Mining giant BHP has dumped plans to build a major renewable energy project at its flagship iron ore operations, sparking claims the company is slowly walking away from efforts to decarbonise.

In 2023, BHP announced it would spend about $US2 billion ($3 billion) building more than 500 megawatts of large-scale wind, solar and battery projects to clean up and electrify its iron ore business in Western Australia’s Pilbara region.

Among those projects was a 50 megawatt solar farm at the company’s Jimblebar mine and a 40 megawatt-hour battery in Newman, to be built at a combined cost of about $300 million.

BHP estimated the project would cut greenhouse gas emissions from its “inland” iron ore division by 15 per cent by the end of the decade and reduce overall emissions by about 2 per cent.

But internal BHP documents seen by the ABC show the miner binned the plans last year because of budget cuts.

A row of solar panels are stood in the ground above red dirt

BHP opened a solar farm with APA in the Pilbara’s Port Hedland, but a planned 50 megawatt solar farm at BHP’s Jimblebar mine won’t go ahead.  (ABC News: Alexander Govan)

The company instead suggested it would pursue other “commercial arrangements” to bring on renewable energy projects.

“Due to capital constraints, the project has ceased,” BHP noted in one document seen by the ABC.

“Its scope has been transferred to the larger WAIO [WA Iron Ore] renewables program which seeks to deliver renewables through commercial arrangements,” the document read.

Decision ‘at odds’ with climate accord commitments

Tim Buckley, the director of think tank Climate Energy Finance, labelled the move a failure.

Mr Buckley said scrapping the solar and battery project was at odds with BHP’s own commitments under global climate accords.

A Caucasian man in a business suit looking at the camera.

Tim Buckley, of Climate Energy Finance, says the renewable energy project would have saved BHP money. (ABC News)

He said the project would have saved the firm money, as well as cutting emissions.

“That is an exceptionally disappointing outcome from BHP,” Mr Buckley said.

“It is incredibly disappointing that Australia’s biggest company refuses to act in alignment with the climate science.

“And it makes the government’s emissions reduction trajectory extremely difficult to deliver on.”

The cancellation of the so-called ‘Inland Solar PV’ project comes amid what one analyst described as a “cooling” by BHP on broader decarbonisation efforts.

In its recent annual report, the mining colossus revealed it had pared back to $US500 million ($759 million) — from $US4 billion previously — the amount to be spent on “operational decarbonisation” by the end of the decade.

In the 12 months to the end of June, BHP spent almost $US10 billion on capital projects around the world, including $US2.6 billion in its iron ore business.

Central to the reduction was BHP’s decision to defer investing in electric truck and train haulage technology that could slash the company’s diesel use. 

Mining industry trials lower emissions trucks

New mining technology is being put to the test in Western Australia with trials of “clean, green, cheaper” trucks now underway.

The miner explained the deferral had been prompted by delays in the development of suitable electric technology that could replace conventional diesel varieties.

And it presaged news, reported by independent WA media outlet Boiling Cold, that fellow iron ore miner Fortescue had also gone back to the drawing board on its plans to electrify its train fleet.

“Following the slowdown in the pace of development of diesel displacement projects for materials movement, the group now expects that the majority of expenditure associated with the introduction of diesel displacement technologies will be delayed into the 2030s,” BHP noted in its annual report.

An iron freight train on the line from BHP's Mt Newman mine in the Pilbara, WA.

BHP has deferred investment in electric haulage options to reduce diesel use in transport operations. (Supplied: BHP)

Despite this, the company insisted it remained on track to cut its “medium-term target to reduce operations (greenhouse gas emissions) by at least 30 per cent” by 2030.

Miners’ moves ‘a sense check’

Sam Berridge, a funds manager specialising in resources at Perennial, said BHP’s moves were consistent with many companies grappling with decarbonisation challenges.

Mr Berridge noted miners in many ways had led the charge towards renewable energy because it often made sense for them to do so.

This was because mines tended to be “micro grids” in their own right and, historically, they had sourced much of their power from dirty and expensive diesel.

