As the world enters into a “new age of sustainability” – driven by Paris Agreement targets, investor expectations and societal pressure – the Australian mining industry faces a number of key questions: to what extent should we decarbonise, what is the best way, and can we continue to thrive as a result?
Ahead of the Resources and Renewables Conference, Michael Wood of Deloitte told Informa that reducing emissions is now a key financial – as well as an ethical – imperative; and that wind and solar power will form a major part of that response mechanism.
“Most countries have now committed to reduce emissions in line with the Paris Agreement. But, deeper than that, we’re now getting broad consensus from the general community that it’s time to make genuine change,” said Wood.
“At an industry level too, we are receiving pressure from the investment community to look beyond the ‘cleanliness’ of just operational assets, to virtually every facet of the value chain: from sustainably sourced nickel for batteries to green-powered smelters.”
Wood says there are a suite of decarbonisation strategies to choose from and that renewables are likely to have the greatest efficacy – in terms of reducing both emissions and cost profiles.
“Renewables such as wind and solar power will help mines electrify, as they can be decentralised and integrated into the operating assets,” said Wood.
“On top of that, renewables are increasingly cost-competitive. In some cases, they will prove cheaper, in terms of their levelised cost of energy, than their fossil fuel peers.”
Wood reminds us that energy represents a significant part of the cost profile for any mining business, with operating costs scaling as high as 40 percent – particularly for those reliant on liquid fuels.
“If you can reduce that component of the cost, through renewable energy, then your shareholders will no doubt be very happy,” he said.
Renewables aren’t, however, a panacea, particularly for mines which now operate 24/7 and whose energy requirements exceed the capacity of available daytime wind and solar power generation.
“Storage is obviously the missing link here, but this increases the capital costs materially,” said Wood.
“Having said that, the learning rate of this technology is improving – and the cost profile consequently shrinking.
“If the scale and demand for battery and other storage technologies continue at this pace, they will become more affordable for mainstream use in the years to come,” he said.
In the meantime, Wood advises mining companies to consider the nature of their business and operating assets when deciding which decarbonisation strategies are appropriate for them.
“There are a range of tactical things around the life and nature of the asset that we need to consider. If your asset life is long, say 20-30 years, you can plan for broader, strategic investment,” he said.
Wood concludes by saying that Australia is in pole position for exploitation of natural resources like sun and wind.
“It’s up to us to capitalise on that and integrate it into our green- or brownfield sites. The sector has plenty of good success stories on this front and we need to tell our story more effectively to the market.
“As it stands, there’s no consistent narrative around mining’s role in decarbonisation, particularly in the context of renewables. And I think that might just be the missing link here.”
Michael Wood is a Director of Sustainability Services at Deloitte. Join him for a broader discussion on this topic at Informa’s Resources and Renewables Conference, due to take place 4 March 2020 in Perth.
Register now to secure your seat.