← The HC Commodities Podcast
The HC Commodities Podcast
The Electrified Battlefront: energy, critical minerals and defense with Joe Bryan
00:48:01
Today, we investigate the intersection of the energy transition, critical minerals and defense. As with commodities, warfare is also going through rapid and profound change, with the electrification of defense over the last 20 year. Batteries proliferate the battlefield and the energy transition is impacting national security. We are seeing the shift from capital assets to small, cheap weapons such as drones that can have profound impacts. This poses a particular problem for the US, where energy dominance has been based in hydrocarbons along with their warfare fighting capabilities. Now in an electrified battlefront, supply chains that support them sit in China, threatening the West's defence capabilities. Our guest is Joe Bryan, principal at Muswell Orange, a boutique consulting firm, focused on energy and particularly its intersection with national security. Before his return to the private sector, Joe was a senior advisor to the Secretary of Defense and was the Department sector...
Loading summary
Transcript38 lines
- [00:00]
A
Foreign.
- [00:06]
B
Welcome to the HC Commodities Podcast, a podcast dedicated to the commodities sector and the people within it. I'm your host, Paul Chapman. This podcast is produced by HC Group, a global search firm dedicated to the commodities sector. Today we're talking about the intersection of of the energy transition, critical minerals and defense. As with commodities, warfare is also going through rapid and profound change. With the electrification of defense over the last 20 years. That has a knock on impact on batteries, but also directionally the energy transition itself. In the west we're seeing the shift from capital assets to small cheap assets like drones that can have profound impacts. And it poses a particular problem for the US where energy dominance has been based in hydrocarbons and as has their warfare fighting capabilities now in an electrified battlefront, supply chains that support them sit in China threatening the West's defence capabilities. Our guest is Joe Bryan, principal at Muswell Orange, a boutique consulting firm focused on energy and particularly its intersection with national security. Before his return to the private sector, Joe was a senior Advisor to the Secretary of Defense and was the Department of Defence Chief Sustainability Officer. He previously served as Deputy Assistant Secretary for the Navy for Energy where he was responsible for policies relating to the Department's installation and operational energy programs. Earlier in his career, Joe led investigations for the Senate Armed Services Committee and served on both Senate's Select Committee on Intelligence and and the Permanent Subcommittee on Investigations. He has consulted on energy policy around the world and began his career working on electricity restructuring and state level policies to encourage growth of clean energy markets. As always, you can really support the show by leaving us a positive review on the platform you're listening on or follow us on Apple podcasts or Spotify or wherever you listen. And as always, I hope you enjoy the episode. Joe, welcome to the show.
- [02:14]
A
Thanks Paul. Thanks for having me.
- [02:16]
B
Yes, I'm looking forward to this. We're talking defense and the intersection with both the energy transition and critical minerals. Before we sort of go into this story, I think because you're somewhat of an unusual guest for our typical guests who typically come from within the commodities sector, it'd be great to get a little bit on your background and kind of what led you to having this discussion and in fact the career that you've had.
- [02:40]
A
Yeah, thanks. Sure. It is a little non traditional although you know, it's a, it's kind of a growing space batteries and critical minerals and their impacts on implications for, for national security both the United States and, and for our allies and partners and others. So it is a, it is an area that's getting a lot more attention. And we, I'm sure we're going to get into that a little bit. So my background is I now run a. I'm the principal of a small consulting firm called Muswell Orange. And the focus of my work is advising around the intersection of energy transition technologies and national security. Very defined, very sort of narrow and specialized space of which, as you note, there aren't. It's not a crowded space at this moment, but growing. Immediately prior to this, I was the senior advisor to the Secretary of Defense in the United States. My job at DOD at the Department of Defense was to provide advice to the secretary and kind of set the strategic direction of the department around all things climate, clean energy, energy transition. And I was also the Chief sustainability officer for the department, had this consulting firm again prior to that. And then from about 2014-17, I was Deputy Assistant Secretary of the Navy for energy. So. So I led all the Navy's energy work for both military platforms and military installations. And we can talk about the important role that batteries have come to play in both of those spaces. Before that, I spent about 15 years on Capitol Hill. I spent a number of years at the Senate Armed Services Committee running their investigations group. And then I spent a couple years, a couple few years on the Intelligence Committee and then a couple years on the Homeland Security Committee, which used to be called Governmental Affairs. And then just to cap this off, I spent the previous eight years doing energy work, clean energy work, from the early 90s until about 2000, both at the state level in the Northeast, U.S. northeast, on utility policy, electric utility policy, around the time we were thinking about restructuring and then some work in Southern Africa, primarily South Africa and Namibia in the late 90s around their energy and mineral sector. So sort of a winding path to get to where I ended up. Never thought I'd in defense policy, but here I've landed, or I don't know if it landed is the right word, but here's where I found myself and.
