Published at http://www.ukerc.ac.uk/support/tiki-index.php?page_ref_id=1871

Dear All,

By way of a reply to Jeff’s short piece on Rare Earth Elements and in the hope that the UK takes a rational view on mineral supply chain policy I bring the following points to the table.

1. REEs are found at economic grades on 5 continents. We let China mine them because they have a peculiar deposit that has very little associated radioactivity. Yes, labour is cheap, but the price differential compared with, for example Australian deposits is mainly in the processing. Chinese artisinal miners can mine and partially process the ore from the Baotau deposit without worrying about the uranium and thorium minerals that come with REEs almost everywhere else in the world. We in the west don’t like to mine REEs because the come from ‘hot’ granites and we have to deal with the waste accordingly.
2. There is a credible suggestion that China has only kicked up a fuss over REEs because Greenland was equivocating over whether to allow development of its world-class mixed REE/uranium deposits.
3. REEs are not alone in being of concern to policy-makers. The wider minerals supply chain is currently being viewed through the lens of what should probably be known as The Critical Minerals Discourse. The USA, the EU, Japan and China have all put in place policy or are in the process of putting in place policy with regard to the minerals that each economic bloc feels are most critical under their own definitions. For the US supplies of minerals that it feels are necessary for military superiority are key, for the EU its economic stability but with a special reference to nuclear technologies, for Japan its metals necessary to drive its auto export industry and for China there is a real mix of developmental metals and high tech metals. The UK’s report was carried out from completely the wrong perspective and has little relevance to the global minerals trade.
4. So far the world has listed 34 minerals as ‘critical’. REEs are only one group. If there is a bubble every time a new piece of technology comes to the fore then we should prepare for many, many more bubbles. My bet for the next good bubble, on the basis of the energy technologies that I know are in the pipeline, is ruthenium. It’s a by-product of platinum processing but is currently mostly poured away with waste. Bubbles are no good for the mining industry because they inject uncertainty into future pricing. It takes 5-50 years to develop a mine and its difficult enough convincing investors to take a risk on metals prices without hyperinflation of specific products due to policy intervention or media hype. Everyone in the business knows that bad decisions get made in bubble conditions and mines funded in those times close quickly.
5. Larger miners are generally not interested in the kind of materials that are currently considered critical because the products are low volume and so relatively low profit. The smaller miners that we are relying on to bring us these critical minerals are therefore higher risk investments as they are usually undercapitalised.
6. Every report published on critical minerals in the last 10 years is wrong. The EU’s report is least wrong. They are wrong because they concentrate on the minerals critical to advanced manufacturing and not the minerals necessary to support a basic public infrastructure. This means that we have the ridiculous situation whereby food is deemed less important than magnets and shelter is seen as less critical than night-vision goggles. We have used REEs for less than 100 years. In less than 10 years they have apparently become more critical to survival than phosphates or aggregates. They are not and never will be as important to long-term human survival as fertilizer or building materials, and they will never be as important as copper is in technological terms. So please, a sense of perspective. If you really want to get into a justifiable panic do it over being able to electrify the world using copper wire, because there is a genuine risk that we will not be able to bring electricity to everyone for lack of the red metal over the next 50-100 years, but we have policies in the UK that allow or even promote disposal of large amounts of copper in preference to recycling.

A final note on the energy efficiency of metals cycles; recycling of critical minerals is underdeveloped in most cases and impossible in some due to their mode of use. REEs for example are mostly used in alloy or in mixed oxide form, so present a difficult recycling target, while other critical metals such as tungsten and cobalt are already recycled to a high degree because their uses are constrained in high value sectors and relatively pure forms. But as a sector the volumes of critical minerals are so low that energy efficiency in their supply chains is not as big a deal as it is in, for example aluminium, zinc, copper or nickel. For example, while the UK may boast a headline copper recycling figure of 80%, the vast majority of that metal recycled never makes it into product before it is shipped back to copper smelters to be re-formed into ‘virgin’ forms for re-use. So an individual copper atom may be shipped back and forth across the world 4 or 5 times before it actually gets used in a technology and the chances that it gets recycled after it has been embodied in a product is virtually nil. Only around 10% of ‘old scrap’ copper is recycled in the UK and the figure is similar across Europe once you dig through the rhetoric.

