Power Grid Modernization Should Create Critical Minerals Demand

The United States currently has a power grid that is in need of modernization. Especially the case with the threat of harsh weather from climate change looming in the backdrop. This will create a demand for critical minerals, providing investors with a potential growth opportunity.

The U.S. government is certainly aware of the need to update the power grid with recent regulation to provide funding for updates and enhancements.

“Recent U.S. legislative efforts recognize the urgency of modernizing the power grid and enhancing its resilience. The Bipartisan Infrastructure Law (2021) allocates $13 billion for grid modernization,” a Sprott Insights blog noted. “The Inflation Reduction Act (2023) guarantees up to $250 billion in loans for projects to reduce greenhouse gas emissions from existing energy infrastructure.”

With that funding comes an increased usage of alternative energy sources, which will require the use of critical minerals—there’s already a growing trend of countries aligning themselves with those that are abundant in their supply of said minerals. Electric vehicles (EVs), for example, will require a higher supply of lithium available, which is used to manufacture batteries for EVs.

“Comprehensive upgrades will be needed, including transitioning to renewable energy sources like wind and solar, constructing storage facilities for renewable energy, and expanding and upgrading transmission lines,” the blog added. “Additional investments in battery facilities are also crucial for optimizing the efficiency of renewables and improving grid reliability during supply disruptions. All this will require supplies of energy transition metals that go well beyond EV battery demand.”

Get Broad Critical Minerals Exposure

With a broad array of investment opportunities that exist in getting critical minerals exposure, investors can use exchange-traded funds (ETFs) for easy ingress to their growth potential. One option to consider, especially for broad exposure that offers diversification in critical minerals, is the Sprott Energy Transition Materials ETF (SETM).

Per its fund description, SETM seeks to provide results that correspond to the total return performance of the Nasdaq Sprott Energy Transition Materials Index. The index tracks the performance of a selection of global securities in the energy transition materials industry.

With the demand for critical minerals projected to rise, the demand for miners who materially affect the supply will also increase. Given this, SETM provides investors access to the miners who produce uranium, lithium, copper, nickel, silver, manganese, cobalt, graphite, and rare earth elements.

For more news, information, and analysis, visit the Gold/Silver/Critical Materials Channel.