Critical minerals shortage threatens EU energy transition

Europe’s clean energy future depends on critical minerals, but supply gaps and weak recycling threaten progress, writes Derarca Dennis

Slices of green geodes

Critical raw materials such as lithium, copper, nickel and cobalt are the backbone of modern energy systems. These minerals power wind turbines, batteries and solar panels, driving the move towards cleaner energy.

As countries transition from fossil fuels and scale up renewable energy generation and storage, demand for these materials is accelerating. And, with demand, comes the question of supply: do we have enough of these raw materials to complete this transition?

Europe’s clean energy plans depend on materials it doesn’t produce at scale. With domestic supply falling short, Europe is increasingly reliant on imports from developing regions.

To address this, the European Commission introduced the Critical Raw Materials Act, with targets for 2030: 10 percent extraction, 40 percent processing, and 25 percent recycling.

Without secure access to these materials, the momentum behind low-carbon energy systems may slow and the path forward could become uncertain.

Critical minerals in the energy sector: what is the issue?

The EU relies on imports for the parts that power its clean energy systems. More than 60 percent of solar PV modules come from outside the EU, with over 20 percent from China. Domestic production covers just four to seven percent of what’s needed to meet 2025 targets.

This reliance on imports makes it harder for the EU to meet its goal of becoming carbon neutral by 2050. The gap between ambition and supply is growing.

Energy systems still lean heavily on fossil fuels

In Ireland, around 53 percent of electricity labelled as renewable is backed by non-renewable sources. Wind makes up most of Ireland’s renewable capacity at 86 percent, followed by hydropower at nine percent and solar at just under five percent. Investment is growing, but one question remains: how will we build the infrastructure if we run short of essential materials?

Critical raw materials are virtually irreplaceable in solar panels, wind turbines and electric vehicles, and yet few solutions exist to ensure their circularity. These materials are finite, and up to 48 of them have been labelled essential in renewable energy systems. The demand for these critical materials is expected to increase by up to six times by 2030 and up to 15 times by 2050 (in addition to current EU consumption in the most severe scenario).

Access to critical minerals will shape the cost, scale and pace of the energy transition, and may fundamentally constrain it. These critical materials for the energy transition include:

  • Copper – essential for electricity networks fed by solar photovoltaic (PV) and wind energy.
  • Cobalt – primarily used in electric vehicles and other battery storage.
  • Lithium – crucial for steady state battery storage.
  • Nickel – used in various low-emission power generation technologies and stainless-steel manufacturing.
  • Rare Earth Elements – vital for wind energy and EV motors.

Proposed solutions

Circular practices are essential to address the scarcity of critical materials in renewable energy. This demands systemic innovation collaboration across sectors:

  • Manufacturers: redesign products for disassembly and reuse.
  • Processors and retailers: invest in circular business models.
  • Regulators: incentivise resource recovery and end-of-life management.

Regulators are starting to push for material recovery, particularly through schemes like Extended Producer Responsibility that include waste electrical and electronic equipment as an identified sector for regulation.

However, we have not seen sufficient incentives and grants to support the establishment of recycling businesses and infrastructure capable of reclaiming critical raw materials at the required scale.

When a wind turbine breaks down, there are limited options for dismantling and recycling. The clear gap between national recycling systems and renewable energy equipment is slowing progress. Engineering and recycling industries need to collaborate, with stronger rules needed to ensure clean-up and recovery at the end of a project’s life.

There is also scope for stronger rules for renewable energy projects. These would require companies to clean up sites when the equipment is no longer useful and to recover important raw materials from the old equipment.

Recyclers also face technical challenges. Critical materials are embedded in components that traditional sorting systems can’t separate, demanding new solutions.

Keeping momentum

The energy transition relies on critical materials as much as it does on clean technology. Circular economy principles offer a way to manage those resources through smarter design, reuse, and recovery.

As demand grows, supply risks could slow progress. To keep momentum, energy systems must be built with long-term resilience and material stewardship in mind.

Derarca Dennis is Assurance Partner and Sustainability Services Lead at EY