Not the rock bands of the 1960s–1980s, but the mining required to extract the heavy metals necessary for electric vehicles and other renewable energy solutions. So, what is a heavy metal and why do we care?
Typically, “In science, a heavy metal is a metallic element which is toxic and has a high density, specific gravity or atomic weight. However, the term means something slightly different in common usage, referring to any metal capable of causing health problems or environmental damage.” Often these toxic elements are carcinogenic.
For most readers this will not come as a surprise. The heavy metals in batteries can be recycled, thus minimizing their negative impact on the environment and subsequently, humans and other life forms, i.e., the food chain. However, smaller batteries are typically tossed into the trash. Larger ones such as lead acid automotive batteries are usually reclaimed (for a fee to the consumer).
From this pundit’s perspective, it is too early in the technology maturity to fully understand how millions of EV (electric vehicle) will be recycled effectively and economically. Managing the lifecycle of these ‘elements’ from mining, use, recycling and reuse is a significant component of these renewables. There is a cost associated with this process, both monetary and socially.
Total Carbon Ownership
In the business, the term TCO usually referees to the Total Cost of Ownership. Updated, this Lifecycle metric may better reflect the Total Carbon impact of a product/solution, i.e., large scale batteries, solar panel, fossil fuels, etc.
TCO = Carbon as a function of two major lifecycle elements; Operations and Decommissioning.
For this purpose we define Operations (aka Use) as the lifecycle process from mineral extraction, manufacturing, deployment and maintenance.
Decommissioning is the process of taking out of service, removal and appropriate disposal of components, including recycling.
Follow on from our blog of November 2, 2021, where Milton Friedman detailed the complex supply chain required to manufacture a simple yellow graphite pencil, one can only imagine how complex the requirements are for a wind turbine. Carbon neutral is not a simple problem to solve.
Enter Structural Dynamics
Many readers understand that Machine Learning Algorithms use the statistical multivariable method, Multiple Linear Regression–defined as, where “one variable is estimated by the use of more than one other variable.” While this tool can be useful when assessing the impact and relationships of several independent variables, it does not necessarily help organizations to understand their TCO.
Theoretically, every economic actor in the supply chain or the decommissioning process can calculate their carbon footprint for each product/step they control. In the real world, such intangibles, i.e., safety are open to interpretation, ‘fudging’ or worse. Moreover, we can expect large gaps or errors (inadvertent or otherwise) in carbon models that must be addressed if we are to realistically address the carbon problem.
In the 1990s as a result of watching a number of systemic enterprise failures and/or poor performance, and wondering how this happened with such regularity the questions was raised–why? This led this author coin the term with the subsequent book, Structural Dynamics: Foundation of Next Generation Management Science.
Most do not understand the processes and structural changes at work on a daily basis. Focused on near term performance metrics, they lose sight of the forest while concentrating on the trees. The subsequent disruption caused is often rapid and economically cataclysmic.
Structural Dynamics uses tools such as Structural Equation Modeling (SEM) to seek to identify the underlying process and structural movements. It appears to be a useful tool to address the Total Carbon Ownership that organizations will have to address in the very near future.
Dealing With Residuals
Whether heavy metals or carbon, organizations must also assure ESG (Environmental, Social, and Governance) criteria are met throughout the energy lifecycle. However, there is a cost associated with these and other organizational structures from the deployment and/or use of energy of all types.
TCO is a decades long cost that can transcend actual corporate life, i.e., acquisition, bankruptcy, etc. Currently, the oil and gas industry is littered with assets no one claims ownership. Two cases follow:
- Stranded assets are, “those investments which are made but which, at some time prior to the end of their economic life (as assumed at the investment decision point), are no longer able to generate an economic return, as a result of changes in the market and regulatory environment.” These resources are no longer worth continued investment.
- Abandoned assets have reached the end of life. By one source, it is estimated that there are approximately 53,000 Gulf of Mexico offshore oil and gas well in this category. Remediation costs range from $500k to $10 million per well–min $26.5 billion.
It is reasonable to expect that all sources in the ‘energy basket’ will have similar end of life futures. Green is therefore, not unique.
A Serious Assessment
This pundit believes that scant attention has been paid to the lifecycle (economic and social) price of renewables and that the Total Carbon Ownership cost has never been calculated–certainly not published. However, there are tools that will shed light on this going forward.
TCO is a function of a detailed and long lifecycle, not unlike oil and gas assets that in some cases are over half a century old. Any subsequent model of this process is by default complex, detailed and full of unknowns, or unmeasured latent variables.
The approached this writer has developed using Structural Equation Modeling driven by Structural Dynamics seems well fitted to address this longitudinal and futuristic problem.
For many, the so-called ‘green energy’ seems without consequences. The history of energy suggests otherwise. A full assessment using Structural Dynamics can reveal gaps, misunderstandings, errors and omissions.
This model will advise management and even regulators what the true cost of an energy source is. The approach is worthy of a serious discussion. By the way, this model works for all sources of energy including coal and other fossil fuels as well as renewables.
What is Your Firm’s TCO and How Can It be Lowered?
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Interested in Cross Cultural Engagement or DEI, check out our Cross Cultural Serious Game
We presented, Should Cross Cultural Serious Games Be Included in Your Diversity Program: Best Practices and Lessons Learned at the Online Conference, New Diversity Summit 2020 the week of September 14, 2020.