Portrait of dark haired man smiling at camera

Resources investor Sam Berridge from Perennial. (Supplied: Sam Berridge)

“Now diesel has been sort of pushed off as being like the highest cost option, I suppose,” Mr Berridge said.

“More solar has crept into the optimal energy mix up to circa 30 to 40 per cent depending on where that project is located.

“And I think it’s starting to plateau at around about that level.”

However, Mr Berridge said the costs of running a mine on renewable energy started to rise “exponentially” beyond a certain point as the need to compensate for the intermittency of wind and solar power mounted.

To compensate for that intermittency, he said many miners were turning to gas power to back up renewable energy sources and ensure their operations could run around the clock.

Ultimately, he said miners were commercial creatures that needed to be profitable to survive and this was driving their decisions.

“The miners will take whatever the least cost option is available to them out of that sort of spectrum,” he said.

“At a time when people are a little bit concerned around what the iron ore price is going to do over the next five years, I think making sure that your power solution is least cost will be certainly front of mind for every business, including BHP.”

Miner no longer investing in electrification

But Mr Buckley, of Climate Energy Finance, was not so sure and noted BHP’s emissions target was measured against a 2020 baseline.

While the company had made good progress on this measure, he said much of the cut to emissions was due to work in Chile, where BHP had signed huge renewable energy contracts.

It was also transitioning towards electric haulage.

According to Mr Buckley, the work done in Chile was masking BHP’s lack of progress in cleaning up operations elsewhere, including in Australia.

“From 2025, BHP’s emissions actually go back up because they’re no longer investing in electrification and decarbonisation,” he said.

“And that was borne out by the statements by BHP in their full year result, where they claimed that battery electrification technologies are developing far slower than they’d expected.

“Therefore they flagged they would not adopt electrification and decarbonisation of their mine haulage equipment until next decade.

“That is diametrically opposed to the phenomenal acceleration of battery technologies in China,” Mr Buckley said.

China turns into the world’s first electrostate

China has put its economic might behind renewable technologies in a desire to stop relying on imported fossil fuels.

Coinciding with BHP’s cancellation of the inland solar project has been a renewed push by the WA government — backed to varying degrees by the big miners — to integrate the fragmented electricity infrastructure of the Pilbara into a connected system.

Historically, the miners have built and maintained their own plants and transmission lines to ensure certainty of supply.

The arrangements have led to the development of a patchwork of separate and often inefficient power systems across the Pilbara.

Now the state government wants to join those systems together in a bid to coordinate the energy transition in what is one of Australia’s most economically important regions. 

Mr Buckley said he understood the arguments for an integrated Pilbara grid, but noted it was by no means guaranteed to happen given the competing commercial interest of miners there.

And he said if it did happen, it would likely be years away.

He questioned what was stopping BHP from building projects, such as the inland solar development, in the meantime.

And he argued that claiming the decision to scrap the project was made on budgetary grounds didn’t stack up, because the company was awash with money. 

“Corporates like BHP are booking 50 per cent annual returns on capital employed from their core businesses,” he said.

“They’re making out exceptionally well.

“It is choosing to prioritise development of mining.

“There is no consideration that BHP is capital constrained. 

“It is a choice by the board and the management to ignore the climate science and leave the problem to everyone else.”Miner remains committed to cutting emissions

BHP declined to be drawn on criticism of its performance.

But the company stood by its record on cutting emissions and reshaping its business.

A man wearing a suit and tie with an evening city scape behind him.

BHP chief executive Mike Henry has said the company remains on track to meet its 2030 operational decarbonisation target. (Supplied: BHP)

In response to questions, the miner, which has a market capitalisation of $211 billion, noted it had shifted most of its electricity supply to renewable energy.

More than 70 per cent of its power came from green sources, the company noted, and its emissions from electricity use had plunged 80 per cent, compared with 2020.

The company explained the focus of its decarbonisation efforts was on cutting diesel consumption and said “electrification is our preferred option”.

“BHP’s climate commitments remain unchanged and we remain on track to meet our FY2030 operational decarbonisation target,” BHP boss Mike Henry said.