Why renewable energy metal companies look promising

By Ellsworth Dickson

There is much discussion these days on how governments can steer their countries to a net zero carbon footprint. President Joe Biden has promised to cut U.S. greenhouse gas emissions in half by 2030. He is not the only politician making similar promises; around the world the pressure is on to go green and government leaders are responding.

Some believe that renewables such as wind and solar power can power most of a nation’s energy needs – but is this realistic?

For example, consultant Michael Barnard, Chief Strategist, TFIE Strategy Inc., has calculated that that, in terms of wind turbines it would take to power the U.S., about 1.26 million turbines would be needed covering 0.01% of the land. Building that number of turbines seems impossible and is not going to happen anyway as the country has other existing energy sources and new alternative ones planned.

Like any other energy source, wind power has pros and cons. According to the Wind Energy Technology Office (WETO), most turbines extract ~50% of the energy from the wind that passes through the giant rotors. Wind turbines can’t be located anywhere; they have to be in an area that naturally has good sustainable winds and even there the wind is not always blowing. Then there are transmission losses, bird and bat kills, and land use for wind farms competes with other land uses.

This is not to say that wind turbines are impractical; “land-based utility-scale wind is one of the lowest-priced energy sources available today, costing 1-2 cents per kilowatt-hour after the production tax credit,” states WETO.

So the question is: Just how many wind turbines will be built and installed as part of overall plan? Both a political and manufacturing challenge.

The U.S. Energy Information Administration says that total annual U.S. electricity generation from wind energy increased from about 6 billion kilowatt hours (kWh) in 2000 to about 338 billion kWh in 2020. In 2020, wind turbines were the source of about 8.4% of total U.S. utility-scale electricity generation. This is a big jump and perhaps an indicator that it is possible to install tens of thousands of turbines in the allotted timeframe. In any case, how can one not conclude that the various metals used to make wind turbines – steel, copper, rare earths – not increase in demand?

Solar power is in a similar situation. Only 3% of the U.S. power supply comes from solar power.

Nevertheless the Biden administration says, based on a study by the Energy Department’s National Renewable Energy Laboratory, solar power could provide almost half of the country’s power needs by 2050. This would require increasing the solar share of energy production to over 37% by 2035 and to at least 44% by 2050.

What does that mean in the field? It means that to achieve these lofty goals, a total of 7.86 billion solar panels would be needed covering 14 million acres. As with wind power, the U.S. is not going to be totally powered by the sun. However, like wind turbines, one could reasonably expect solar panel metals demand to significantly increase.

Stanford University’s Mark Jacobson and UC Davis’ Mark Delucchi (J&D) recently published a study in the journal Energy Policy examining the possibility of meeting all global energy needs with wind, water, and solar (WWS) power.  They find that it would be plausible to produce all new energy from WWS in 2030, and replace all pre-existing energy with WWS by 2050.

Overall in 2030, J&D envision 50% of global power demand will be met by wind, 20% by concentrated solar thermal power, 14% by solar photovoltaic (PV) power plants, 6% by solar PV on rooftops, 4% each by geothermal and hydroelectric, and 1% each from waves and tides.  This will require a major construction effort – nearly 4 million 5-megawatt wind turbines, and nearly 90,000 300-megawatt solar PV plus thermal power plants, for example.

It is strange that the two researches did not include nuclear power in the energy mix when not only is it part of today’s mix but more expected in the future. Nuclear energy already plays an important role in the world. In the first quarter of 2021, 26.2% of Europe’s electricity – 70% in France – came from nuclear generation; the largest percentage of all fuels.

On October 11, uranium traded at US$37.25 a pound. A year ago it was US$29.26 a pound. According to Jonathan Hinze, president of uranium research firm UxC, the all-in cost of production for unsubsidized mines ranges between US$10 and US$38 a pound.

In this scenario of rising prices and a drawdown of oversupply, uranium miners are incentivized to start or increase production. The past year has been a bull market for uranium and it’s not over. For example, Cameco Corp. [CCO-TSX; CCJ-NYSE] shares were up $1.82 on October 18 to $32.76, up from $12 a year ago.

However, as Cameco has pointed out, underlying the uranium market is the odd scenario whereby “about 80% of primary production comes from countries that consume little-to-no uranium, and nearly 90% of uranium consumption occurs in countries that have little-to-no primary production. As a result, government-driven trade policies can be particularly disruptive for the uranium market.”

This means that uranium projects in Canada, United States and some other countries are in favorable jurisdictions for advancement. In the U.S. about 60% of electricity generation is from fossil fuels – coal, natural gas, petroleum, and other gases. About 20% is from nuclear energy, and about 20% is from renewable energy sources.

The World Nuclear Association estimates that about 50 nuclear reactors are being built in 16 countries with 440 currently operating. They said that uranium is renewable and most of the uranium used in nuclear reactors can be recycled.

Some jurisdictions have water-generated power such as hydro projects in eastern and western Canada that are also important to the energy mix.

So what conclusions can we reach from all these facts and figures? There is no way to accurately predict future demand for renewable energy metals – copper, lithium, nickel, cobalt, manganese, graphite (a non-metal), uranium, silver (PV cells) and even steel (wind turbines) – because of politics and promises that have not yet materialized. In addition, more than at any time in history, ordinary citizens almost everywhere want to be good environmental stewards and together represent a force to be reckoned with as can be seen from the worldwide frequent climate protests. Even if we can’t come up with concrete numbers for future forecasts, all this bodes well for a significant increase in demand for renewable energy metals.

For mining stock investors, exploration companies targeting renewable energy metals – and producers too – are clear candidates for investing.