Supporting the decarbonisation of Australian mining
By Aaron Borg, Head of Battery, Mining & Industries for Australia, and Campbell Webster, Director, Energy+ Group for Australia & New Zealand, at Societe Generale
Off-grid renewable energy is already playing a role in the decarbonisation of Australia’s mining sector. In an era of volatile energy prices, remote renewable power installations can also offer a buffer against price shocks and support access to a growing global market for materials that have a lower carbon footprint.
As the Australian mining industry sharpens its focus on decarbonisation, off-grid renewable power is emerging as a key lever in the transition to a more sustainable future.
Low-carbon production is quickly becoming an imperative for Australian mining and resources companies. Many businesses have set targets that aim to contribute to net zero by 2050, and shareholder pressure is driving the sector to explore decarbonisation.
Higher emitters also face regulatory pressure under Australia’s Safeguard Mechanism, which requires them to reduce their carbon footprint each year. Mining companies are especially exposed: 132 of the 219 entities covered by the scheme are in the mining sector. 1
Decarbonisation, however, is far from a quick fix. Moving millions of tonnes of rocks and minerals is energy-intensive, and Australian miners face the added complication of doing so in remote locations. High upfront costs prevent many businesses from investing in less polluting equipment.
To move forward, we must be able to show that decarbonisation brings financial benefits for the mining sector. Thankfully, renewable power is doing just that.
The case for clean energy
Advances in solar and wind technology, with improved manufacturing technologies and a growing number of players, have brought down the cost of renewable energy generation dramatically. Including integration costs, the levelised cost of electricity generated by solar and wind is now the lowest of all new-build technologies, according to CSIRO, Australia’s national science agency.2 But the equation is more complicated for remote mining businesses, which need a dependable and certain source of electricity 24 hours a day. With no easy way to connect to existing electricity grids, they must develop off-grid solutions.
That’s where a combination of renewable power, battery storage and back-up generators come in. Even with the added cost of a battery energy storage system (BESS), renewable or hybrid power solutions can be the most economical option – especially if the nearest grid connection is hundreds of kilometres away.
Given that many of these mines are located in very remote parts of Western Australia, where they enjoy an abundance of sunlight, solar and BESS have been the preferred choices in many instances, however some sites lend themselves to the inclusion of a small array of wind turbines.
That said, the trade-off between higher capital expenditure and the savings from reduced fuel costs is still a difficult one for many miners. Innovative business models and novel financing structures have a crucial role to play in helping the sector overcome this hurdle.
Closing the capex gap
The high upfront costs involved in remote renewable energy installations mean access to finance is a key enabler for the mining industry’s transition.
Recent signs are encouraging. Financing is becoming more competitive as investors and lenders warm to the sector.
For capital providers, off-grid renewable power projects are very different from traditional, grid-connected facilities. Each mine has its own infrastructure, and there is no back-up buyer for the electricity produced. Financing is therefore dependent on the predictability of cashflows from the mining project, rather than on the grid price.
Power purchase agreements (PPAs) are specific to each mine, and long-term contracts are increasingly common given the high capex costs. Contracts can extend to 15-25 years, depending on the life of the mine.
That makes stranded asset risk a key concern for the investors and lenders who back off-grid installations. While solar panels and BESS can be removed and transported to different locations more easily than wind turbines, capital providers must assess both the viability of the energy project and the longevity of the mine it will serve. On the flip side, revenues from a single customer can be more predictable than selling into the market, which is attractive to investors seeking a stable return.
That includes independent power producers like Zenith Energy, which in June agreed to sell a majority stake to private equity firm KKR3. Societe Generale recently supported a A$1.9 billion financing of Zenith Energy’s portfolio, which includes renewable power plants and hybrid off-grid facilities supplying energy to remote mining sites.4
Zenith is growing quickly. Its new financing provides over A$1 billion of growth funding to support new developments and refinancing5. A portion may be attributed as a green loan, with proceeds earmarked for the addition of renewable power capacity.
A long-term trend
Transactions like this allow Societe Generale to combine our cross-sector expertise with our risk assessment capabilities, integrate innovative technology, and align with our own energy transition ambitions. Societe Generale in 2024 set a new target of providing €500 billion of sustainable financing by 2030.
In May, we also supported a A$1.6 billion debt financing for Pacific Energy, which is also expanding its portfolio of distributed renewable energy projects across Australia.6
Decarbonisation initiatives like this are also just the start: clean power is a tangible and necessary step in the mining transition, but more work is needed to move fleets of heavy vehicles away from fossil fuels. Addressing Scope 3 emissions which can account for a significant portion of an operation’s total carbon emissions, meanwhile, requires a global effort to electrify industrial processes.7
Investments in clean energy can also be a source of opportunity: Australia is currently the world’s largest producer of lithium, and boasts rich reserves of nickel, rare earths and other minerals that are critical components in batteries and electrification.8
As demand for low-carbon materials increases, a continued focus on decarbonisation will ensure Australia’s mining sector remains well-placed to capitalise on opportunities over the decades ahead.
1. metallurgicalsystems.com/the-national-greenhouse-and-energy-reporting-scheme-nger-amp-the-safeguard-mechanism-a-guide-for-mining-and-resources/
2. www.csiro.au/en/research/technology-space/energy/Electricity-transition/GenCost
3. media.kkr.com/news-details
4. zenithenergy.com.au/zenith-energy-completes-a1-9-billion-debt-refinancing/
5. infralogic.inframationnews.com/content/15420898
6. pacificenergy.com.au/wp-content/uploads/2025/05/Pacific-Energy-and-QIC-complete-2-billion-refinancing-and-equity-raise.pdf
7. www.mckinsey.com/featured-insights/mckinsey-explainers/what-are-scope-1-2-and-3-emissions
8. www.ga.gov.au/aimr2024/world-rankings