In the valley next to Germany’s Black Forest lies a possible solution to one of the most perplexing problems facing Europe’s transition to sustainable transport.
About two miles underground there is enough lithium for at least 1 million electric vehicles a year, and one miner says he can tap into those reserves at about half the cost of competing sources and without dumping greenhouse gases.
Join heated discussions with the Moneyweb community and get full access to our market indicators and data tools while supporting quality journalism.
R63/month or R630/year
You can cancel anytime.
With the critical resource for battery-powered cars typically coming from far-flung regions using landscape-setting methods, Vulcan Energy Resources’ 1.7 billion ($ 2 billion) project could be key to Europe’s ambitions. to become the world’s first climate-neutral continent. .
“We will produce a product locally that is not only cheaper but also more environmentally friendly than the alternatives,” Horst Kreuter, managing director of Vulcan in Germany, said in an interview.
The company, backed by Australia’s richest woman Gina Rinehart, signed supply agreements with Renault SA, the owner of Jeep Stellantis and Korean battery maker LG Chem.
The Australian miner has now contracted most of its lithium production and plans to start deliveries in 2026 at the latest.
But there are doubts. The project is based on technology that has not been implemented on a large scale and there have been signs of local opposition about the risks that pumping lithium brine to the surface could cause tremors.
Short seller J Capital Research criticized the group for being overly optimistic. Vulcan called the October report “false and misleading” and sued the firm.
Despite the concerns, the project is moving forward as it addresses growing concerns about the environmental impact of building battery-powered cars. From lithium to cobalt, building a zero-emission vehicle involves even harder resources to come by than conventional cars, and that comes at a cost to the environment.
Amid the intensification of the global fight for dominance in the electric vehicle sector, the International Energy Agency in May recommended that Western governments consider storing critical minerals such as cobalt, nickel and lithium. Already, automakers are stepping up battery recycling efforts and pushing to establish themselves in mining for greater control over the resources needed to make electric cars.
Volkswagen has established a facility in Germany to eventually reuse 90% of the battery components. Mercedes-Benz manufacturer Daimler AG supports an initiative for more sustainable production of cobalt, which has been linked to human rights abuses. Tesla Inc. struck a nickel deal with BHP Group Plc in July and agreed to a cobalt deal with Glencore Plc in June.
But the key resource is lithium. It was rarely needed in the oil-based economy, but about 8 kilograms (18 pounds) is required for a modern electric car.
Right now, the silvery-white metal typically comes from open pit mines in Australia or South America, where there are concerns about wasting water and toxic materials released from mass evaporation pools. Then the raw materials are sent to Asia for processing. By the time the lithium ends up in European or American electric cars, a large amount of carbon dioxide has been emitted.
As the transition accelerates, BloombergNEF expects demand for minerals in lithium-ion batteries to grow fivefold by 2030. A global lithium price index has more than tripled this year, driven by rising sales. of electric cars in China, the United States and Europe. .
Automakers are under pressure to clean up their supply chains and meet sustainability goals, and Vulcan says Germany’s lithium may play a role.
For decades, geothermal plants in the Upper Rhine Valley have been pumping hot fluids from below the earth’s surface to generate electricity, a form of renewable energy. The facility never worried about lithium in the brine, but Vulcan plans to add an extraction step before the fluid is reinjected.
About half of the electricity generated in the process would boost lithium production, while the other half could be sold. Vulcan installed a small pilot plant and, in late September, produced its first batch of battery-grade lithium. It plans to start larger-scale production in 2024, Kreuter said.
There are challenges to the Vulcan method. Brine is a complicated mix that includes potassium, iron, manganese, and sodium, impurities that must be filtered out before lithium can be put into batteries.
Public opposition has derailed new geothermal projects and locals are on the alert after past incidents. In the Black Forest town of Staufen, dozens of buildings cracked after geothermal drilling in the early 2000s. A few kilometers across the Rhine in France, authorities last year closed a geothermal plant near Strasbourg after drilling caused small earthquakes.
Never before has there been production of commercial quantities of the metal from deep-well brines, and Vulcan has yet to prove it can get the money to install the plants. So far, the company has raised about 200 million euros.
Still, with demand for lithium booming, the concept is catching on. BMW AG invested in Lilac Solutions, a US startup backed by Bill Gates that aims to extract lithium via a similar method from the Salton Sea in California. German power company EnBW AG is also studying the feasibility of producing lithium from deep wells in the Rhine Valley.
Kreuter said he is confident that Vulcan can convince regulators and the public that his project will make lithium production more sustainable. For the company, the economics of the plan are equally attractive.
“We can finance the production of the brine by selling renewable energy,” Kreuter said. On top of that, “we don’t have the costs of developing and operating a mine.”
© 2021 Bloomberg