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Can the white gold of the Rhine drive Germany’s green e-car race?

By Michael Nienaber

BERLIN (Reuters) – Faced with rapidly increasing demand from the German electric vehicle industry, energy and mining companies are trying to bring lithium, trapped in underground springs with boiling hot water thousands of meters below the Rhine, to the surface.

The Upper Rhine Valley in the Black Forest in southwest Germany extends over an area of ​​300 kilometers in length and up to 40 kilometers in width and, according to estimates by geologists, contains enough lithium for more than 400 million electric cars, the largest deposits in the world.

This could reduce the dependency of the German automotive industry, also based in southwest Germany, on imported lithium, and talks are ongoing with the automakers at an early stage.

Skeptics, however, are questioning the economy and are also concerned about possible local opposition, which may be louder in densely populated Europe than in remote Australia or the deserts of South America, from which lithium has previously been supplied.

The staunch German-Australian start-up Vulcan Energy Resources says it can deliver climate-neutral lithium based on geothermal energy that will be used by up to five planned power plants.

The German energy supply company EnBW already has geothermal power plants and is investigating whether lithium can be a profitable by-product.

“The lithium deposit we are talking about is gigantic and its properties are ideal for our goal of producing high-quality lithium on a large industrial scale in Germany,” Horst Kreuter, co-founder of Vulcan Energy Resources, told Reuters.

The company plans to invest 1.7 billion euros (2 billion US dollars), of which it has so far raised around 75 million euros, in the construction of geothermal power plants and facilities for the production of the lithium.

By 2024, 15,000 tonnes of lithium hydroxide could be produced per year at two locations. In a second phase from 2025 onwards, 40,000 tons per year are to be extracted at up to three additional locations.

The story goes on

Kreuter says he is already in talks with cathode and battery manufacturers as well as the auto industry.

He has strong backing from Hancock Prospecting, led by Executive Chairman Gina Rinehart, one of Australia’s leading investors.

In a statement emailed by Hancock Prospecting, Hancock said it was focused on lithium projects with “the potential to produce a high quality product at a competitive cost” and was helping Vulcan develop a pilot plant.

WHITE GOLD

As part of the batteries needed for a low carbon economy, lithium is often referred to as white gold.

But its economy has a checkered history. Projects have often lagged behind schedule and the price has been volatile depending on supply shortages and flooding.

Prices have risen this year as demand from the electric vehicle sector has started to outpace supply.

Kreuter predicts that lithium will be able to hold a price that is at least equal to the current level.

“Internally, we expect a market price of USD 13,000 per tonne of lithium hydroxide by 2025,” said Kreuter, adding that extraction costs in Germany would be “far below” this level, without being more precise.

The European Union is relying on electric vehicles to achieve its climate goals. Last year lithium was added to the Critical Raw Material List and a supply guarantee plan was put in place in support of a green recovery.

The European Commission, the EU executive, has estimated that Europe would need up to 18 times more lithium by 2030 than it does now and 60 times more by 2050.

So far, most of the lithium has been imported from the area of ​​South America known as the lithium triangle, where it is produced by evaporation from salars or salt flats.

Australian hard rock lithium relies on energy-intensive processes to extract it, in addition to the carbon costs of shipping it around the world.

In Europe, Portugal is the largest producer of lithium, but its miners sell almost exclusively to the ceramics industry and are preparing to produce the higher quality lithium needed for batteries.

GEOTHERMAL

Because of the connection between lithium production and geothermal energy in Germany, proponents say this is guaranteed to be an environmentally friendly solution, although geothermal itself has critics.

Geothermal drilling in 2007 caused the underground layers of plaster to swell, so that houses in Staufen, a picturesque village in the Black Forest, were raised and damaged.

Thomas Koelbel, an expert in geothermal energy at the energy supplier EnBW, who plans to mine lithium in an existing plant in the city of Bruchsal, also in the Black Forest, said the company had done everything to prevent local resistance.

“With our plant in Bruchsal, we have shown that there are no additional noise-polluting neighbors. There are no emissions at all,” he said.

EnBW estimates that 900 tons of lithium could be extracted per year at the Bruchsal site. It is expected that lithium will be produced from a prototype for testing purposes towards the end of the year and a final decision on the feasibility of the project will be made by 2024.

Auto industry shows early interest

Some investors are reluctant because they have doubts about how quickly the commercial extraction of lithium from thermal water can be developed in Europe.

“If you look at Vulcan’s project development plan, you would assume that it is fairly new. Even investing in conventional lithium projects in recent years has not been easy,” said Reg Spencer, Canaccord Genuity analyst in Sydney.

However, the prospect of offsetting the cost of lithium production by selling geothermal energy could lead to “very inexpensive lithium production,” he said.

The auto industry is also interested, but is not relying on it.

A spokeswoman for Mercedes-Benz AG, part of Daimler AG, said the company is in early talks and will reassess the situation as soon as Vulcan has analyzed the first exploration material and can provide reliable forecasts on delivery volumes.

A BMW spokeswoman said the company is following developments on the global lithium market and is not ruling out the purchase of German lithium if quality, delivery volume, social and environmental standards are appropriate.

All parties acknowledge that it will take time for significant quantities to be delivered.

Michael Schmidt of the German Mineral Resources Agency (DERA) said that if production expectations were met in three to four years, it would be just in time to address supply bottlenecks expected in the middle of the decade.

He estimates that domestic lithium demand will increase to 9,000 tons per year in a slow roll-out scenario for electromobility and to 32,000 tons per year in a fast scenario.

Germany imported around 5,300 tons last year.

“Every ton of lithium that Germany does not have to import from abroad is better for its industry,” said Schmidt.

($ 1 = 0.8278 euros)

(Reporting by Michael Nienaber in Berlin; additional reporting by Jan Strupczewski in Brussels, Ilona Wissenbach in Frankfurt, Christina Amann in Munich, Annkathrin Weis in Karlsruhe and Melanie Burton in Melbourne; editing by Barbara Lewis)

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