Understanding Capital Asset Flows of Metals in the Energy Transition – ENB Research Team Exclusive

ENB Publishers Note: This is the first in our series of white papers the ENB Research Team will be releasing related to the energy transition and the effect it will have on society from all angles.  Tune in next week for a tour of the Mines Mineral Model – which is the basis for this analysis. Special shoutout to Clark Martin for his co-authoring of this research.

Governments and policymakers are currently faced with a choice between meeting growing energy demand with fossil or renewable loads – with both having significant tradeoffs.  The choice between these paths is a short- and long-term planning issue that the International Energy Administration & the Energy Information Administration (United States) have undertaken to determine the mix of energy sources needed to achieve certain energy sustainability benchmarks.  These energy transition scenarios vary in transition speed, but all begin to divest from fossil fuels significantly.  

Building upon the infamous “Mines Mineral Model” – we explore how capital resources might be allocated during these projected transition scenarios by placing an expected value on different mineral investment structures.  The initial model explores two metals (Copper and Nickel) and utilizes a Capital Asset Pricing Model to shed light on possible capital flow patterns for different metals and transition scenarios.

Policymakers and government officials should be diligent to expand this methodology to include additional minerals and assess the various types of investments needed to achieve these different energy transition scenarios. When expanding this research to include more minerals, one could discover certain minerals critical to the United States supply chain which, under certain energy transition scenarios, are acutely underfunded – which could lead to yet another energy crisis, this time in the form of critical mineral supply. 

Understanding how capital assets might flow given these transition scenarios will lead to more targeted and effective policy descions as the government begins the inevitable step of mandating and regulating emissions to help further achieve these goals.  Sandstone Group is excited to bring this research and looks forward to a robust discussion based on the results. 

Visit the model codebase here

Download our full research and findings by filling out the form above. 

Email mtanner@sandstone-group.com with any comments or pushback.


About Michael Tanner 6 Articles
Michael started in the energy business as a commodity research analyst before helping start an oil trading desk with a Colorado-based oil company. He began working with Sandstone in 2018, helping energy companies with their market research and data analysis. He brings a quantitative approach to covering the oil and gas markets and enjoys the numbers behind the headlines. Michael graduated from Colorado School of Mines with a B.S. in Economics and Petroleum Engineering and a M.S. in Applied Economics from Colorado School of Mines.