Lithium is a key ingredient in batteries for electric cars and renewable power storage, making it a critical commodity for the energy transition to reduce emissions of greenhouse gases. Most of the world’s lithium supply is currently produced in Australia and processed in China, but that could change during the next decade as new technology such as direct lithium extraction, or DLE, helps ramp up production of this key resource from brine, according to Hugo Nicolaci, an analyst in Goldman Sachs Research.

Lithium is typically extracted through hard-rock mining or from underground brine water. Unlike traditional methods for producing lithium, DLE uses filters, membranes or resin materials to extract the mineral from brine water. And much as shale technologies did for oil, Nicolaci says DLE may significantly increase the supply of lithium, nearly doubling production from the same resource and improving project returns through a process that may be more sustainable. We spoke with Nicolaci about his forecasts for the lithium market and the impact DLE may have on the transition to renewable energy.

Why is lithium important?

Lithium is a big enabler of the energy transition from a battery perspective as we move to electric vehicles and add energy storage to electricity grids, allowing for greater penetration of renewables. As a result, lithium is increasingly being seen as a critical mineral by governments, where they want to secure supplies for that transition, and that has made it an increasingly important commodity in the last couple of years.

Traditionally, lithium produced from brine water is stored in evaporation ponds. As the water evaporates, the other elements of the brine such as magnesium or calcium precipitate out, leaving the brine more concentrated to produce lithium carbonate. The evaporation process, however, yields only 40% to 60% of the potential lithium in the brine. DLE has the potential to yield 80% to 90% or more. It’s also much faster. The evaporation process can take nine to 18 months depending on the type of project and weather conditions. With DLE, that process can be shortened to days or even hours. And you don’t need all the land for the pond evaporation process. What’s more, you can potentially reinject the remaining brine water after the process, which further reduces the environmental impact.