Energy Innovation: A Golden Opportunity for the UAE, Estonia, and Zimbabwe
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Energy Innovation: A Golden Opportunity for the UAE, Estonia, and Zimbabwe
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By Saniya Fatima, Analyst, Botho Emerging Markets Group, and Naam Chakravorty, Gulf Region Analyst, Botho Emerging Markets Group
October 17, 2021
The lithium and battery storage sector is dominated by a handful of markets, but surging global demand coupled with increased traction of the element are now generating exciting new partnership opportunities across emerging markets. As countries scramble to diversify the existing China-dominated lithium battery value chain, Zimbabwe, the UAE, and Estonia are three key players we believe should partner to capitalize on the growing lithium market. While Zimbabwe has the lithium reserves and the UAE boasts a favorable business enabling environment and an appetite for sustainability-driven R&D and investments; Estonia is the Baltic leader in e-mobility technology and innovation. These respective advantages make the three countries prime partners for a potential market-driven energy innovation consortium. This piece explores what the potential trilateral trade partnership to expand the lithium market could look like — and how its implementation could present a framework for stronger trade ties between emerging markets in critical global value chains.
How Does the Current Lithium Value Chain Affect the UAE, Estonia, And Zimbabwe?
Presently, lithium’s value chain is dominated by a few market players like Chile, Argentina, and Australia on the upstream front and China on the processing and battery manufacturing side. Due to the concentration of the supply chain in a few hands, experts have raised alarm bells around the possibility of a supply chain breakdown due to the increasingly strained U.S. - China relations. An alternate energy innovation consortium would not only strengthen the lithium supply chain but could also expand the commercialization of the sector in the world’s fifth-largest lithium producer, Zimbabwe.
Beyond production, trade centers like the UAE also stand to benefit. A strategic lithium value chain advances the UAE’s position as an investor, developer, and trade facilitator. It also bolsters the UAE’s sovereign investment company, Mubadala’s vision to position the country in fast-growing resource markets. This consortium provides a strategic and financial avenue for the Abu Dhabi Global Markets initiative looking to invest USD 500 Million in mining companies in emerging markets, bridging the UAE’s investment interests with Zimbabwe's lithium prospects. Finally, Estonia stands to benefit from such a partnership, as a robust lithium supply chain is key to safeguarding the country’s e-mobility sector. With e-mobility consuming more than half of lithium produced globally, lithium shortages have previously hampered Electronic Vehicle (EV) growth worldwide. In light of this, Estonia’s ability to secure lithium supply could consolidate the country’s role as an e-mobility leader amongst the Baltics, while also giving Zimbabwe’s lithium an additional gateway into Europe’s USD 25.48 Billion EV market.
A Closer Look at Zimbabwe’s Lithium Sector
Zimbabwe is sub-Saharan Africa’s largest lithium producer with more than 1200 metric tons (MT) of lithium produced in 2020 and 1600 MT produced in 2019. The country has the potential to account for nearly 20% of global lithium reserves, especially with Zimbabwe’s Kamaviti Lithium Tailings Project in the bankable phase, and the Odzi West Lithium Project in the grassroots phase. The Zimbabwean government is positioning itself to capture more of the global market by inviting lithium processing investments and expects lithium revenues to triple by 2030. However, despite the rising demand for lithium, Zimbabwe has faced challenges resulting from political and economic instability, as well as mineral misgovernance due to the non-declaration of lithium exports to Asia and Europe. The country could better capitalize on mining earnings and demand by forming strategic collaborations with the UAE and Estonia to create a more transparent and Zimbabwean public sector-enabled value chain. Additionally, agreements signed in 2018 between the UAE and Zimbabwe to protect and stimulate investment and avoid double taxation, as well as a Memorandum of Understanding (MoU) on energy marketing and supply, serve as a foundation for the possible collaboration. An information-sharing framework could also aid Zimbabweans in closing the knowledge gap about lithium mining and the value chain. In addition, the consortium has an opportunity to capitalize on the early stages of lithium prospecting, such as by investing in R&D and processing for the Kamaviti and Odzi West Projects. This would align with the UAE and Estonia’s R&D ambitions and paves the way for a knowledge-sharing partnership.
