BHP’s green tunnel vision

BHP Billiton has caught some flak from the green movement about its massive Olympic Dam project, including over its apparently conservative choice of power supplies.

And it’s right that BHP is under scrutiny, because if the biggest mining company in the world, one that measures its annual profits in the tens of billions of dollars can’t afford to invest in that green thing, then who can?

But not so fast. While BHP Billiton appears to have committed to connecting the mine to the coal-fired grid and gas supplies, and is seeking approval for a gas-fired power plant of up to 650MW to power the project, it is also keeping its options open.

In a decision that stands as a clear message to the country’s established energy generators, and to the Cassandra’s who idly dismiss the potential of renewable energy sources, BHP Billiton is pointedly refusing to sign long-term power supply agreements, because it is canvassing the possibility of sourcing much of its power from geothermal and solar thermal energy sources. The supplementary environmental impact statement released on Friday makes it clear to its board of directors that it would be mad if it didn’t.

Consider the graph below. It shows that in the initial stages of the project, up to the point that the mine gets to a 20 million tonne per annum capacity, the biggest greenhouse abatement opportunities are from bio-diesel and from gas (CCGT), but they are both costly.

However, by the time the Olympic Dam project ramps up to a 40mtpa operation – likely within a decade of final approval – its greatest greenhouse abatement opportunities lie with geothermal and solar thermal energy sources. And, more importantly, they both have a negative cost of abatement, which is to say that if the technology is available, then BHP will make more money by replacing its gas and coal-fired energy sources with geothermal and solar.