The transition to clean energy is facing a significant challenge in the form of a shortage of critical minerals such as lithium, cobalt, nickel and graphite.
These materials are essential for technologies like electric vehicles and battery storage, but current supply levels are struggling to keep up with soaring demand. If this gap remains unaddressed, it could slow the progress of the global energy transition.
To limit global warming to 1,5 degrees Celsius, global clean energy investments must reach nearly $4,5-trillion annually by 2030[. In 2023, spending on renewable energy totalled $1,8-trillion, which aptly illustrates the scale of the challenge.
“Technological innovation is a key driver of this transformation, but new advancements also bring new risks, exposures and the need for tailored risk management strategies. Many renewable energy developers are adopting emerging technologies with limited historical data, increasing the need for risk assessment and mitigation,” says Magda Boom, account executive: construction & engineering and renewable energy projects at Aon South Africa.
Key factors driving the gap include:
- Rising demand for critical minerals: The rapid expansion of clean energy technologies is pushing demand for essential battery materials to unprecedented levels.
- Limited supply and geopolitical risks: These minerals are concentrated in a few regions, making the supply chain vulnerable to disruptions.
- Challenges in mining expansion: Environmental concerns, complex permitting processes and long development timelines hinder efforts to increase mineral production.
Some potential consequences are:
- Price volatility: Supply shortages can cause significant price fluctuations, affecting the cost of clean energy technologies.
- Slower energy transition: If supply cannot keep pace with demand, progress toward a clean energy economy may stall.
To address these challenges, stakeholders must take proactive steps to bridge the gap. This can be achieved by:
- Increasing investment in mining and exploration to expand supply.
- Enhancing recycling and reuse technologies to recover valuable minerals from end-of-life batteries and other products.
- Developing alternative battery technologies that reduce reliance on scarce minerals.
- Fostering international collaboration to build resilient and stable supply chains.
Investment in research and development can accelerate the deployment of reliable and cost-effective renewable energy solutions. Innovations like sodium-ion batteries and hydrogen-based direct reduction processes are helping businesses lower capital costs, improve safety and reduce project risks — while advancing a greener future.
The insurance industry has a role to play. “By offering longer policy terms beyond the traditional annual renewal cycle, insurers can help unlock capital for clean technology investments. Currently, many emerging clean technologies are not viable at scale due to uncertain long-term insurability, creating financial barriers. Ensuring stable and predictable coverage could encourage investors to back more projects, accelerating the energy transition,” says Boom.
Supply Chain Logistics: A Persistent Hurdle
Supply chain vulnerabilities are another major challenge in the clean energy market. Despite global efforts to expand renewable energy infrastructure, supply chain disruptions can delay projects and increase costs. These issues are even more pronounced in international projects, where sourcing materials from multiple countries adds complexity.
A shortage of specialised equipment, such as installation and maintenance vessels for offshore wind farms, has further strained supply chains. “Delays in obtaining critical components can extend project timelines and increase financial risks.
“Additionally, competition among economic powers for the same resources has intensified supply chain constraints. It is essential for the market to firm up on supplier framework agreements and to find a way to standardise technology in the space to increase flexibility and resilience in the market,” Boom explains.
The Talent Conundrum: Meeting Workforce Demands
As renewable power capacity expands, the industry faces a growing challenge in attracting, upskilling and retaining the right talent needed in a growing market. According to the World Economic Forum, global energy jobs have grown by over 5 million since 2012, reaching 12,7-million. However, the clean energy transition will require another 10,3-million workers by 2030.
“Inflation and high demand for specialised skills have driven up salaries in addition to organisations exploring added benefits such as bonuses to appeal to the talent market. Navigating this complex talent market is reshaping recruitment strategies in the face of an ageing workforce, fierce competition for The insurance industry is poised and able to support renewable energy businesses in navigating new risks while also providing employee benefit solutions that meet the needs of a growing market. talent and an evolving society,” says Boom.
To sustain growth and meet emerging workforce needs, the renewables sector must build a resilient talent strategy. This includes developing strong employee value propositions, offering meaningful career development opportunities and fostering a workforce equipped with the skills necessary for the clean energy transition,” she adds.
The Role of Insurance in Managing Risk
By adapting insurance models to cover emerging risks and providing long-term stability, insurers can play a critical role in closing the gap in the energy market.
“By addressing these supply, investment and workforce challenges, the renewable energy sector can drive a more sustainable and secure transition toward a clean energy future,” Boom concludes.
[2] https://www.un.org/en/climatechange/raising-ambition/renewable-energy#:~:text=In%20comparison%2C%20about%20$4.5%20trillion,environmental%20benefits%20of%20renewable%20energy.