- [05:08]
B
It'S fascinating, right, because even talking about sort of utility policy, where all these things are starting to intersect as we see the energy transition take shape, whether that's under the framing of a climate agenda or under a framing of national security and energy security.
- [05:23]
A
Yeah, for sure. I mean, I don't know if folks. No, I know we're going to talk a lot about the importance of batteries and critical mineral supply chains for operational capabilities like drones and submersibles and basically everything we do in the department, but it's not always well understood that the Department of Defense and the military installations. So the bases that the Army, Navy, Air Force, Marine, Space Force have around the country and around the world are almost exclusively dependent on the commercial electric grid for their power. So all the challenges we face on the US Grid in particular, but also globally on grid, and both in Western Europe and elsewhere, we face as a military in figuring out how we're going to support our military bases and the critical missions that are housed there, which is an increasing number, actually, as we think about the pressures that the grid faces around things like demand growth from AI and a growth in manufacturing sector in the United States, which is really putting pressure on the grid and in a way that's raising significant questions about, for example, the capacity of our transmission system to handle it and what we can do to mitigate some of the risk that we face both as a country and as a military, given that dependence. So, yeah, it's an interesting space and I think it's gotten a lot more attention than it used to. But again, we have a tendency to react when we're faced with a crisis and when things seem to be going reasonably well. We don't, we don't know. We're not always as proactive as we ought to be in adopting a new direction and taking ourselves to a place where we're going to be able to better mitigate some of the risk we face.
- [07:02]
B
Yeah, yeah. And there's probably, there's a part two about that grid security piece. But I guess in some ways this is a very new story around the different technologies and what implications that has on logistics and supply chain. But in some ways it's also a very old story. Right. I mean, you know, I'm British, you know, the, the British Navy switching, you know, essentially all those bases that the British Nav had around the world. And then subsequently the US Were in large part predicated on energy supply. And we saw, you know, for example, the switching of the Royal Navy from coal to oil, you know, triggered BP and, and all the rest of it. Right. So this is, this is also a, you know, it is in some senses an old story that what's changed, of course, is this electrification of defense, if I can use that term, the inclusion of batteries everywhere at all time for everything. Can you tell us, like, when did that transition start happening? When did the Department of Defense and allies in general start thinking about the battery supply chain, about batteries, key involvement in military capability?
- [08:08]
A
Yeah, and you're right. This is if you go way back in history, you know, sail to steam. I mean, There aren't many sailmakers around making sails for military boats. But that, but that go back long enough and that's where we were. So there's been a lot of technology change over the. Has driven military capability for, you know, for hundreds of years. The battery work actually has a pretty interesting history. You know, I think that the Department of Defense and our military services, I think we move along in much the same way that the commercial sector moves along. As the past 20 years, we've seen the rise in electrification of things that either used to be powered by natural gas or liquid fuels or new devices that never existed before and happened to be electric. I think we've seen as we've seen those markets grow and those products emerge in the commercial sector and in our daily lives, you know, we've seen the same thing, I think in the military. And my first interaction with that batteries and battery supply chains and their implications for the military came when I was at the Department of the Navy. As I mentioned, I was the Deputy Assistant Secretary of the Navy for Energy. And part of my job was to understand the energy needs, the associated risks and how to drive programs to mitigate some of those risks. For at the time, Navy and Marine Corps and my team, and in particular some folks in the Marine Corps were spending a lot of time thinking about the logistics risk around fuel that had, that had emerged as a, as a challenge in Iraq and Afghanistan. Right. One of the most dangerous jobs in Iraq and Afghanistan was logistics support. The supply convoys that delivered fuel, water and food, other bullets, ammunition to the troops at the forward most point were subject to incredible risks. And in fact, I don't know, the highest rate of casualties, significant rate of casualties in Iraq and Afghanistan was delivering fuel on the battlefield. You know, one of the most dangerous jobs is in, were in those fuel convoys. And so coming out of Iraq and Afghanistan, in fact there was, there's a bunch of work and in fact some General Mattis, who is, who at the time of Iraq and at the time of the advance in Baghdad, was the commanding general of the Marine Corps Combat Development Command. And he coined a phrase back. This is going back, you know, 20 years almost was unleash us from that tether of fuel. So he saw as the challenge of that fuel logistics and how do we cut that tether a little bit. So folks were thinking of like how does one do that? And in that context, there was a lot of talk about things like hydrogen and, and electrification, hybridization of our tactical vehicles and of our other assets, including like hybridization of our of our forward deployed generators. And so I was engaged in, my team was