October 3, 2023
By Haley Zaremba

DOE Eyes Historic $1 Billion Loan To Kickstart U.S. Lithium Boom

• The DOE's loan to Lithium Americas for the Thacker Pass project could cover up to 75% of its construction costs, becoming the largest ever awarded to a mining company.
• Lithium, vital for renewable energy technologies, is in soaring demand; the US currently relies heavily on China for its supply.
• While the move aims to strengthen the US green energy sector and ensure energy security, it faces opposition from environmentalists and Indigenous groups.

The North American lithium industry is likely about to get a $1 billion injection. The United States Department of Energy (DOE) is currently in talks with Canadian mining company Lithium Americas over a massive round of funding for its Nevada project. If the deal – the terms of which are currently being finalized – is inked, it would fund over half and as much as 75% of construction costs for the massive Thacker Pass project, thereby kickstarting the United States’ lithium era in earnest.

The historic loan would be the single-biggest ever awarded to a mining company by the DOE. The domestic lithium sector has already received a major boost under the Biden Administration, which views homeshoring lithium supply chains as a key part of its climate imperative. Earlier this year, the DOE awarded a $700 million conditional loan to Australian lithium company Ioneer for another Nevada-based project at the Rhyolite Ridge Lithium-Boron Project in Esmeralda County.
While the Ioneer project is already a huge development for the U.S. lithium production sector (which until recently has been an extremely small industry), the Thacker Pass project would majorly raise the stakes. Plans for the mine, huge to begin with, have only increased in scale – the project recently revised its budget to $2.27 billion, up from $1.06 billion. “The mine has the potential to be North America's largest source of lithium for electric vehicle batteries and would bolster U.S. President Joe Biden's efforts to reduce dependence on Chinese supplies for the metal,” Reuters recently reported.

Lithium is a key building block for many components of renewable energy technology and infrastructure. The rare Earth mineral is an essential ingredient in solar panels, batteries for renewable energy storage, and electric vehicle batteries, among other uses. Going forward, global demand for lithium is set to skyrocket. A report from Popular Mechanics published earlier this year calculates that “an electrified economy in 2030 will likely need anywhere from 250,000 to 450,000 tonnes of lithium. In 2021, the world produced only 105—not 105,000—tonnes.”

As such, securing a dependable and affordable source of lithium is critical for building up the United States green energy sector, as well as for meeting climate goals. The problem is that, at present, China holds a near-monopoly on many rare Earth supply chains, including lithium, and therefore holds a lot of leverage in global energy markets. As a result, the United States is extremely dependent on Chinese production and manufacturing to keep its own clean energy sector running in the near term.

The Biden Administration is determined to break away from that dependence – but building up domestic lithium supply chains will be difficult – and contentious. The massive Thacker Pass project has already faced opposition from environmentalists and Indigenous groups alike. “Biden is walking a fine line by trying to balance the raw-material demands of the energy transition against campaign promises to protect the environment,” Bloomberg reported late last month.

While a certain degree of NIMBY-ism is to be expected, as lithium mining is associated with acute environmental risks and negative externalities, it’s only fair that the United States shoulder some of this dirty job. Plus, there are serious benefits to developing such industries in countries with relatively strong environmental protection and oversight mechanisms like the United States.
What is more, homeshoring significant parts of the clean energy supply chain will be necessary for building up the United States clean energy sector and resolving geopolitical vulnerabilities and areas of potential energy insecurity. For years, the United States has been falling behind in the clean energy race, and it's high time that the nation gets serious about domestic decarbonization before it loses its foothold in a changing global market.

The United States is not the only country seriously ramping up lithium production and acquisitions. Around the world a modern-day gold rush is unfolding as nations try to snap up lithium acquisition agreements as fast as they can to keep up with demand as well as their own climate pledges. Producing lithium is not just a matter of energy security – it’s a matter of good economic sense.

By Haley Zaremba for Oilprice.com