Copper has often been important for technological progress. It was copper cladding for sailing ships’ hulls that led to dramatic improvements in speed, manoeuvrability and durability in the late 18th and early 19th centuries. That history continues in the modern era: copper is one of the critical metals – arguably the most critical – for the transition to low-carbon energy.
Electrification is central to the energy transition, and copper’s combination of conductivity and ductility makes it ideal for electrical uses. Low-carbon technologies often need more metal than their higher-carbon counterparts. Offshore wind, for example, uses about three times as much copper as coal-fired power generation in terms of tons per gigawatt of capacity. An upper-end electric car might include about 78 kilograms of copper per vehicle, compared to about 22 kg in an equivalent gasoline-fuelled model.
That is the crucial context for the announcement this week from KoBold Metals, a mining startup backed by Bill Gates and Jeff Bezos, that it has found a large-scale copper deposit in Zambia that is suitable for rapid development. The discovery is the first significant example of developers and investors working in low-carbon energy becoming directly involved in mining to increase supplies of the metal they need.
KoBold’s backers include Breakthrough Energy Ventures, Gates’s investment firm that backs companies working to cut greenhouse gas emissions. Microsoft, which was founded by Gates, and Amazon, which was founded by Bezos and where he remains executive chairman, have ambitious goals for using only renewable energy and achieving zero greenhouse gas emissions. Another backer is Equinor, the Norwegian energy group that is active in offshore wind.
The location of the discovery, known as Mingomba, is not particularly surprising. It is in Zambia’s northern Copperbelt province, on the same geological formation that includes large copper mines in the neighbouring Democratic Republic of Congo. Zambia is already a significant copper producer, although at only about half the rate of its peak back in the 1970s.
Zambia’s President Hakainde Hichilema is hoping to encourage a rapid revival in the industry. The government has set a target of increasing copper production from about 800,000 tons a year today to 3 million tons a year over the next 10 years. President Hichilema this week described the Lobito Corridor, a US- and EU-backed development plan that includes a new rail link to connect Zambia’s copper mines to a port on the coast of Angola, as “a generational opportunity” for the nation.
What is unusual, says Nick Pickens, Wood Mackenzie’s research director for global mining, is the consortium that KoBold has assembled, and the signal that sends about the chances of the project going ahead and coming into production.
International mining groups have for decades been wary of investing in Zambia. Unstable fiscal terms, inadequate power infrastructure, particularly when hydro output is hit by low rainfall, and worries about reputational risk have been effective deterrents.
Copper production in the DRC has soared over the past two decades, hitting about 3 million tons a year, but that has largely been the result of investment by Chinese companies.
International mining companies’ capital spending, in general, remains relatively subdued, constrained by investor pressure for dividends, political risk in many of the countries with the best deposits and concerns about the need to ensure compliance with ESG standards and emissions reduction goals. The total capital being allocated to growth by the five major international mining companies – BHP, Rio Tinto, Vale, Anglo American and Glencore – will be up this year, to over US$10 billion. But as a percentage of their total capital spending, it will be within the range of recent years, and on an inflation-adjusted basis it will only be about US$500 million more than the industry planned to spend in 2020.
The companies backing KoBold, which also include BHP, raise the possibility that capital could be raised to support the development of Mingomba with a clear focus on delivering copper to enable the energy transition.
The share of global copper demand coming from “green” sectors including renewables and EVs is on course to double over the next 10 years, from about 8% to about 16%.
In Wood Mackenzie’s base case forecast, world copper consumption rises about 24% between 2023 and 2033, to reach about 32 million tons a year. To get on course for net zero emissions by around 2050, which is required for the Paris agreement goal of attempting to limit global warming to 1.5 °C, copper supplies would have to increase even faster.
“Countries are just not pushing forward with investment fast enough to deliver the supply that will be needed,” says Wood Mackenzie’s Pickens. “And that has to change if we are to hit net zero.”
There is still a long way to go to bring Mingomba into production. KoBold has not yet conducted a pre-feasibility study. Reuters reported that the mine could cost US$2 billion, and that KoBold is open to bringing in more partners to help develop it. Other reports said KoBold was aiming to start construction in 2027 and begin producing in the early 2030s.
