Underpinning long-term demand is the US election win by the Democrats under Joe Biden, who campaigned on a platform of renewable energy and cutting carbon dioxide emissions to zero by 2050. Combined with China’s adoption of a net zero emissions target, asset managers say several miners and mining support companies could benefit.

A World Bank Group report, “Minerals for Climate Action: The Mineral Intensity of the Clean Energy Transition” finds the production of minerals, such as graphite, lithium and cobalt, could increase by nearly 500 per cent by 2050. This aims to meet the growing demand for clean energy technologies to limit global warming to well below 2C, compared to pre-industrial levels—a target set by the Paris climate accord. The World Bank report reveals that some minerals, such as copper and molybdenum, will be used in a range of technologies, while others, such as graphite and lithium, are needed for battery storage.

Australia currently produces nine of the 10 mineral elements required to produce most lithium-ion battery anodes and cathodes, including graphite, the other key element, according to a research paper from Austrade, The lithium-ion Battery Value Chain. Other Australian commodities used for batteries include manganese, cobalt, and nickel.

“US President-elect Joe Biden’s US$2 trillion ($2.6 trillion) clean energy plan may increase demand for solar panels, wind turbines and electric vehicles. Copper, nickel, cobalt, lithium, graphite and silver miners could benefit from higher production of such energy sources,” said CommSec senior economist Ryan Felsman.

“Over the past few months we have seen Europe make headway on its ‘Green New Deal’ and Chinese President Xi Jinping announce plans to source 25 per cent of China’s primary energy from non-fossil fuels or renewables/clean energy.

Key stocks that could benefit, according to Felsman, include:

  • BHP Billiton (ASX: BHP)
  • Rio Tinto (ASX: RIO)
  • Newcrest Mining (ASX: NCM)
  • OZ Minerals (ASX: OZL)
  • Western Areas (ASX: WSA)
  • Northern Star Resources (ASX: NST)
  • Evolution Mining (ASX: EVN)
  • Saracen Mineral Holdings (ASX: SAR)
  • Syrah Resources (ASX: SYR)
  • Orocobre (ASX: ORE)
  • Pilbara Minerals (ASX: PLS)
  • Galaxy Resources (ASX: GXY)
  • Mineral Resources (ASX: MIN)

As Australia's largest LNG producer, Woodside Petroleum (ASX: WPL) is another beneficiary as gas is the cleanest burning hydrocarbon. Hydrogen too is expected to be a significant source of renewable energy in the future, says Will Baylis, portfolio manager with Martin Currie Australia.

“When Australia develops a fully integrated hydrogen industry, Woodside is well placed with existing infrastructure to produce and export hydrogen,” says Baylis.

“AGL Energy (ASX: AGL) is already working on a pilot hydrogen plant adjacent to Loy Yang in the Latrobe Valley, in partnership with the Japanese, Victorian and Australian Governments. Other ASX companies will benefit indirectly. Spark Infrastructure (ASX: SKI) and Ausnet Services (ASX: AST) have a regulatory incentive to source renewable energy for transmission via the regulated asset base return,” said Baylis.

He also names Worley (ASX: WOR) as a beneficiary, as a major provider of project and asset services to the global energy industry, as well as APA Group (ASX: APA), which has over 80 per cent of the gas transmission market in Australia which could eventually carry hydrogen.

Mining contractors and service providers also stand to benefit, says Redpoint Investment Management chief executive officer and portoflio manager, Max Cappetta. 

“We like companies such as Worley … We particularly like the work they are doing providing the engineering expertise in delivery of clean energy solutions across wind and solar farms. This provides them a clear path to transition away from being involved in fossil fuel extraction.”

Cappetta adds that some companies are evolving their business models to meet renewable energy demand. Listed Australian nickel and goldminer IGO (ASX: IGO), for example, recently bought a stake in lithium mining and processing interests in Western Australia.

“This initially propelled the share price from $5 to over $6 and in early 2021 the share price has moved above $7. This re-rating is all the more impressive in light of the fact that forward earnings expectations are only modestly higher at this time,” says Cappetta.

“We have preferred IGO as an exposure in the mining sector and maintain this position view relative to lithium peers Pilbara Minerals and Syrah Resources based on the strength of IGO’s balance sheet and current profitability,” he said.

Nevertheless, Evan Metcalf, ETF Securities co-head of portfolio management, says lithium miners including Pilbara Minerals, Galaxy Resources and Mineral Resources will benefit from increased demand.

“Manufacturers of battery storage, such as Tesla, Samsung and Panasonic should also see increased demand for their wares, with some like Tesla already known for large-scale battery storage.” Investors can access companies like these on the ASX using the ETFS Battery Tech & Lithium ETF (ASX: ACDC), says Metcalf.

Emanuel Datt, managing director and CIO of Datt Capital, says copper will also benefit from the move to renewable energy in the US, which will also have a stimulatory effect on the prices of base commodities used to make steel.

“For instance, existing electrical infrastructure is massively deficient in a scenario where there is widespread adoption of electric powered vehicles. Accordingly, with the assumption that electrical grid infrastructure will require expansion—we expect this will be most bullish for copper, iron ore and coal,” says Datt.

“Copper is one of the most broadly used metals in electrical infrastructure due to its conductivity, low cost and easy availability. All renewable sources of energy generation are highly dependent on steel—which is made from iron ore and coking coal … Accordingly, we consider the best exposures to this theme on the ASX to be OZ Minerals (copper), Whitehaven Coal (ASX: WHC) and Fortescue Metals Group (ASX: FMG) (iron ore),” he says.

In Australia, significant coal-fired generation capacity will be retired over coming decades and is likely to be replaced by large-scale renewable energy generators and energy storage. Over the past decade, the share of electricity generation from renewable sources has increased steadily to be nearly 20 per cent in 2018 (as the graph below shows), according a report from the Reserve Bank of Australia, Renewable Energy Investment in Australia. This share was higher in 2019 and is expected to continue to increase as projects that are currently under construction or have been recently completed begin generating output.

Australian electricity generation by fuel type

Share of total electricity generation

a chart showing an increase in renewable energy

Source: Department of Energy and the Environment

Just this month, Origin Energy (ASX: ORG) has announced plans to develop a giant 700 megawatt battery at Australia’s largest coal-fired power station in Eraring, NSW. That battery would become the largest storage device in the world after Tesla’s South Australia, battery at the Hornsdale Power Reserve, currently the largest lithium-ion battery in the world.