Access to critical raw materials has become a new sphere of economic competition and a frequent point of leverage in trade wars. It’s no exaggeration to say that in 2025, an agreement for critical mineral resources could reshape the structure of international relations. The negotiations between the U.S. and Ukraine for a security arrangement founded on joint resource ownership will shape relations among the U.S. and all of its European partners, between the U.S. and Russia, and therefore among the major powers of the world. It’s not a specific outcome that anyone would have expected two years ago, but we shouldn’t be totally shocked. The energy transition and the advanced equipment of the future require new materials, especially critical materials.
In this new era, some regions find themselves blessed with ample resources, while others must make do with minimal natural reserves. By most measurements, the EU has the fewest reserves of critical minerals. EU leadership has been active in developing policies — most notably the European Economic Security Strategy and the Critical Raw Materials Act — to address this multilayered challenge of economic resilience. Yet, the EU’s sophisticated plans to promote competitiveness and build international partnerships lack the crude efficacy of the Trump administration’s bold resource grab in Ukraine.
The good news for the EU, however, is that the history of shortages is also a history of innovation. For private companies navigating scarcity, there is a full toolkit of innovation approaches to mitigate supply risk and put future growth on a foundation of resilience. To better understand the outlook for particular companies and their product portfolios, and to connect those specific material risks to the right solutions, Lux Research developed a Raw Materials Criticality Framework. The analysis features a composite measurement of supply risk with a measurement of the future supply/demand balance (or imbalance). What can we learn from applying the framework to core components of the energy transition?
Figure 1. Lux’s Raw Materials Criticality Framework applied to solid oxide electrolyzers, highlighting Supply Risk and Criticality of rare earth elements (REEs).
For equipment like water electrolyzers that rely on REEs, the key issue is supply volatility; REE production is concentrated in very few countries, and those countries tend to have weaker governance. It’s not only companies’ operations teams that can mitigate this type of risk. R&D and innovation groups also should combat this volatility by cultivating novel sources. Valorizing critical minerals in industrial waste is a great starting point and a major thrust of innovation activity at present. For example, Latrobe Magnesium is scaling up a novel process to harvest the magnesium in fly ash, the main byproduct of coal-fired power plants. Beyond these near-term efforts, it’s wise to consider high-risk, high-reward bets for technical innovation. Deep-sea mining is one such opportunity. Although policy barriers and environmental concerns now stand in the way, advances in robotics and AI could enable a more environmentally friendly way to extract the trillions of dollars of minerals on the ocean’s floor in the upper layers of crust.
Figure 2. Lux’s Raw Materials Criticality Framework applied to monocrystalline silicon PV, highlighting Supply Risk and Criticality of silver.
For many base metals and specialty metals, the key issue is the gap between current production volumes and the anticipated need for these metals in a net-zero-energy scenario. For example, the need for silver to deploy solar photovoltaic (PV) power at this massive scale would represent about 80x annual silver production. It may be impossible to fully close that gap, but an innovation strategy centered on recycling would help address such challenges. Circular manufacturing and design for disassembly are complementary approaches that have not received sufficient attention. To make circularity a reality, business model innovation will pay real dividends — often, it’s the collection phase that’s the bottleneck to circularity. For example, Ascend Elements partnered with the GreenTraxEV software platform to develop a robust EV battery recycling value chain. Organizing consortia with the right incentives will facilitate collection and recycling.
Navigating an environment of volatile and scarce raw materials is daunting, but innovators can adjust their strategy to enhance resilience. To learn more about the innovation approaches that can mitigate supply risks, tune in to our webinar “Risk and Criticality: Innovating for Raw Materials Security” on April 1.
