Dr. Luis Tercero Espinoza heads the business unit Systemic Risks at the Fraunhofer Institute for Systems and Innovation Research (ISI). An interview about the raw materials of mobility, challenges in the supply chain and the latest strategies for finding solutions.
Dr. Tercero, you are the head of the business unit "Systemic Risks". What's that about?
Our unit has evolved out of innovation research. We began by looking at infrastructures that have a relevance for the economy, such as energy and traffic networks, but also at the sourcing of raw materials for production systems. All these sectors are currently going through a period of radical change. This involves systematic risks. If we don't have enough raw materials for our industry, or t future technologies, our whole production structure is put under threat. In recent years our key preoccupation has been with various aspects of the supply and demand of raw materials.
Does this also have something to do with electric mobility?
Yes. Electric mobility is an important driver behind the major shift we are experiencing towards new requirements in terms of the raw materials of the future. It is something that we scientists have been thinking about for a long time. In 2009, we were already looking into whether there was enough lithium for electric cars.
With what outcome?
The short answer is: there is enough. However, to be more specific, it all depends very much, on how you define availability. Lithium, for example, is found both in mineral form and in salt lakes. There are various reserves of minerals containing lithium in Europe, along with considerable experience in mining it. The lithium from South America, on the other hand, is extracted primarily from brines. In terms of energy efficiency, it actually makes most sense to source the lithium there, since the sun does much of the work. Having said that, extracting it from the brine deposits requires a lot of water, and that is in an already very dry region.. The question is not just whether there is enough of it, but also where the raw material is to be found, how difficult it is to extract, and what is the impact of this process. With regard to the raw materials used for electric mobility, particularly copper, lithium, nickel and cobalt, the answer is very heterogeneous.
Can you perhaps give us an overview?
Resources of copper are widespread, with mines in many countries across all continents. The global supplier base is also good. On top of this, there is a well-developed recycling infrastructure for copper, which, incidentally, is not the case with lithium. The geographical distribution of nickel is similarly diverse. On top of this, it should be said that the global primary production of both raw materials by far exceeds what is required by the battery industry. It is a very different situation with cobalt. Not only the deposits are far scarcer; they are also much more regionally concentrated. Seven of the world's largest cobalt mines are in the Congo, and these produce about half of the world's supplies.
In other words, there aren't enough mines?
Not at the moment, no. But the planning horizons in the mining industry are extremely long, and a timeframe of 20 to 30 years is not unusual. In that same sort of time, car manufacturers have already launched various new model series and registered a corresponding requirement for raw materials.
And the way the electric car trajectory is developing, there could be a shortfall?
We cannot exclude that possibility. However, not over the long term and not because the supply is inadequate. A shortage would arise if the production capacity did not grow quickly enough or if demand rose too quickly. We can of course assume that the mining companies are extremely keen to serve growing sales markets. The question is much more about the ecological and social conditions under which our raw materials are sourced.
Is recycling a good alternative?
Recycling is a good and important additional source. Copper, cobalt and nickel are all easy enough to recover from old batteries. In the case of cobalt, we have the added advantage that our requirement for use in batteries will fall as further technological advances are made. This, however, also results in battery recycling becoming a less attractive proposition overall, since cobalt is one of the most valuable assets involved. It is more difficult to recover lithium carbonate to the required level of purity. Moreover, h the safety aspects make the recycling of traction batteries challenging, since the batteries may still be partially charged and the electrolyte is flammable.
You have already mentioned the ecological and social issues in the raw materials supply chain that are so often criticized. Where do we stand with the traceability of the basic materials?
The question of origination is, of course, a very important one. In the case of cobalt or nickel ores, it is still possible to establish where they come from based on their precise chemical composition. This is no longer possible with a refined metal, since ores from different countries of origin are mixed together in the refinery. Even the possibility of identifying forensic evidence is thus excluded. What is left is the option of following a due diligence process, as undertaken by many manufacturers. Blockchain processes, too (see info box) might provide the possibility of obtaining proof of origin for raw materials.
