Mining and clean energy - Core Case

Mining and clean energy

To the extent the demand for renewable energy continues to grow, the mining industry is facing a decisive moment for becoming a recognized contributor in the transition to broader energy.

Mining is fundamental for the growth of renewable energy, since green technology strongly relies on certain metals and minerals – that come from mining.

Therefore, both industries – mining and energy – must undergo adaptations for the growing demand for these materials to be met. 

In this text we will approach the main characteristics of the energy transition (the so-called clean energy) and its relation to the mining industry. Read until the end to learn more about this important matter!

Renewable energy in the future

The effects of climate change already affecting several parts of the world and the alerts made by scientists, especially in the last IPCC report point to an alarming situation in the worldwide energy system. 

The raising of sea levels, intense heat eaves, loss of habitat and animal species, droughts and floods have led to global pleads to diminish the impacts of climate change – which must happen sooner rather than later.

According to the Paris Agreement and global pressure, governments and large companies are trying to reduce energy-related carbon dioxide emissions. They try to achieve that especially by implementing renewable energy sources, such as wind, solar and hydro.

The International Renewable Energy Agency projects that, for meeting the climate goals, total participation of renewable energy must increase in two thirds by 2050, suggesting that renewable energy may represent 60% or more of the total final consumption in many countries. 

This demand means that the sources of renewable energy will have to increase both their capacity and generation. For instance, the global cumulative installed power of onshore wind power will have to be expanded threefold by 2030 and ninefold by 2050. 

For offshore wind power, the increase would have to be tenfold by 2030. In terms of solar power, the global capacity will need to grow from a total 480 gigawatts in 2018 to 2,840 gigawatts by 2030 and 8,519 gigawatts by 2050. As for solar power, it is projected to reach 8,519 gigawatts in capacity worldwide by 2050.

These changes are significant and to that effect, companies need to be tuned to current demands which, in addition to being necessary for the environment, impact the economy – ESG’s agenda and sustainability and are attracting more and more investments; therefore, it is necessary for these demands to be broadly met.

Clean energy and dependency on mining

Discussions concerning sustainable energy and the global supply chain are often at odds with the fact that a renewable energy dependency plan relies deeply on the mining industry – since it supplies and metals and minerals necessary for building and operating it.

Solar power relies on the supply of aluminum, copper and certain rare earth elements (including indium and cadmium) for producing photovoltaic panels. 

Likewise, wind turbines are made of steel and their manufacturing, consequently, requires the production of iron, but also some rare earth elements, such as neodymium, which are necessary for the magnets used inside the turbine generators. 

Overall, copper is essential for the entire energy-generation infrastructure, as well as for electrical vehicle technology (EV).

Rare Earth Materials and wind turbines

For example, the case of rare earth metals, such as dysprosium and neodymium: Both metals are used for making alloys for permanent magnets found in wind turbine generators, with China mining approximately 63% of the global rate earth materials market. Currently, one 5-megawatt wind turbine requires one ton of alloy. 

Given future projections for wind power, the global demand for neodymium and dysprosium is projected to increase 2.1 times, with 65% of new turbines installed int he next ten years, incorporating technology that requires rare earth materials. 

Copper and wind turbines

Likewise, copper is in high demand due to its high conductivity and durability. Inside an installed wind turbine, the copper content is from 2.5 to 6.4 tons per megawatt, used in the generator, transformers and wiring. 

The global wind power market, currently requires an average 450 kilotons of copper a year and that is expected to increase to 600 kilotons per year by 2028. This number will probably be substantially increased, considering that future requirements for renewable energy will lead to larger wind turbines notwithstanding the need for copper for other technologies, such as solar power and electrical vehicles. 

The demand for copper due to electrical vehicles alone is likely to increase in 1,700 kilotons by 2027, since electrical vehicles are projected to represent more than 7% of annual vehicles sales until 2025. 

Copper and rare earth metals are difficult to replace and reuse thereof depends on recycling initiatives, which means their continued mining is essential to support the renewable energy industry.

Silver and solar panels

Silver, due to its high resistivity, is used in solar cells in the form of a past that collects electricity from the cell, so it may be stored or consumed. The metal is used in 95% of photovoltaic panels installed, which is equivalent to 9% of the total global production of silver. 

With the solar power capacity growing rapidly, the demand for silver mining is high.

Storage batteries – copper, lithium, nickel and cobalt

Given its intermittent nature, the increase in the generation of renewable energy will require large power storage units, which, on its turn, will lead to the increase in demand for minerals contained in storage batteries, especially copper, lithium, nickel and cobalt. 

However, there is a concern that the fast increase of the demand for these metals cannot be met based on annual production rates. Automakers, such as Tesla and Mercedes-Benz are already cutting down production forecasts due to concerns with the offer.

Mining challenges for clean and sustainable mining

Carajás – PA Copper Mine.

The core objective of the change into renewable energies is the reduction in greenhouse gas, caused by fossil fuels. 

However, this change cannot cause even more impacts on the environment we are trying to preserve, and therefore, it requires that mining operations also become more sustainable ​​concurrently with the energy transition process.

Climate change also represents a broader threat to the mining sector. Metals that will probably have an increased demand, due to their importance in the production of renewable energy technology, tend to be concentrated in areas that are more vulnerable to the effects of climate change.

Furthermore, the activities of the mining industry also require energy, and therefore, they are sources of emission of greenhouse gas. 

The mining industry, which already has its environmental impacts broadly known by society, has even greater challenges to change this scenario, since the demand for minerals will be continued – as will the need for adaptation into a more sustainable world.

More sustainable mining, cleaner energy and opportunity

The Javiera Power Plant that supplies Minera los Pelambres, one of the largest copper mines in Chile is managed by Antofagasta Minerals.

The Financial Times reported in September 2019 that the number of institutional investors that committed to completely remove fossil fuels from their portfolios by 2030 soared from 180 in 2014 to over 1,100, representing approximately US$ 11 trillion in assets. 

Therefore, at the same time the demand for renewable energy continues to grow, the enthusiasm for investment in fossil fuels and mining is decreasing.

Consequently, the industry challenges are great and it will be necessary implementing continuous adaptations for managing a broad and detailed ESG agenda, thus attracting investment and development that is adequate to current demands.

The mining industry, therefore, must pay attention to opportunities renewable energy present as one of the several solutions for making the industry more sustainable. 

One of the top advantages of renewable energy applied to mining is it can supply the energy needs of mining operations in remote areas, where the cost of building the infrastructure necessary for connecting the mine to the grid or building a conventional power plant would be substantial. 

Therefore, with the progress in renewable energy technology and the commitment of some of the top players in the industry, the industry is ready for the change and there are many benefits to mining companies moving to renewable energy:

  • Reduced reliance of fossil fuel that is vulnerable the fluctuations of global prices and reduction in carbon emissions;
  • Meeting environmental and social criteria (ESG) used for measuring the sustainability of a given project – will be a prerequisite requirement for both investors and creditors.

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