Electrification of Australian mining is crucial for making the industry energy secure

If the need to electrify Australian mining wasn’t clear before the 2026 Iran crisis, it is now. The industry must stop relying on imported diesel and advance towards energy security.

The diesel fuel price shock caused by the Iran conflict has exposed an uncomfortable reality that mining, one of Australia’s most crucial industries, is overwhelmingly –and increasingly – dependent on imported fuel. Regional economies, livelihoods and Australia’s global influence rely on fuel imports that are vulnerable to external events and coercion.

Advancements in the development of electric versions of specialised mining equipment suggest electrification is the longer-term solution, but several challenges stand in the way. The industry is set back by policy uncertainty, complexities around decarbonisation options and shifts in cost structures, as well as higher financial burdens borne by early-stage resource developers, known as junior miners, and mid-tier miners.

Industry and government must work together to solve these challenges in the next two to four years before equipment replacement cycles lock in the nation’s reliance on imported diesel into the 2040s. A robust response should involve strengthened diesel disclosures, strong demand signals to original equipment manufacturers (OEMs) and special assistance for smaller miners. This requires whole-of-government and intra-industry cooperation.

Concerted effort is necessary given the scale of the challenge. Mining contributes around 10 percent of GDP, supports 1.2 million jobs and buttresses Australia’s global influence. The industry uses about 35 percent of diesel consumed in Australia, or about 32 million litres per day, and growing by around 6 percent annually. More than 85 percent of Australian diesel is imported, so supply disruptions or price shocks can have a major impact.

The Iran crisis has been a watershed moment. Diesel prices more than doubled at their peak, particularly stressing junior miners and contractors. Many considered temporary mine shutdowns (termed care and maintenance in industry), which would have had a severe impact on workers and regional economies. If the conflict re-escalates, these risks could return.

Until recently, such diesel dependency was just a structural risk of the mining business. There were few alternatives, and diesel was needed for everything from on-site generators, pumps and drills, to dozers, haulage trucks and trains.

But the rise of electrification over the last decade has changed the game. Electric drills, pumps and excavators have reached operational deployment in Australia and overseas. Progress has been made on even the most challenging technologies, such as battery electric haul trucks and rail.

For example, battery electric haulage has been deployed at-scale in Chinese coal mines, including in the harsh conditions of Inner Mongolia. And in the Pilbara region in Western Australia, where the iron ore industry uses massive 240-290 tonne haul trucks, trials have been initiated by the three largest producers. Similar trials are ongoing for battery electric locomotives.

A major challenge holding back the electrification of mining in Australia is policy uncertainty. Under non-emergency conditions, most state governments do not receive regular, granular data on end-user diesel consumption. This makes localised policy responses difficult, such as amending tender conditions or mine approvals to push diesel-inefficient producers to improve.

Moreover, there is no public action plan that brings together the federal and state governments to reduce imported diesel reliance in the resources industry. There have been rumours of changes to the diesel fuel tax credit, which refunds miners for fuel excise, under both the Coalition and Labor governments, but nothing has materialised.

Policy uncertainty discourages businesses from making substantial investment decisions. This particularly affects key under-trial technologies that must be adapted for the challenging conditions in the Pilbara, which require changes to operational deployments, energy infrastructure and worker training.

There is an added degree of complexity: the OEMs moving the fastest in battery electric technologies are not the ones that Australian miners have traditionally relied upon. Switching between OEMs is very different to moving from a Toyota Camry to a BYD Seal; it could require changes to operational deployments, maintenance plans, worker training and financing.

Businesses must also adapt to changing cost structures. Cyan Ventures is a specialist sustainability advisory and project development firm that has worked extensively with the resources industry. Our modelling suggests that by 2035, capital costs for diesel haul trucks will be 34 percent lower than battery electric (BEV) haulage, while operational costs will be 51 percent higher. Although battery electric haulage will be cheaper overall, firms will still need to adapt to this ‘CAPEX intensification’.

This particularly impacts junior and mid-tier miners because they are generally more diesel reliant. They may not have the same access to financing nor the market power to negotiate better terms or develop bespoke equipment with OEMs.

To solve these issues, state governments should regularly track end-user diesel consumption to guide local policy. They should also consider mandating public diesel disclosures to help shareholders push for energy security.

Companies that are hesitant about electrification should be prompted to send demand signals to OEMs that preserve optionality, such as technology-agnostic trucks and retrofit-friendly equipment. Concurrently, governments should provide special assistance and support to junior and mid-tier miners to help them become energy secure.

More broadly, industry should come together with the federal and state governments to develop a coordinated national action plan. This could involve government engaging with key trading partners and OEMs to deliver preferential pricing, financing and retrofit support. Industry could encourage cooperative procurement to increase economies of scale, generate strong demand signals and strengthen negotiating power.

Making Australian mining energy secure is too important to rely on fragmented approaches. All stakeholders must come together to execute a holistic strategy, before the industry is locked into further reliance on imported diesel.