Circularity of critical minerals for India's clean energy transition

As the global race for critical minerals picks up, India is poised to play a pivotal role in critical mineral supply chains. The Budget 2024 introduced a gamut of policy measures, including the Critical Minerals Mission, aimed at promoting domestic mineral exploration, mining, and production in India. The mission focuses on developing domestic mining capabilities and fostering circularity and innovation. The Government of India is also said to be in the process of designing a Production Linked Incentive (PLI) scheme to encourage the recycling of critical minerals in India. This scheme will likely target e-waste recycling, incentivise the production of recycled critical minerals, and promote investments in advanced recycling technologies. This initiative is significant, considering the potential role circularity can play in securing critical minerals for India’s clean energy transition.

To meet its net zero commitments, India will need an uninterrupted supply of low-cost clean energy technologies (CETs). While policies supporting the domestic manufacturing of CETs have been announced, the manufacturing base will depend entirely on a reliable supply of critical metals and minerals. Localised production and monopolised supply chains over critical minerals present potential challenges to India’s energy security. However, while the supply of primary or virgin minerals remains challenging, a substantial quantity of minerals can be obtained from secondary sources. This can be achieved by recycling manufacturing scraps and end-of-life (EoL) renewable energy (RE) systems. Circular value chains that reuse and recycle EoL RE system components can help create value by reducing both the use of primary materials in RE technology manufacturing and the waste generated from decommissioned projects.

This is especially significant in the Indian context, given the vulnerability of primary critical mineral supply chains. A recent WRI India paper on “Critical Minerals for India’s Clean Energy Transition” groups the vulnerabilities in India’s critical mineral supplies under the broader themes of supply security, supply resilience, and sustainable development. Limited domestic production of minerals, coupled with extreme import dependency on a handful of countries, creates a supply risk that could disrupt CET value chains, leading to a multiplier effect on the prices of these technologies. Most energy transition-related critical minerals witnessed a significant price increase over the last few years, with high peaks and volatility between 2020 and 2022. This impacted the returns on nearly 4.4 GW of solar power projects and the profitability of Indian manufacturers.

Domestically, mineral production is affected by low private investments, limited technological know-how, and an evolving policy-regulatory environment governing the mining sector. While RE policies have remained ahead of the curve, those related to critical minerals have not. Deterioration of air, water, and soil quality around mines, through acid mine drainage, increased levels of metal concentration in soil and groundwater, and discharge of mining dust can negatively impact the ecology around these mines and become hazardous for nearby communities.

The recovery, reuse, and recycling of critical minerals from spent technologies can resolve some of these issues. Critical minerals obtained from secondary sources within the country will reduce the material intensities of CETs and help reduce India’s import dependence. It will also be an important sector for job creation in the economy.

Estimates suggest that a circular economy approach to critical minerals could reduce the demand for primary minerals by nearly 18 per cent by 2030. This will, however, require the establishment of efficient processing facilities within the country. While India has taken a step in this direction with the announcement of the Battery Waste Management Rules, 2022, coherence between e-waste management policies and those encouraging the recycling of spent technologies is needed. There is also a need to formalise the reuse and recycling sector, which remains unorganised and thus afflicted by major inefficiencies.

The clean energy sector offers significant opportunities for the Indian economy. India can be positioned as a key player in the global supply of critical minerals. This endeavour necessitates the establishment of an enabling policy-regulatory landscape and coherence among the various players in the RE value chain segment, complementing the provisions of the PLI scheme in the works. The recent measures announced by the government could help balance rising imports by supporting domestic mining and ensuring environmental sustainability by promoting the recovery, reuse, and recycling of critical minerals from spent technologies.

India’s success in this domain could be a useful primer for other developing countries that have limited access to primary resources but are looking to enhance their mineral security for economic development.

Niharika Tagotra is a Senior Research Specialist and Abhinav Sharma is a Manager with the Energy Program at WRI India.

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