Why cobalt question poses challenge for storage sector

• Cobalt is used in batteries to increase battery life and energy density
  
• But global cobalt demand could soon exceed refining capacity by 300%
  
• Cobalt mining centred on countries that cause major environmental concerns

It’s a lustrous, very hard, silvery metal and some would argue that the world’s prospects of bringing about the climate transition are being jeopardised by doubts about its future availability.

Cobalt, which is found in the earth’s crust, has been identified as one of the metal ores which must be mined more extensively if storage is to play a key role in future energy systems around the globe. This is because cobalt increases both battery life and energy density.

The problem is mining cobalt is fraught with difficulties.  

Environmental health and safety concerns

At present, the extraction and treatment of cobalt is concentrated in developing nations in Africa and Latin America. As a result, one of the key issues facing the cobalt mining industry is that, as a recent report by the Massachusetts Institute of Technology (MIT) highlighted, the developing nations in question “may lack adequate regulatory resources and enforcement mechanisms to effectively manage EHS [environmental health and safety] concerns”.

The report added that the “lack of regulatory capacity” in such countries heightens EHS concerns - it also highlighted how unanticipated EHS issue can result in lengthy project delays, significant cost increases, and loss of public support.

But that’s not the only cobalt-related challenge facing the energy storage industry.

The cobalt supply shortage

The MIT report states that the total energy storage capacity that may need to be deployed to fully decarbonise the electricity sector in the US alone could be close to 100 terawatt-hours (TWh) by 2050.

In the case of some much-needed elements, global resources are large and sufficiently broadly distributed to raise little concern about the ability to meet demand in order to ensure 100TWh of storage capacity is actually deployed. For example, aluminium, graphite, iron, lead, manganese, phosphorus, sodium, sulphur, and zinc all fall into this category.

However, in the case of cobalt, the picture is rather different.

According to the MIT report, the size of the global resource base of cobalt – and, incidentally, that of lithium, nickel and vanadium – is currently not sufficient to guarantee the supply necessary to meet the 100TWh target.

Why are cobalt supplies at risk?

If all newly mined cobalt was reserved for use in batteries, the level of production would have to grow at a CAGR [compound annual growth rate] of slightly more than 10 per cent – which is a lot higher than the historical average – to meet demand associated with 100 TWh of deployment by 2050.

The issue here is that, unlike, say, lithium, nearly half the cobalt consumed in the US goes to high-performance alloys, and there are doubts about whether the needs of the battery storage industry will supersede that of industries requiring alloys, such as the automotive sector.

Meanwhile, cobalt mining and cobalt refining are heavily geographically concentrated. Around 70 per cent of all cobalt is mined in the Democratic Republic of the Congo. Meanwhile, cobalt processing is similarly concentrated, with 70 per cent of processing taking place in China.

As demand increases, there are concerns that the geographic concentration in cobalt mining and processing means there are supply risks in the short term.

By how much will cobalt demand exceed supply?

It should be noted that, the nature of cobalt extraction – that is, the fact it is mined as a by-product of nickel and copper extraction – means that an increase in cobalt prices does not necessarily lead to increases in supply.

This partly explains why it is estimated that global demand for cobalt could exceed current refining capacity by more than 300 per cent by the end of the decade.

While the supply of mined cobalt is expected to remain steady in the short term – perhaps even running a surplus – it is anticipated that there would be a shortage of capacity for downstream extraction and refining if the 100 TWh target for storage deployment in the US was met.

Why further investment in cobalt is needed

How should the industry tackle the cobalt question? The MIT report concludes that the expectation is that future sources of cobalt will become more geographically diversified and that cobalt will, in future, be more frequently mined as a by-product of nickel during the next decade.

But that won’t be enough. Sustained investment in the development of supplies of refined cobalt will be needed in order to meet future storage demand.

However, environmental health and safety concerns mean that will be easier said than done.