The world shift towards decarbonization and achieving complete electricity generations from renewable energy sources (RES) creates a new power configuration in energy geopolitics. Apart from global state competition for investment in green projects (e.g., power stations, hydrogen infrastructure, carbon capture utilization & sequestration facilities), there is an ongoing trend in the research & development of electric batteries.
For energy systems to become climate neutral, states should adopt new technologies needed to balance electricity markets. Historically, coal generation alongside pumped hydropower plants were in charge of “power management,” utilized to stabilize demand & supply and meet energy needs during peak hours. As states plan to phase out coal, as the most CO2-intensive fossil fuel, in the long run, and not all states enjoy such an abundance of hydroelectricity as Norway, the industry needs new solutions to balance the energy system.
So-called non-dispatchable renewables (solar and wind) cannot be controlled by system operators, as one can`t perfectly predict and plan the total amount. An uncontrolled flow of solar and wind has distorted German energy systems, crushing electricity prices on the German market to negative levels [Amelang, 2020].
Energy batteries, capable of storing extra-electricity, are regarded as one of the promising ways to balance energy systems. Up-to-date battery technology remains under-developed with only 3.1 GW [IEA, 2020] of available energy storage worldwide. Besides, whereas hourly and daily energy storage becomes more available, prospects of seasonal storage remain weak.
Nevertheless, despite the lack of wide battery use, the batteries market has already become a tension point of “renewable energy geopolitics.” Within the last few years, the electric batteries trade has become a vital tension point in relations between Eastern Asia capitals (Beijing, Seoul, and Tokyo) as well as between China, U.S., and European Union.
China is the world leader in exporting rare earth elements (REE), minerals widely used in different electronic devices, including batteries, and even in the military industry (e.g., for production of jet engines, lasers, antimissile defense systems). In its Paper on REE European Commissions estimates that China is accountable for 98% of EU REE supplies [European Commission, 2020].
Chinese dominant position in the REE sector pushed Western capitals to focus intensely on supplies diversification and domicile production development. In 2020 President Trump, accusing Beijing of aggressive economic policy in REE sector, issued a decree on “national emergency” to overcome American dependence on Chinese REE [White House, 2020].
Apart from new initiatives such as special dialogue between the U.S., Japan, and the European Union, Brussels had fought a legal battle with rare earth elements export restrictions. EU won over China in WTO on REE case in 2014, forcing Beijing to cancel export restrictions [WTO, 2014]. Besides, in November 2019 European Union also filed a lawsuit against Indonesia on the same matter. According to Brussels, the Indonesian export ban on nickel harms its steel industry [WTO, 2021].
Whereas the world REE battle encompasses different industry sectors, tensions between China, Japan, and South Korea relate to electric batteries. Seoul and Tokyo are leading world manufacturers of electric batteries. During the last two decades, 9 of 10 ten companies making most patents in battery technologies were of Japanese and Korean origin, including world-renewed giants such as LG, Toyota, Sony, Samsung, and Panasonic.
As a post-covid revitalization also foresaw an increase in electric batteries demand, Japan and, to a greater extent South Korea, accounting for 60% of world production, voiced stronger concerns about the need to diversify away from China.
Expectations for batteries market growth open opportunities for third states to seize the momentum in breaking the Chinese monopoly. Beijing itself is said to lower its REE explorations level in the future due to environmental consequences of mining [Standaert, 2019].
As REE is not the only way for creating batteries, there will be technology battles. Apart from REE, International Energy Agency defines cobalt (mostly exported from Congo) and copper (mainly exported from Chile) as crucial for energy storage [IEA, 2021].
However, the world can`t diversify completely away from REE. The vital question to pose is which countries have chances to compete in REE sector.
Ukraine has every chance to become a voice in REE industry. Ukraine, having only 1MW capacity of domestic energy storage and not even legal regulation of energy storage, cannot compete with giants as Japan and South Korea. However, Kyiv should instead cooperate with Seoul and Tokyo and empower a Memorandum of Understanding with EU as a success story [European Commission, 2021] to play its part in substituting China on the market.
