Record deployment of clean energy technologies such as solar PV and batteries is propelling unprecedented growth in critical minerals markets, according to a new report by the International Energy Agency (IEA).

The market for critical minerals that help power electric vehicles, wind turbines, solar panels and other technologies key to the clean energy transition has doubled in size over the past five years, says the report.

The first annual IEA Critical Minerals Market Review shows that the energy transition is unlocking huge demand for minerals such as lithium, cobalt, nickel and copper.

From 2017 to 2022, the energy sector was the main factor behind a tripling in overall demand for lithium, a 70% jump in demand for cobalt, and a 40% rise in demand for nickel.

The market for energy transition minerals reached $320bn in 2022 and is set for continued rapid growth, moving it increasingly to centre stage for the global mining industry. The 2022 level was broadly similar to the market size for iron ore mining.

The market is responding. Investment in critical mineral development rose 30% last year, following a 20% increase in 2021. Among the different minerals, lithium saw the sharpest increase in investment, a jump of 50%, followed by copper and nickel. The strong growth in spending by companies on developing mineral supplies supports the affordability and speed of clean energy transitions, which will be heavily influenced by the availability of critical minerals, said IEA.

In 2022, the share of clean energy applications in total demand reached 56% for lithium, 40% for cobalt and 16% for nickel, up from 30%, 17% and 6% respectively five years ago.

“At a pivotal moment for clean energy transitions worldwide, we are encouraged by the rapid growth in the market for critical minerals, which are crucial for the world to achieve its energy and climate goals,” said IEA’s executive director, Fatih Birol.

“Even so, major challenges remain. Much more needs to be done to ensure supply chains for critical minerals are secure and sustainable. The IEA will continue its early leadership in this space with cutting-edge research and analysis – and by bringing together governments, companies and other stakeholders to drive progress, notably at our Critical Minerals and Clean Energy Summit on 28 September,” he said. The summit will be in Paris.

If all planned critical mineral projects worldwide are realised, supply could be sufficient to support the national climate pledges announced by governments, according to the IEA’s analysis. However, the risk of project delays and technology-specific shortfalls leave little room for complacency about the adequacy of supply. And more projects would in any case be needed by 2030 in a scenario that limits global warming to 1.5 °C.

Diversity of supply also remains a concern, with many new project announcements coming from already dominant countries. Compared with three years ago, the share of the top three critical mineral producers in 2022 either remained unchanged or increased further, especially for nickel and cobalt.

Additionally, environmental, social and governance (ESG) practices are making mixed progress. Companies are making headway in community investment, worker safety and gender balance. However, greenhouse gas (GHG) emissions remain high, with roughly the same amount emitted per tonne of mineral output every year. Water withdrawals almost doubled from 2018 to 2021.

The affordability and speed of energy transitions will be heavily influenced by the availability of critical mineral supplies, said the report. Many critical minerals experienced broad-based price increases in 2021 and early 2022, accompanied by strong volatility, particularly for nickel and lithium. Most prices began to moderate in the latter half of 2022 and into 2023 but remain well above historical averages.

Countries are seeking to diversify mineral supplies with a wave of new policies such as the European Union’s Critical Raw Materials (CRM) Act, the US’ Inflation Reduction Act (IRA), Australia’s Critical Minerals Strategy and Canada’s Critical Minerals Strategy. Even so, globally export restrictions on critical raw materials have seen a fivefold increase since 2009.

Investment in critical minerals development recorded another sharp uptick by 30% in 2022, following a 20% increase in 2021. Companies specialising in lithium development recorded a 50% increase in spending, followed by those focusing on copper and nickel. Companies based in China nearly doubled their investment spending in 2022.

Exploration spending also rose by 20% in 2022, driven by record growth in lithium exploration. Canada and Australia led the way with over 40% growth year on year, notably in hard-rock lithium plays. Exploration activities are also expanding in Africa and Brazil. Lithium stood out as a clear leader in exploration activities, with spending increasing by 90%.

Uranium also experienced a significant surge in spending by 60% due to renewed interest in nuclear power amid concerns over Russian supplies. Nickel was a close follower with a 45% growth rate for exploration, led by Canada where high-grade sulphide resources, proximity to existing infrastructure and access to low-emissions electricity create attractive investment opportunities.

Despite headwinds in the wider venture capital sector, critical minerals start-ups raised a record $1.6bn in 2022. The 160% y/y increase took the critical minerals category to 4% of all venture capital funding for clean energy.

The battery sector is undergoing transformative changes with the emergence of new technology options. And in a bid to secure mineral supplies, automakers, battery cell makers and equipment manufacturers are increasingly getting involved in the critical minerals value chain.