Series 3 Episode 1: Unlocking the UK’s potential with lithium

Welcome back to our Innovation in Energy podcast series. I'm Liz Hunt, Energy and Resources sector leader for PwC UK.
Today we are revisiting critical minerals and the role that they play in the energy transition agenda and in society more broadly. To tackle this, I'm delighted to be joined today by Cameron Tonkin, COO of Green Lithium, and Alan Moore, a Capital Projects Director in our Energy, Utilities & Resources team. Cameron, as COO of the UK firm that’s directly working with critical minerals. And perhaps before we get stuck into the detail, could you give the audience just a quick overview of what Green Lithium is and what your main goals are as a business?

Yeah, absolutely Liz. Green Lithium is a refinery developer and operator of these assets and we're a UK company and we're developing a low carbon lithium refinery. Our first is in the North East of England at Teesside, and we're currently in design of that. And just for the folks listening, to just make clear where a refinery sits within the supply chain. First one is the miner, which produces the lithium ore known as spodumene. The second is the refiner, in this case Green Lithium, to process that lithium ore spodumene into lithium chemicals. The third is the cathode producer. The fourth is the gigafactory that we sometimes hear about in the media and those sorts of things. And then the fifth is the automotive or the energy storage industry. So I think of those five steps and we're second in that supply chain line.

That's fantastic. Thank you. And that’s really useful color, actually, because I think there's a lot of terminology in there, so it’s very useful just to set the scene for our listeners. And so with energy transition being such a priority for public and private sector alike and around the globe, critical minerals, particularly around lithium and carbon, are becoming increasingly important. So how do you see the macro dynamics of energy transition influencing the demand for those minerals, and what strategies should companies adopt to ensure a stable supply chain going forward?

Yeah, absolutely. And starting with that macro piece, you know, fossil fuels account for 81.5% of global energy consumption in 2023, and that's down from 82% in 2023, 22, sorry, and down from 86% in 1995. So, when you look at those numbers from 86% to 81.5% last year, you've got to ask yourself has the energy transition really started? And these are statistics according to the Energy Institute. So investment in green technology, however, is on track to achieve $2 trillion. So there's a lot of movement in this space, and the estimate is that it needs to more than double to achieve net zero goals by 2030. So there's still a lot more to do. In terms of electric vehicles, adoption is increasing despite the recent softening in EV sales. The projections remain high, as manufacturers move towards fully electric fleets, and that will continue as the technology improves as well. In terms of critical minerals that you mentioned and mineral processing capacity, China's at least ten years ahead of the rest of the world and the rest of the world is playing catch up with that. And at the moment, this is causing an imbalance where developed nations, so particularly in North America and Europe, are becoming increasingly reliant upon China as they strive to meet their decarbonisation commitments. And so the solution to that at a macro level is to start to build supply chains to produce battery chemicals closer to home like we're doing as Green Lithium. And to give you an insight in terms of the pace of global lithium demand in 2020, a total of 345,000 tonnes of lithium were produced and used, by 2030 that must grow to 2 million tonnes. So 345,000 tonnes, 2020, 2 million tonnes by 2030. So that's a significant challenge in terms of those five steps from the miner all the way through to the processed battery and the capacity of that supply chain to meet that demand. In terms of strategies, I'll touch on governments. So what we're seeing is governments implement policies to avoid overreliance on international supply chains and that price volatility that that can bring, and that's through supporting development of in-country capability. So for example, Green Lithium, you know, we've received some good government support, which has been excellent. But we're also seeing policy interventions such as in the US with the Inflation Reduction Act, in Europe with the European Critical Raw Materials Act, again about supporting and building out supply chains more more locally.

Some of these statistics are really stark, aren't they, actually. And if you think about, you know, 1995 to 2023, and we've had sort of what was that about 5% reduction in fossil fuels contribution. That's quite striking actually. And I think, you know, we are just at the start of this journey and there's been also a lot of discussion we've been having internally around what is the role that public versus private investment plays and how do we get the capital deployed into the energy transition agenda, including the critical minerals space. So that's really, really interesting to hear your perspectives on it. Alan, perhaps just turning to you from your perspectives, what challenges do our clients face in standing up both their businesses and capabilities in the UK, particularly, but more broadly?

