BHP cancels coal contracts, goes 100 per cent renewables at huge Chile copper mines

Mining giant BHP has confirmed its plans to turn to renewable energy at its huge copper mines in Chile, saying that it aimed to source 100 per cent of its power needs from renewables from the mid-2020s and will cancel its current coal contracts.

The announcement confirms RenewEconomy’s report last week that BHP was in final negotiations for a renewables-based contract for the huge   Escondida and Spence copper operations , after putting up its energy supplies to a tender earlier this year.

BHP says the switch to 100 per cent renewables will save money and lower emissions, and this is after setting aside more than $1.1 billion for the cancellation of existing coal contracts.

“These new renewable energy contracts will increase flexibility for our power portfolio and will ensure security of supply for our operations, while also reducing costs and displacing CO2 emissions,” Daniel Malchuk, the head of BHP Minerals Americas, said in a statement.

“From a commercial perspective, these contracts will deliver an estimated 20 per cent reduction in energy prices at Escondida and Spence operations.”

“This is an important step in our transition to sustainable energy use over the medium term in Chile.”

BHP says the separate contracts amount to three terawatt hours year, equivalent to about 3 per cent of Australia’s total electricity usage, and about six per cent of Chile’s.

Escondida and Spence have signed a 15-year contracts for about 3TWh a year with ENEL Generación Chile, a subsidiary of the Italian energy giant,  and a 10-year contracts for another 3TWh/year to Colbún. The ENEL contracts will begin in August 2021 and the Colbún contracts in January 2022.

BHP says the contracts will effectively displace 3 million tonnes of CO2 per year from 2022 compared to the fossil fuel based contracts they are replacing – the equivalent to the annual emissions of around 700,000 combustion engine cars.

Most of the supply for the mines is expected to come from solar, considering Chile’s excellent solar resources, with the balance from hydro power.

The fact that the commitment to the new renewable energy contracts will result in the cancellation of existing coal contracts – and a $US780 million ($A1.13 billion) hit to its half year accounts, is truly significant and comes despite its ongoing membership of the Minerals Council of Australia which rubbishes renewables and continues to defend coal as the cheapest source of supply.

It also comes after BHP’s own CEO Andrew McKenzie cast doubt about the ability of renewables to deliver results in a modern economy. Now they will be powering two of its biggest assets.

BHP also put its Australian supply contract out for tender earlier this year, but negotiations are still ongoing due to the complexity of the market arrangements here.

Those tenders are likely to include the giant Olympic Dam project in South Australia, and will likely take into account whether that project is expanded or not.

Other miners in Australia are also considering a large share of renewables, including Oz Minerals, which is looking to use solar to power 80 per cent of a new nickel project, and Element25, which is looking for cheap wind and solar to support a “green metals” project that will create manganese steel at a new project in W.A.

Other smaller mines are also including a mix of wind, solar and storage as demonstration projects to illustrate the cost-competitiveness of renewables compared to the traditional sources of gas and diesel.