More transparency in the supply chain:There are varieties of ways in which companies can influence environmental and social standards along the supply chain. Daimler's procurement department, for example, arranged for the cobalt supply chain of one of its battery cell suppliers to be audited according to OECD standards by an external testing organization and is currently in the process of investigating further cobalt supply chains [see Sustainability Report 2018, p.110]. The company is also involved in a pilot project testing the use of blockchain technology. In the future, this could help Daimler to impose contractually regulated sustainability requirements along the full length of the supply chain.
A promising approach?
Anything that improves transparency is good. This is true of blockchain projects, but also of supply chain audits. A lot stands and falls on such ideas. Especially in areas where we, as consumers, are no longer able to track what raw materials are used to manufacture a product, nor under what conditions. A traffic-light system relating to the manufacturing process might well mean that one or the other purchasing decision turns out differently. The most promising approach, however, is offered by the due diligence obligations, which help companies to identify ecological and social problems along their value chains and enable them to provide support to improve conditions.
Is that your vote, then, for state regulation of the supply chain?
It is a complex subject. With any regulation, you run the danger that, in solving one problem, you open up two new ones somewhere else. Laws relating to corporate due diligence therefore need to be very carefully thought through. It would be preferable if we, as a society, could agree unanimously on the need for added transparency. And there are already examples in Europe of how such a thing can be done.
For example, the REACH regulation that allows transparency over the use of chemicals as well as the banning of dangerous substances. This is a far-reaching decision, which is not necessarily positive for everyone concerned. The same is true when it comes to sourcing raw materials. The USA followed this route with the Dodd-Frank Act with which they introduced reporting requirements for publicly listed companies with respect to the use of so-called "conflict resources". They used their power as purchasers to set standards. And all of a sudden the manufacturers had to provide proof of their due diligence investigations. In Germany, there is still no consensus on whether we want to know where things come from.
About REACH: The prevention of critical substances is a top priority in the development, manufacture, use and recycling of our vehicles. Therefore, in accordance with this requirement, Daimler AG supports in particular the objectives underlying the European Chemicals Regulation REACH (Regulation (EC) 1907/2006 - Registration, Evaluation, Authorization and Restriction of Chemicals). This regulation, which went into effect on July 1, 2007,is to ensure the protection of human health and the environment against the hazards posed by chemical substances (for more information click here).
How is it with you? Does your professional focus on rare earths and water circulation affect your everyday behavior?
Of course it does, even if the effects aren't necessarily obvious. On the one hand, like most people, I find it difficult to cope with the fact that the impact of my actions remains very vague. Whether I go to work each day by bike or drive an old car has an effect, but it's not one that I can see. With acid rain, it was different: whatever pollutants we pushed out into the atmosphere rained back down on us and we could see the trees dying. As far as CO₂ is concerned, these days, we probably really only register the fact that our summers are now longer, or that it rains less than it used to, and maybe we even find that cheering. As a scientist I know that the way all of us, together, behave can definitely have an impact. I eat much less meat than I used to, and travel mostly by train. I think we need to be clear about what we need and what we don't need, and to take action accordingly. I am also becoming aware of the fact that we seem to be focusing almost too much on CO₂. Although that is important, we are perhaps running the danger of neglecting subjects such as water and air pollution control, or biodiversity.
A personal question now, to finish on. You've lived in Nicaragua, the USA and Germany. Do you see cultural differences in attitudes towards mobility?
It's difficult to differentiate between culture and necessity. Part of the culture of mobility in Germany, for example, is that people travel by tram. The tram arrives on time and is safe. Buses and suburban trains are also safe, but that is not necessarily the case everywhere in the world. We only acquired our family car because otherwise we had to allow so much more time for certain everyday journeys, if we used public transport. It wasn't practical. Culture and necessity are mutually dependent. In the US and Nicaragua I know people who will drive a distance of just a few streets by car. That perhaps wouldn't be the case in Germany, simply because there are too few parking spaces.