Mining producers are being called upon to accelerate the switch to clean energy for powering their mines. Not only that, they’re under pressure more than ever to produce the materials necessary to make the global shift to renewable energy across all industries. However, challenges abound.

Renewable energy sources such as solar and wind are becoming an increasingly prominent global energy source in the global power mix and various industries, including the mining sector, are shifting to low-carbon energy. Often viewed as a ‘dirty’ industry associated with environmental devastation and high carbon emissions, the mining sector has been working to clean up its act. Adopting renewable energy and integrating it with existing fossil-fuel-based power plants to power mine sites is part of this effort.

What else is driving miners to adopt clean energy?

Employing green energy will not only lower the sector’s carbon footprint and be cost-effective in the long term, but it will also make it a more sustainable practice, for the environment as well as the mining industry itself. It will also satisfy investors in the sector as they become increasingly environmentally focused.

What is more, a hybrid electricity grid fueled by both green energy and fossil fuels will be more reliable for the continuous operation of mines than a grid powered by thermal energy alone.

Mining producers are receiving increased pressure from stakeholders and policymakers to accelerate their transition to renewables. At the moment, the low carbon transition, in not only the mining sector but all industries, is “far too slow to put global emissions into sustained decline towards net zero”, according to the International Energy Agency (IEA) on Wednesday 13 October 2021.

Why is the transition to green energy in mining so slow?

However, despite the advantages of (and need for) low carbon power in mines, as well as the external pressure on mining producers, the process will not be a simple one, and accelerating the transition will be a challenge.

Part of the pressure on miners to transition to clean energy faster is due to the urgent need to cut down on carbon emissions. However, policymakers, capital markets, and consumers may not fully perceive the challenges involved in transitioning to green energy for miners due to supply optimism. This is the assumption that the resources required for the green energy transition are readily available. This is not in fact the case; vast quantities of these materials will be needed and increasing the supply to meet the requirements will be a large and expensive undertaking for miners.

We can see this assumption, for example, in the case of the global copper market. Copper is in high demand, being a central material component in the transition to and generation of clean energy, with more versatile properties than all other metals used in the production of wind and solar facilities, storage, technologies, and electric vehicles. This means that generating wind and solar energy involves four to six times more copper than generating fossil-fuel-based energy. Copper has also been in a physical deficit for more than five years, and as a result, has declined in quality due to lower ore grades being mined. This has also lowered the market price of copper, even though the demand remains high and mining companies are struggling to meet this demand.

Tapping into new copper deposits will be no small feat

Although there are still abundant untapped copper reserves where higher ore grades could be mines, extracting copper from these would involve further exploration and the establishment of new mines and workforces, a costly, resource-intensive endeavour. However, this would also enable the producers to meet the high demand for copper.

As well as having to tap into new ores, the transition to renewables will require that mines expand existing facilities and ramp up operations to increase production, build renewables storage facilities and produce necessary technologies, increase labour and transportation, build storage facilities, and produce necessary technologies. This will require the expansion of workforces and transportation fleets – and high levels of capital expenditure.

These high costs are a chief concern for producers, which are currently receiving insufficient investments to carry out these projects and so will suffer financial loss in the short term.

This concern is not offset by the incentives producers will receive from leveraging low-carbon energy in the long term.

Financial gain is one incentive – renewable power systems will ultimately result in lower electricity costs for producers. Other incentives for producers with sites in Australia, South Africa, and Zimbabwe are that renewables-based power grids will be more reliable (as well as cheaper) than the thermal power grids they currently run on. What is more, mines producing their own power will have far easier access to electricity in remote areas due to having onsite facilities.

These long-term incentives and the pressure from investors are so far not quite enough to spur miners to accelerate their transition to renewables, as they are outweighed by producers’ concerns with the short-term expenditure. At the same time, producers that do not accelerate their efforts to integrate green energy and decarbonize their operations face losing funding from environmentally focused investors.

For the moment, many producers remain reluctant to spend more capital in the short term to accelerate the transition to renewables through the creation of new projects and expansion of current power infrastructure, wanting to wait for demand for commodities to go up rather than responding to forecasts from environmental authorities.

That’s not all…

Another worry for producers is the possibility that supplies of materials needed to build EVs and renewable infrastructure grids may not be delivered fast enough to make up for the loss of hydrocarbons. That and the potentially huge need for hydrocarbon fuels in the production of solar and wind infrastructure means there’s a chance that the demand for oil and gas will increase, and that carbon emissions may actually become higher, at least in the short term.

However, mining companies do have the alternative option of purchasing off-site renewable energy instead of generating low-carbon energy themselves, and many have started to seek long-term power purchase agreements (PPAs), which is an increasingly popular and more affordable route. It is also a good option for mines whose sites are not suitable to house renewable power infrastructure.

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