gx-renewables-in-mining-final-report-for-web
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gx-renewables-in-mining-final-report-for-web
Renewables in Mining:
Rethink, Reconsider, Replay
More than just a cost play, renewables
offer a distinct competitive advantage
Thought leadership series | Vol. 2 1
Renewables in Mining |
Thought
Though Leadership
leadership Series
series | Vol. 2 Renewables
Renewables
in Mining
in Mining |
| Though
Thought
Leadership
leadership
Series | series
Vol. 2
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Renewables in Mining | Though Leadership Series | Vol. 2 Renewables in Mining | Though Leadership Series | Vol. 2
Introduction
With renewable energy fast- The initial article in this
becoming a mainstream energy series explored how miners
source, mining companies have can drive value through energy
a material opportunity to use management across the social,
renewables to lower costs, environmental and financial
improve safety, reliability and triple bottom-line. As a
sustainability, and mitigate risks follow-on, this piece takes a
to ultimately gain a competitive deep dive into renewables
advantage. Realising the full as a compelling part of the
benefits from renewables involves energy management
more than installing a solar array business case.
or wind turbines, it requires a
willingness to rethink operational
processes and to reconsider
the way work is done.
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Renewables in Mining | Though Leadership Series | Vol. 2 Renewables in Mining | Though Leadership Series | Vol. 2
The changing
landscape of
renewables
Energy is one of the biggest The renewables landscape has A recent report by Finkel 20172
expenses for mining companies, evolved dramatically in the past LEVELISED COST OF ELECTRICITY (LCOE) helps dispel this misperception
constituting approximately couple of years. Today, major The levelised cost of electricity is the net cost to by detailing the levelised cost
30 percent of total cash operating mining companies – ironically, install, operate and maintain an electricity system, of energy (LCOE) for different
costs, therefore the rewards of even some of the world’s largest divided by its expected life-time electricity output. forms of electricity generation
shaving off even a fraction of suppliers of fossil fuels – seek to It is commonly measured in $/MWh. expressed in the average AUD
energy usage can be considerable. use more renewable energy in per megawatt hour (MWh):
Mining companies understand an effort to drive down costs and
the criticality of energy to enable curtail emissions1. This is due, >L
arge scale Solar PV -
production and many realise the at least in part, to shifts in the AU$91/MWh (US$69/MWh) in
benefits that come from managing levelised cost of renewable power 2020 decreasing to AU$61/MWh
energy efficiently through as compared to traditional fossil (US$46/MWh) in 2030
operational designs that don’t fuels, with renewables having
> Large scale Solar PV with
rely solely on grid or renewable already achieved parity in
battery storage - AU$138/MWh
sources. However, while energy some instances, and fast-
(US$105/MWh) in 2020 decreasing to
management practices are approaching it in others.
AU$87/MWh (US$66/MWh) in 2030
becoming more prevalent in the Nevertheless, perceptions
sector, some have yet to integrate about the cost of solar and wind >G
as CCGT – AU$83/MWh
renewable energy sources and power have largely not kept pace (US$63/MWh) in 2020 increasing to
enabling technologies, such as with this new reality, with many AU$93/MWh (US$71/MWh) in 2030
solar and wind power and smart miners still thinking of renewables
>G
as OCGT - AU$123/MWh
storage, into their energy by default as the higher cost
(US$93/MWh) in 2020
management programs. This may option for mines operating
increasing to AU$135/MWh
be due to lagging perceptions both on and off the grid.
(US$102/MWh) in 2030
about where renewables stand
today in terms of complexity, >W
ind - AU$92/MWh (US$69/MWh)
cost, reliability, and performance. in 2020 decreasing to AU$79/
MWh (US$60/MWh) in 2030.
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An eye
on battery
Until recently, the other type of >C
o-location of renewables with > Tesla, in partnership with the >S
hifting high energy-intensity
reliability concern, which relates natural gas or diesel generation French battery company Neoen, work to coincide with peak solar
to intermittency, was harder to – for example, the 115MW El is building the world’s largest and wind – for instance, the
address. But that too has proven Arrayán wind power plant is lithium ion battery in South Cronimet ‘Zimbi’ mine in South
to be more manageable than the largest wind energy facility Australia – a region with Africa was facing a scenario
some anticipated, especially since in Chile14. The project was significant mining activity – to where it would have to rely on
the viability of battery storage has developed through a joint help the state address energy 1.6 MW of diesel generation
been demonstrated and the cost venture between Pattern Energy reliability issues17. The capacity to meet its annual
of utility-scale batteries is starting and Antofagasta Minerals. Via a PowerPack battery farm will power needs20. Diesel is often
to decline. With battery storage power purchase agreement, store energy from the third the single largest operating
becoming an increasingly Minera Los Pelambres, a stage of the Hornsdale Wind expense for off-grid mines, and
important, but not the only, subsidiary of Antofagasta Farm18. When complete, it will unpredictable price spikes can
part of the equation, mining Minerals and one of the world’s top 100 MW of capacity and erase profits. To help curb diesel
companies around the world have biggest copper mines, sources provide 129 MWh of energy consumption and mitigate
demonstrated that intermittency about 20% of its power needs generation to the region for fuel-price risks, the company
can be managed through a range from the plant, which reduces its balancing load and supplying built a 1MW solar photovoltaic
of techniques, including: reliance on diesel generators15. emergency back-up power19. plant as part of a solar-diesel
Under the arrangement, the hybrid system, which reduced its
remaining power is sold into the annual diesel consumption by
Chilean spot market16. about 24%21. And, to maximize
its return on investment, the
company shifts its flexible load
from peak periods during the
evening to the daytime when
solar resources are abundant22.
