“We don’t doubt ourselves:” Fortescue’s race to real zero – and the radical rethink behind it

Iron ore giant Fortescue has just four years left to meet its real zero emissions by 2030 target, a mammoth task that will require it to fundamentally change how it operates. But the iron ore giant’s CEO Dino Otranto still believes it will meet and beat the target.

“That’s absolutely the aim,” he told Renew Economy, as the company seeks to completely remove fossil fuels from its Pilbara operations.

“We don’t even doubt ourselves… If you doubt, doubt creeps in, then you start slowing down and kidding yourself. Just got to build it. Is it going to fail? Sometimes. Are you going to get critics? Yep.

“A diesel two stroke engine is remarkably efficient and we need to compete with it, and that technology has been evolving and iterating for 150 years. So for us to come in a relatively short amount of time to then compete economically and technically with it [for trains]… what we now need to focus our attention on is the continued build out of lower cost electronics to charge it.”

The size of the project, to use no fossil fuels across the entire mining operation by 2030, does require a little bit of faith. 

The company runs five mines, 760 kilometres of railways and a port. 

To electrify these, it must replace 70 locomotives, and likely add more, with battery alternatives.

It must build another 5 gigawatts (GW) of renewable energy projects in the Pilbara alone, according to data on planning applications from RenewMap, and an as yet unknown number of large scale batteries. 

And while deliveries of electric versions of everything from excavators to water carts and front-end loaders do start this year, the company does have to replace everything by 2030.

Then it must change how it does mining. 

Does it run the port at Port Hedland, as seen above, the ore processing at one mine — or all of them — or something else? Image: Fortescue.

Instead of gas and diesel being available at any time, the company will need to forecast weather, model where electricity will be generated at any one time, and manage every single battery in its fleet from the grid-connected to utes.

From Perth, it will need to use that information to decide, in advance, whether there will be enough electricity in its network to run every one of its three mining hubs, whether there will be just enough to run ore processing, whether some parts of some mines will need to be idled, and send electrons to exactly where they’re needed at every time of the day. 

That task of coordinating every facet of a mining operation with the variability of renewable energy almost makes getting to real zero seem simple by comparison – almost. 

Don’t have all the details, yet

The problem for Fortescue is that it has not yet figured out how to decarbonise some of the more complicated elements of the operation. 

The two new battery locomotives, launched with much fanfare last week, are not technically adequate to replace the whole fleet. 

Fortescue is still looking for the tech that can handle the whole 400-plus kilometre distances and 40,000 tonne loads, preferably so it doesn’t have to over-buy locomotives in order to swap out engines for charged ones half way to a mine. 

How to get the company’s eight freight ships off fossil fuels is also still a conundrum that hasn’t been solved.

And it’s expensive to replace all equipment in just four years.

In 2022, the company said it would spend $9.5 billion, albeit with an expectation of around $1 billion in operating cost savings every year.

When those savings will start to kick in is less clear; Fortescue founder Andrew Forrest claimed at a conference in Germany this week it would begin next year, but Fortescue has since walked back those comments and clarified that the bulk of those savings will materialise closer to the end of the decade.

On the spend side of the ledger is the deal signed last year with BYD for 5.6 gigawatt hours (GWh) of batteries at what Fortescue says is the lowest cost price for storage seen yet, and a cost of solar hovering around $40 per megawatt (MW), compared with diesel prices of $120-300/MW.

All of which provides the meat to Otranto’s statement that they must have “economic decarb” as much as technical. 

Otranto says the cost of deployed capital per megawatt is “coming right down” for solar in double-digit percentages (he wouldn’t share what those figures are), but does expect decarbonisation generally to make them an even cheaper supplier of iron ore.

AI ambition

While the real zero aim is an interesting metric that Forrest has tied himself and the company to, the knottiest problems lie after that is done.

Because how does anyone run a mine on solar and wind alone? 

It adds another level of complexity when all operations must respond to surpluses and deficits of electricity on a daily basis.  

One idea offered is to ‘sprint’ during sunny days and focus on taking as much ore out of the ground as possible.

The stockpiles, then, become stores of energy – a little like water heated using rooftop solar electricity can be viewed as storing that power for later. 

During periods when solar isn’t delivering, Fortescue might then idle the actual mining operations and devote more limited electricity resources to the ‘baseload’ needs of ore processing of those stockpiles, which takes place at the mine.

Alternatively, the company might prioritise electricity to entire mines which are supplying specific or bigger customer orders in the near future. 

To prepare for this Fortescue has had to prepare a suite of technologies which, in future, will be used to manage where every electron in its network goes. 

While mines in Canada and Greece have been electrified, no company in the world has tried to run its entire operation off renewable energy at this scale.

Fortescue has had to buy its own weather forecasting and modelling software, and battery and energy management systems that can use that data to make decisions when to sprint and when to idle parts of its operation, and how to eke a little bit more from each vehicle each time it’s running. 

It’s having to build 620 kilometres of 220 kilovolt powerlines to deliver this power, and of course, build the generation as well. 

“We believe that we can economically distribute the electrons across our network, because what that saves is capital,” Otranto says.

“So you don’t have to build excessive solar or install excessive batteries or have excessive trucks to make sure they’re all full and run them when the clouds go.”

He says they are selling the battery management part of the software to companies in other industries, but not to rivals in the Pilbara. 

“When we advertise our capital intensity of decarbonisation, it’s significantly less than our peers, and right now, they don’t understand that,” he says.

“They don’t understand why Fortescue can do it so cheaply. But the reality is, we understand how the network of electrification works, probably better than a lot of our peers.”

If or when Fortescue reaches real zero, the next test will be how this AI-led approach to managing mining operations works.

Renew Economy travelled to the Pilbara as a guest of Fortescue.

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