Europe’s energy transition: the case for a coherent approach to raw materials

The first of its kind in the wind industry: Siemens Gamesa carried out an analysis to calculate the exact volumes of materials and manufacturing capabilities needed to achieve Europe’s energy transition goals. This article highlights some of the findings.

Today there are 190 gigawatts of wind-power capacity installed in Europe. Sounds like a lot, but it’s not. Last year wind energy covered only 15 percent of power demand in the European Union. The EU has made it abundantly clear that renewables are the future:

• In 2019, the European Commission launched the Green New Deal, ushering in a new era in which economic growth is defined by the need to reduce our carbon footprint.
• With the European Climate Law, the EU went a step further and made climate neutrality by 2050 a legally binding target. The significance of that is undeniable.
• When Russia launched its war of aggression against the Ukraine, the EU took an additional step with its REPowerEU plan announced back in May 2022 – this time with a view to energy security and independence.

REPowerEU sets the target of 510 gigawatts wind capacity by 2030. To reach that target, the current volume of installed wind-power capacity will have to be nearly tripled. That’s the equivalent of providing electricity to 320 million homes within just eight years! The sheer volume of resources and raw materials needed to achieve not only that target, but the overall energy transition by 2050, is significant. But just how significant?

A closer look at the numbers

To find out, Siemens Gamesa carried out an analysis – the first of its kind in the industry – to calculate the exact volumes of materials and manufacturing capabilities the wind industry would need to meet the 2050 targets. The methodology behind the calculations was simple: The required energy was divided by wind-turbine* production capacity to determine the number of turbines needed. That number was then multiplied by the total number of resources and constituent parts that go into one wind turbine, resulting in a raw-material volume total.

Let me give you a few concrete findings: For the requisite onshore and offshore wind turbines, we would need 120 million tons of steel by 2050. That’s the equivalent of only six percent of a single year’s global steel production. Of copper, we need 1.3 million tons, which is five percent of one year’s production. The list goes on and includes aluminum, rare-earth metals, and many other materials.?

We would need 120 million tons of steel to meet the EU’s targets by 2050. That’s the equivalent of only six percent of all steel produced in a single year.

The wind industry’s current challenge is the backlog of such materials due to soaring energy, commodity, and transport prices. This comes as a result of the pandemic, skyrocketing inflation, and Russia’s war of aggression against the Ukraine. On top of that, you have the issue of geology. Several of the raw materials, such as rare earth metals, are available in only a small number of regions in the world, making them difficult to access. These are all challenges, but they can be overcome.

Coherent approach to account for raw materials and build competitive supply chains

Overall, the analysis offers a striking revelation: That the amount of raw material we need is, in fact, relatively low in the scope of overall annual production volumes. Despite this, we’re operating in an increasingly complex market environment.

The saturated markets, which include materials such as steel, aluminum, and copper, emerged rapidly in recent decades and remained stable until the seismic supply-chain disruptions of the last two years. Those disruptions have made it difficult to secure quantity at competitive prices.

Then you have the growth markets – carbon fiber, green steel, etc. – which need to be further developed in the coming years to provide enough capacity for the energy transition. We need strong policies that help channel investment into these growth markets so that they can ramp up production.

And lastly, there are the protected markets, which include the 17 known rare earth metals. These are only moderately abundant in the earth’s crust and are important for the wind industry, because they have unique properties that are critical to some offshore wind-turbine models.

The European wind industry is ready to build the wind turbines needed. But the capacity increase will require significant investments along all stages of the lifecycle, especially where raw materials are sourced. And we have to look beyond these individual markets to develop a coherent approach that applies to all raw materials. Otherwise, we’ll lose too much momentum in the energy transition. That’s why we’re asking policy makers to:

• Define auction volumes as soon as possible, to provide security for investments at predictable rates;
• allow auctions to account for price increases and qualitative criteria, such as CO2 emissions and diversified supply chains; and
• stockpile raw materials in a strategic and affordable way, to avoid market disruptions down the road.

These small, attainable policy changes will exponentially benefit the wind industry – and they are critical to achieving Europe’s targets. With just over 25 years to attain climate neutrality in the EU, the European wind industry needs strong and immediate support from policy makers. The time to build competitive and sustainable supply chains is now.

Investments in renewables result in virtuous cycles

Appraising the qualitative over the quantitative is important not only for the use of raw materials in the wind industry – but for the energy transition as a whole. Because renewables have an added output: their societal value . This can take many forms, but renewables commonly benefit local communities by stimulating local economic activity and long-term job growth. Renewables are occasionally criticized as being overly resource intensive when compared to other forms of energy generation. But this view is incorrect and overly simplistic. They are monetarily deflationary. Although there are initial upfront costs to install renewables, the long-term costs remain level or decrease over time. Fossil fuels, on the other hand, are inflationary. The more coal and oil are consumed, the scarcer and more difficult to extract they become, thereby raising commodity prices. Added to that are fluctuations in the economy, which are influenced by politics, wars, pandemics, and other supply chain disruptions. The wind and the sun, however, are a constant that we can rely upon.

In the past seven years, the generation capacity of offshore wind turbines has doubled – a rate of development and deployment only comparable with the IT industry. This speed of development will, over time, undoubtedly continue to lead to improvements that reduce the number of materials used in wind turbines.

Investments in renewables also result in virtuous cycles. Investments lead to innovations, resulting in greater generation capacity and lower costs, and thereby making renewable energy projects more attractive for investors. The cycle begins anew, leading to more innovation. That is why, in addition to investments in grid technology and storage, we need significant investments made along the entire wind-turbine product life cycle. And this begins with securing the constant availability of raw materials at fair prices.

* Calculations were based on the Siemens Gamesa 5.X SG 6.6-170 for onshore and the SG 14-222 DD turbines for offshore.