engaged in those conversations with the Navy Marine Corps. And, and one of the things that a very smart guy on my staff who ran what was called the Expeditionary Energy Office, guy named Jim Cayley, he was a Marine and came to join my office a couple years later. But he was very focused on, hey, we're seeing the proliferation of batteries on the battlefield to support all kinds of capabilities. And the concern was at the time that it wasn't so much like, oh, we have these batteries and the supply chain for those batteries goes back to China or some adversarial or competitive country. It was more that we're seeing a proliferation of batteries on the battlefield and we're going to have to support those batteries logistically. So the tactical vehicle has one kind of battery and the radio has another kind of battery and some communications device or the generator. You just have this wide array of battery types that were forward. And so the question at the time was, hey, are you just replacing the, the folks who were doing fuel logistics with a bunch of people and goods and replacement batteries? And so the battery logistics chain is going to look, if we don't do something about it, is going to be logistically complex and maybe carry with it the same risks. So it's interesting that the supply chain questions that first emerged, and this is going back 2014 thereabouts, supply chain questions that first emerged were ones of like, military logistics to support a forward deployed force that was increasingly reliant on batteries. And so it's interesting that we were both driving, particularly the question of like, how can we hybridize our tactical assets to reduce the amount of fuel that they might demand? And at the same time, growing concern about like or emerging concern about how do you support those various disparate batteries on the battlefield and do you create for yourself the same challenge that you're trying to solve? So the roots of it were really.
- [13:15]
B
Back then and it didn't seem, I mean, you and I met at the benchmark conference and lots of presentations in and around this. It still seems that there's a proliferation of different types of batteries out there. There's no drive to standardization, which is perforce of the different technologies they used in, I guess. But also there is a, an added challenge here which is one of the, the secretary, I think it was the assistant Secretary of Defense said, you know, back in Iraq it was, you know, whenever you got a free moment was try to sleep, you know, eat. And now it's also charge your Batteries as well. And I guess in the terms of batteries, there are technology and a fuel. So there's. There's a time lag to charge them. There's also, you know, what fuel are you using to get that electric? I mean, there's a. It seems like it's a lot more complicated than just having a generator turn up, you know, or fuel turn up to put in the trucks.
- [14:03]
A
Right, for sure. So you're right in the first order that we're seeing. Just between the time we first started thinking about batteries, say 10 years ago, and now 20, 25. Think about how much equipment used by the Department of Defense by soldiers, sailors, airmen, Marines, relies on a device or a battery at its core. So you think about anywhere from a tactical vehicle. I mean, we talk about the hybrid, hybrid Bradley, in a minute. But we have tactical vehicles, we have unmanned systems, whether they be drones, uas, submersibles, surface vessels. You have handheld radios, you have all the equipment, electronic equipment on ships, you have radars. You think about our future systems. You have things like directed energy. Weapons are going to rely on batteries. Lasers are going to rely on batteries. So almost everything that we now use in the military and everything that we plan to use to enhance our capability relies on batteries. And in this move that we see in the commercial sector to electrification, particularly, as we all know around the transportation sector, we're seeing that in the military as well. We're not to the point, of course, where we're going to have electric tanks on the battlefield, but hybridization and, and electrification of platforms. Think about all our unmanned systems is becoming almost dominant in the conversations about future capabilities. So electrification, just as it's driving the commercial sector, is driving, driving dod and I think that brings with it all kinds of interesting capabilities, but it also brings with it a new set of risks. And I think we talk about that as we dig a little bit into the supply chain.
- [15:52]
B
Yeah, exactly. So there's those logistical challenges, that standardization challenge, that actually last mile capability is going to be there wherever the supply chain stretches back to. Obviously, what's exercising the west at the moment is this supply chain is completely dominated by China. And we're going to talk about sort of the realization of that within the Department of Defense and strategies, or lack of, to overcome that. But just one more piece, because I think it is interesting. We've obviously gone through quite a revelatory few weeks in warfare, and this story sort of marches ever forward. And we've seen it in Ukraine, we've obviously seen it in Israel. We were Just discussing it offline. This shift from big capital assets, it seems, you know, aircraft carriers, real projections of power in a few very, very expensive, very complicated assets suddenly being vulnerable to drones, to very cheap technologies driven by batteries. I mean, it seems like that is a, you know, whilst at the moment the B2 is an unrivaled capability and sits very much in this big capital asset bucket, it seems like the world is shifting towards these very cheap, very, very responsive battery driven technologies like drones that are changing the nature of warfare as well. So not only are you dealing with the, with changing technologies, it's also the speed of change as well.