The urban mining movement has a potential economic value of over $50bn per year in copper and gold alone and yet we export end-of-life products and e-waste to China by the shipload. Contrary to received wisdom China is currently the leader in e-waste recycling, both by value and technology, and is publishing paper after paper on the automation of that process. We are their mine for this raw material and they get it at knock-down prices because we have the wrong end of the stick with regards to its value. So in my mini-polemic I plead for a rational view on minerals, their supply chains and their use. Be concerned over mineral supplies, but be concerned over those supplies that actually matter not the ones where you have a choice over whether they matter or not. Your definition of ‘critical’ minerals defines you.

Update:
A Reuters piece on the same subject

They’re a proliferation risk.
They’re a cost-effective, low-carbon, utility-scale alternative to coal.
They’re unproven and dangerous.
They are old technology and a known risk.
They produce radioactive waste that is just as bad as any big nuclear plant.
They have the potential to bring fresh water to arid parts of the world.

As far as I can tell these are the main rhetorical positions for and against the development of the nuclear mini-reactor. If I’m missing anything let me know.

Lets take a look at each in turn.

They are a proliferation risk – the argument is that by multiplying the number of nuclear installations, the number of nuclear-savvy engineers and scientists, and the amount of nuclear material transported around the world you are multiplying the risks associated with that material or its derivatives becoming accessible to ‘the bad guys’.
That makes absolute sense from a numerical, risk-based approach. No system is 100% reliable (that includes security and accounting systems), so doubling the volume should increase the risk by a commensurate amount.
But there is the counter argument that by making these reactors one-shot, non-refuellable sealed units the degree of risk drops when compared to the current macro-reactors. We should also consider whether building 50-year life-span installations is inherently more or less secure than building multiple 10-20 year installations that employ a restricted set of technologies.
There appear to be two main, credible proliferation risk points; fuel enrichment and waste handling/reprocessing. By centralising both to the mini-nuke manufacturers surely you are bringing together those risk vectors and making them more manageable.
There are some benefits to building strong communities around our critical infrastructure rather than commoditizing it. After all its got to be better to have thousand families worth of eyes looking out for security risks rather than a thousand pairs of eyes, who frankly should be concentrating on the work itself. Whether that is best done by centralisation of reactor manufacture or centralisation of power production I couldn’t say, but what I do know is that community support is necessary for either and it carries benefits past simply providing the workforce.
I’m afraid that the argument that some bad guys will come along and rip a mini-reactor out of the ground and whisk it away to play with is simply not credible for the majority of designs that are around right now. Most of the installations are still 50 tonnes plus for the body of the reactor and they tend to be surrounded by thick concrete walls.

They’re a cost-effective, low-carbon, utility-scale alternative to coal.
Well that’s just wishful thinking right now. Until someone gets their design through the nuclear regulators and actually builds one we simply can’t know that for sure. Certainly the 10-50MW size is a really convenient bracket to sell within, but local conditions and regulations will have a massive say in whether they are cost-effective or not.
For example a 30MW reactor in the Australian outback might be just what the mining industry needs in order to get away from using diesel to extract nickel, so reducing the full-cycle emissions profile of electric vehicle using nickel-hydride batteries, but Australia doesn’t currently permit civil nuclear power generation so to be the first company to take that challenge on will probably not result in black ink on the bottom line.
Alternately if we look at somewhere like Japan, where the civil nuclear industry is very advanced, why would they bother with tiny reactors ? Their electricity grid is advanced and ubiquitous. They have decades of experience in all steps in the civil nuclear cycle. They might want to develop mini-nukes as an export route but I doubt that they will be using many themselves.
So we need to be careful about blanket statements regarding costs, but that’s the same for all power generation.
Low carbon ? Well, that depends on who’s life cycle assessment you believe, but I think that it is credible that our current 50-year lifespan reactors are low carbon when compared to most power generation technologies, including renewables.
An alternative to coal ? It depends on your application. If you are a blast furnace that can site next to a remote iron ore mine, yes that’s almost certainly true. Reduced transport emissions alone will make a big dent in the total emissions pattern. But for an urban centre where demand is cyclical a nuclear reactor is not a good fit on its own, irrespective of the size. Nuclear reactors work best to provide a steady base-load because they can’t be switched on and off and back on again in the same way as coal or gas. They’re not alone here. Renewables have a similar issue with intermittency and both would need some form of back-up or storage to provide electricity with a domestic demand profile.

