Critical minerals price swings stall energy storage projects

DLA Piper has published research showing that 23% of energy storage participants have seen viable projects deferred or cancelled because of volatile critical minerals prices. The survey identifies price instability as a significant barrier to investment across the sector.

Based on responses from 550 participants across the energy storage supply chain, the research found that 52% view critical minerals price volatility as a major constraint or a dealbreaker for investment. Of that group, 12% said it was the primary constraint or an outright dealbreaker.

The effect appears to extend beyond early investment decisions. The survey found that 28% of respondents reported delays to project delivery, while the same proportion said they were struggling to secure bankable long-term offtake agreements. Another 27% said investment decisions had been pushed back, and 26% reported a higher cost of capital.

The data comes as scrutiny of critical minerals supply chains intensifies, with market participants weighing exposure to raw material price swings alongside regulatory and financing risks. Respondents identified the difficulty of committing capital in the face of uncertain future commodity prices as the biggest obstacle to investment.

Regional divide

The survey found marked differences between markets. In the UK, 56% of respondents said volatility was a major constraint and 16% described it as a dealbreaker. In the US, 46% called it a major constraint and 18% a dealbreaker.

Germany stood apart from the other markets surveyed. Just 8% of German respondents described volatility as a major issue, and it was the only market in which no respondent called it a dealbreaker.

Italy was also more likely to treat volatility as a minor factor, while in Australia more than half of respondents said it was one of several material considerations rather than the defining risk. The research also identified China as more likely to classify volatility as a minor concern, reflecting its position in the global supply chain and its influence over benchmark indices.

Alex Jones, Energy and Natural Resources partner at DLA Piper, said: "While financing difficulties and regulatory delays remain key challenges, our research suggests that price volatility is now one of the most significant factors holding back investment in energy storage.

"Unpredictable pricing pressures are creating a domino effect across the sector, reducing investor confidence, constraining financing and structuring, and ultimately contributing to project delays, repricing and, in some cases, abandoned projects."

Supply response

Participants also reported strategic changes as companies try to reduce exposure to swings in minerals markets. The survey found that 37% of developers, including hyperscalers, OEMs, utilities and independent power producers, are pursuing vertical integration to gain greater control over supply. Among mining and raw materials producers, 32% said they were taking the same approach.

The report cited POSCO Holdings in South Korea as an example of this model, with operations spanning upstream resources, refining and recycling. The findings also showed that miners were the group most likely to respond to price spikes by applying more conservative valuations, at 34%.

Another area of change is pricing structures. Respondents said many companies are reassessing contracts that rely on benchmarks shaped largely by the Chinese market and are exploring alternative reference points.

Component-linked pricing, in which contracts refer to battery or cell indices rather than the spot price of the raw mineral, was the most widely supported alternative. It was backed by 37% of respondents overall and 46% of battery and technology manufacturers. Lenders were most likely to favour contractually guaranteed price floors, at 43%, while developers preferred hybrid structures combining different approaches, at 46%. Mining and raw materials producers leaned towards long-term fixed pricing with periodic resets, at 48%.

Oliver Wright, Energy and Natural Resources partner at DLA Piper, said: "For years, companies have had to depend on supply chains they do not control, and recent volatility has shown how quickly pricing and supply terms can shift.

"As a result, developers and miners are now actively working to secure the stretch of the chain they depend on most, from the mine through the refinery to the recycling plant, so that a squeeze upstream no longer disrupts their operations. But control over supply risks only solving part of the problem. For many niche critical minerals, there isn't an index, so you can't rely on index-based pricing. And where indices do exist, they are often influenced by China. That's why, based on our research, we expect the industry to shift what contracts are priced against, whether that is component-linked pricing, price floors or hybrid structures."