- [17:14]
A
Yeah, no question. I mean obviously there's still place for those strategic assets carriers or the B2, as you note, and that the relevance of that platform obviously in the past week is obvious. But at the same time as we were talking offline, notable of the past couple weeks is how central those small, inexpensive electric driven drone technology was to major, major military initiatives by both Ukraine, the drone attacks that they had in Russia a couple weeks ago and took out all kinds of very expensive Russian assets. And then of course Israel's use of drones in Iran last week, same. I think it demonstrates one, obviously we played a role with the B2, but those assets and those capabilities becoming increasingly relevant and cleverly used and also the, you know, the asymmetric threat that we see from those, those, the development of those platforms, small UAS attributes against us too. I mean, because as you know, rightly, those weren't, those didn't cost billions of dollars to buy that equipment like, like a, like a carrier does or B2. And you know, nevertheless, they were able to inflict significant both monetary and capability damage on their targets. So fundamentally changing the way folks think about these technologies and how to use them. And it's changing right before our eyes.
- [18:51]
B
The energy and resources sector is experiencing unprecedented change.
- [18:56]
A
To help navigate this change and capture.
- [18:58]
B
Its opportunities, HC Group launched Enco Insights.
- [19:02]
A
A global advisory network dedicated to the.
- [19:04]
B
Sector providing senior advisors and subject matter experts to investment and infrastructure funds, law firms and corporates.
- [19:13]
A
Encoinsight leverages HC Group's 20 years of.
- [19:17]
B
Connections in energy and commodities to give.
- [19:19]
A
Clients the expertise they need when the.
- [19:22]
B
Stakes are high and insight matters. Learn more@encoinsights.com let's go on to that supply chain. So there is that argument that U.S. foreign policy has largely been driven by national security and energy requirements, right? The need for access to oil. That equation somewhat changed with the, the shale revolution and in part has led, I believe, you know, to the US's continued growth in GDP versus, you know, certainly the rest of the west over that last decade or so. The problem here, I guess, is that is twofold. One is that the battery supply chains have shifted to predominantly to China. That obviously doesn't advantage the US like it did in oil. And then secondly as well, it's not just that the supply chains sit there, it's also the ip, the capability, the know how sits outside the US as well in a lot of instances, especially when it comes to sort of some of the drone technology or the batteries that support those and so forth. So can you sort of set that challenge up? You know, I think this audience is very well aware of the China's control of the supply chain and particularly the processing pieces. But can you sort of set, you know, when did this start to become front and center and visible to US policymakers? And how has the thinking evolved around this?
- [20:42]
A
Yeah, it's interesting. I think that this. So certainly when I was at the Department of the Navy in the 2014, I left there in 2017, this idea of the supply chain risk for batteries as we saw them proliferating again on the battlefield and in our military systems, it wasn't kind of hadn't become a focus of policy yet. And I think that's partly because I think the whole electrification of military assets was relatively newish at the time. The other thing is that I think China was not yet was just kind of emerging as the center of conversation in like the Department of Defense. So at the time of 2014, 2015, 2016, sure, China was emerging as a, as a strategic competitor to the United States. There was the pivot that I think you recall, folks may recall that Secretary Clinton at the time, the Pacific pivot in the there was certainly a shift of military thinking of what our presence in the Pacific look like. But I think between that time and now, it's really emerged that the competition with China is going to be a defining feature of our time and of both our national security conversations and of our conversation about our economic security. So I think those two things, both electrification and in the competition with China, were not, I won't call them nascent, but they weren't as prevalent in conversations like that I or others might be having in the Pentagon at the time. Now, granted, my job wasn't to figure out who our biggest strategic competitor was. My job was to figure out energy stuff for, at that time, the Department of the Navy. But again, I was around enough and there's osmosis in the Pentagon and national security circles, that it just wasn't the dominant conversation. So I think those two things began obviously to change kind of probably in the 2016, 2020, and then certainly the battery discussion and the conversation about the supply chain and China's control or dominance over particular processing, but also upstream stuff and how they had positioned themselves globally. That became a much bigger conversation at the beginning of the Biden administration. But. But some of those things had been. Had been kind of brewing in the Trump administration. I mean, on the tactical side of the Department of Defense understanding the capability enhancements that the electrification could bring. There was a white paper that was put out by army futures command in 2020, so before the shift to the Biden administration, that had been in the works for a while. And it was about electrification of the U.S. army ground for how hybridization in particular, but electrification could bring capability benefits to the Army. And then around the same time, you know, I think the army issued their first contract for the hybrid Bradley. So there was this kind of brewing understanding of, like, electrification brought with it some military value. And that military value begins, as we talked about, with the fuel logistics being more efficient, but it also brings with it things like silent watch, low heat signatures, low audible signatures, which on the battlefield has potentially a lot of value. And so the electrification conversation was emerging inside, inside the military at the time. Then, of course, we've all witnessed a growing awareness coming out of COVID and other things of the vulnerabilities in our supply chain. And I think that coming out of COVID and understanding those challenges and then turning to kind of military assets and the enabling technologies for those military capabilities, I think people started to look at batteries, I being one of others, and going, wow, we have a. We. It didn't necessarily sneak up on us, but we understood that this is going to be a bigger deal than what we had thought maybe four or five years earlier, or maybe we just hadn't been considering it as much four or five years earlier.
