Analysis: Could copper's impending supply crunch threaten energy transition?

Analysis: Could copper's impending supply crunch threaten energy transition? | Windpower Monthly

The wind industry relies on copper for the electrical components and cables in wind turbines, plus the cabling that connects wind projects to wider energy infrastructure. The red metal is used in turbines' generators, power transformers, gearboxes and tower cabling, as well as for the cables to deliver the electricity to the grid.

Investment banking major Goldman Sachs, which previously described copper as “the new oil” due to its importance for green energy, found that onshore wind farms use around 4,000 tonnes of copper per gigawatt of capacity, while offshore installations can use up to 13,000 tonnes per gigawatt.

Green end-use of copper as a whole accounts for around 8% of existing copper consumption, according to energy consultancy Wood Mackenzie.

The company warned in its 2022 'Red Metal, Green Demand' report that the pressure on copper supply caused by rising demand could jeopardise the green transition. It forecast green end-use for copper worldwide to rise to 14% by 2030, and up to 16% by 2033, according to the report's “base case” scenario for copper supply and demand.

That rising demand is now forecast in the immediate short term too, with Wood Mackenzie’s latest report on the subject, 'Copper: Things to look for in 2024', suggesting it will do so this year amid improving macroeconomic conditions.

“We expect energy transition to once again play a vital role from a copper end-use demand perspective in 2024, however, this is not without risks,” the report read, suggesting that increasing demand could raise copper prices and have additional knock-on impacts for buyers.

Mining misadventure

A battle over the future of the open-pit Cobre Panama copper mine in Panama – the 20-year concession for which was declared unconstitutional by the country’s Supreme Court last year – highlighted challenges in ramping up supply in line with demand, and could provide lessons for similar projects.

The mine was estimated to produce more than 1% of the world’s total copper production when fully operational, but faced waves of opposition and protests from indigenous groups, environmental activists, trade unions and wider Panamanian society. Canadian operator First Quantum suspended activity at the mine in late 2023.

The extractive, impactful nature of much copper mining means that existing and future projects alike could face similar challenges unless operators and developers take mitigating measures seriously.

“The events at Cobre Panama highlight the challenges involved in developing and operating new mines, especially the importance of government cooperation and political stability within a country and gaining the support of local communities,” a Wood Mackenzie spokesperson told Windpower Monthly.

Supply and demand

Meanwhile, industry organisations are concerned that the supply-and-demand relationship for copper on the global market could become unbalanced and reduce the amount of copper available for the green energy transition at just the wrong time.

“A supply shortage of any mineral or metal necessary for renewable energy technologies, of which copper is only one, would result in an inability to meet energy transition goals, and thus carbon reduction targets, because in reality a supply/demand gap cannot physically exist,” John Hipchen, director of energy and electrical systems at the Copper Development Association, told Windpower Monthly.

“Demand realisation cannot actually exceed supply, so buildout of renewable energy systems, or EV charging infrastructure would have to slow to meet supply capacity,” he said.

On current trends, such a shortage could occur within ten years, according to recent estimates.

Referencing the firm’s 2022 report, Wood Mackenzie’s spokesperson said the company continued to forecast a sizeable copper supply gap in the coming years: “We currently estimate that the theoretical supply gap will stand at 4-5Mt by 2033. This assumes the conversion of 70% of brownfield probable projects, plus an allowance for mine-life extensions into the base case mine supply.”

They added: “Given this implied imbalance between global copper supply and demand, the market still needs to bring on additional mine production in order to maintain market equilibrium and retain a reasonable market balance over the next decade.”

Ramping up

As the Cobre Panama situation indicates, however, increasing production of copper without negative impacts on local communities or the environment that can provoke resistance to mining, is likely to prove a difficult but essential tightrope to walk for the prospects of a renewables-led green energy transition.

Ramping up production of copper would also need to be coupled with shoring up existing supply if the world hopes to head off any supply shortages amid the rising demand.

To this end, the securing of key minerals for the energy transition including copper is already at the forefront of existing policy proposals in Europe and beyond.

On 13 February, Fatih Birol, the head of the International Energy Agency (IEA), announced plans to launch a security programme for critical minerals including copper.

“Currently, we are not able to keep up with the demand, and the ability of manufacturing these critical minerals is concentrated in one single country or two," he pointed out.

Indeed, the US Geological Survey estimated that just four countries – Chile, Peru, Congo and China – sourced more than half of the 22 million tonnes of copper produced from mines worldwide in 2023.

In response to the apparent brittleness of the metal’s supply chain, the EU included copper as a “strategic raw material” in last year’s Critical Materials Act, which aims to strengthen and diversify supply chains for key metals needed to speed the bloc’s pivot away from fossil fuels.

Copper industry representatives hope that such political action to support copper’s role in the energy transition does not impede on their existing partnership with the wind industry.

“We need governments to emphasise smart, planned, coherent mineral and industrial policies to build required supply availability…we don’t need government intervention to create meaningful engagement and partnerships between the wind and copper industries,” Hipchen said.