Photographer: Carla Gottgens/Bloomberg

BHP and Goldman Back a Solar Project Out in Australia’s Banana Plantations

  • Batteries may transform resources sector’s access to power
  • Mining companies can’t ignore solar anymore: policy institute

The world’s biggest miner and Wall Street’s top-ranked merger firm are among the high-profile backers of a remote solar project nestled among banana crops in Australia’s far tropical northeast. For BHP Billiton Ltd., it’s a chance to unlock renewable technology for the global mining sector.

As mining companies grapple with energy costs and seek to curb emissions, Melbourne-based BHP is expanding its interest in solar power in Chile, the U.S. and Australia, including the Lakeland Solar and Storage project, about 1,900 kilometers (1,180 miles) north of Brisbane, the Queensland state capital.

The venture is being developed by Conergy Asia & ME Pte. Ltd., which was bought in August by a unit of Goldman Sachs Group Inc. and Tennenbaum Capital Partners. Goldman has been investing in renewables across Asia and earlier this year said it was on track to reach its target of arranging $1 billion of renewable energy bonds in Japan. The New York-based firm didn’t respond to a request for comment.

Lakeland will allow experiments with the use of renewable power and grid-scale battery storage in a remote environment -- offering BHP a test bed for the technologies in a region that mirrors the far-flung locations of many of its mines. The findings will be applicable across the mining sector and they will be shared widely, according to the company.

“Battery storage is one solution we are exploring that may transform the way the resources sector accesses electricity,” Graham Winkelman, head of BHP’s climate change practice, said in an email. “We are working in partnership to accelerate development of new technologies that can materially reduce emissions but have not yet been delivered at acceptable cost.”

Costs of combined solar and battery storage projects are expected to fall by an average of about 37 percent through 2030, Bloomberg New Energy Finance estimated in a report last month. Moves by miners to use more renewable energy comes as a power crisis in Australia has seen prices paid by BHP in its home nation almost double in some instances in the past two years.

A power failure in South Australia last year disrupted output at BHP’s giant Olympic Dam copper and uranium mine, cutting full-year earnings by $105 million. The energy crisis prompted billionaire Elon Musk’s Tesla Inc. to start installation this year of the world’s largest lithium-ion battery system to support the state’s power grid.

Read More: Why Energy-Rich Australia Suffers the World’s Priciest Power

Miners are accelerating efforts to examine renewable power generation and storage in an act of “self-help,” amid the high costs of energy, according to Sandeep Biswas, Chief Executive Officer of Australia’s top gold producer Newcrest Mining Ltd., which has sent teams to Israel and the U.S. to study developments in solar technology. “It’s incumbent on us to pursue these other options that are out there,” he told reporters in Melbourne this month.

Solar and other sources of renewable energy, including wind, are expected to generate more electricity than coal by 2040, the International Energy Agency said in a report this month. Since 2010, costs of solar photovoltaic capacity have tumbled by 70 percent and battery costs by 40 percent, while solar experienced the largest growth in 2016 among any form of generation, according to the IEA.

Miners “can’t ignore solar anymore,” said Tony Wood, energy program director at the Grattan Institute, a Melbourne-based think tank. “Some of them will be testing the water, some will be looking to get social responsibility credit for looking at it, but the main reason is because it now makes commercial sense.”

High energy prices are threatening plans for investments in Australia, Mike Henry, BHP’s president for the minerals Australia unit, said September. Rio Tinto Group, which operates Australia’s largest single power consumer, the Tomago aluminum smelter, has warned spiraling costs are putting businesses including mining, manufacturing and agriculture operations at risk.

‘Untapped Opportunity’

Switching to more renewable energy represents a major untapped opportunity to cut carbon emissions in the mining sector, according to the Rocky Mountain Institute, an advocacy group that’s collaborated with BHP on a project in Arizona to install solar farms in disused pits. BHP’s use of renewables rose in the year to June 30, though accounted for a small fraction of total energy consumption, according to an August filing.

Rio Tinto and Barrick Gold Corp. are also installing or testing the use of solar farms to cut costs and emissions, while lithium developer Pilbara Minerals Ltd. said last month it is considering the addition of solar generation at its Pilgangoora mine in Western Australia, scheduled to enter production early in 2018.

Use of renewables by miners is increasing, particularly for remote sites where they’re better able to provide predictably priced power, Ernst & Young LLP said in a report last month. Diesel generation, the dominant power sources at mines without connections to local grids, is likely no longer the most cost-effective option, according to the Rocky Mountain Institute.

In the U.S., the average working mine has capacity to convert an additional 30 percent of its typical energy load to electricity, while reducing use of coal, gasoline and diesel, the institute said in a July report.

At the Lakeland project, which combines a 13 megawatt solar array -- with more than 41,000 panels -- and grid scale lithium-ion battery storage of about 5.3 megawatt hours, BHP is working with Origin Energy Ltd. and Ergon Energy Corp. to monitor results at the full scale commercial plant, which is scheduled next month to complete commissioning. BHP, which has a knowledge-sharing partnership with Conergy, is contributing to the build and connection of the plant and will help with battery testing, the company’s Winkelman said.

— With assistance by Perry Williams

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