Ukrainian National Geological Survey has already prepared an investment overview on REE available in Ukraine, covering 21 of 30 REEs, which the European Union defines as critical ones [Ukrainian National Geological Survey, 2021]. Namely, Ukraine benefits from one of European largest deposits of lithium, a mineral widely used for lithium-ion batteries and electric vehicles.
Ukrainian Ministry for Energy should consider designing a special advisor or representative on REE, in charge of creating a legal and business framework for energy storage, cooperation with the National Geological Survey, and negotiations with European and Asian companies regarding investment in Ukrainian REE exploration and production. If Ukraine manages to create such a “success story” in energy storage, it will be easier for Kyiv to encourage firms from other economic sectors to enter the Ukrainian REE market.
Besides, Kyiv should encourage energy storage cooperation within Ukrainian-German relations. Energy cooperation between Kyiv and Berlin is currently focused on searching for alternative agenda, capable of acting as compensation for Nord Stream-2, German-Russian gas pipeline bypassing Ukraine.
Hydrogen was initially proposed to be a milestone of new German-Ukraine energy relations. However, the hydrogen industry is only making its first steps on a global scale and is not expected to flourish in the short run. Consequently, energy storage cooperation should be voiced by Ukrainian politicians as one of the priorities in dealing with their German partners, given that Berlin is especially active in this field [German Energy Agency, 2021].
Even though there are concerns about the technological development of batteries, which is desperately needed to increase its capacity and decrease price to make it widely affordable, energy storage will be an integral part of the energy transition. And the question of which countries have a chance to find their place in the global supply chain will become critical.
References
Amelang, Soren (2021). Negative Electricity Prices: Lockdown’s Demand Slump Exposes Inflexibility of German Power. Retrieved from https://energypost.eu/negative-electricity-prices-lockdowns-demand-slump-exposes-inflexibility-of-german-power/. Accessed on 10.10.2021.
European Commission (2020). Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions. Retrieved from https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52020DC0474. Accessed on 10.10.2021.
European Commission (2021). Memorandum of Understanding between the European Union and Ukraine on a Strategic Partnership on Raw Materials. Retrieved from https://ec.europa.eu/docsroom/documents/46300. Accessed on 10.10.2021.
Executive order of U.S. President (2020). “Executive Order on Addressing the Threat to the Domestic Supply Chain from Reliance on Critical Minerals from Foreign Adversaries”. Retrieved from https://trumpwhitehouse.archives.gov/presidential-actions/executive-order-addressing-threat-domestic-supply-chain-reliance-critical-minerals-foreign-adversaries/. Accessed on 10.10.2021.
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IEA (2021). Role of Critical Minerals in Clean Energy Transitions. Retrieved from https://www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitions/mineral-requirements-for-clean-energy-transitions. Accessed on 10.10.2021.
International Energy Agency (2020). Energy Storage. Retrieved from https://www.iea.org/reports/energy-storage. Accessed on 10.10.2021.
National Geological Survey (2021). Investment Opportunities in Exploration & Production: Strategic and Critical Raw Materials. Retrieved from https://www.geo.gov.ua/wp-content/uploads/presentations/en/investment-opportunities-in-exploration-production-strategic-and-critical-minerals.pdf. Accessed on 10.10.2021.
Standaert, Michael (2020), China Wrestles with the Toxic Aftermath of Rare Earth Mining. Retrieved from https://e360.yale.edu/features/china-wrestles-with-the-toxic-aftermath-of-rare-earth-mining. Accessed on 10.10.2021.
WTO (2014). China – Measures Related to the Exportation of Rare Earths, Tungsten, and Molybdenum. Retrieved from https://www.wto.org/english/tratop_e/dispu_e/431_432_433abr_e.pdf. Accessed on 10.10.2021.
WTO (2021). Indonesia — Measures Relating to Raw Materials. Retrieved from https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds592_e.htm. Accessed on 10.10.2021.
Note: The views expressed in this blog are the author’s own and do not necessarily reflect the Institute’s editorial policy.