Renewing the Mining Industry

In this article, we examine the greening drivers in the mining industry and discuss why renewable generation technologies are well placed to realise these goals.

The old ways are no longer fit for purpose

Mines play a crucial role in the domestic and global economy, providing the raw materials necessary to produce many different products. However, the nature of mining operations is that they are often found in remote places with little or no access to the electricity grid. Mining operations consume large amounts of electricity and, since a reliable power supply is critical, mining companies have traditionally relied on diesel and gas generation as the baseload power supply.

Whilst gas and diesel generators are reliable, they can be very expensive to operate and market conditions cause gas and diesel costs to be highly variable – the current environment is an excellent example of this. There are also additional costs with companies spending significant capital to build infrastructure and on logistics, not to mention the various health and environmental impacts.

The mining industry is also facing other significant challenges. For example, diesel generators can produce around 1kg of CO2 for every kWh generated. Increasing pressure from activists to stop projects harmful to the environment and the abandonment of coal stocks from investment portfolios, therefore, come as no surprise. In addition, stakeholders and directors of companies are requiring an increased focus on ESG and, in particular, ESG issues are often a critical part of the assessment process of financiers that provide the capital that enables mining projects to be funded and developed.

The infrastructure required for the renewables revolution to proceed is however heavily reliant on the mining industry to provide the necessary raw minerals for its construction and continued operation. This means that sustainable solutions are required to offset the deleterious environmental impacts of the mining industry while remaining economically viable and attractive to investors.

The Australian mining sector is alive to the necessity to have a greener approach to resource extraction and beneficiation. To this end, we have seen various commitments to use renewable generation to power mining operations. For instance, Fortescue Metals Group has committed to build the multi-billion-dollar Uaroo Renewable Energy Hub in the state’s Pilbara region in Western Australia which will use alternative energy sources to power its Pilbara mining operations. The company has said that it hopes the project will inspire others to implement similar solutions as they too target net-zero operations.

Not only does this make sense from an ESG perspective, but it also utilises the opportunities of declining generation costs, decentralised generation technologies, the rise of storage technologies and potential additional revenue streams.

Switching to renewable technologies

Australia is fortunate to have world leading solar and wind resources. Solar PV or wind turbines, when coupled with storage technology, can be deployed to provide low-cost zero emissions power to sites that would otherwise need significant capital expenditure to connect to the grid or be forced to rely on fossil fuelled generators. Rapid advancements in energy storage technologies are improving efficiency and providing the solution to the renewable intermittency problem (i.e. that renewable energy is only generated when the sun shines or the wind blows).

Take for instance the development of mineshaft energy storage by companies such as Green Gravity, which deploy super-heavy weights in legacy unused mine shafts (estimated at nearly 100,000 across Australia) to capture and release energy. The weights are raised at times of the day when energy prices are cheap (or on-site surplus generation is available) and then lowered at the precise moment the power is wanted – either for an industrial purpose or simply because energy prices in the grid make it an attractive time to dispatch. Importantly, the environmental footprint of such an operation is very small even when compared to alternative energy storage technologies such as lithium-ion batteries.

While becoming fully independent from diesel or gas is difficult for a mine, energy costs can be reduced drastically when renewable generation is added to the energy mix and various other ESG related benefits can be derived. Crucially, renewable generation is not linked to the volatile prices of diesel and gas, making it easier to budget for energy costs.

Mining companies can also combine different energy generation technologies in microgrids, improving resilience while reducing electricity costs and meeting ESG objectives. For instance, the Agnew Renewable Energy Microgrid project will consist of five wind turbines delivering an 18 MW wind farm, a 10,000 panel 4 MW solar farm and a 13 MW / 4 MWh battery storage system with security and reliability of the microgrid underpinned by a 16 MW gas engine power station.

As adding renewable generation to a mine site is an upfront capex costs, the operational costs of these facilities are drastically lower than diesel powered sites. This is because sunlight and wind are free and the design life of renewable generation facilities can often exceed 25 years with relatively minimal maintenance costs. Batteries have a comparatively shorter service design life and mining companies can expect to change batteries twice during the service life of the solar or wind farm. However, batteries are a less mature technology and cost reductions and service life increases can be expected in the short term.

The Role of Green Hydrogen

Mining projects are well placed to provide an important demand side industry for green hydrogen (GH2). GH2 can be used to store renewable energy to generate electricity. It can also power equipment and trucks and cars, and it can even be used in certain traditionally hard-to-abate sectors such as steelmaking as a reducing agent. At the moment, hydrogen is only used as a part-replacement for coal or coke in steel operations, but in these large-scale undertakings, even a partial replacement of a large amount of carbon can make a significant impact.

The cost of electrolysers is currently the main issue when it comes to scaling up and utilising GH2 economically. While electrolysers are not yet at a price point where they can be deployed at scale to produce the amount of GH2 required for these large mining projects, as the technology advances and demand through industries the resources sector grows, electrolysers costs are expected to reduce accordingly.

Carbon Neutrality by 2050

As Australia pivots towards carbon neutrality by 2050, resource companies are already eyeing energy as an area where relatively easy gains can be made. Efforts are well underway to decarbonise operations and supply chains across Australia. In Western Australia alone, almost half of all electricity generated in the state is used outside of power grids by resources companies operating in remote areas.

As referenced above, along with a solar farm and a battery, five giant wind turbines are powering much of the operations at the Agnew gold project, about 1,000 kilometres north-east of Perth. Energy company EDL, which built the Agnew power system, estimates there is about 2 gigawatts of “off-grid” power demand in Australia. And other major players, including Rio Tinto, BHP and Woodside, have unveiled plans to spend billions of dollars on wind turbines and solar panels as they seek to go green.

It is clear that the mining and renewable energy industries have and will continue to have a very close relationship. Ultimately, mines and resource projects will need to have a holistic approach when it comes to decarbonising, namely one that combines electrification, energy efficiency, batteries and green hydrogen in order to make the best use of potential synergies.

We will be examining the opportunities for the beneficiation industry through initiatives such as green steel and green aluminium in a follow up to this article.

The Hamilton Locke team advises across the energy project life cycle – from project development, grid connection, financing, and construction, including the buying and selling of development and operating projects. For more information, please contact Matt Baumgurtel.