Global mining giant BHP has signed a five year contract that will see it source wind and solar to deliver up to half of the power needs for its coal mining operations in Queensland.
It’s the first big renewable energy off-take agreement signed by BHP in Australia. It’s been on the cards for more than a year, when BHP first revealed it was looking at its energy supply contracts, and follows its decision last year to switch to 100 per cent renewables for its huge copper operations in Chile from the mid 2020s, and to cancel the existing contract from a coal generator in that country.
The Queensland deal has been struck for five years – from January 1 – with the recently formed state-owned utility CleanCo, and BHP says it will underpin the development of Australia’s biggest solar farm at Western Downs (400MW), which is due to be built by Neoen by 2022, and the new Karara wind farm, part of the massive MacIntyre wind project, due to begin operations in 2023.
Karara is a facility being built by CleanCo within the larger Macintyre wind project owned by Acciona. Both Western Downs and MacIntyre have signed long term PPAs with CleanCo, forming the bulk of its targeted 1,000MW of wind and solar additions by 2025.
BHP says its Queensland coal mines, operating in ventures with Mitsubishi and Mitsui, have an average load of around 150MW.
“This is an important step forward in BHP’s transition to more sustainable energy use across our portfolio, and a first for our Australian operations,” BHP’s President Minerals Australia, Edgar Basto said in a statement.
“This is a prime example of prudent business decisions going hand-in-hand with social value, strengthening our business and benefitting the community.”
BHP says the “firm renewable power purchasing agreement will meet half of its electricity needs across its Queensland coal mines, reduce the company’s Australian “Scope 2 emissions” by 20 per cent from FY2020 levels, and displace an estimated 1.7 million tonnes of CO2e between 2021 and 2025 – which it says it equivalent to the annual emissions of around 400,000 combustion engine cars.
BHP’s coal mines in Queensland extract metallurgical coal, which is used in steel making rather than coal-fired power generation.
It is not clear why the power purchase agreement is only for five years, or what is proposed beyond that. It could be that BHP will reassess the contract and possibly look for a higher renewable share going forward.
BHP also has significant mining operations in the Pilbara and at Olympic Dam, where is it considering expansion. Fortescue and Rio Tinto have both committed to major renewable projects for their iron ore operations in the Pilbara, but BHP has yet to reveal its intentions for its other operations.
For the Queensland coal mines, power will be contracted for the first two years from CleanCo’s low emissions portfolio which includes hydro and gas generation assets. From late 2022, the newly operational solar and wind farms are expected to progressively contribute up to half the electricity requirements, with the remainder supported by CleanCo’s low emissions portfolio.
Combined with large-scale generation certificates, this will enable BHP to reduce Scope 2 emissions from its Queensland operations by 50 per cent by 2025, based on FY2020 levels.
“This contract will help our operations across Queensland to further increase their sustainability through reducing the greenhouse gas emissions we generate from electricity use by half,” BHP Mitsubishi Alliance (BMA), Asset President, James Palmer said in the statement.
“It will also support two greenfield renewable projects that in turn are expected to generate regional jobs in Queensland.”
CleanCo has a target to support 1,000MW of new renewable energy generation by 2025, and has already announced large scale off take agreements for both Western Downs and MacIntyre.
Queensland Resources Council’s Chief Executive Ian Macfarlane, a notorious opponent of wind and solar energy when he was Coalition energy minister in two Coalition governments (Howard, then Abbott), said the deal was “a great example of how Queensland’s resources industry is working hard to make a smooth transition to a low carbon economy and is another sign of our commitment to embracing new technologies which lower emissions and deliver reliable energy.”