What stands out for me, Cameron, from what you just said, is has the energy transition really started, and whilst there has been a significant amount of investment committed from the UK government, actually, what we're hearing from our clients around delivering major capital projects, big refineries like yourselves, is that there's three main barriers to accelerating that investment. Number one is productivity. And this is backed up by our Global Mine report, which highlights that productivity is a real challenge in the sector. Secondly, it's having the supply chain, the capability and the capacity to deliver and stand up delivery organisations like yourself to support the energy transition. And then the third, having a skilled and capable workforce to deliver that investment at the rates required.

Yeah, that piece of our workforce we hear across the sector actually, and so many people are looking at what skills do they need for the future and how does that translate and it's something we looked at in our Green Jobs Barometer. It's got quite interesting the kind of level of new skills that need to come in to sustain the journey that we're all headed on. And perhaps just pivoting from skills, the nerdy engineer in me, I'm keen to understand a bit more about Green Lithium’s technology. Could you tell us a bit more about that and how it differentiates you in the market?

Yeah, absolutely. I'm pleased you asked the question. So Green Lithium has a really strong focus on environmental and social governance at its core and specifically will be commissioning a plant with a process that will enable us to target eliminating scope one and two emissions by 2035 and in that process differentiate ourselves from conventional resource intensive and carbon intensive refining that currently takes place in China.
So what I'm talking about is our refinery process, known as alkaline leach, which is inherently less carbon intensive than conventional acid leached processes that I just referred to, that's used in refineries in China. And this lower intensity is due to lower temperatures, lower pressures. Things like smaller reactor vessels and independent specialists that have done studies on this for us, to substantiate our flow sheet selection that we're using with the technology selection, to your question, has as highlighted that we'll be commissioning a refinery that will produce per kilo of lithium below four kilos of CO2 and no hazardous waste. And I'll add to that as well. In that process at Teesside, we're using renewable energy sources such as electricity from wind in the North Sea and then also green hydrogen as fuel sources to power the refinery also.

And that's so important as a differentiator, isn't it? Because we hear quite a lot of noise when we talk about the electric vehicles, for example, around the actual carbon intensity of developing those products and the materials that go into them. So that's really encouraging to hear that that's possible to do that with such a low impact. And clearly the development of that technology is critical. Alan, what can new entrants in the market who support energy transition do to build their own capability and capacity and gain investor confidence and support?

Firstly making sure that they've developed a long-term guiding vision of where they want to be and with a clear pathway of how to get there. Next, it's about building that relevant capability and capacity through obtaining the relevant skills. And our recent CEO survey has actually highlighted that 52% of those CEOs in the EU&R sector believe that a lack of skills is actually inhibiting how their organisations are creating and delivering value. Therefore, it's really important that organisations like Green Lithium are focusing on how they're attracting and retaining talent, but also how they're looking at adjacent sectors to bring in the talent that they can develop. I think in addition to this, it's understanding very clearly what your business model is, but also what capability and capacity you need and when across that value chain so that you're able to make sure that you've got agility in your operating model, but also that you're able to control costs and plan accordingly. In addition to this, I think new entrants should be looking at how they partner and collaborate, and Cameron you mentioned some of that earlier around the stakeholders that you're engaging in wider in government, and how you're establishing those relationships with industrial experts, research organisations and academia to obtain that broader knowledge, importantly that innovation, and wider access to skills. I think doing all of this will ensure that entrants like Green Lithium will have a strong focus on driving as much value across on that end-to-end supply chain, but also, and importantly building resilience in the supply chain as well.

And that collaboration piece is really interesting because with the level of innovation required as we go through this journey, it's something that I've talked about with one of my colleagues who was working with them with the World Economic Forum on this quite a bit. And with that, Cameron, what do you think the direction of travel is for collaboration between all of these new start ups and new entrants? How do we pool that innovation and technology to get the best outcome?

Yeah, good question. I mean, collaboration is absolutely essential, not least to unlock the market opportunity. In terms of critical minerals, what we're talking about here is building out a new in-country capability. And that takes time and it takes effort from all places of the market. In terms of us as Green Lithium, we’re on good terms with other new entrants and we share many of the same challenges and hurdles that we face in developing, you know, a critical minerals capability up in the North East. Sharing innovation and technology is not always as straightforward because there's different varieties of technology in those sorts of things that even exist within the European lithium refining space, let alone globally. But in the UK, you know, we've really benefited from collaborative relationships with the likes of MPI and CPI on research programs. University of Sheffield, North East Faraday Institute, and industry associations such as the Critical Minerals Association have also been key to bring people together and to be able to workshop challenges, but also opportunities, which is a key thing.

