The Supply Chain and Industrial Organization of Rare Earth Materials: Implications for the U.S. Wind Energy Sector

Rare earth metals play an important role in many new and “green” technologies, such as electric vehicles, energy-efficient lighting, and wind turbines, and the use of these technologies is likely to continue to increase in the United States and elsewhere. However, China’s dominance in producing rare earths, the widespread vertical and horizontal integration by Chinese firms, and China’s export quotas have raised concerns about their availability. In fact, the cost of acquiring these materials from China has increased significantly over the past several years.

In a new RFF report, The Supply Chain and Industrial Organization of Rare Earth Materials: Implications for the U.S. Wind Energy Sector, RFF experts Jhih-Shyang Shih, Joshua Linn, Timothy J. Brennan, Joel Darmstadter, Molly K. Macauley, and Louis Preonas examine some of these concerns. The report—which was prepared at the request of the U.S. Department of Energy—focuses on two rare earth elements, neodymium and dysprosium, both desirable metals for some types of wind turbines.

China’s market power or export policies would not appear to significantly affect the U.S. wind industry or the overall electricity sector—absent major changes in policy or market conditions, wind is not expected to account for much of U.S. electricity generation, even by 2035. Also, the use of wind turbines containing rare-earths-dependent magnets has not yet grown very far in the United States. Many analysts expect the use of rare earth materials to increase over time, however, conceivably reinforced by policies that increase the construction of new wind turbines in the United States.

This report provides a basis for understanding some of the key physical and economic factors influencing rare earths markets and, in turn, the effects on the producers and consumers of the final products that embody these elements.​