- [24:52]
B
And that is, you know, there's definitely been a crescendo. And it seems like now that there's by, you know, it's one. I think outside of sort of UFOs, this is the only other element that has some kind of bipartisan agreement that something needs to be done about it. There are the intractable problems which we've covered in depth, you know, around duration, you know, the length of time it takes to get these up and running. You've got technological uncertainty. You've got, obviously geographical dispersion of these. Of These products that you need to, etc, etc, and largely as well, fundamentally is that much of the supply chain and the way that the Department of Defense, the US the West in general, goes around military procurement is obviously relying on private companies. One of the default setting would be, well, let's just, you know, the Department of Defense has such a trillions of dollars worth of budget. Can't it just make it happen? And can't they be the catalyst that allows domestic industry to build up in the discovery as well as the processing of these critical minerals all the way through the battery supply chain? That's, that's somewhat of a misperception, I understand, from our conversation. Can you just help us understand that piece and really how the, you know, the fundamental challenge the DoD faces, and this again is mirrored by other, by the, you know, the Ministry of Defense, you know, others around the world. Just this, this issue of scale and impact.
- [26:15]
A
Yeah, for sure. I'll start by going. Your first question is like, I think the, the interests in the supply chain are reflected across administrations. I mean, we've seen executive orders, at least two to maybe three actually from the current administration, you know, focused on at least in part, securing the critical mineral supply chain, including for, for batteries. And on the platform side, on the DoD capability side of things, I mean, we see a military budget in particular, the reconciliation bill that's being debated right now in, on the head on the Hill, the thing that's been called, I guess, by the administration the big beautiful bill, you know, that's got a ton, just tons, billions and billions and billions of dollars for unmanned systems, both aerial systems and subsurface and surface systems, and the supply chain to support them. And so this, the fact is that most of those are, a lot of those are going to be electric. And so the understanding of how these electrified military platforms, how important they are to kind of our capability and our military is reflected in both in the budget. And we often say, like, you know, the money talks on policies that come out of Washington. People talk about a lot of things being important, but you got to see where they're putting their money. And a lot of money is, is being directed towards these unmanned systems. Your question about the supply, about DoD's market power is a really interesting one. And it's across technologies. I think it's, it's in a misperception that persists and that is, you know, you have a lot of conversations even in, even in Washington and even in places on Capitol Hill where people look at the Department of Defense's budget this year, the budget request is somewhere around 860, $870 billion. If you look at reconciliation on top of that, we're looking for this year, if reconciliation bill passes, you're looking at another $150 billion. So that in its entirety for this year, you may see the government direct close to a trillion dollars at the Department of Defense to develop capabilities and to do their job. But the misperception is that that kind of investment can drive market transformation or can drive investment across a series of enabling technologies like batteries. And I think I know the most about the battery question. And the truth is that notwithstanding all those military platforms that I just described that rely on batteries and all those emerging platforms, submersibles, UAVs, directed energy weapons, all of these things that rely on batteries and growing reliance on lithium ion batteries, all of that demand accumulated is very unlikely to move the market. I mean, if you look at the Department of Defense's demand, I think there's been some estimates done by the Department itself that an aggressive electrification scenario over the next 10, 20 years is going to get DOD to, you know, a gigawatt hour of demand annually. So I think you, if you can think about the scale of the battery manufacturing industry and the number of gigafactories now, I think what are there like 250 gigafactories in operation globally and maybe another 150 in the pipeline. And you think about the output of those factories, a gigawatt hour of demand annually spread across many different battery form factors and maybe even some chemistries is just not the kind of scale that's going to drive investment to meet that specific demand. I mean, just the transportation sector, electrification of, of the commercial transportation sector is, is just so much larger than the military's demand and so much bigger driver of, of, of what people are going to invest in that. I think the Department is, is, and those who think the Department can move that market on its own would be, would be really wise to take a step back and kind of really think about the facts in the matter and then talk to some folks in industry and see if they're, if they're making those investments. And I think it's a story that we've heard before that folks who supply goods to the Department of Defense can struggle because there is a Department of Defense and government isn't always easy to contract with and their demand is not always consistent or large enough to, to justify major industrial investment. And so folks need to know that in the public space, but Department also needs to understand that so they can properly set expectations and develop their requirements in a way that allows them to, to work with those who are driving scale in the industry rather than try and create their own requirements that are unlikely to get the kind of response that we need in order to develop the capabilities that you and I just talked about.