They’re unproven and dangerous.
It depends which design you are talking about here. Certainly some of the new modular mini-nukes are unproven. Bill Gate’s travelling wave reactor certainly is, but you can’t simply equate unproven with dangerous. You can equate degree of proof with degree of risk and I’d back you on that, but a rhetorical position that lack of proof of safety is proof of lack of safety is just nonsense.

They are old technology and a known risk.
Again it depends on which technology we are talking about. But simply saying its old stuff isn’t actually that reassuring. For example the Russians are proposing a simple re-use of nuclear submarine reactor technologies with a lead-bismuth cooling system. Apart from the number of boats they lost, that’s a really toxic mix to be using as coolant and it doesn’t inspire confidence. Its old and known, but unacceptably high risk to many people. Of course just using the word nuclear implies an unacceptably high risk to some.

They produce radioactive waste that is just as bad as any big nuclear plant.
No denying that.
Well, unless the newer technologies are used. The problem is that the fuel cycles used in most current commercial reactors are variants of the cold war fuel cycles designed to produce plutonium for bombs. Not all nuclear reactions that can be used to produce excess heat in a controllable manner from readily available fuels produce plutonium as an end-product and even those that do can be tweaked to produce more or less.
This is essential a question of perception. If you believe that all radioactive waste is equal then it doesn’t matter about the efficiency of the fuel cycle, or what fuel it uses, or what the waste products are and there is no argument that the size of the reactor is about as relevant as its colour. If however you apply a risk-based approach, then not all waste is equal (the current situation under most legal jurisdictions) and there is a valid argument that fuel cycles designed for purely civilian uses can be less harmful than in the past.
But you can’t have both. You can’t argue that some power-generating techniques are less risky than others (on the basis of emissions or pollutants, or economics or whatever) except nuclear which is just plain bad.

They have the potential to bring fresh water to arid parts of the world.
The water argument is an interesting one and one that makes a lot of people very nervous. Nuclear reactors use vast amount of cooling water in their current form and what is being proposed is that they are used for desalination in order to take advantage of this Hey presto ! You have a double-edged sword against poverty and hunger. Power and fresh water provided in areas currently without either. The big problem being that areas without power & water generally don’t have effective government either.
There is no doubt in my mind that the world needs more of both, but whether dropping a mini-reactor onto the coast of Somalia is the best way of achieving that compared with more conventional development mechanisms. I dunno. Historically its been big hydro that carried out this function, but the number of rivers large enough to make a difference is going down compared with the amount of disputes between upriver and down-river water users which seems to be going up.

So what have we learnt ? Not that much because until someone actually gets through licensing with one of these things we’re just not going to get a good look at the economics. Apparently the licensing will cost over $100m in the US. Separate for the EU and anywhere else that might want to buy one. If they are $25m a unit with a 10 year life whoever builds them is going to need a hell of an order book to build a self-sustaining business.

For what its worth I don’t think that mini-reactors will be cost effective in ‘normal’ urban or industrial environments, areas that have grid power already. What they could be really good at is driving down costs of things like mining or oil refineries so that we don’t have to transport dead weight three times around the world before we use it. We make the product or a semi near the primary resource and ship those instead.

So the UK Conservative party want to build a Green Investment Bank to consolidate all the funding functions currently held by bodies such as The Carbon Trust and the Marine Renewables Deployment Fund.
Fair enough, seems like a good idea. Use ISAs to fund it ? Again, no objections there.

Here’s what it needs to be successful;
A strong research department.

That’s it. Nothing else. Just a set of market savvy investment analysts to make sure that the technologies and projects that are being invested in are not complete trash. It won’t be able to afford the best brokers or indeed the best analysts, but then its aim is not to outperform the market. It would be good for the country if it did, home-grown profits count double in this game, but there is no shareholder imperative to work against (or indeed with) so fiduciary responsibility is replaced by electoral responsibility.

