With an increased focus on sustainable development and decarbonisation, a huge emphasis has been placed on the mining industry to source alternative fuels. These urgent requests for the industry come alongside global panic related to the realisation that fossil fuel reserves are quickly diminishing to a point of unsustainable extraction.
The global demand for energy is set to grow 47% by 2050, with oil remaining the top source, just ahead of renewable. Energy sources are predicted to be divided as below -
This demand places a lot of pressure on the mining industry, with their reliance on fossil fuels needed to power their fleets. As Australia progresses towards reaching its net-zero goals, industries like mining face an uphill battle to reach the sustainability party. A show of contribution towards these goals, whilst reinventing their business image towards a sustainable-thinking brand, will be crucial to withhold public support and shareholder trust.
Current mining assets at a glance
When looking at the Australian mining industry, there are an abundance of assets that are being used for extraction and operations all over the continent which all have a typical combustion engine requiring either petroleum or diesel.
In Australia today there are roughly -
· 6,500 large trucks – 110t and over
· 1,250 large loading units – shovels and excavators
· 3,500 ancillary assets – graders, dozers, loaders etc.
The future of mining
The future of mining, specifically on the equipment side of things, certainly looks exciting and innovative. A contemporary focus has been placed on transitioning to alternative fuels as well as completely redesigning the power trains of mining equipment all together, much like that of an EV.
Most recently, Sandvik and Caterpillar have collectively made strides in alternative fuel research. Anglo-American and Williams Advanced Engineering too have partnered up to attempt the construction of the world’s largest hydrogen-powered mining truck. Whilst the Swiss-based Kuhn Gruppe have developed the world’s largest electric powered dump truck.
The three paths that these companies have taken are most likely to dominate the market, but which is most likely to rise above the rest?
1. Battery electric vehicle (BEV)
The movement towards a fully electric mobile equipment fleet, potentially using a battery-swap approach, will be a likely option for both above and underground mining. There are currently several electric trucks available, from Komatsu to Epiroc as well as other joint venture projects in the pipeline with Fortescue and WAE being one of the closest to home. It’s interesting to note that miners themselves are much more involved with alternative fuel innovations than the OEMs.
A combination of fuel cell EV (FCEV) mobile fleet with a build-up of green ammonia or hydrogen capacity derived from wind or solar. Hydrogen as a fuel source is becoming an exciting concept, so much so that the likes of BHP, Fortescue, Anglo American and Hatch formed the Green Hydrogen Consortium that pledges to collectively work together to accelerate renewable energy-powered hydrogen production and its application to the resources sector. Fortescue again has seen success with the combustion of ammonia in a locomotive fuel, paving the way to achieve completely renewable green fuel.
Anglo American’s newly named nuGen™ hydrogen powered truck is set for launch in May 2022 at the Mogalakewna platinum mine in South Africa. A huge step on the path towards hydrogen powered vehicles which should allow for 50- 70% reduction in emissions.
3. Synthetic fuel
The goal of a carbon-neutral combustion engine has spurred the idea for synthetic fuels. Synthetic fuels are made solely with the help of renewable energy. It starts with hydrogen being produced by water which is then added to carbon to create liquid fuel. This carbon can be recycled or captured from existing C02 reduction technologies. It’s estimated that 2.8 gigatons of CO₂ could be saved by 2050 with the use of synthetic fuels. This option means an entity can keep its existing mining equipment which is beneficial in reducing CAPEX costs.
Taking into consideration these alternatives, some challenges arise that the industry should be mindful of.
Challenge 1: Scalability
With such prolific companies seeking innovations away from current carbon emitting machinery, the future does look bright. Much like any invention or new concept, it takes time to gain traction and build it to a scalable level. Take EV’s for instance, Tesla certainly created a new innovative market of automobiles that are eco-friendly for the planet, but it took years before any semblance of market penetration occurred. The same will apply to the mining industry and its relevant machinery, especially for electric or hydrogen-powered equipment.
Challenge 2: Time efficiency
Of Australia’s current mining assets, a large majority were purchased between 2006-13. With the current global supply chains already under stress due to various factors, things aren’t expected to get much better over the coming years. The consensus is that it will be near impossible to replace the existing fleet with new, renewable-focused machinery any time before 2040. Therefore it’s all well and good being ambitious towards investing in these alternative fuel machines now, but with no significant volume of assets available, miners have no other options but to delay investment.
Challenge 3: Cost to retrofit
A way around Challenge 2 would be for current fleets to retrofit their assets whereby the removal of diesel or petroleum engines will be replaced by one of the two alternative fuel engines as previously mentioned.
Herein lies another challenge, cost. Some experts have estimated that for a 25 million ton run-of-mine to retrofit their existing fleet with alternative fuels change-overs, a sizeable investment of between $100-$130M would be required. This eyewatering number would struggle to convince board members and shareholders alike that a future ROI will occur, with the likely scenario of waiting until an existing fleet reaches its end of life before investing in new, complete alternative fuel assets.
The life of a mine will also impact on this decision making. The time in which, through the employment of the available capital, the ore reserves, or such reasonable extension of the ore reserves as conservative geological analysis may justify, will be extracted. If the current mine only has less than 10 years life remaining the probability of spending to retrofit is less likely.
Challenge 4: Rental companies
With a portion of mining companies leasing equipment, contractors and rental companies will be challenged with what technology to add to their asset portfolios.
· What fuel alternative type do they invest in for their fleet?
· Will capex be an issue?
· Much like renting a Tesla, a premium would be expected on the leasing of an alternative fuelled vehicle to mining companies. Will this be enough of a ROI and tolerable for the miners?
Challenge 5: Infrastructure
With Australia being an expansive country with mining operations in some of the remotest places on Earth, what new infrastructure will be required to support these new alternative assets? Synthetic fuels are the likely route to reducing emissions in the short and medium term.
Being a fuel made from renewable energy, wind farms and solar will be an integral piece to the renewable infrastructure puzzle. With over 35% of Australia’s renewable energy coming from wind and 25% sourced from solar, increased infrastructure spend will need to take place in order to scale and support the transition to synthetic fuels. Will governments need to assist, or will miners have to bear the brunt of not only the investment of equipment but infrastructure too?
There is no denying that alternative fuels are the way of the future but awareness of Australia’s mining situation as well as global factors need to be considered. The transition to renewable, net-zero mining fleets will be no easy task, especially for an industry working as widespread and remotely as Australia’s. Fortunately, we are home to some of the worlds largest and cash flush mining companies which bodes well for investment into cleaner mining when the time is right.