BHP targets renewables after $100m hit

BHP’s CEO warns renewable energy could raise costs and reduce power security while having no impact on emissions.

BHP’s Olympic Dam copper, gold and uranium mine in South Australia. (Aaron Bunch)

BHP Billiton chief executive Andrew Mackenzie, who took a $US105 million cost hit at the Olympic Dam copper and uranium mine in South Australia after recent blackouts, says the nation’s renewable energy schemes could raise costs and reduce power security while having no impact on emissions.

The head of the world’s biggest miner has warned that a long term expansion of Olympic Dam may not go ahead if power security and costs are not addressed and that this will probably need carbon capture and storage if emissions cuts are also wanted.

“Let’s talk about affordability, reliability and emissions reduction, as opposed to having some secondary target about just having more renewables, which might deny you all three,” Mr Mackenzie told media in London last night after releasing a first half profit of $US3.2 billion on the back of strong commodities prices.

“We have lost $US100m in this period because of the intermittency of power in South Australia, and also we are facing more expensive electricity, frankly, than we budgeted for at this time last year.”

BHP’s head of Australian mining, Mike Henry, said short term measures were required, on top of longer-term ones being looked at by chief scientist Alan Finkel’s review of power security.

“The things that need to be considered are things like interconnected capacity; in the case of South Australia specifically, shoring up infrastructure reliability, ensuring there is more baseload power that can be easily drawn upon when the wind is not blowing or the sun is not shining,” Mr Henry said.

“It was all of these things that created the circumstances by which you end up having a three-week outage, as we had at Olympic Dam.”

Mr Mackenzie, who has been keen to promote achievement of Paris climate targets, said coal had been unfairly maligned.

“When you see how the world is evolving, people have probably been too quick to condemn coal,” he said.

“Firstly, I think they did this by exaggerating its carbon impact relative to other fossil fuels, and secondly by neglecting its convenience, availability and the opportunities, with technology, both to burn it more cleanly and ultimately to find ways of dealing with some of the carbon emissions through carbon storage.”

He said carbon capture and storage, whether you are a climate change believer or sceptic, provided risk insurance.

“Japan, India, Australia or the United States — and I could probably add to that — these are all countries that are probably heading down a route where, in order to deal with the affordability, reliability and emission issue, they need to promote more carbon capture and storage.”

Earlier, Mr Mackenzie warned the nation’s unreliable power infrastructure could stop a planned expansion of Olympic Dam.

Speaking to investors, he said a proposed future doubling of the size of Olympic Dam to produce 450,000 tonnes of copper a year would not go ahead in the current situation.

“We would not look at a major expansion of Olympic Dam unless we can be confident we have a reliable, and affordable source of power within South Australia,” the mining boss said.

“We sincerely hope that the government of South Australia and some of the reviews underway that we’re contributing to, some of which go to the federal level, actually address some of the great difficulties we’ve had to face.”

BHP (BHP) is working on increasing capacity at Olympic Dam from about 180,000 tonnes to 230,000 over the next five years but it studying a bigger expansion that would use acid-leaching technology.

Five years ago, it abandoned $US30bn expansion plans that would have seen a big pit built and production of 900,000 tonnes a year.