And actually I'm just reflecting on some of the statistics you mentioned earlier. So I think you said we could go from 345,000 tonnes in 2020 to 2 million tonnes in 2030, so in ten years that’s like an eight fold increase. So given that such rapid growth in the demand for critical minerals, how does that then align with the timelines we have to develop those supply chains and to develop that technology, what does that disconnect mean in terms of how companies are responding and what should we be doing?

Whichever way the disconnect is, it will leave holes in the localised supply chain and these will likely only be filled by China. But what I would add is China's own domestic demand will outstrip their production into the early 2030’s as well. So there is a critical shortage looming in terms of battery metals with the transition to decarbonisation through batteries for both vehicles, but also energy storage. And we're seeing governments and OEM play a key part in ensuring that there are as few gaps as possible that we've already mentioned, but appreciating that there's no way Europe can be self-sufficient any time soon. More investment and commitment is needed to support new entrants like Green Lithium, and I'll give you an example of that. So Green Lithium is developing a refinery that will produce 50,000 tonnes output of lithium hydroxide monohydrate per year. That's enough lithium for a million EVs in terms of their batteries. Okay, that's 6% of the European 2030 addressable market. You could have another ten Green Lithiums and you still wouldn't saturate the market. That just gives you an idea of how much potential there is in the market, but also how much of a need there is for localised capability. And whilst Green Lithium is all about refining, the final comment I'll make is that once lithium chemicals have been refined they then go to the cathode producer to make the battery cells so the cathode manufacturers are equally shortage in numbers. And equally there is a lack of capacity in the European market, not least the UK market in the cathode space as well. So again, this isn't just about developing more refineries, it's also about developing more cathode producers, more gigafactories and more plants to be able to have that fully integrated supply chain, that helps to give some resilience on a global scale to firm up supplies for energy transition.

Thank you. And Alan, I'll just be really curious to get your reflections on that. Just hearing those comments around the supply chain and how you see that playing out in practice?

So I think a vertically integrated supply chain can bring huge benefits, you know, Cameron you just outline a number of them. But some of the costs of that can be high. But what I do think is the UK is uniquely placed here with Green Lithium to invest in the UK capability and across the supply chain to be a genuine leader in the Western world with a commodity that is in such high demand. And no doubt this will bring significant economical, environmental and societal benefits to the UK and have the potential to position us as a leader servicing critical minerals within the energy transition across the globe.

For me, one of the things that I think we talked a lot about is the scale of private investment that's needed to meet our supply chain requirements over time. So actually,given those challenges and the need for that sort of collaboration, public and private, what is the opportunity that the UK has to play a bigger role at a global scale, in the race for critical minerals.

The UK is a good and safe jurisdiction with common law and that shouldn't be underestimated. There's a large automotive market here, not just in the UK, but the UK gives access to that in terms of the broader European market. There's a really strong push here in the UK towards affordable renewables and also affordable hydrogen. And the UK also brings standards and governance.And that might sound slightly boring, but the UK's very good at that. Just look at British engineering. You don't have to look too far into the distant past to see the quality of British engineering, financial services in the banking sector. So these you mentioned about investment in private investment. The UK is a great place in terms of banking and investment on that front and the final comment that I would make that the UK brings to the international stage is the knowledge economy. The UK has significant strengths in this space as reflected by the number of leading universities that are here and that's a clear and direct link to research and development capability across the piece.

Wow, that sounds like a really compelling case for the UK. Let's hope we can keep those key features around regulation and governance, stability and innovation and education. I think I heard sort of all of those themes there. Alan, any reflections from you on that as well?

I think, look, Cameron absolutely fantastic summary. I think, you know, the only build I'd have would be the amount investment that we need in our energy transition over the next five, ten, 15 years is significant. But what great opportunity we've got to accelerate that with our homegrown commodity that can service a wider market.

Fantastic, well on that really positive note there’s a lot to be hopeful for, but unfortunately that’s it for today and concludes this episode of our Innovation in Energy podcast. Thank you so much Cameron for joining us. It’s been hugely insightful to hear your thoughts and perspectives and thank you Alan for joining us. It has been a truly fascinating discussion. I have certainly learnt a lot. Thank you to all our listeners. Please subscribe and see you next time.