Leibowitz: The Global Energy Revolution Meets Trade Bottlenecks

Second, the increasing production of electric vehicles itself will create additional demand for electricity and the elements necessary to make EVs. A primary material is lithium, because lithium-ion batteries are the best way of storing energy for EV trips.

So, while EVs may slow CO2 emissions from tailpipes, electric generation will add to the total. The net result could well be not too much CO2 reduction by 2050, unless our electric infrastructure improves. Renewable energy generation (wind farms, solar arrays) are generally far away from population centers, so new transmission and distribution lines will be required. Old lines leak more energy in the form of transmission losses than newer technologies. This in turn requires massive investments in the electric grid.

The Wall Street Journal published an editorial recently that brought home the intricate and vital interrelationships of the changing world. Citing the IEA report referenced above, the Journal noted that electric demand growth will require new factories to make lithium-ion batteries and, equally important, new transmission lines to link renewable energy production to homes and factories that will need it.

Transmission lines require wires that efficiently conduct electricity (aluminum is used almost exclusively to transmit electricity over long distances). So, where will we get the aluminum to meet this need? Not in the United States. According to the WSJ, primary aluminum production in the United States has declined by 68% over the last 20 years. Chinese production of aluminum has skyrocketed over the same period. Aluminum imports will likely increase as the grid is improved.

New transmission lines also require effective insulation for safety and efficiency. The best insulation materials are petrochemicals, requiring oil and chemical refineries. New materials may be developed, but it will take a long time.

Finally, transmission and distribution lines require new transformers. Those products are in exceedingly short supply. Already, the wait for some transformers is more than two years. If upgrading of the power grid ramps up, the wait will increase. Ramping up transformer production in the US will take many years, in part because electrical steel production domestically is far short of the required volume. For the near future and probably beyond, transformers will need to come from abroad.

The EV situation inherently involves similar issues. Lithium is a key ingredient in EV batteries. China dominates production of batteries. Chinese companies have teamed up with global companies, such as Volkswagen, to build factories in the US and elsewhere to make the batteries. Recently, Chinese manufacturer Gotion announced plans to build a battery production line in Illinois. Last year, the same company announced a similar factory in Michigan. Foreign investment may be the best way to ramp up EV capacity.

If the capital investment will come from China to make batteries in the US, where will the lithium to make these batteries come from? It will not come from the US, which produces less than one half of one percent of the world’s lithium. Australia produces nearly half, Chile is second at 30%, and China is third at about 15%.

As recently as the mid-1990s, the US was the largest lithium producer, mining about one-third of the global total. Today, there is only one active lithium mine in the US, and its production is confidential.

The lithium battery factories will need, therefore, to import large quantities of lithium from abroad. And the supply of lithium will need to double by 2050 to meet projected demand. Trade will have to surge in these and other areas to meet climate goals.

So the question for these and many other problems is less “What should we do?” and more “What should we do first?” As a lawyer, I recognize that many of these issues are bound up in litigation. Especially in the environmental sphere, opening new mines and building new transmission lines will result in lawsuits from environmental groups to stop new projects. Even if ultimately approved, these lawsuits may take the economic energy out of a project, leading to massive delays or even cancellation.

The reality we face, increasingly, is whether to be serious about climate goals. While we may long for a world without fossil fuels, the reality now is that we need fossil fuels for transmission lines, air travel, water bottles, and thousands of other uses. If the electricity sector needs to transform, should we do it now or wait years while the production of needed materials returns to the United States?

The practical needs of the country, and the world, may be at odds with the desires of our politicians and interest groups. Settling that will be difficult indeed.

Editor’s note: This is an opinion column. The views in this article are those of an experienced trade attorney on issues of relevance to the current steel market. They do not necessarily reflect those of SMU. We welcome you to share your thoughts as well at info@steelmarketupdate.com.