The analysts need to have cross-sectoral visibility so that they are not working against each other but apart from that nothing special needs to be in place, except some independent oversight to build confidence in the market that these are kosher companies with realistic chances of commercial success.

Of course if the worst happens and all its investments come to nought, that could be a lot of cash that the govt has to refund to the ISA holders, but presumably there will be some form of hedge against catastrophic loss.

We’ll have to wait and see what Labour’s equivalent looks like when the last pre-election budget is announced on Wednesday, but Reuters is reporting a £2bn investment fund with half from assets sales and half from private investment. I’m sure that there will be more detail than that, but if Alistair Darling’s announcement conforms to the leak, sorry briefing, then it really isn’t very imaginative. Its just another pot of cash with another set of criteria. £2bn isn’t enough to kick-start any major infrastructure projects (the super grid is estimated at around £30bn, the high speed rail at £30bn and each of the 8-12 new nuclear reactors is supposed to be around £5bn (very roughly)), so you have to ask where is this money aimed at ? We’ll find out on Wednesday I suppose.

Monbiot vs Delingpole

March 5, 2010

As is my want in these cases, no comment on content as Monbiot and Delingpole have a quick tussle on BBC’s The Daily Politics (unusually a distinctly right-leaning BBC show)

Interesting presentation by Jeff Rubin at the Business of Climate Change conference in Toronto in Sept 2009
Its 45 mins long, but well worth it to see how an experienced (and charismatic) financier sees the issues connecting energy, trade and globalisation. I think his timings are wrong, but otherwise its a reasonable reading of a potential future.

You’ll note that he never once mentions energy independence, only alludes to energy security but never uses the phrase, and speaks about the development of regional economies as oil costs erode labour price advantages currently experienced by emerging economies. Don’t misunderstand, its all about energy security, but he doesn’t fall into the rhetorical trap of invoking overtly nationalistic tendencies. He uses protectionist measures (carbon tariffs) to get to his view, coupled with internal carbon pricing, but everything is in believable economic terms.

If we consider Canada, and specifically British Columbia (BC), as a thought experiment in this context its interesting to see the North American western seaboard as an emerging power in Rubin’s new re-jigged, less global economy. Yes, there is a focus on resources for export in BC, but with the amount of hydropower and BC’s commitment to zero carbon electricity there may well be a competitive advantage to base a regionalised economy along that seaboard, with population and industrial centres served by natural resource flows north and south of the 49th Parallel.

Apart from BC, the combined regional energy policies are supportive of a low-carbon transition with gubernatorial and state-level initiatives favouring low carbon energy sources in California, Oregon and Washington State. A cursory reading of their respective policy positions shows that energy independence is not a rhetorical standpoint that is used strongly, except by the Governor of Oregon. There are good (and reasonably obvious) reasons for this. BC and Washington State have excellent hydro power resources, and both have potential to raise the electricity production from small and medium-sized hydro. This reduces their dependence on energy imported from outside the region. California is known for its innovative technology and progressive policies in the energy field, so has much to gain by driving a new industrial sector.

But lets take a step back to Jeff Rubin’s point about localising production of goods. That implies localising non-energy natural resource production as well as energy. The western seaboard is in an enviable position to do this. Pretty much every kind of natural resource can be found in this part of the world; timber, fish, metallic ores, agriculturally productive land. As a region it’s got it all. But !

But on its own BC doesn’t have a large enough consumer-base to support a fully vertically integrated economy. Apart from the 3 million folks in the Vancouver area, its mostly forests and mountains. Likewise it doesn’t have the full range of agricultural products that most of us have come to expect in the last few decades, due to its climate. It has an excess of low-carbon power and raw materials (and no shortage of ingenuity). It could be energy independent, but it would end up paying over the odds for the food and manufactured goods that it seems likely would be produced in California in this new regional emergent economy. The binding cross-border factors could be water and electricity, but BC should also look at processing of those raw materials to add value to them prior to export.

So an internal drive to a progressive energy policy fits with a regional strategic economic vision. Energy security is allied with food and water security and internal economic coherence.

I think I’ve just convinced myself to move to Vancouver ;)

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