Home Environment Energy Energy Transforming natural resources into prosperity and development comes with a huge energy demand. In order to meet this demand, we keep a portfolio of power supply contracts and self-generation, consisting mainly of renewable energy sources. KPIs Report As Vale is one of the five largest electricity consumers in Brazil, an important performance indicator is the cost of electrical power. Vale Global's electricity cost is US$ 5 billion/year. We are currently ranked among the- industries with the lowest electricity cost in the world. Intensity of energy consumed by product(1) Product Unit(3) 2020 Iron ore GJ / t Fe Eq 0.080 Pellets GJ / t Fe Eq 0.821 Manganese ore GJ / t Fe Eq 0.097 Manganese ferroalloys GJ / t Fe Eq 7.418 Coal (thermal and metallurgical) GJ / t Fe Eq 0.726 Nickel and copper(2) GJ / t Fe Eq 0.979 Notes: (1) Intensity of energy consumed by product is the amount off energy necessary to produce one ton of products in the activities of the production units. The volumes of energy consumed at logistics operations (railroads and ports) are not included. (2) Together with the extraction and processing of nickel, our operations also produce copper, cobalt and precious metals. Due to the low expressiveness of cobalt and other precious metals volume, the indicator only considers the total of volumes of nickel and copper. Some units produce copper only. (3) In the indicator GJ/tFeEq (Gigajoules per tonne of iron ore equivalent) all productions of the different Vale products (coal, nickel, copper, manganese, etc) are converted to the equivalent of iron ore, our main product. Performance Evolution Share of renewable sources (In thousand TJ) In 2020, despite the reduction in Vale's energy consumption, the composition of the energy matrix continued with similar percentages as in 2019. With regard to overall energy intensity, we report for 2020 the advance to 0.362 TJ/thousand tons of iron ore equivalent, an energy intensity 4.5% lower than in 2019. Electricity represented 30.8% of Vale's energy consumption matrix, of which 87% came from renewable sources. In Brazil, of the total of 6.7 TWh electricity contracted and consumed by operations via Grid, 99% are from renewable sources, with 94% of this energy being ensured by concession contracts for own assets and by Vale's energy acquisition contracts and had its renewable origin confirmed by generators’ certificates or declarations, which have been audited by a third party. Vale's electricity generation portfolio is 99.9% renewable and is therefore one of the company's competitive advantages on the climate agenda. The installed capacity in 2020 was 2.3 GW, coming from hydroelectric generation assets located in Brazil, Canada and Indonesia. These plants supply about 60% of Vale's global electricity consumption – 68% of Vale's consumption in Brazil1 – and help reduce production costs and CO₂ emissions by ensuring renewable hydroelectric power use. Competitiveness and increase in self-generation By increasing our self-production and reducing demand during peak hours, the electricity costs become more competitive. For Canada and Brazil, between 2018 and 2023, these initiatives represent a reduction of around 25%, between the projected cost and after the initiatives. Goals and Deadlines Our goals for 2030 are: Reach 100% of renewable self-generation by 2025 in Brazil and 100% of renewable electricity consumption globally by 2030. Improve 5% of the indicator of global energy efficiency compared to baseline of 2017 by 2030 (1) The three pillars of energy initiatives are: 100% consumption of renewable power Replacing of conventional power sources for renewable energy. Energy efficiency High energetic performance throughout Vale's production chain, supported by a systematized management model and multidisciplinary teams. Powershift Energy matrix transformation: replacement of fossil fuels with renewable energy through electrification of machines and equipment. 1 Target of Energy Efficiency Program from Vale. The main goal of the program is to maximize the reduction of energy consumption through the implementation of energy efficiency in all operations, thus contributing to reduction of greenhouse gases emissions, eliminating ESG Gaps and reducing costs. The expectation is to obtain an improvement of the global energy efficiency (all operations) of at least 5% by 2030. Vale also has an Powershift Program, which is focused on changing the company’s energy matrix, replacing the use of fossil fuels by renewable energy through the adoption of new technologies, significantly reducing greenhouse gas emissions. Our Management For us, the efficient management and supply of energy in Brazil are priorities, given the uncertainties associated with changes in the regulatory environment and the risks of tariff increases. In this sense, we operate across the entire electricity chain from supply to final consumption management, to ensure that the most secure, renewable and competitive energy will be available to our operations. Energy Supply Management: Our installed capacity in Brazil is 1.8 GW, coming from directly and indirectly controlled plants, through our subsidiaries. We use the electricity produced by these plants to meet our internal consumption needs. Currently, about 60% of the electricity consumed by our operations in Brazil comes from self-production. By 2025, Vale is committed to achieving electricity self-sufficiency in Brazil. Energy Demand Management (2019): Energy Matrix: Energy Efficiency: Energy Efficiency is a key factor