But it is still significant that this group of influential companies and individuals agrees that a world with fewer greenhouse gas emissions has to be a world with more copper mining. KoBold’s progress in Zambia will be an indicator of how far the rest of the world, including governments, investors and other companies, can be persuaded to help put that insight into practice.
Ørsted, the Danish renewable energy company, announced in its latest capital markets update that it was cutting back its growth expectations, lowering portfolio risk, and suspending dividend payments. Its 2030 capacity target has been lowered 25-30% to 35-38 gigawatts, and planned capital spending for 2024-2030 is down a third to DKK270 billion (about US$39 billion). The company will pay no dividend for2023-2025. Thomas Thune Andersen will be stepping down as chair.
Akif Chaudhry, Wood Mackenzie’s research director for corporate strategy and analytics, commented: “Offshore wind remains core to the strategy. But Ørsted’s plan is significantly pared-back and de-risked. It will still be substantially bigger in 2030 than it is now. But the growth ambition is, rightly, not at the breakneck speed it once hoped for. There’s also more room for flexibility in capital allocation in the event of changing market conditions.” Ørsted shares have dropped about 75% from their peak in 2021.
President Vladimir Putin has urged Germany to do more to increase its gas imports from Russia. In an interview with US journalist Tucker Carlson, President Putin said: “Why don’t the Germans say [to Ukraine]: ‘Look guys, we give you money and weapons. Open up the valve, please. Let the gas from Russia pass through for us. We’re buying liquefied gas at exorbitant prices in Europe, which brings the level of our competitiveness, and economy in general, down to zero. Do you want us to give you money? Let us have a decent existence [and] make money for our economy. Because this is where the money we give you comes from.’ They refuse to do so. Why? Ask them… Those [German leaders] are highly incompetent people.”
The state of Texas could build its own gas-fired power plants to help prevent blackouts, its Lieutenant Governor Dan Patrick has said. Speaking to the state’s Texas Power Grid Investment Summit, Patrick said: “If we can’t get an incentive program to attract investors to build, then the state will have to build [the fleet of power plants] ourselves and then subcontract out for someone else to run it.” The summit, attended by state government officials and investors, was convened to discuss how to add 10 GW of dispatchable power generation capacity to the Texas grid.
Larry Fink, chief executive of BlackRock, also spoke at the summit, in what was seen as an attempt to rebuild relations with Texas after being blacklisted over his company’s climate strategy.
The European Commission is moving ahead with plans to cut the EU’s greenhouse gas emissions by 90% by 2040, despite weeks of protests by farmers across the continent. However it has backed away from goals specifically applying to the agriculture sector.
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“The campaign to connect to solar energy is becoming a mass movement in India. Just a few days ago, another big mission was started in India: a plan to install rooftop solar in 1 crore (10 million) houses in India was announced. With this, 1 crore of our families will become self-reliant in the field of energy. Arrangements are also being made to send the extra electricity generated in their homes directly to the grid. You can imagine how big an impact this programme is going to have in a country like India. This is going to create a huge opportunity for you to invest in this entire solar value chain.” – Narendra Modi, prime minister of India, gave the opening speech at this year’s India Energy Week in Goa. He outlined plans to increase production in a range of energy sectors, including natural gas production, oil refining, hydrogen and solar power.
This chart comes from a recent note by Mark Bononi, Wood Mackenzie’s principal analyst for global gas and LNG asset research, exploring the key implications of the Biden administration’s “pause” in authorisations for new LNG projects to export gas to countries that do not have a free trade agreement with the US. It shows at a glance the outlook for US LNG export capacity out to 2050.
The burgundy section shows capacity already in operation, the pink section shows capacity currently under construction and the green section shows our forecast for projects that have not yet taken final investment decision but are expected to come online in the late 2020s and beyond.
The impact on those pre-FID projects from the administration’s new policy will depend on how long the pause lasts, and what new processes are put in place for authorisations when they eventually resume.
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