German firms must diversify supply chains for energy transition resources – analysis
Clean Energy Wire
Supply chains for key technologies of Germany’s energy transition largely hinge on relations to individual trading partner countries such as China, economic research institute ifo said. The institute said supply chains should be diversified to avoid becoming bargaining assets in case of diplomatic tensions, such as in the war on Ukraine, or external shocks like the coronavirus pandemic. “Action is urgently needed” to make supply chains of critical minerals “crisis-proof” and ensure supply security for decarbonisation technologies, such as batteries or renewable power installations, the researchers found in an analysis of Germany’s raw material import dependence published together with industry chamber DIHK. “More import sources are needed to make supply chains more resilient,” ifo author Lisandra Flach said.
The analysis listed nine important minerals that are especially vulnerable to supply chain problems, including cobalt, silicon, lithium, graphite or rare earths, for which alternative sources could only be accessed with long delays. China is the world’s biggest supplier for seven out of the nine critical resources, but alternative import countries are available, Flach said. Secure resource supply is essential for companies to master the shift to climate-friendly production, DIHK’s Manfred Größl said. “Companies need to do more than they do now to make supply chains stronger and more diverse,” he said, adding that this could only be achieved with diplomatic assistance by the government and the EU. The planned supply chain law, which requires businesses to strengthen environmental protection and human rights in their production processes, would instead make resource procurement more difficult and could bolster the market dominance of individual supplier countries, Größl said. Recycling critical raw materials to keep them in the economic cycle should be given much greater attention and could be greatly improved by better EU-coordination, the DIHK said. In a survey published by ifo in late June, almost 75 percent of companies in Germany said they currently experience supply shortages for important materials, particularly within the automotive and electronic industries. Most of the surveyed businesses said they expect these challenges to linger until at least 2023.
As energy transition technologies such as renewable power installations or e-cars become more widespread and fully enter mass production, supply chain security has shifted into the focus of analysts. A global trend towards non-fossil energy systems could greatly intensify competition for key resources needed to manufacture more sustainable products, and observers have warned that better environmental and social standards, as well as circular economy approaches to many critical raw materials are needed to avoid taking the same kind of risks as with the supply of fossil energy sources.