Inflation Reduction Act Gets Home-grown Lithium Cooking
It’s no secret that the Inflation Reduction Act has been a game-changer for the U.S. energy transition value chain. Indeed, the legislation was a key driver for launching Statevolt when we did, and subsequently our partnership with Controlled Thermal Resources on our Hell’s Kitchen Lithium and Power plant. Despite its name, the Hell’s Kitchen Lithium and Power facility has no affiliation with Gordon Ramsey’s hit US reality TV show. Instead of terrorising aspiring chefs, the 54GWh Gigafactory will produce lithium and geothermal power right here in California.
As the demand for EVs and renewable energy grows, so too does the demand for lithium, which is needed to produce the batteries that store the energy generated by renewable sources. The need for domestic lithium supply chains is at an all-time high, with U.S. lithium demand for EVs and storage forecast to reach 383 kilotons by 2030 (Source: IEA).
If there’s one thing that Russia’s war in Ukraine has shown, it’s the dangers of overreliance on a singular country for essential natural resources. Let’s not let the same thing happen again with critical minerals. Allowing China to maintain its monopoly on lithium, nickel, copper and other minerals critical to the energy transition is at best, naive, and at worst, catastrophic for global supply chains.
At Statevolt, we strongly believe that repatriating supply chains, or bringing back production and manufacturing to local markets, holds the key to the global energy transition. Not only does it leave energy transition supply chains less exposed to geopolitical uncertainties, but it also reduces reliance on long-distance transportation, which is a significant contributor to greenhouse gas emissions. By having a secure and reliable source of lithium, the U.S. and other countries can reduce their dependence on foreign sources of the metal and better control the supply chain for batteries, which are critical to the growth of the renewable energy sector.
Additionally, local supply chains create local jobs, in turn, stimulating local economies. Here at Statevolt, we are implementing a ‘hyperlocal’ business model at Hell’s Kitchen, with 2,500 local people in Imperial Valley set to be employed by the development.
Furthermore, domesticating battery supply chains ultimately benefits consumers. High costs remain a barrier to entry for many of those looking to make the switch to an electric vehicle. Although EVs have become cheaper in recent years, the rising price of critical minerals, driven by strained supply chains, is threatening to reverse the trend of declining costs for clean energy technologies. Lithium prices have seen a particularly large jump over the past year, with the cost of lithium-ion batteries rising by over 250% since 2021 (Source: IEA). Increasing domestic lithium production is one way we can alleviate the strains on the current global lithium supply chain, ultimately helping to bring down the cost of EVs for consumers.
As the world looks to keep pace with the U.S. on attracting green investment, domestic supply chains must be at the forefront of policymakers’ minds. The EU has moved quickly, with its ‘European Green Deal’ set to offer incentives in the form of subsidies, faster permits and industry partnerships for job-creating green projects. Ultimately, the countries attracting large-scale green investment projects will be the ones with the strongest domestic supply chains, and therefore best placed to meet energy transition targets.
There is no doubt that this is an exciting time for the energy transition industry as governments and policymakers are channelling their efforts into attracting and retaining green investment. But what comes next? With the introduction of the IRA, the U.S. has every chance of becoming the dominant player in the global energy transition. Somewhat counterintuitively, we need to invest with our local communities in order to tackle a global issue like the energy transition. Repatriating supply chains, creating local jobs and boosting regional industry will be critical if we are to maintain momentum in the global transition to clean energy.
Lars Carlstrom is CEO and founder of Statevolt.
