The Impact of Rapid Technological Change in the

The Impact of Rapid Technological Change in the Global Energy Industry and on U. S. Imports Containing Rare Earth Elements C. Elise Logan 1 I. Madinabeitia 1 G. C. Pickenpaugh 2 W. M. Summers 2 1 2 Deloitte Consulting LLP, Contractor to NETL Solutions for Today | Options for November 6, 2019

NETL Disclaimer DISCLAIMER "This report was prepared as an account of work sponsored by an agency of the United States Government. Neither the United States Government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use would not infringe privately owned rights. Reference herein to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply its endorsement, recommendation, or favoring by the United States Government or any agency thereof. The views and opinions of authors expressed herein do not necessarily state or reflect those of the United States Government or any agency thereof. ” ACKNOWLEDGEMENT Team Key. Logic’s contributions to this work were funded by the National Energy Technology Laboratory under the Mission Execution and Strategic Analysis contract (DEFE 0025912) for support services. In particular we would like to acknowledge the support of: Gavin Pickenpaugh, Economist, Energy Markets Analysis Team, NETL W. Morgan Summers, Engineer, Energy Process Analysis Team, NETL 2

NETL’s Rare Earth Elements Program Mission Development of an economically competitive and sustainable domestic supply of rare earth elements (REEs) and critical materials (CMs) to assist in maintaining our Nation’s economic growth and National Security Objectives: • Recovery of REEs from coal and coal byproduct streams, such as coal refuse, clay/ shale over/under burden materials, aqueous effluents, and power generation ash • Advance existing and/or develop new, second-generation or transformational technologies to improve process systems economics, and reduce the environmental impact of a coal-based REE value chain National Energy Technology Laboratory Rare Earth Elements Program 3

Critical Metals for Energy Transition Electric Transport Wind Energy Storage Solar Energy 4

Global EV stock (Million vehicles) Global Electric Vehicle (EV) Stock Projected Growth Light commercial & heavy duty Passenger, light duty Plug-in Hybrid Electric Battery Electric The global EV Stock has a projected compound annual growth rate of 30% IEA (2019), "Global EV Outlook 2019", IEA, Paris 5

EV Major Markets (2018) 2018 EV sales and growth over 2017: • China: 1. 1 million cars (55%) • Europe: 385, 000 cars (31%) • U. S: 361, 000 cars (82%) • Canada: 44, 000 cars (38%) Sales in the United States are growing faster than the rate of the global market with an 82% growth rate from 2017 to 2018 IEA (2019), "Global EV Outlook 2019", IEA, Paris 6

Materials use in EVs is technology specific Technology market share in EVs Permanent Magnet Traction Motors (permanent magnets) Li – Ion batteries Nickel Metal Hydride (Ni. MH) batteries Induction motors Amount of embedded REE Lambert, Fred. 2018. Tesla motor designer explains Model 3’s transition to permanent magnet Adamas Intelligence • Tesla made a significant change to its electric motor strategy with the introduction of the Model 3, switching from an AC induction motor to a permanent magnet motor • In 2018, 93% of all passenger EVs sold globally used permanent magnet (“PM”) traction motors 7

Rare Earth Content of a Typical EV Battery elements Magnetic elements Ni. MH batteries use a La/Ce alloy in the cathode Hybrid electric vehicles Nd. Fe. B magnets are ~25% by weight Nd, 7% Pr, and 1% Dy+Tb Plug-in hybrid electric vehicles Battery electric vehicles Fuel cell electric vehicles Per vehicle element usage (kg) Rare earth content of a typical EV is dominated by the magnetic components Xiang-Yang. Li. 2019. "Scenarios of rare earth elements demand driven by automotive electrification in China: 2018– 2030. " Resources, Conservation and Recycling Pages 322 -331. 8

Global Primary REE Production At least 15, 000 tonnes/yr of additional capacity required to meet growing demand through 2025 Adamas Intelligence: Rare Earth Market Outlook: Supply, Demand, ad Pricing from 2016 through 2025 Production data from USGS 9

U. S. REE Imports Related to EV Technologies Import Estimate (tonnes) 45, 000 REEs Embedded in Permanent Magnet Motors in EVs Imports (tonnes) 40, 000 35, 000 Neodymium 95. 07 30, 000 25, 000 20, 000 Praseodymium 30. 55 15, 000 10, 000 5, 000 - Dysprosium Imports asas Raw Imported Raw Material Imported. Embedded Embeded inin Imports Finished. Goods USITC Import Data 2. 88 - 20 40 60 80 10

Three-pronged Resource Supply Chain Risk Management Approach 1 3 Diversify Sources Reduce Or Substitute 2 Recycle End-of-life Products 11

Substitution and Recycling Initiatives Substitution or Reduction Toyota replaced 20% of magnet Nd with additional (cheaper) La/Ce Honda increased Nd in magnets to eliminate need for (pricier) Dy/Tb However, complete substitution for REEs considerably lowers performance Recycle End-of-life Products Honda expects to recover 80% of REEs in used Ni. MH batteries globally In general, only about 50% of embedded REE are economically recyclable across all end-use products Lambert, Fred. 2018. Tesla motor designer explains Model 3’s transition to permanent magnet motor. February 27 Bradley S. Van Gosen, Philip L. Verplanck, Robert R. Seal II, Keith R. Long, . 2017. U. S. Geological Survey. Critical Mineral Resources of the United States —Economic and Environmental Geology and Prospects for Future Supply. 12

NETL Rare Earth Program 2018 -2019 Major Accomplishments Source Diversification • NETL Research and Innovation Center (RIC) ◦ Development of Fiber Optic Sensor for Detection of ppm REE Concentrations ◦ Immobilized Amine and Organo – Clay Sorbent Development ◦ Lab Scale Facility Produced 40 wt% REE-Y-Ca. Mg- Fly Ash & 2. 7% Ca. Co 3/Mn AMD Pre-Concentrates • Bench Scale Program with West Virginia University (WVU) ◦ Produces Rare Earth Concentrates from acid mine drainage (AMD) ◦ Achieved Recovery of nearly 100% of REEs from AMD • Modular Pilot Scale Processing with University of Kentucky (UK) ◦ Produces Rare Earth Concentrates from Leachate collected from the Coarse Refuse Area at Dotiki ◦ Produced grams/day of Rare Earth Oxide Concentrate containing greater than 90% Rare Earth Oxide (Dry Basis) • Pilot Scale Processing with Physical Sciences Inc. (PSI) ◦ Produces Rare Earth Concentrates from post-combustion ash ◦ Produced >15 wt. % Concentrate of Mixed Rare Earths National Energy Technology Laboratory Rare Earth Elements Program 13

New technologies and market pulls entrench REEs as critical materials The electrification of vehicles will continue to drive demand for REEs China continues to be the major supplier and processor of REEs in the world Political tensions may destabilize supply of REE imports to U. S. The U. S. will continue to be extremely dependent on REE imports for EVs and beyond Source diversification efforts complement substitution, usereduction, and recycling efforts to mitigate risks 14