Australia Leaps Towards Renewables; BHP Replaces Coal with Renewable Energy at Chile

Andrew Mackenzie seems to have ticked another checkbox on delivering the environmental promises the giant Australian miner- BHP Group Limited (ASX: BHP) made to the investors and the shareholders of the company, by securing renewable energy contracts for the Escondida copper mine in Chile.

Global resource producers are now considering the investors’ demand on focusing at the climate change, and Australia as the world-leading resource producer has recently witnessed many firms acting on the changing environment by adopting measures to curb down the value chain (Scope 3) emissions.

BHP Climate Focus

The global miners and resource producers rely largely on fossil fuels to meet their energy demand. Apart from their own emissions, the utilisation of raw material produced by the global mining and resource industry also creates substantial carbon emissions, which is typically classified as the Scope 3 emissions aka value chain emissions.

About 43 per cent of BHP’s operational emission comes from its electricity usage, which utilises fossil fuels such as oil, coal, etc., for the in-house power generation.

To Know More About BHP’s emission source, level of emissions and adopted policies, Do Read: BHP Climate Focus- A Ticket to Long-Term Sustainability?

While BHP is targeting the value chain emissions for quite some time now, in a move to tackle the Scope 1 and Scope 2 emission (In-house emissions), the company announced four renewable power agreements for its Escondida and Spence copper mine to meet the power demand.

As per the company, the new contracts would serve the energy needs of both the copper mines in Chile and would also extend a hand in managing the future power demand as well.

BHP plans to serve all the power requirement of both-Escondida and Spence by renewable energy sources from the mid-2020s.

The President of BHP Minerals Americas- Daniel Malchuk believes that the new contracts would inch up the energy portfolio’s flexibility and would further ensure the security of supply for the operations.

The new renewable energy contracts would also reduce the costs and carbon footprints, and from the commercial perspective, these contacts would slash the energy prices by 20 per cent (BHP’s estimate).

The Energy Contracts

The contracts agreed for the Escondida and Spence copper mines include a 15-year three terawatt hours per year contracts to ENEL Generación Chile, commencing in August 2021 and a 10-year contract for three terawatt hours per year to Colbún, commencing in January 2022.

The energy contracts would efficiently displace 3 million tonnes of carbon dioxide emissions a year from 2022- equivalent to approx. 700,000 combustion engine cars’ emissions per annum.

The energy contracts are also value accretive and include a provision of USD 780 million, which would be recognised on the company’s 2019 half-year financials and is related to the cancellation of the existing coal-based contracts.

Water-Saving at Escondida and Spence

BHP has been working on eliminating the water drawdowns from the aquifers in Chile for over a decade now, and the company intends to reach zero aquifers drawdowns for operational supply by 2030. BHP installed a desalination water plant of 1000 litre per second capacity at its Spence copper mine to support the growth option.

BHP also installed an additional desalinated plant in 2017 with a maximum capacity of 2,500 per second at its Escondida copper mine, and apart from that, the company invested over US$4 billion in Escondida’ s desalination facilities with an aim to eliminate groundwater usage by 2030 in Chile.

BHP, being among the top global miners, is focusing on climate change, which, as per the subject matter experts is an essential element for long-term sustainability.

While BHP is consistent in its efforts, another Australian giant miner- Rio Tinto (ASX: RIO) is narrowing down its focus on the value chain emissions, and the company is pulling in efforts to address the immediate attention-needed to mitigate the environmental concerns.

To Know More About Rio’s Action Over the Changing Climate, Do Read: Australian Giant Miners-Rio And BHP To Curb Value Chain Emission

Not just these Australian miners, global behemoth such as Anglo American is also pressing for renewable energy.

In July 2019, Anglo American mentioned that the company would use only renewable sources to power its mines in Chile by 2021.

The investors and shareholders are also pressing the companies to act on the changing climate and to reduce the harm done by the mining companies, which is now prompting individual miners to act as per the shareholders’ will to maintain the symbiotic relationship between an investor and an investee.

To Know More, Do Read: How ESG Consideration Rings Bell In Assessing The Quality of A Mining Stock?

While the miners are curbing on the fossil fuel to meet their energy demand, the global and Australian energy producers are also adopting measures to slash out the fossil fuel inputs for the energy generation.

Recently, the Australian energy retailer- Origin Energy Limited (ASX: ORG) expressed its aim to exit the coal-fired power generation by 2032 and shift its energy generation portfolio towards renewable energy resources.

To Know More, Do Read: Origin Energy Joins the Cause of Reducing Carbon Footprints

Australia Energy Dilemma

Australia is a significant consumer of energy, and the energy consumption of the nation is further anticipated to increase by the industry experts.

To Know More, Do Read: Australia’s Energy Consumption Gushes; While ACCC Nods in Consent for Liberty’s Acquisition by Viva

The country largely relies on coal-powered energy generation, replacing which is an onerous task for the nation amid abundant and cost-effective coal supply.

The suitable replacement for coal in energy generation is natural gas (considering the climate change goals), and Australia is already facing spiked natural gas prices amid lower supply due to high LNG generation. Which, in turn, is a challenge for Australia to easily replace the coal-dependency.

To know More About the LNG Exports and Domestic Natural Gas Supply Conditions, Do Read: Australia Set to Surpass Qatar Over LNG Exports; Domestic Natural Gas Conditions To Derail the Projections?

However, in the recent days, we have seen many Australian biggies replacing their energy contracts from fossil fuel-based to renewable-based, and also the nation is diverting towards the renewable energy, albeit with a slower pace.

Also Read: Staggering Leap of Renewable Energy; Latest with Energy and Resource Sector Players in Australia

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