Exploring the substitution potential of critical materials for the energy transition

Abstract

In light of transitioning towards a sustainable, low-carbon energy system, NdFeB (Neodymium-Iron-Boron) permanent magnets are set to play a crucial role. These magnets, currently the strongest available, are integral to the functioning of wind turbines, electric cars, and various digital appliances. Their superior performance is attributed to the inclusion of rare earth elements (REEs). NdFeB magnets contain four REEs: Neodymium and Praseodymium, categorized as Light Rare Earth Elements (LREEs), as well as Dysprosium and Terbium, classified as Heavy Rare Earth Elements (HREEs).
There is a general consensus among researchers that the amount of REEs available in the earth’s crust suffices to meet the growing demand for NdFeB magnets by the energy transition. A potential bottleneck issue is therefore not the availability of REEs in the earth’s crust, but the timely supply of REEs needed for NdFe B magnets under acceptable prices. China’s dominance in NdFeB magnet production presents a substantial risk to the widespread adoption of wind energy and electric vehicles.
This study employs a model-based analysis to explore the potential of substituting REEs in NdFeB magnets within the NdFeB supply chain and clean energy technologies. To accomplish this, a combination of System Dynamics (SD) and Exploratory Modelling and Analysis (EMA) is employed to model the system and subject it to a wide range of scenarios. The assessment of the long-term demand and supply of materials supply chains is a complex and deeply uncertain issue. SD is tailored to model intricate systems with time delays, accumulation, internal feedback loops, and non-linear behaviours. To address the inherent uncertainty in the system, EMA is utilised to provide decision-making support under deep uncertainty through computational experiments.
The global supply system for NdFeB magnets primarily consists of several key elements, including the supply chain, demand, primary production, recycling, and the substitution of REEs. Primary REE production encompasses both legal and illegal activities, with a significant portion of HREEs being extracted through illegal means. The demand for NdFeB magnets and the REEs required for their production emanates from various industries, including electric vehicles, wind turbines, computer hardware, and other applications. To meet this demand, there are several potential methods for substituting REEs, including element-for-element, process-for-element, magnet-for-magnet, and component-for-component substitution. These substitution methods are influenced by factors such as the average periodic price of REEs, potential cost reductions in the case of process-for-element substitution, a substitution threshold for magnet-for-magnet substitution, and various considerations, including power density and technology readiness, for component-for-component substitution.
The study's findings indicate that the electric cars, wind turbines, and REEs in use will follow a similar pattern characterized by a significant level of uncertainty. In the most conservative scenario, there is a slight increase until 2050, while in the most optimistic scenario, there is exponential growth.
The most influential uncertainties affecting the quantity of electric cars and wind energy are driven by intrinsic demand stemming from the energy transition, product lifespan, and the production system's ability to adapt rapidly to changes in demand by scaling up or down. Differences in product lifespan are especially pronounced in the early stages of the simulation due to relatively low growth in intrinsic demand during that period. However, in the later phases of the simulation, intrinsic demand becomes the predominant influencing factor.
Both wind energy and electric cars demonstrate a positive relationship with the quantity of REEs in use. Nevertheless, scenarios exist where a relatively high number of wind energy systems and electric cars can be developed without an exceptionally high utilisation of REEs.
Substitution has the potential to temporarily alter demand or induce a permanent shift in the demand curve, depending on price levels and substitute product quality. Short-term demand for technologies and materials tends to remain continuous, with fluctuations in response to price changes. However, introducing new technology or changing production processes can lead to a permanent shift in the demand curve. Elevated prices incentivize firms to explore alternative technologies, leading to the development of superior products.
The study's findings suggest that both element-for-element and process-for-element substitution have the potential to induce both temporary and permanent shifts in demand. Magnet-for-magnet substitution is a more temporary solution, while component-for-component substitution often results in a more permanent change.
The development of alternative technologies that do not rely on NdFeB magnets has the potential to significantly impact the number of wind turbines and, particularly, electric cars without NdFeB magnets. Such advancements can lead to more permanent forms of substitution and contribute to increased adoption of these technologies. While currently available alternatives can also serve as substitutes for NdFeB-based cars, alternative technologies for electric vehicles that are still in development might have the potential to significantly reduce the number of electric cars utilizing NdFeB magnets.
In conclusion, this research suggests that substitution is unlikely to play a central role in securing a sufficient number of electric cars and wind turbines for several reasons:
1. The Earth's crust contains an ample supply of REEs, which should be sufficient for producing the necessary number of electric cars and wind turbines, at least until 2050.
2. Although REE production may lag behind demand, the process of substitution takes time and can only offer limited short-term flexibility. Moreover, short-term disruptions have a relatively minor impact on long-term supply.
3. Alternative technologies with reduced or no reliance on REEs do not significantly outperform their REE-intensive counterparts, thereby not leading to an increase in demand.
This is not to say that a substantial number of electric cars and wind turbines can only be produced with a large quantity of REEs. There are scenarios in which the utilisation of NdFeB and REEs remains relatively low, yet a considerable number of electric cars and wind turbines can still be manufactured.
While the importance of transitioning to a sustainable, low-carbon energy system is evident, the likelihood of a substantial number of electric cars and wind energy systems being in use by 2050 primarily hinges on demand for these technologies. Other factors such as technological advancements, price reductions of wind energy and electric vehicles, government policies, and incentives can also stimulate this demand.
Recommendations for future research include the use of this model for other critical metals. The extension of this model make it relatively easy to use this model to evaluate the substitution potential of critical metals in other technologies. Especially when metals are a vital component of an intermediate product that is used in the end-product, then the structure of this model would be directly applicable.