As renewables penetrate ever deeper into national energy systems, it is time to consider the short- and long-run impacts of upstream supply shocks in seemingly well-supplied markets like copper and lithium.
By Ingeborg Hutcheson Fiskvik, Henna Narula, and Sujeetha Selvakkumaran
The ongoing energy transition is chipping away at established geopolitical boundaries, as the focus on crude oil steadily shifts to critical minerals such as lithium, copper, cobalt, nickel and rare earth elements – minerals fundamental to batteries, grids and low-carbon technologies.
However, the supply of certain critical minerals is anything but diversified. Both mining and processing are concentrated geographically, making supply chains vulnerable to shocks, even in well-supplied markets. These disruptions can stem from a variety of sources, including extreme weather, social license disputes, or trade disruptions.
While critical mineral supply shocks are unlikely to be as profound or frequent as the kind of shocks to the world’s energy system that fossil fuels have all too often delivered, with the recent closure of the Strait of Hormuz a particularly acute example, our analysis reveals that modeling upstream shocks to renewables is a very necessary exercise.
Opposition to extractive industries and infrastructure tend to be rooted in concern over the impact on the local environment, resources, and biodiversity. However, local opposition rarely constrains the energy transition directly; its primary impact operates through project delays, cost escalation, and heightened uncertainty that propagate across global supply chains, particularly for mineral intensive technologies such as batteries.
These disputes should be understood not as isolated local events but as embedded risks within already-stressed supply chains. In some cases, they can escalate beyond community resistance into regulatory/government intervention, broader political conflict, or expropriation, generating abrupt supply disruptions. Evaluating “greenversusgreen” tensions therefore requires assessing how localized frictions translate into systemic risks for the pace and resilience of the energy transition.
Chile, a key supplier of lithium and copper, exemplifies the complex interplay between resource extraction and environmental constraints. The country’s key mining region sits on the edge of the Atacama Desert, one of the most water-stressed environments in the world.
Mining in this region relies heavily on groundwater, creating growing competition between industry, local communities and fragile ecosystems. In the Salar de Atacama, lithium and copper extraction account for over 65% of local water use, and tensions with local communities are escalating over cases of over-extraction and contamination of freshwater (WRI, 2024).
Growing concerns over water depletion and environmental impact has resulted in legal action and public protest. In response, stricter water limits on mining operations have been imposed and companies have pledged to halve their authorized brine extraction (S&P Global, 2025).
To assess the consequences of unmitigated local opposition to the extraction of minerals, the impacts must first be translated into metrics that are meaningful for the energy transition itself. Local resistance does not directly “reduce decarbonization”; rather, it manifests through
These effects can then be propagated through the energy system to quantify their macro-level consequences.
In the case of lithium and copper, the two minerals considered in this study, the most immediate transmission channel to the energy transition is through lithium-ion (Li-ion) batteries. Lithium is a core input to battery chemistry, while copper is essential for battery manufacturing, grid connections, transformers, inverters, and electric vehicles (EVs). Disruptions in lithium and copper supply therefore directly affect battery deployment, which in turn influences EV uptake, grid-scale storage expansion, and the integration of variable renewable energy.
In our modelling framework, we translate mining-related opposition into two system-level shocks. The first shock is the shock to the cost of batteries because of the supply disruption to lithium and copper extraction and supply. We formulate the supply disruption as a cost elevation of batteries. When the raw materials to fabricate the Li-ion batteries lose about quarter of their global supply (Chile’s contribution to global lithium extraction is about 28%, and copper extraction is about 25%), it injects a hike in cost of batteries. It also should be noted that lithium extracted from Chile is considerably cheaper than lithium produced in Australia or the US (Li, Sacko and Beiker, 2025). This hike in cost is going to affect the cost of all batteries, because battery production is also concentrated in a few countries.