for cost optimization while ensuring reductions in the emission of Greenhouse Gases. Vale is implementing in its operations a modern Energy Management System, called SmartEnergy, which will allow the automatic monitoring of energy consumption, thus facilitating and providing transparency to the management works of the company's global energy matrix. Impact Management Sustainable development is a priority to our affiliated power generation companies. In this sense, actions focused on biodiversity protection, pollution prevention and mitigation of impacts resulting from operations are examples of this commitment towards sustainability. Fish Transposition Systems (FTS): Structures - ladders or elevators - built around dams that allow the continuity of the fishes’ migration process during the “piracema” period - when the fishes go up the river for breeding. In Aliança Geração, the Funil plant was the first in Brazil to install the FTS (January 2004) and has already transported over 1,000 tons of fish in Rio Grande (MG). In Belo Monte, the FTS consists of a 1,200-meter long canal with bulkheads that provide areas of low water velocity and allow the fish to rest. For more information about Impact Management on energy, see our position on the resettlement of Belo Monte. Policies and Standards Vale is developing an Electrical Energy Commercialization procedure with the purpose of establishing guidelines for the processes of energy Purchase and Sale, seeking alignment with internal Standards and maximization of results. Main Guidelines: Apply all internal procedures and processes related to the energy purchase and sale process, as well as the applicable delegation standards. Monitor and analyze the regulatory environment, working with regulatory entities and bodies to preserve the interests of Vale S.A.'s. In the commercialization operations, seek to maximize Vale S.A.'s results while minimizing the costs of operations. Promote auctions or calls with other agents of the industry for energy purchase and sale operations, on a priority basis, aimed at keeping auditable records. Minimize risks in the commercialization operations, by means of: (i) requirements and resources management; (ii) energy ballast management and contracting; (iii) application of risk analysis methodology; (iv) definition of commercialization strategy incorporating available resources and self-sufficiency strategy. Risks Overview Power shortage Higher energy costs or energy shortages may adversely affect our business. Fuel oil, gas and electricity costs are a significant component of our production cost, representing 11.1% of our total cost of products sold in 2018. To meet our energy demand, we rely on the following resources: oil products, which accounted for 31% of the total energetic needs in 2018, electricity (31%), natural gas (17%), coal (17%) and other energy sources (4%). Natural Disasters Natural disasters, such as gales, droughts, floods, earthquakes and tsunamis, may adversely affect our operations and projects in the countries in which we operate, and may lead to a contraction in sales to affected countries, among other factors, due to interruption of energy supply and destruction of industrial facilities and infrastructure. Suppliers Major parts of our iron ore, pelletizing, nickel, coal, copper, energy and other business segments are operated through joint ventures. This may reduce our level of control, as well as our ability to identify and manage risks. Our projections and plans for these joint ventures and consortia assume that our partners will fulfill their obligations to make contributions to capital, purchase products and, in some cases, provide qualified and competent management personnel. If any of our partners fail to meet their undertakings, the affected joint venture or consortium may not be able to operate in accordance with its business plans, or we may need to increase the level of our investment to implement these plans. Perspectives We continue with the purpose of achieving electricity self-sufficiency in Brazil. We have been seeking to continuously invest in self-production from renewable sources, such as hydroelectric, wind and solar plants, based on the quality and safety of the supply, cost competitiveness and sustainability. The way to self-sufficiency and cost reduction: In addition, we entered into another renewable energy supply contract from the Folha Larga Sul wind project, in full operation since Augusto, 2020. This contract also includes the option of Vale acquiring the farm, which would add up to 150 MW to our generation capacity. Business Case Folha Larga Wind Project Wind project with innovative business structure, which serves as a reference to other developments. Benefits: 150 MW installed power Long-term PPA with energy at a competitive price Call option for Vale of up to 100% of the project Increase of 200% (from 3% to 9%) of the share of wind energy in Vale’s electrical matrix in Brazil Increased thermal efficiency of pelletizing furnaces in Brazil Purpose: To use the Lean Six Sigma methodology to act directly in reducing deviations and in the specific consumption of thermal energy applied in the pelletizing furnaces for pellet processing, seeking operational excellence in order to achieve the individual benchmark of production units in an integrated manner. Tubarão thermal energy consumption (Mcal/t) 4.3% reduction in the thermal energy consumption of Tubarão pelletizing plants. Reduction in specific natural gas consumption from 10.64 to 9.65 Nm³/t, representing a reduction of 9.3%.