California's Lithium Valley: Tapping into the EV Revolution's Most Critical Ingredient

• The Salton Sea region in California has one of the world's largest lithium deposits, estimated at over 300,000 tons per year production potential.
• Companies like EnergySource Minerals are developing facilities to extract lithium from the geothermal brines, powered by renewable energy.
• Automakers like GM, Ford, and Stellantis need vast new lithium supplies to meet electric vehicle production goals.
• Producing lithium domestically provides advantages over imported lithium for US auto companies.
• Lithium production could bring economic benefits to the impoverished Imperial Valley region, but environmental impacts need mitigation.

The EV revolution is driving explosive growth in demand for lithium

With major automakers across the globe racing to transition their fleets to EVs, securing stable supplies of battery-grade lithium has become a make-or-break priority. Fortunately for US companies, an untapped lithium jackpot lies right in California's Imperial Valley, poised to enable domestic supply chains.

The Salton Sea geothermal field holds one of the world's biggest lithium deposits, estimated by EnergySource Minerals to exceed 300,000 tons per year production potential. That's more than half of the current global output. Deep underground brines heated to over 600°F contain a world-class lithium resource that can now be tapped with new extraction methods.

As EV-maker Tesla's former lithium supply chain manager David Deak said, “I had a Eureka moment when I saw [EnergySource's] unique technology.” The company's innovative process uses ion-exchange beads to selectively absorb lithium ions, similar to a Brita filter. This enables direct lithium extraction from the superhot geothermal brines, avoiding the open pit mines or evaporation ponds used in Australia and Chile.

EnergySource CEO Eric Spomer stated, “Our process in combination with this resource will be the cleanest, most efficient lithium process in the world.” By leveraging the massive renewable geothermal energy available locally, the Salton Sea’s lithium can be produced with a far lower environmental impact than current global sources. EnergySource plans to break ground on a $1 billion extraction plant by late 2023, with 2025 commercial production powering up to 500,000 EVs annually.

Several rival firms are also moving quickly to tap into the Salton Sea’s lithium riches. Controlled Thermal Resources has optimized their process at a demonstration plant and will soon build a larger commercial lithium facility. Warren Buffett's BHE Renewables operates numerous geothermal power plants nearby that provide parallel opportunities. With Berkshire Hathaway’s cash and expertise, they could become a major player.

Major Car Manufacturers Moving Upstream

These projects aim to capitalize on surging lithium demand as automakers scramble to ramp up electric vehicle production. Stellantis, owner of Chrysler, Dodge and Jeep, has already signed a 10-year lithium supply agreement with Controlled Thermal Resources. GM invested directly in CTR as well. Securing future domestic lithium reserves protects these companies from overseas supply disruptions like those experienced early in the pandemic.

Producing lithium and components locally also reduces exposure to tariffs or shipping delays. This is strengthening the investment case for developing a full battery supply chain in the US. The recently passed Inflation Reduction Act includes sizable tax credits for domestic production of EVs and lithium extraction, further boosting investment prospects.

For the Imperial Valley community, lithium production offers hope for much-needed economic revitalization. The region suffers from unemployment rates of around 16%, among California’s highest. Lithium firms expect to generate thousands of well-paying jobs that align with the local workforce’s skills and experience.

Rod Colwell, CEO of Controlled Thermal Resources, stated: “It can change the landscape of the region.” New positions should have average salaries above existing regional pay scales, providing stability for younger generations. Local colleges are already developing training programs tailored to the lithium industry's labor needs.

Companies must address sustainability and community impact concerns

The area faces environmental justice challenges as disadvantaged communities bear the health burdens of existing pollution. Transparent engagement will be critical to earn public trust. Strict controls and oversight are needed to prevent damage from large-scale industrial activity.

The lithium industry also presents opportunities to combat urgent environmental crises around the Salton Sea itself. The shrinking lake exposes toxic dust as agricultural runoff declines. Lithium extraction's brine byproducts could help restore water flows to suppress dust and revive habitats. This synergistic restoration model aligns economic and ecological needs, bolstering the industry's sustainability credentials.

The sheer size of the Imperial Valley’s lithium reserves provides confidence that production can continue for generations. With global EV adoption accelerating, US companies have a prime window to capitalize on the Salton Sea’s potential and build domestic lithium supply chains at scale. Though complex tradeoffs exist, the right strategies and partnerships could yield substantial rewards for investors while creating positive change in California’s Lithium Valley.

• World-class lithium deposit in Imperial Valley, CA capable of supplying >10% of global demand
• Proprietary extraction technology enables sustainable, low-cost production
• Key raw material for the high-growth electric vehicle battery market
• Secured early customer supply agreements with major automakers
• Strategic opportunity to build US lithium supply chain amid surging demand
• Significant barriers to entry for potential competitors
• Strong government support through IRA tax credits and DOE initiatives
• Potential for high investment returns as lithium demand takes off over the next decade