BHP To Mine Uranium With Renewables?


BHP Billiton has caught some flak from the green movement about its massive Olympic Dam project, including over its apparently conservative choice of power supplies. A spokesperson for Greens senator Scott Ludlam last week was scathing: "BHP Billiton has designed a world’s-worst-practice uranium mine, when the alternative would see a lower greenhouse footprint and skilled jobs retained in South Australia". 

It’s right that BHP is under scrutiny, because if the biggest mining company in the world — one that measures its annual profits in the tens of billions of dollars — can’t afford to invest in that green thing, then who can? Not so fast. While BHP Billiton appears to have committed to connecting the mine to the coal-fired grid and gas supplies, and is seeking approval for a gas-fired power plant of up to 650MW to power the project, it is also keeping its options open.

In a decision that stands as a clear message to the country’s established energy generators, and to the Cassandras who idly dismiss the potential of renewable energy sources, BHP Billiton is pointedly refusing to sign long-term power supply agreements, because it is canvassing the possibility of sourcing much of its power from geothermal and solar thermal energy sources. The supplementary environmental impact statement released on Friday makes it clear to its board of directors that it would be mad if it didn’t.

In the initial stages of the project, up to the point that the mine gets to a 20 million tonne per annum capacity, the biggest greenhouse abatement opportunities are from biodiesel and from gas (CCGT), but they are both costly.

However, by the time the Olympic Dam project ramps up to a 40mtpa operation — likely within a decade of final approval — its greatest greenhouse abatement opportunities lie with geothermal and solar thermal energy sources. And, more importantly, they both have a negative cost of abatement, which is to say that if the technology is available, then BHP will make more money by replacing its gas and coal-fired energy sources with geothermal and solar.

The mine, by the time it has scaled up to this size, will be emitting up to 3.8 million tonnes of C02e per year. More than half of those emissions could be reduced through geothermal and solar thermal energy, and the company will make money by doing so. Further reductions could be achieved with solar PV and biodiesel, but these appear expensive at current estimates.

Some particularly profitable abatement opportunities are also available, such as crushing the ore inside the pit, but this abatement opportunity will depend on the mine design. There is also a potential role for solar thermal in reducing emissions — which is nearly doubled when the mine gets to its maximum capacity of 60mtpa, and the abatement costs of solar PV fall sharply. At that point, carbon capture and storage also potentially starts to play a role.

The abatement cost survey was adapted from the famous McKinsey curve developed several years ago, but was updated specifically for this project with the help of a McKinsey team that spent a month in BHP Billiton’s offices. BHP Billiton insiders suggest that the solar PV and biodiesel estimates may already be redundant, such is the pace of the declining cost curve. As one observer noted: "This (document) could not be a clearer indication of how the energy industry could change in the coming decade." And it is why the company is so keen on keeping its options open. The technology options are being reviewed on an annual basis.

BHP Billiton cannot commit to those technologies now because they are not bankable at such a scale. But it fully expects that they could be in the next few years, which is why, as one observer noted, "no one wants to hook up with long-term contracts". By extending a grid connector to the site, it keeps its options open. A gas-fired power plant is still possible, even likely, but it might not be needed at anything like the scale envisaged.

So far, the company has only committed to around 57MW of renewable energy sources — 35MW to power a desalination plant that will take water from the Spencer Gulf, and a recently adopted commitment to buy a further 22MW of renewable power from the grid to power the pumping stations to get the water to the project site.

The company intends to install a 250MW co-generation facility using waste heat from the burning of elemental sulphur, which will also serve to reduce emissions and energy costs. Elsewhere, its adoption of renewable energy is on a micro scale, including the installation of solar hot water and solar photovoltaic systems in the new airport, the expanded Roxby Downs and Hiltaba Village.

It would, of course, be a delicious irony if this massive mining project, and one expected to become the largest source of uranium in the world, was powered by geothermal and solar thermal energy installations.

Questions remain: Can these technologies deliver on time? And what help will the government provide to ensure that they are able to seize these opportunities?

If the world’s biggest mining company can see that powering its biggest project with geothermal and solar thermal is a cheap and effective option, then perhaps it is time the government recognises this too, and moves its renewable energy policies out of neutral and into a forward gear.

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This article was first published on Climate Spectator. Read it here

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