- [31:29]
B
Yeah, this is, you know, DOD needs to be looking at what GMs buying for their fleet of electrified vehicles and think about, you know, can we get some level of standardization alongside that? There is a challenge there that we'll come onto in just some of the inconsistencies within that one big beautiful bill and some of the actions of the latest Trump administration. One other piece, though, is of course one, one sort of way of cutting the Gordian knot is actually through research and development. Right. I mean, one thing the Department of Defense has done, along with darpa, NASA, all this piece, right. Is obviously is be at the very forefront of innovation by funding some great minds coming together. That's how we got the microchip and all the rest of it in the first place. We had Chris Miller on talking, you know, his great book Chevy Chip War, talking about that, that history, how much money has been put into research and development. Because if we can circumvent, and we've already seen this in battery chemistries, right, Anytime, you know, cobalt or nickel are expensive, so everyone's leaning into the manganese or whatever it might be. They're leaning into the ion phosphate, LFPs and so on. So there's an economic incentive to, to make these batteries cheaper and also make the supply chains less diverse and dependent. Are we, you know, is there any money allocated to research and development that gets us to that solid state battery that's kind of made of sand and we can just dig it out of the Mojave Desert and everything's. Everything's fine again?
- [32:50]
A
Yeah. So, I mean, I'll say this. The research and development infrastructure, well, setting aside the physical infrastructure, which can sometimes be challenged like the rest of our Department of Defense facilities, which, which we don't always do the best job of investing in, but the, the people that work there and the work that's going on is, is pretty incredible. I mean, you mentioned darpa. You have the Office of Naval Research, you got the Air Force Research Lab, you got the Army Research Lab. There's some really interesting and important work happening there. And maybe the next microchip is part of that. And maybe an incredible battery that runs on water and is 10 times more power dense than the latest LFP. Maybe that's in there somewhere. So I think that's all there and I think that's an important part of thinking about how the US competes ultimately in the battery manufacturing space and then by extension in for the military capabilities that those batteries are going to enable. But you know, given the scale of the battery industry, I mean the speed, what I just observed from the outside is watching, I watched, you know, just the news feeds pretty closely and just read a lot about what's happening in, in the private sector. And it looks to me like there's really exciting and interesting developments coming out of R and D in the private sector every day. And my expectation is they're actually putting probably a lot more money and a lot more focus of themselves on sort of next gen battery stuff because the commercial opportunity is so great. I think that DoD you're probably, I mean I expect that you're seeing probably really interesting research on particularly applications of batteries and specific kind of defense requirements that may not align with the commercial market. And so I think there's probably a lot of that. Maybe we're going to get some really amazing breakthroughs. But I think one of the things I see out of the private sector is, is a focus not just on the, on the research and development but also on the manufacturability of these things and how they're going to fit into existing plant into which we've, you know, we folks have invested, you know, hundreds of billions of dollars and it's probably going to be maybe a little bit sticky for a while. So as we all know, I mean lithium ion batteries had a long, that they didn't just emerge 10 years ago. They've had, they've been performing for a long time and people are pretty confident what they can do. And I think it's going to take probably, you guys could probably speak better than I but it seems like it probably take a while to, to fundamentally bring a new technology to market in mass quantities before we've done it in, you know, for kind of establishes kind of history of performance that Lithiumion is right now. Hello, I'm David Hunt, founder and managing director at Hyperion Search. Founded over a decade ago, Hyperion Search has helped organizations from major utilities to startups recruit their leadership teams and key individual contributors to accelerate both their growth and the energy transition. Our three main verticals are renewable power, energy storage and E mobility. The energy transition and the talent that delivers it has been our passion since day one. To find out more, visit hyperionsearch.com or listen to my leaders in Clean tech podcast available on all platforms.
