Renewables in mining: how the mining sector is driving energy diversification

Liam Davis, Partner and Kate Swain, Partner, McCullough Robertson

The global focus on renewable energy projects has continued to gain momentum over the last 12 months, and so too has the uptake of renewable energy projects by the mining sector, and for good reason. With the cost of renewables declining and reliability increasing, the time is right for miners to adopt renewable energy as a means to reduce energy expenses, while at the same time responding to the push for economy-wide shifts to decarbonisation.

The landscape is changing

As governments around the world enact legislation designed to bring their economies in line with the goals of the Paris Agreement, companies across all industries will have to adapt to these new rules and regulations in order to remain compliant. Already, the Australian mining industry has shown support, with the Minerals Council of Australia confirming industry ambition to support the goals of the Paris Agreement, and of course the Australian Government’s release of the ‘Long-Term Emissions Reduction Plan’.

Within Australia, we know that emissions produced in mining operations are being increasingly monitored and reviewed, and reducing scope 1 and 2 emissions is key to limiting extensive hurdles and regulatory burden.

Currently, in numerous states, project approval requirements mandate the development authority’s consideration of a proposed mine’s emission mitigation measures, and environmental protection authorities are increasingly being challenged to have mitigation policies and measures.

At the Federal level, high emitting entities face hefty administrative requirements associated with the reporting regime. Technological advances continue to reduce the cost of developing renewable energy projects and stakeholder requirements are driving an increasing corporate appetite to ‘go green’.

Technological shifts have allowed renewably-sourced energy to become more generally competitive with other energy sources, and the advancement of technology including wind, solar, hydroelectric and geothermal energy is becoming an increasingly available and attractive measure within mine-site operations. So what opportunity does this represent for the Australian miners?

Microgrids

We’ve seen increasing appetite by miners to implement renewable energy supply solutions for their operations. Microgrids are proving an attractive option, combining an array of technologies to generate and store energy for mine site use.

In mid-2020, EDL Energy completed the delivery of Australia’s largest renewables microgrid, a 56 MW ‘hybrid’ microgrid project at South African mining company Gold Fields’ Agnew Gold Mine in Western Australia. The microgrid is comprised of five wind turbines capable of delivering 18 MW of power, a 10,000-panel solar farm contributing 4 MW, a 13 MW/4 MWh battery energy storage system and a 16 MW gas engine power station.

The Australian Renewable Energy Agency (ARENA) supported the project with a capital contribution of $13.5 million and the renewables component of the project is expected to provide up to 70% of the mine’s energy requirements. Hot on the heels of the Agnew project, a number of other mine microgrids have been developed or are in the pipeline.

These include recent announcements by copper miner, Oz Minerals, who are progressing to the next stage of studies to power its proposed West Musgrave Project with a hybrid fossil fuel-solarwind-battery solution. This could make it one of the largest fully off-grid, renewable powered mines in the world.

As an alternate to the micro-grid system, majors like BHP have been acquiring energy via external contracting. BHP recently entered a five-year supply contract for its Queensland coal mines with CleanCo. This deal proposes to halve BHP’s Queensland coal mine emissions over the next five years and will assist in the growth of CleanCo’s new Karara and MacIntyre Wind Farms and Western Downs Green Power Hub. External contracting also provides greater flexibility for operations facing a lack of life-certainty, with less initial capital, or with a short lifespan remaining.

Pumped hydro

Relatively new to Australian mine sites, pumped hydro is providing both innovative and rehabilitative solutions to mining operations. In January 2021, Centennial Coal received funding from ARENA to perform a series of technical studies and trials for the potential deployment of a 600 MW pumped hydro energy storage (PHES) system using underground coal mining voids.

ARENA considers the Centennial Pumped Hydro Energy Storage Project to affirm the utility of large-scale PHES to ‘firm-up’ intermittent renewable generation and to address grid security and reliability issues, which have accompanied the accelerating rollout of renewables onto the distribution network.

Furthermore, when compared to traditional PHES, the development of PHES on former mine sites can result in significant cost reductions given the lower cost of civil construction works (due to the pre-existing lower reservoir and existing underground shafts), as well as typically being co-located with existing transmission infrastructure.

A number of other PHES developments on former mine sites have been proposed, or are already in the development stage. Genex Power has recently started preliminary work on the 250 MW PHES component of its Renewable Energy Hub at Kidston, and AGL Energy and Idemitsu are testing the feasibility of transforming disused Muswellbrook Coal mining voids into a PHES development.

Related to these developments, Hydro Tasmania, Macquarie Group and Shell have just struck an innovative deal under which Hydro Tasmania sells the rights to power stored in its PHES system during the highest-priced parts of the day. The first-of-its-kind deal heralds the development of a new financial product, which is expected to be popular with electricity retailers seeking to hedge against escalating price risk. This is anticipated to spur the development of PHES projects, including on mine sites.

Solar

Alongside wind energy, ARENA argues that large-scale solar PV is one of the most technically mature and economically viable option in diversifying mine site energy usage. In September 2020, Malabar Resources obtained planning approval from the New South Wales Government for the development of a 25 MW solar farm on rehabilitated mine land. We are currently supporting Malabar on next steps for the development and construction of this project.

The solar farm will be constructed on open cut mine voids that have been backfilled after the completion of mining activities. The solar farm is positioned in close proximity to existing infrastructure and will connect to the network via an existing substation located on the Maxwell Infrastructure site, or via the construction of a new transmission line.

With an annual energy generation of 60 GWh, the Maxwell Solar Farm will have the capacity to power about 10,000 New South Wales homes – nearly all the homes in the surrounding towns of Muswellbrook and Singleton. Other mining companies are opting to further reduce their greenhouse gas emissions through the development of solar, and solar and battery systems, including Rio Tinto, who recently proposed a 34 MW PV solar farm and lithium-ion battery energy storage system at Gudai Darri, Western Australia. This comes alongside the announcement of a further solar farm and battery project to generate energy for the Weipa bauxite operations, which will increase Rio Tinto’s current solar capabilities to 4 MW with a 4 MW battery.

Surrounding site practices

In addition to low-emission energy sourcing, sites are taking measures including equipment upgrades, energy optimisation, automation and electrification. These efforts benefit operations by reducing upfront energy costs and avoiding issues like price volatility and fuel shortages, and also help to reduce emissions on a smaller scale.

Rio Tinto has implemented an automated heavy-haul long distance rail network through its AutoHaul program. Similarly, earlier this year Newmont announced its Boddington mine would be investing in automated haul trucks to reduce fuel usage and associated emissions. Newmont has further announced a $500 million investment into implementing a range of changes to reduce site emissions, including electrification, automation and artificial intelligence alongside renewable energy infrastructure.

Pumped hydro is providing both innovative and rehabilitative solutions to mining operations. With the cost of renewables declining, and reliability increasing, the time is right for miners to adopt this as a means to reduce energy expenses, while at the same time responding to the push for economy-wide shifts to decarbonisation. The Australian mining sector continues to integrate innovation and diversification into existing and future operations. With benefits realised by all stakeholders, we expect to see mine site use of renewables continue to grow. 