How can mines best manage the climate transition?

Between ambitious decarbonisation targets, fast-changing technologies and increasingly unstable weather, long-term business planning is more challenging than ever for mines. ENGIEImpactWALeaderAmySteeloffersstrategiestohelp minersmanagetheclimatetransition.

EnergyandMines:Howaredecarbonisationgoalsbeing integratedintobusinessplanning?

AmySteel:Integratingdecarbonisationgoalsintobusiness planningistypicallyphasedduetoorganisationalsilos. Organisationsneedtoensuretheirdecarbonisation commitmentsarecomplementarytotheirwidercorporate aspirationstounlockcompetitiveadvantage.

Integratingdecarbonisationgoalsintobusinessplanningis typicallychallenging duetoorganisationalsilos.Accordingto ENGIEImpact’sresearch73%ofleadersrespondedthatthelack ofcross-functionalapproachwasabarrier.Organisationscan overcomethisbyinvolvingthebusinessplanningteaminthe assessmentandroadmappingprocessfordecarbonisation options.Activeparticipationfromtheteaminmeetings,where theycan askquestionsandchallengeassumptions,fostersabetter understandingofdecarbonisationtechnology,risks,timing,and costs.Thisleadstotheintegrationoftheseassumptionsintothe businessesimplementationplanovertime,helpingtofacilitatea smoothtransitiontowardsamoresustainablefuture.

E&M:Whataretheprosandconsofaphasedinapproach todecarbonisingpowervs.investinginthehighest penetrationofrenewablesandstoragefromtheoutset?

AS: A phased approach to decarbonising power offers a range of pros and cons compared to investing in the highest penetration of renewables and storage from the outset.

Pros of a phased approach:

No-regrets investments: A phased approach enables businesses to make no-regrets investments while there is still uncertainty about the ideal zero-carbon end game. Companies can invest in renewable energy technologies with confidence, knowing they are making progress toward their decarbonisation goals, even if the exact path to a zero-carbon future remains unclear.

Technology cost reductions: Deploying the system in phases can result in a more favourable overall net present value (NPV) because technology costs are expected to decrease over time, especially in the harder-to-abate and emerging technology categories. Waiting for more cost-effective solutions can make large-scale decarbonisation projects more financially viable.

Capital allocation: Implementing a phased approach can help manage the challenge of finding the large amount of capital required to deploy a 100% renewable energy system. By breaking down the investment into smaller, incremental steps, companies can more effectively allocate resources and manage their capital expenditure.

Adapting to system changes: As various components of the energy system change, such as the electrification of vehicle fleets, new load profiles will emerge. A phased approach allows for adjustments and reinvestment to accommodate these evolving load profiles, preventing potential inefficiencies or disruptions in the system.

Cons of a phased approach:

Locking into fossil fuel contracts: Phasing may be less effective if it results in locking into long-life contracts for fossil fuels, which can delay decarbonisation efforts and run the risk of higher carbon price exposure or stranded assets. Companies must carefully evaluate their long-term commitments and consider the potential implications for their decarbonisation objectives.

Greenfield site opportunities: For greenfield sites, the entire plant may be designed for zero carbon from the outset, which can save incremental switching costs as technologies and systems change or come online. In such cases, a phased approach may not be as advantageous as building a fully decarbonised system from the start.

Insufficient initial impact: If the initial renewable energy system size is too small, it may not have a noticeable impact on emissions, leaving the company lagging behind its peers. A phased approach needs to ensure that each stage of implementation contributes meaningfully to emissions reductions to maintain competitiveness and credibility in the market.

Potential inefficiencies: A phased approach may create inefficiencies in system design and integration, as new technologies are added over time. Companies need to carefully consider the long-term implications of each phase and its impact on the overall system to minimise inefficiencies and maximise the benefits of their decarbonisation investments.

E&M: How can mines plan and design around technologies not yet available?

AS: Mines can utilise scenario-based planning to analyse different technology options and combinations through modelling various alternatives to plan and design around technologies not yet available. This method helps identify essential technologies, create stage-gates and decision points, and provide price signals indicating favourable technologies for deployment in the mine. By using scenario-based planning, mines can effectively navigate uncertainty and make informed decisions about the best course of action for their decarbonisation efforts.

E&M: How are miners taking into account and integrating climate risk into their decarbonisation plans?

AS: The mining industry is no stranger to harsh climates, but forecasts of hazards such as heavy precipitation, drought, and heat indicate these effects will get more frequent and intense, increasing the physical challenges to mining operations as well as power outage events across both variable renewable energy and traditional energy generation. However, integrating physical climate risk into decarbonisation has been rarely done to date.

As extreme weather events grow in both frequency and magnitude under the changing climate, decarbonisation plans should be adapted to build resilience to these more potent extremes. Mining companies should also be planning for shifts in chronic conditions such as wind patterns, solar irradiation and temperatures which can impact the generation profiles of solar PV and wind.

E&M: What are the challenges of developing strategies for Scope 3 emissions and how can mining companies navigate these?

AS: The mining industry is one of the largest industrial contributors to global greenhouse gas emissions — accounting for 4% to 7% of scope 1 and scope 2 emissions globally. This number goes up to approximately 28% of global GHG emissions when indirect scope 3 emissions are considered.

Mining companies must take a stewardship role in reducing Scope 3 emissions, even if they have no direct control over them and approach this challenge as an opportunity to gain a competitive advantage. To effectively reduce scope 3 emissions, mining companies must:

Have an accurate understanding of their scope 3 footprint and set an ambitious yet attainable scope 3 target in line with leading frameworks.

Engage with suppliers and customers within their value chain to improve data accuracy and support value chain decarbonisation efforts.

Identify and implement mitigation efforts that reduce scope 3 emissions and business risk, while demonstrating financial returns where possible.

Get all levels of the company on board. It is impossible to make lasting changes without organizational buy-in at every level of the company.

Improve reporting and transparency of scope 3 emissions.

Tackling scope 3 emissions is challenging and requires coordination across a number of players within the value chain. Developing partnerships to reduce emissions and align reporting requirements is therefore an opportunity that the industry should embrace.