- [36:08]
B
In some ways, America's dominance has been linked to the hydrocarbon economy itself developed. Right. And as you say. But there's, there's a couple of things going on. One is this change is inexorable. You know, there's clear battlefield advantages to having lots of cheap unmanned drones attacking things than very expensive big assets doing it and risking human life. And there's almost, I mean this is sort of a part philosophical, but you know, the hype, the counterfactual, there's somewhat of a, you can imagine a world it is. Whilst it's brought many riches and obviously to a town like Houston where I am, you know, huge independence and wealth to the US by having the shale revolution, there is sort of this twinge of the fact that had that not have happened and had the US remained absolutely focused since 1974, whenever it was on, on energy dependence and the fact that it was, it could still be, you know, we might have a very different world in front of us in terms of the dominance and leadership in these energy transition technologies and the electrification technologies. And it wouldn't have been perhaps so complacent to have yielded those advantages to China and some extent Europe where they are absolutely energy dependent. Right. There is sort of this, this wealth, the tragedy of being a commodity rich country that we see plays out in GDP growth and innovation and political engagement and all the rest of it. You know, that is somewhat a bit of the story here. Right. If we, if we didn't have this wealth of shale oil, would we be in a different space and actually would we be having these, this same internal tension?
- [37:46]
A
Yeah, there's probably certainly part of that there. The other thing is, I think I've spent a lot of my career thinking about climate change and climate has unfortunately become somewhat politicized to say the least. And I think that's a diplomatic way of putting it. One of the things that I experienced when I was in the Department of Defense and a thing that I think is instructive in the conversation we're having today is, is that, you know, when you go into the Department of Defense and you're the guy who's supposed to, who's supposed to be driving towards, you know, a better kind of climate aware footprint for the department and to think about climate and its challenges to US national security. I mean that the Pentagon is a, it's a conservative place. People don't join the military typically because they want to, they want to spend their careers working on climate. And so one of the challenges to us as a team, to me and my team inside the Pentagon, was to communicate why these energy transition technologies which are, happen to be good for the climate, why those ought to matter to those people who joined the military for completely other reasons and whose expertise and experience is about war fighting and capability and not so much on climate. And one of the things we spent a bunch of time talking about was, hey, we might care about this in part because electrification, use of renewables, deployment of batteries, that all is helpful to advancing our climate objectives. But you could be a person who doesn't even believe in climate change and still believe that this was an absolutely critical path for the United States to go down, in part because, hey, electrification of our tactical assets brings with it incredible potential for combat capability. You know, we just talked about all the unmanned systems and, and the advantages they bring, all the directed energy weapons, all of our future platforms that all relies on electrification, which all as an underlying technology, as an, as a enabling technology, as batteries. And so you could, you can fundamentally dismiss climate as a, as a threat to the United States or to the world and still think that these decisions to figure out how to use this technology and figure out how to secure the supply chain by positioning the US in that market in a way that drove investment, you could all still think that's a, that's a really good idea. So that's what we tried to focus on. Not the motivation for why you want to necessarily achieve an objective, but to agree on the objective. And you can come to that for whatever reason is important to you. And so that conversation in the Pentagon is much more productive because then you can think about things like the joint war fighting concept, which is the way in which the Department of Defense and the military thinks about how they need to plan for the next war. And within the joint war fighting concept, there's this concept of contested logistics that presumes that if we go to war, that our logistics system is going to be contested at every space from garrison to deployment, to support sustainment. All of those logistics links are going to be challenged. And how do you mitigate some of that risk is you become much more efficient, so you don't require as much logistics and you, you actually use technologies that can decrease your need for those logistics in the first place. So all of these technologies are really important for, simply for doing your job as a military. And finding those places of agreement, those objectives you can agree on is really critical for bringing more people on board this, this movement. And I'll, I'll just close by one thing, we've talked about risk here in the risk of a supply chain that is for the capability that you need, but a supply chain that traces back to your chief competitor and your pacing threat. I think you guys, I think you saw, Paul, last November when skydio, who's a drone maker, supplies drones to Department of Defense, but also supplies them to a bunch of commercial customers and I think to the Taiwanese fire service. Well, last November, Skydio's CEO put out a statement on LinkedIn that China cut off their batteries, rendering Skydio unable to deliver its product to its customers. And I think that we've talked a lot about the potential risk that the Department of Defense and the military faces in having its supply chains dependent on this, on this competitor. And I think that manifests itself. And there's a really good example that's not a theoretical risk. This is something that actually happens and did happen and specifically on batteries. And we all know what's happened on upstream minerals to rare earth in particular, but like, but this happened on batteries. And that's the risk that we really need to keep forefront in our mind as we make these decisions about where we want to put our policy goals and where we want to put our people. As you, as you rightly mentioned, I.
