Post: The energy transition – the aggregates industry’s biggest opportunity?

The energy transition – the aggregates industry’s biggest opportunity? 

For the aggregates industries, 2021 will be remembered for two very clear themes – the post-Covid recovery and that, that environmental concerns have anchored themselves as a mainstream aspect of business operations. 

As trillions of dollars of global stimulus fuelled a rebound in both industrial and consumer demand, commodity prices surged. Copper, iron ore and lithium all hit records, alongside coal and natural gas. After years of streamlining businesses and being intensely disciplined in bringing on new supply, miners were able to deliver record profits. 

But despite the record prices, it also became clear that sustainability concerns, which have been growing in prominence for some time, is now central in terms of both attracting investors and holding a social license to operate. Companies that have focused their attention on their performance in this arena are seeing the benefits. 

Sustainability opportunity 

But unlike many industrial sectors, the aggregates industry is caught between two competing themes when it comes to environmental and social governance (ESG). On one side comes the continued pressure from mining and consumption of fossil fuels. However, the industry is also the partner needed to produce key materials that will enable the green transition.  

The opportunity for the sector is clear. End-users, especially those pushing energy transition agendas, such as the electric vehicle makers, want to be able to tell consumers that the materials they use come with impeccable green credentials. That’s created the opportunity for the sector to position itself as a trusted partner in fighting climate change.  

The opportunity is right here, right now, but how can the aggregates industry strengthen its position as key player in the energy transition? 

Net zero ambitions 

Despite many challenges still facing the sector, from inflation, resource nationalism and continued trade disruptions, it’s clear that boards are focusing on the opportunity presented by the global energy transition.  

While the mining industry is able to tell a compelling story explaining its role in the materials it produces, the impact of its operations remains a hurdle. Scope 1 and Scope 2 emissions—when pollution is created by the miners’ operations, and Scope 3—the pollution created when the materials they mine are used by their customers—remain significant obstacles for many investors. 

Last year saw nearly every major miner commit to becoming carbon-neutral in their own operations over the next two to three decades, and perhaps more importantly, details on how they intend to get there.  

• BHP announced it was exiting oil and gas and continued to move away from thermal coal alongside a commitment to reduce greenhouse gas emissions to net zero by 2050.  
• Anglo American exited thermal coal altogether and said by 2030 it is targeting a 30% cut in GHG emissions (Scopes 1 and 2) against a 2016 baseline 
• Vale announced its exit from the coal market as part of its commitment to become carbon-neutral by 2050 and reduce one-third of its emissions by 2030.  

• Glencoe is targeting net zero by 2050. 
• Rio Tinto pledged to spend US$7.5B to halve its Scope 1 & 2 carbon emissions by 2030.  
• Newcrest Mining is targeting net-zero Scope 1 and Scope 2 carbon emissions by 2050 
• LafargeHolcim committed to hitting net-zero emissions by 2050. 

The UK concrete and cement industry (via the MPA) also launched a roadmap to become net negative by 2050, removing more carbon dioxide from the atmosphere than it emits each year. 

This trend has been repeated across the metals industry.  

• BHP sign a nickel supply agreement with Tesla, with the two companies saying they would work together to make the supply chain cleaner.  
• Rio Tinto is working to produce carbon-free aluminium, partnering with consumers such as Apple. 
• Glencore has also struck a cobalt supply deal with Tesla. 

The scale of the investment and strategy transformations shows just how seriously the industry is taking it, but also the scale of the costs involved. But the stakes are high. A failure to proactively address ESG issues can result in future problems that are more difficult to overcome than if addressed at the outset; the development of hydrocarbons as an energy source is a case example.  

How to get there… 

As energy accounts for a significant proportion of both operating costs and emissions in the aggregates industry, the rewards of shaving off even a fraction of energy usage can be considerable.  

The increasing shift away from centralised power generation is bringing big changes for the global energy landscape and there are opportunities for the industry to get involved. The push “to save costs” should not been seen as being in conflict with the pull to “achieve net zero”, but rather aligned, given the common goal of reducing fossil fuel usage and increasing energy efficiency at the lowest cost.  

Having a well-developed energy strategy ensures alignment – identifying quick wins and no regret actions that once implemented can provide immediate benefits, followed by longer-term capital investments that prepare your estate for the transition to net zero. Newer technologies, including battery technology and electric vehicle charging will create even greater opportunities to provide optimisation and flexibility services to the grid, through demand side response.  

Using the assets your business already has on site GridBeyond supports your business create a holistic energy and risk management strategy that finds your energy flexibility and places in the right markets at the right time to achieve savings, revenues and sustainability. 

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