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Amid rising energy costs, the increasing depth of our underground mines and longer hauling distances at our open pits, our integrated energy and carbon management strategy focuses on ensuring security of supply, improving energy efficiencies and reducing the cost of energy while, at the same time, decarbonising our operations and building resilience against climate change.
Gold Fields' total energy spend, which combines the Group's electricity and fuel spend, accounts for a significant portion of our operating costs. During 2019, this amounted to 20%, down from 22% in 2018, representing 17% of our All-in sustaining costs (AISC) (2018: 15%). Energy remains the second largest cost item in the Group after human resources costs.
Given the reliance of the Group's operations on energy supply, in 2017 we updated our 2013 strategy and set a number of aspirational goals for 2020, including:
Gold Fields has an energy and carbon management strategy supported by operational plans that are aligned to the global ISO 50001 energy management standard. The key pillars of these plans are to reduce the Company's diesel usage by:
Together with our 2019 IAR, we are publishing our second climate change report that is aligned with recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) Report. The report provides details on our climate change risks, opportunities, strategies, policies and performance trends. Our TCFD Report 2019 can be accessed on our website at www.goldfields.com/integrated-annual- reports.php.
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By March 2020 our Cerro Corona, Damang and Tarkwa mines were certified to the ISO 50001 standard. We aim to have all our operations certifiable to the standard by 2020. This year, we will be updating our strategy with 2023 goals.
Over the years, we have worked to create energy independence for our mines. Supply from utility grids remained at about 50% of our electricity consumption in 2019, with four of our nine mines supplied through the grid – these are the energy intensive South Deep, St Ives, Cerro Corona and Asanko mines. The remainder have on-site power plants managed by independent power producers (IPPs), who have long-term supply agreements with the mines. This contrasts with the position in 2015 when all of our electricity was grid-based.
During 2019, Gold Fields further distanced itself from the use of carbon-intensive energy sources and, for the first time, started using renewable energy to power our mines. While renewable power accounted for only 1% of our energy mix in 2019, it is becoming increasingly important. With this in mind, we expect that by the end of 2020 renewable sources will supply about 10% of the energy requirements of our mines in Western Australia – 2% of the Group total.
In August 2019, Agnew became the first mine in our portfolio to be supplemented with solar energy when it connected to an on-site 4MW solar farm. Five wind turbines, providing an additional 18MW, will be added to the system by mid-2020, as will a 13MW battery energy storage system. By end-2020, Agnew will become one of the first gold mines in the world to receive over 50% of its energy requirements from renewable sources, with the remainder of its electricity needs being supplied by a gas plant. Granny Smith integrated 8MW of on-site solar energy into its power system in Q1 2020, alongside a 2MW battery energy storage systems and a gas power plant.
In South Africa, we are engaging with government to develop a 40MW solar power plant at our South Deep mine, while our Ghanaian mines are set to complete assessments for solar and battery power this year.
Gold Fields remains committed to its goal of 20% renewable energy generation over the life-of-mine at all new mines, including at its newly approved Salares Norte mine in Chile, which is planning to realise an initial 15% of electricity generated from solar photovoltaics (PV) when it becomes operational in 2023.
Total energy consumption increased by 7% in 2019, with 56% of the total comprising haulage diesel, 36% electricity and other fuels 8%, compared with a 54%/32%/14% split in 2018. Diesel consumption was up by 3% amid higher tonnes mined at our open pit mines, particularly Cerro Corona and Tarkwa, and Gruyere coming on stream in H2 2019.
Despite higher energy consumption in 2019, overall energy spend was marginally lower at US$300m (2018: US$302m), while energy spend per ounce of gold produced decreased to US$134/oz (2018: US$146/oz). This was due to higher Group production and lower diesel costs, excluding the net realised gains of US$9m from our oil price hedges in 2019. Since June 2017, we have realised net gains of US$35m from these hedges and new contracts have been entered into until December 2022.
In 2019, efficiency initiatives delivered 405TJ of energy savings, which resulted in long-term cost savings of US$27m (US$12/oz). Since the launch of our energy and carbon management strategy, Gold Fields has realised cumulative savings amounting to 2,090TJ in energy (3% of energy consumption during this period), equivalent to US$119m in cost savings and avoiding 574t CO2-eq in carbon emissions (7% of carbon emissions during this period).
While energy efficiency initiatives have a dual benefit of improving energy productivity and reducing our carbon footprint, a number of our initiatives reduce our carbon footprint significantly without necessarily reducing our energy usage, such as fuel switching from diesel to gas.
Group energy consumption
Group energy spend and savings (US$m)
| Year | Total | Savings | ||
| 2015 | 311 | 30 | ||
| 2016 | 289 | 11 | ||
| 2017 | 258 | 22 | ||
| 2018 | 302 | 29 | ||
| 2019 | 300 | 29 |
We continue to implement energy efficiency initiatives, including:
In 2018, Gold Fields became the first South African mining company to endorse the recommendations of the Financial Services Board's TCFD and, in 2019, we published our first TCFD Report. That report serves as our baseline to monitor our climate change performance and replaces our previous submissions to the CDP (formerly the Carbon Disclosure Project), while we continue to submit our CDP Water report. Our 2019 TCFD Report is being released in conjunction with this IAR.
In 2019, failure to implement climate adaptation measures is among Gold Fields' top 10 Group risks. Every five years we review our vulnerability to climate change and update Group-wide strategies and programmes in response. The next review will take place in 2021.
Gold Fields' climate change programme specifically focuses on the assessment and mitigation of climate change-related risks, including energy management programmes to reduce emissions, monitoring of regulatory changes, ensuring water security and increasing reuse and recycling of water (see Water management). We integrate assessment of climate-related risks and opportunities in project studies, operational and strategic planning.
The negative physical impacts of climate change are real and immediate, due to:
Our carbon emissions performance mirrors the energy usage trends at our operations. Total Scope 1 – 3 CO2-e emissions during 2019 amounted to 1.94Mt, an increase from 1.85Mt in 2018, reflecting the increased diesel consumption resulting from higher production levels, as well as the inclusion of Gruyere for the first time.
We expect longer-term carbon emission reductions from the energy efficiency, fuel-switching and renewable energy projects we have in place at our mines.
The Agnew and Granny Smith renewable energy plants will initially reduce our carbon footprint by about 50kt CO2-e per year.
Emission intensity, which is measured using Scope 1 and 2 emissions only, was slightly lower at 0.64t CO2-e/oz in 2019 from 0.66t CO2-e/oz in 2018 due to the higher gold production. In 2016, we set ourselves an aspirational target of reducing cumulative carbon emission by 800kt CO2-e between 2017 and 2020. We reached 54% of these savings by end-2019 and are on track to achieve 75% of this target by the end of 2020.
