerals are lacking. A comprehensive strategy, along with willing partners, more resources, better transparency and regulatory improvements, is essential to expand economic development and prove the viability of these projects.

“I am very optimistic,” says Helaina Matza, “as you probably can hear from my enthusiasm for the work that I’m lucky enough to take part in. But the challenge is really in scale. And so, the work that we’re doing on the continent of Africa is certainly not indicative of all the need on the continent.”

“There’s many other corridors and areas that require additional investment, some that maybe are lucky enough to have critical minerals that help make that investment a bit easier, but many that do not. So, how do you scale this theory of economic development deployment in a way that we can cover more markets more broadly? I think it’s going to be a bit of a trip,” Matza says.

Diplomacy remains key despite the complexities in the relationship with China

Concerns persist over economic policy and overreliance on single-country supply chains, such as in the case of China. Matza says that efforts are underway to diversify these supply chains.

“Creating that diversity, whether it’s all at home or in other parts of the Indo-Pacific with our European partners is in interest of the global market,” says Matza. “We’re talking about some very nascent minerals and metals and then some that have been trading for a long time. So, as much as we can invest in diversity and resilience, to help support the normalization of this market to the extent we can. We think that’s our goal and objective. And that’s a big piece of how we’re approaching this issue.”

The implementation and rollout of regulations concerning foreign entities are complex, such as in the case of nickel from Indonesia, where there is a reliance on Chinese shareholders in its production process. The treasury and energy departments are working to provide guidance and clarity, though challenges and questions remain regarding definitions and practical application.

The policies aim to balance short-term constraints with long-term benefits by engaging with various stakeholders, including the automotive and battery industries and critical mineral producers, to ensure resilience and support investment, despite the inherent complications and subjective nature of what constitutes effective control.

Key things to keep a close eye on in the short term: market trends, elections and supply chain health

  • Closely monitoring market trends in essential battery raw materials such as nickel, cobalt and lithium is vital, particularly for mining and processing projects in the industry that are temporarily on hold. Market fluctuations could have significant impacts on where we go next.
  • The presidential elections in the US. If the administration changes, so could some of the narratives – but there are some reasons to be confident. There is a bipartisan agreement on the importance of strategic competition and supply chain security for the US and current efforts focus on long-term development with work expected to persist across future administrations.
  • Continuous effort and attention to supply chain health and international relations are necessary, even in times of success, to ensure ongoing progress. Global enthusiasm for local innovations is well-deserved, but partnerships and global connectivity, despite potential shifts, remain crucial.

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