Grand plans for global energy are under threat - but from unexpected sources

The Times
November 29, 2008
Leo Lewis, Asia Business Correspondent

The tempting dream that global recession may be vanquished by a worldwide push into green technologies is threatened by a powerful international army of foes: Chilean salt lakes, German ball bearings and Japanese ingots.
The critical role of these three has, until now, been largely ignored: expansive national schemes and grand political pronouncements have been crafted worldwide on the assumption that the engineering and chemistry behind those bold alternative energy plans would take care of themselves.
That, industry veterans say, may have been wishful thinking.
Without this trio of resources, Europe and Asia's ambitious plans to build dozens of nuclear power plants, China's dream of giant wind farms and America's hopes for the electric car could be, at best, delayed and, at worst, dashed entirely.

The cracks in the future supply of the “picks and shovels” of green technology, scientists and financial analysts argue, have begun to show. In the case of lithium, the metal on which the vision of the electric car is based, the level of worldwide reserves may prevent more than a few tens of thousands of units of the hotly anticipated Chevrolet Volt ever being produced.
Since the commercialisation of lithium ion batteries in the early 1990s, production and use of the technology has soared. The metal - difficult to extract and with reserves skewed to certain pockets of South America - has been seized on by the global electronics industry as the answer to its prayers. The power of the lithium battery drives personal information technology, from iPods and mobile phones to laptops and BlackBerrys.
Between 2003 and 2007, industrial demand for lithium doubled and now consumption stands at about 80,000 tonnes a year: give or take 18 months of global downturn, the growth rate for lithium demand is soon expected to return to about 25 per cent per year.
However, some experts say, the present calculations of lithium reserve usage do not take sufficient account of the potential demand from the car industry if it truly plans to convert the world to cleaner, emission-free electric cars. The sort of batteries large enough to power a car use about 100 times more lithium than a laptop and, according to William Tahil, research director of Meridian International Research, there is not enough commercially extractable lithium in the world to meet the sort of demand implied if motoring goes electric.
By his calculations, world reserves of lithium - that is, the quantity that can be extracted economically - are about four million tonnes. Mr Tahil told The Times that production of lithium cannot possibly be expanded to meet the ambitions of the car industry. Even highly productive lodes of the material, such as the deposits at the Salar de Atacama salt lake in Chile, may be past their peak already.
Although Mr Tahil's warnings are not universally accepted by industrial users and producers of lithium, actions speak louder than words. Toyota is said to have scrapped plans to use a lithium battery in its 2009 Prius hybrid and will stick with the heavier, less efficient, nickel battery. The company said recently that it did not believe that future lithium supply would be able to sustain the dual demands from the electronics and car industries.
Another of the cornerstones in the world's attempt to wean itself off fossil fuels has been the belief that nuclear power could be ramped up substantially. If all the plans for new nuclear generators are totted up, the World Nuclear Association has said that an additional 237 reactors will be built over the next 21 years.
The only snag with that plan lies in the island of Hokkaido and in a century-old steel forge that produces 80 per cent of the world's reactor cores - a highly specialised piece of steel, milled from a single 600-tonne ingot, which only a few companies in the world can handle. Nearly two years ago, the nuclear industry started to get worried: Japan Steel Works (JSW) was able to churn out only four of these reactors a year, far, far below the demand implied by the politicians' promises and considerably lower than the biggest players in nuclear - Areva, of France, and Toshiba, of Japan - were at all happy with.
JSW accepted that there was a problem and said that it would invest heavily to ramp up production to 8 cores per year. But that will still not be enough to meet implied demand: JSW has an overstuffed order book that stretches decades out and the tussle to win spots near the front of the waiting list has turned ugly, according to some reports. Toshiba, Hitachi and Mitsubishi all hold stakes in JSW in what is understood to be an “ongoing gesture of goodwill” to the steelmaker.
In a move that analysts said revealed the extent of the desperation in Europe, Areva struck a deal with JSW this month for long-term purchase agreements and bought a 1.3 per cent stake in the company. JSW has said that it might be able to produce 12 reactor cores per year by 2011. Nuclear industry insiders told The Times that JSW's virtual monopoly was still the “biggest, most overlooked bottleneck” for a nuclear renaissance.
Where the nuclear industry is confronted by the complexities of handling very large hunks of specialised steel, the wind-power industry, especially in China, faces a technology bottleneck on a far smaller scale: it cannot lay its hands on enough gearboxes and the German ball bearings that keep them rolling. As one of the most important components in a wind-turbine generator, and the second most costly after the supporting tower, gearbox supply issues feature heavily in the industry's growth plans.
The component shortages are particularly acute. In the past, leading turbine makers invested heavily to secure the supply chain, buying up the gearbox makers, but that has still not solved the issue. Simon Powell, of CLSA Asia-Pacific Markets, said that although the financial crisis had mildly alleviated the imbalance of supply and demand in wind power, the gearbox and bearings shortage could last for another two years.