Some sectors are quickly adopting renewables. Here, we look at developments in mining and metals and oil and gas.
Sector view: Mining and metals
Escalating energy costs in remote locations are prompting mining and metals to shift from conventional energy. And as projects move further into frontier markets, off-grid power solutions are required.
Renewables play a part in allowing the industry to maintain their social license to operate. Mining and metals companies are among the largest generators of carbon, leaving them open to scrutiny by environmentalists and others – so action is required.
Listen to Mike Elliott, EY Global Mining & Metals Leader, discuss why energy should be top of mind for CFOs in the mining sector (and beyond).
Mining is an energy intensive industry and energy access is becoming increasingly difficult and expensive in many regions of the world. Falling grades require more energy to extract each tonne of mineral. Miners are grappling with these increasing costs while commodity prices tighten. In addition, miners are having to compete with both governments and communities for these scarce resources. This has prompted the need for alternative power solutions.
Renewables will play an increasing role in the industry going forward as it will:
- Help companies achieve energy security
- Enhance reputation and brand by meeting the sustainability expectations of customers, investors and other stakeholders
- Fulfil energy needs in remote locations
- Become more cost effective
These are key triggers for change for CFOs who are looking to preserve both profitability and social license to operate.
Sector view: Oil and gas
The US is experiencing a renaissance in oil and gas, as natural gas takes precedence. A few years ago, the country was seen as a producer with a declining resource base.
Now, it is one of the top natural gas producers in the world. And it could soon catch up with Middle Eastern producers.
This is not a one-time event in which the US is able to provide some additional supply. This is a shift that is changing the global dynamics of supply and demand within the energy sector.
It will influence relationships between companies and have wide-ranging geopolitical implications.
CFOs need to be keenly aware of ways in which they can shift their energy needs to natural gas. Over the long term, it is a more reliable source and offers options for the components of products to the method in which products are delivered.
It is a flex fuel, because it is a feedstock for many chemicals used to produce products. Plants also can burn it to provide low-cost power.