Australia’s Fortescue (FMG.AX), opens new tab said on Friday it was expediting the rollout of an off-grid green energy system to eliminate fossil fuels, particularly diesel, from its iron ore operations, helping it cut costs as power prices rise due to the Iran war.
Fortescue expects to save $100 million in fossil fuel costs by next year. It sees the decarbonisation program helping it cut unit costs by $2 to $4 a wet metric ton when complete at the end of 2028, two years earlier than first planned.
Fortescue’s CEO of metals and operations, Dino Otranto, said disruptions sparked by the U.S.-Israeli war with Iran have forced companies to think more carefully about energy supply.
“I think a lot of people have been taken by surprise by the situation, and it demonstrates … how vulnerable our supply chains are to foreign interests,” he said on a media call.
Fortescue has had by far the most ambitious targets of the iron ore majors to reach what it calls “Real Zero” carbon emissions from its operations by 2030, meaning cuts without using carbon offsets.
It has been able to turn on its renewable power and battery grid earlier than planned, which has insulated it from the past month’s diesel supply shocks rippling through the mining industry, Otranto said.
The world’s fourth-largest iron ore miner is now expected to complete its Pilbara green grid by the end of 2028, which includes 1.2 gigawatts of solar capacity, more than 600 megawatts of wind generation and 4-5 gigawatt-hours of battery energy storage.
By comparison, Australia’s biggest existing battery can generate 2.2 GWh of power.
Early next year, it expects to complete installing 290 MW of renewable capacity to meet the power requirements of its ore processing facilities, enabling daytime “green processing” across its Pilbara operations.
The company also hopes the system will able to run its operations for 24-hour periods without fossil fuels by later next year.
Otranto said green power development could become a new business line for Fortescue.
“We built our Pilbara Energy Connect infrastructure – solar, wind, batteries – in record time, in some cases, probably double the speed than anyone else out there,” he said. “And that makes the value proposition extremely beneficial.”
In 2020, Fortescue launched plans to become a green power pioneer but last year significantly scaled back those ambitions, cancelling major green hydrogen projects in the U.S. and Australia citing high costs and a lack of customers.
Reporting by Melanie Burton in Melbourne and Sherin Sunny in Bengaluru; Editing by Shreya Biswas and Sonali Paul