Estonia’s Stake in the Proposed Consortium
Despite the fact that the Estonian government does not have near-term targets for energy storage, several local startups and universities are working to move energy storage technologies from R&D to commercialization. For instance, Estonian-based Skeleton Technology's competitive edge in developing a graphene-super battery has been validated in real-world applications. The company has gained significant commercial traction due to the Japanese investment conglomerate Marubeni’s heavy investment in its technology. Many Estonian energy startups also benefit from EU R&D funding through programs like Horizon 2020, an EU research and innovation program with a funding capacity of nearly €80 billion. The EU has declared its interest in expanding energy storage options, citing a growing demand for innovations in the battery storage sector. Furthermore, Estonia's climate strategy demonstrates that energy storage innovation could be vital to the country's long-term success. Estonia is currently the most energy-independent country in the EU, but it also has the highest energy intensity of all OECD countries, thanks to its abundant oil shale. And, as Estonia develops its energy innovation plan, a partnership with the UAE can help, particularly because the UAE has recently expressed interest in deepening its economic ties with the country. An R&D and trade relationship focused on battery storage and energy innovation between the UAE and Estonia could also serve as a model for collaboration between emerging markets.
The UAE government is Open to Experimenting with New Energy Innovations
Despite the UAE's vast fossil fuel resources, clean energy deployment remains a top priority for the government in order to diversify its oil-based economy, as part of Vision 2021. Over the next three decades, the government expects to invest USD163 billion to fund different renewable energy initiatives. The UAE's requirement for energy storage in relation to renewable energy within the country, on the other hand, is limited, as the country receives abundant solar radiation, eliminating the need for large-scale battery storage installations. Despite this, the government has been working to establish itself as the region's battery storage R&D leader. For example, Abu Dhabi has established the region's first and the world's largest virtual battery facility, with a capacity of 108 MW dispersed across ten sites. In addition, the UAE has made progress in research, having recently submitted a patent with the US Patent and Trademark Office for innovative lithium-ion battery technology. In addition, the UAE is home to a number of renewable energy companies with projects outside the country, including Yellow Door, Amea Power, ENGIE, and EDF, all of which will benefit from the country's battery storage trade.
Furthermore, the UAE government's policies and incentives to adopt EVs are expected to generate significant growth in the energy storage sector in the foreseeable future. For instance, Dubai Taxi recently introduced 200 Tesla EVs into its fleet, marking the start of the city's campaign to promote green transportation options. Battery storage is expected to play an important role globally, in the deployment of renewables and e-mobility, and successful clean energy adoption will require advancements in energy storage lifetime, range, and charging speeds, all of which make sustainable energy more appealing. For the next few decades, the UAE government-led R&D efforts will continue to look at these issues. The UAE can lead the region in energy storage trade, by addressing aspects such as lithium supply, and battery storage technology development.
Conclusion
The collaboration between Estonia and the UAE on battery storage R&D activities might lead to both countries becoming regional leaders in energy innovation, while also giving Zimbabwe the chance to join a knowledge-sharing consortium and attract investment for lithium mining projects. The upcoming Expo 2020 event will provide emerging markets with the opportunity to forge previously untapped economic relationships. For example, the event could serve as a forum to explore a lithium-driven partnership as the UAE reiterates its commitment to clean energy alternatives, Estonia highlights its e-mobility accomplishments, and Zimbabwe promotes the country's mining possibilities. While emerging economies may not always be able to compete in terms of quantity of resources and expertise, they can use local talent and resources to create more flexible and balanced collaborations that are tailored to their individual needs.
By Saniya Fatima, Analyst, Botho Emerging Markets Group, and Naam Chakravorty, Gulf Region Analyst, Botho Emerging Markets Group
For more information, contact Saniya and Naam here.