From 2026 to 2030, we assume that the CAPEX of the battery is going to increase by 28% from the baseline CAPEX for all regions, given that lithium costs are about 15% of the total battery cell cost, and the copper makes about almost 70% of the battery by weight. We do know that supply shocks revert (the Ukraine war gas price hikes in Europe have almost normalized). However, prior evidence also shows that they do not often revert to their original costs/prices but rather settle at a higher level (this phenomenon is called the ‘ratchet effect’ (Reuters, 2026)). Thus, we have formulated this cost hike coming down from its zenith at 28% in 2030, to 5% above the baseline CAPEX by 2035.
The second system-level shock is that the grid-connected battery projects in the period from 2026 to 2035 face a 2-year delay, i.e. if a project has an FID of the year 2027, it only comes online in 2029 because of project delays, opposition, and regulatory oversight. This is not entirely unrealistic; where there are public opposition or punitive regulatory measures, large energy projects face delays.
These cases are deliberately constructed as thought experiments, designed to illustrate how delays to critical mineral extraction could lead to temporarily higher battery costs or delays in battery deployment, which would potentially slow the pace of the transition.
It is also important to recognize that battery technologies are not static. Battery chemistry continues to evolve, and if certain materials become more expensive or constrained, battery design, including material substitution, and chemistry choices would likely co-evolve in response to shifting market conditions and supply dynamics. In a similar vein, if the price of raw material lithium and copper prices were to increase, and battery prices were to rise as a consequence, then mining in other geographical locations would get more attractive and the raw material market would reach an equilibrium. However, mining in a new location, or even restarting mining from a temporarily shut off location takes time, investment and clear market signals, which are all obfuscated in a time of market shock/upheaval.
Case 1 – Higher cost of battery (HC): An increase in global battery costs, reflecting higher mineral extraction costs, additional water management requirements, project risk premiums, and supply chain disruptions. In this HC battery case, we assume the CAPEX cost of batteries increases 28% compared with our baseline (our Energy Transition Outlook 2025) CAPEX cost by 2030, and then gradually falls to just 5% above the baseline, by 2040.
Case 2 – Higher cost + delay in projects (HC+D): In addition to the increase in global battery cost, we model a case which also has a two-year delay in battery project deployment, representing delays in acquiring hardware, production curtailments, legal disputes, or slowed investment decisions resulting from heightened social and environmental conflict.
These two shocks (cost and/or delay) provide a tractable way to quantify how local “green versus green” tensions can propagate through global energy systems.
Figure 1 shows the levelized cost of storage (LCOS) of three cases: Baseline (our 2025 ETO forecast), Higher cost batteries (Case 1), and Higher cost + delayed batteries (Case 2). Despite uniformly higher CAPEX across all regions, the regional LCOS varies significantly, when compared with the ETO 2025 forecast.
Figure 2 shows the impact of the increased cost on the levelized cost of Li-ion battery storage for EV adoption in Latin America, home to the lithium triangle and significant lithium production; Greater China, the region in our model with the highest EV adoption rates; and Sub-Saharan Africa, the region in the model with the slowest EV adoption rates.
The global transition of the power sector toward solar and wind, both variable renewable sources, is measurably slowed by both higher Li-ion battery costs (Case 1) and a two-year delay in utility-scale battery deployment in addition to higher lithium-ion battery costs (Case 2).
The most significant consequence is a broad slowdown in electrification. As battery costs rise, EVs become more expensive, which dampens adoption rates and reduces overall electricity demand.
Electricity generation also becomes costlier, though to a lesser extent. Expensive Li-ion batteries limit the deployment of solar and wind capacity, which in turn raises the marginal cost of power generation. Globally, total electricity generation and demand fall by roughly 5% in both scenarios compared with the ETO case.
The combined shortfall in solar and wind generation is larger than the drop in total demand. While demand falls by around 4%, renewable generation declines by roughly twice that amount. The remaining gap is filled mainly by fossil fuels: nearly two-thirds of the difference is covered by fossil generation, leading to about a 10% increase in global fossil fuel output compared with the ETO case.
These numbers describe the global picture. The regional impacts, however, vary substantially as outlined below.
The higher cost and delays in battery deployment lead to lowered capacity adoption which in turn leads to significantly different storage capacities across scenarios. These differences are far from evenly distributed.