- [42:59]
B
Guess in some ways as well. And you know, there's sort of this thin chance that there's sort of a rapprochement with, with China and it makes, you know, in Adam Smith's world, it makes great, you know, they've specialized in this world and they make them far more cheaply and higher numbers than anywhere else in the world can. And there's also terrible environmental impacts that whilst it's terrible that's happening, it's, you know, there's somewhat of a feel we'd rather it happened over there than in our backyards. But even if there were that sort of rapprochement and, or just the sort of the, the real politic of there will continue to be batteries made in China and bought in the West. It seems like the cat's out of the bag. You know, you've got this political alignment and deep understanding about how crucial this is. And that intersection, as you say, of, you know, where there is hope is actually in this case, energy security actually overlaps with, with, you know, energy transition, with climate goals. And in that center of that Venn diagram, obviously sits metal, sits the battery supply chain. Just doing a thought piece on this for our Q2 market review. But also that is within that, then that overlap is, is actually where Change can be affected. And as you say, it's a lot of it is about framing it correctly, but this is advancing. You know, you might want to stay in a hydrocarbon world, but there is no doubt the battlefield of today, and therefore certainly the future is very much dominated by batteries and their effects are extraordinary. In fact, we're seeing sort of this weird World War I futuristic war going on tragically in Ukraine that demonstrates that perfectly. Right?
- [44:36]
A
Yeah. And I mean I assume that the United States and I think we should all resume. The United States wants to have a competitive auto industry and the direction of the world seems to be that we're going to electrify our transportation sector. So my hope would be that we would encourage that and want to be part of that. And even if under your scenario that we were to have someone other than the United States do a lot of the upstream work, whether it's the processing or even a lot of the extraction, the truth is that I think it's always wise for the Department of Defense to be very clear eyed about its supply chain and the security of that supply chain to support the kind of activities that our military may be asked to do. And so I think we have to think very, very carefully about our policy decisions we make on the commercial side that might have knock on effects on our ability to actually achieve that security. So yeah, it's not easy and we're sort of in a transition here in a lot of ways. But there's more of the story yet to be written, right?
- [45:44]
B
Yeah, yeah. Well, you certainly seem to a man in demand in D.C. so when, when, who should, who should.
- [45:52]
A
I got four kids, so I'm always demand to be. They're luckily all got their driver's licenses so you know, they. I'm not as in demand carting them around town as I used to be.
- [46:01]
B
But, but when, when should people call you and Muswell Orange? You know, I guess our audience are very much, you know, people in the metal supply chain, people in the energy supply chain, people obviously in the AG supply chain. You know, I guess what, you know, when should people call you?
- [46:16]
A
Yeah, look, I've done. So let me think about that. So you know, most of the companies that I work with are dual use companies. They are, as I mentioned, I'm focused primarily on or almost exclusively on energy industry. So battery industry, we've done a bunch of things with offshore wind in the past. I do some things with advanced manufacturing because of the logistics, energy logistics benefits of deploying manufacturing forward. So some in that space we do a lot with energy services and some things in the utility industry thinking about the supportability of military facilities with alternative energy infrastructure. But all the technology areas that I work with are kind of true dual use technologies. They're really things that have a commercial market but also have an applicability within the Department of Defense. And typically not just for their energy attributes as a clean technology, but for the their the kind of capability benefits they might deliver to the military. And that's sort of what you and I have talked about over the past 45 minutes or so. So if you find yourself in that space and you're interested in kind of exploring what the market might look like in dual use, give me a call.
- [47:33]
B
Awesome. Well, Joe, thanks for coming on the show and you know, look forward to having you on again in the future, you know, as the story develops. And I'll put links to to Muswell Orange in the show notes.
- [47:42]
A
Appreciate it, Paul.
- [47:45]
B
Thank you for listening. To find out more about HC Group, our global offices and our expertise in search within the commodities sector, please visit www.hcgroup.global.