Most of the reduction in installed storage capacity between the ETO case and Cases 1 and 2 occurs in low-income regions (Sub-Saharan Africa and the Indian Subcontinent in the ETO analysis) and in Latin America. While global battery capacity falls by 10% to 12% in Case 1 relative to ETO 2025, Latin America sees a much steeper decline of nearly one third, to 39%.
The disparities are even more pronounced in Case 2. Latin America’s battery storage capacity drops by 50% to 69% compared with ETO 2025, whereas the global reduction is only 15% to 17%.
In short, delays in battery adoption are not evenly felt. They disproportionately affect low-income regions, and the region hit hardest is also a major supplier of the raw materials required to produce these very batteries.
The ripple effects of higher Li-ion battery costs and project delays extend well beyond storage alone. Because solar paired with batteries is one of the most cost-effective pathways to expand clean electricity, any disruption to battery deployment immediately constrains solar growth. In our results, this linkage is unmistakable: regions that fall behind on storage also fall behind on solar capacity and generation.
Low-income regions (Sub-Saharan Africa and the Indian Subcontinent) see solar+storage capacity fall by roughly 5.5% relative to the ETO case, closely mirroring the global average decline of around 5%. But Latin America stands out once again. The region experiences reductions roughly three times as large as the global average, reinforcing a pattern we observe throughout the analysis: the impacts of battery cost increase and delays are not evenly distributed. Instead, they concentrate in regions that already face structural barriers to energy investment, and when the cheapest technology becomes expensive, which is solar combined with batteries, the adoption of these technologies is reduced and electrification slows.
This uneven contraction in solar+storage capacity has broader implications for the pace and equity of the energy transition. Regions with slower battery adoption lose access to the flexibility needed to integrate higher shares of renewables, which in turn limits their ability to electrify enduses affordably. In striking irony, the region most affected – Latin America – is also home to Chile, a major supplier of the raw materials essential for producing the very batteries whose scarcity is slowing its own clean energy deployment.
What our model experiments demonstrate is that increases in Li-ion battery costs and delays in project deployment would slow clean electrification globally but would not derail it. Furthermore, they slow it disproportionately in low- and middle-income regions where solar and wind constitute the lowest-cost generation options.
Higher storage costs constrain renewable integration, reduce electrification rates, and slow the pace of transition away from fossil-fuels. The result is not merely a temporal delay, but a structural shift in the energy transition dynamics.
At the same time, the regions most affected by slower battery deployment are often those supplying the minerals underpinning the transition. In our case study context, Latin America — and specifically Chile — experiences some of the steepest reductions in storage capacity, even as it remains central to lithium and copper supply.
This creates a feedback loop: local socio-environmental conflict constrains mineral supply -> constrained supply raises technology costs -> higher costs slow domestic and global clean energy deployment -> slower deployment prolongs reliance on fossil fuels, with associated climate and environmental burdens that ultimately fall back on vulnerable regions.
There is therefore no clear “winner” in a “green versus green” conflict. Unmitigated opposition, unresolved governance gaps and insufficient water management do not protect the climate, nor do they secure local development gains. Conversely, accelerating extraction without credible social and environmental safeguards risks intensifying resistance and deepening the very bottlenecks it seeks to avoid.
Supply chain shocks like this hypothetical example are avoidable and mitigatable. The overall renewable energy technology supply chain is globalized and robust, thanks to its decentralized nature. Disruptions are expected to slow but not derail the transition, as dispersed supply chains are more secure and less susceptible to major shocks like the fossil fuel bottle neck we see today in the Strait of Hormuz.
The implication is not that mineral extraction must proceed at any cost, but that resolving environmental, social and governance (ESG) risks is not peripheral to the energy transition, but rather a central issue that cannot be avoided.
Eyal Li, Stefano Sacco, and Georg Bieker (2025). Expanding the lithium value chain in Chile: Mining, batteries, and recycling.
Reuters (2026). US drivers long-term pain at pump, analysts say; Trump bets they are wrong.
S&P Global (2025). Community matters: Mining, local engagement and the race for critical energy transition minerals.
World Resource Institute (2024). More Critical Minerals Mining Could Strain Water Supplies in Stressed Regions.