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The size
of the prize Based on our expertise, miners have the
opportunity to drive down energy costs by up to
The companies in these examples appear to 25% in existing operations and 50% in new mines
understand the size of the prize. Based on
our expertise, miners have the opportunity
to drive down energy costs by up to 25% in
existing operations and 50% in new mines
through an effective energy management
program, of which renewables are a major
component. In addition to cost savings, the
ability to reduce emissions and preserve
the mine’s social license to operate increases
the size of the prize even more. In the
context of the Paris Agreement, carbon
reduction points are a question of how –
not if – with renewables positioned to do
much of the heavy lifting in the global
decarbonisation journey. In unison with the
energy sector, mining organisations can
play an important and advantageous role in
accelerating grid transition around the world,
reaping the carbon benefits as they go.
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Renewables
warrant “The clean-energy movement is global, it
is industry-agnostic, and it is irreversible.”
With the traditional barriers of advantage and creating As Marlene Motyka, Deloitte’s US they go about it, companies
cost and reliability diminishing, shareholder value from and Global Renewable Energy seeking to address the triple
the landscape for renewables renewables. That is because leader, points out, the commercial bottom-line of social,
has changed enough for solar and the industry is moving forward at and industrial segment is spurring environmental and financial
wind power, and perhaps even rapid pace Several large mining development of renewables value owe it to their stakeholders
geothermal, biofuels, and other companies have been integrating around the world, even surpassing to consider integrating renewables
less publicised renewable options, renewables at progressively higher policy as a driver in some regions. into their energy management
to be considered when evaluating ratios, and all four of the world’s Rapidly falling costs of solar and strategies,” said Ms. Motyka. “The
operational strategies, particularly biggest miners plan to source wind power are one reason for clean-energy movement is global,
for new mines. Yet, many remain more of their energy from this trend, but the growing it is industry-agnostic, and it is
reluctant to consider renewables. renewables, mainly to manage number of companies with irreversible,” she added.
This hesitancy is often related to costs, obtain security of supply sustainability goals is also a major
a commodity mindset, where and to curb emissions intensity23. factor. In response to increasing Following current trend lines,
miners want to have a one-to-one These developments in the mining corporate demand for clean everyone will eventually
substitute for their electricity sector are part of a larger, global energy, a host of associations and incorporate renewables. If miners
sources, only cheaper. trend toward greater procurement industry coalitions have sprung up delay in pursuing this course, they
But, companies that wait for that of renewables by corporations. to make it easier for companies to may find themselves on a higher
type of direct comparability forgo enter into power purchase cost curve than their competitors,
any chance of gaining a competitive agreements with developers and putting themselves in the
utilities or to self-generate their unenviable position of being a
own electricity by implementing high cost producer trying to
on-site solutions. Either way, preserve its margins.
miners who ignore renewables, do
so at their peril. “No matter how
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Digital
intelligent
grid
It is important to consider the critically needed, thus making the
role of the digital intelligent grid business case more compelling.
inside the mine environment as In addition, these intelligent
well as the load and demand controls are also needed to better
characteristics of the entire mine synchronise peak shifting and
when configuring the most coordinate work storage which
optimal system, either in off-grid further reduce the need for
or on-grid conditions. Intelligent investment in energy storage.
controls at the grid edge can High penetration of renewables
enable sophisticated real-time without solely relying on energy
demand management that storage to ensure uninterrupted
could go a long way to balance supply of electricity is not possible
the grid dynamically in response without the digital intelligent grid.
to fluctuating renewable supply. This intelligent grid will eventually
The result is fewer batteries will incorporate machine learning
be needed to guarantee and artificial intelligence in order
uninterrupted power where it is to create a dynamical, optimised
energy system.
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Opportunities
obvious opportunity for
from emissions avoidance
integrating renewables. But,
calculating the return on such >G
reater insight and control,
become
projects by simply comparing the including the opportunity to shift
levelised cost of renewables with work to peak power-producing
periods, by matching renewables
clearer
today’s fuel price can be deceptive.
It can even produce a ‘no go’ with digital/smart energy
decision because it doesn’t management systems
consider the full risk/reward ratio
>P
ost-closure benefits – consider
While the business case for The unique resource and it leaves out some significant
the ROI over the life of the
renewables is strong, mining characteristics of a given location, value drivers. In building the
energy systems rather than the
companies frequently face the demand profile of the mine, business case for integrating
life of the mine. Since renewable
organisational and cultural and the distinct electricity and renewable solutions into mining
solutions often outlive the mines
barriers that make it difficult fossil fuel pricing in a particular operations, decision-makers
themselves, the asset could be
to move ahead. Responsibility region means there is no ‘one-size should additionally consider:
given back to the community as
for energy procurement and fits all’ solution. Nonetheless, an aspect of corporate
consumption is often fragmented finding a solution that works for >F
uture fossil-fuel price volatility
responsibility; the value of this
across the organisation, and a particular situation is getting based on 10-year price forecasts
contribution in terms of brand
frequently no individual or group easier. As the data and body of from reputable analysts
enhancement and social license
is looking at energy management knowledge concerning renewables
>T
he value of price predictability to operate (which could facilitate
from a broader integrated increases, financing becomes easier permitting and regulatory
since renewables provide
perspective. This leads to a lack more readily available, and approvals) should also be
electricity at a steady price over
of awareness of the full range of developers offer more flexibility factored in
a set period of time
renewables solutions and value- in installation design and
creation opportunities now configuration. It also helps that >T
he risk profiles of different >G
reater access to capital
available, as well as the inability certain areas are emerging as energy options where the mine – investors are increasingly
to articulate and evaluate solar and wind ‘hot spots’ for is located. i.e. What’s the risk pressuring miners to
what needs to be done to mining, with robust ecosystems of supply disruption? If demonstrate sustainability
take advantage of them. forming around them. At present, grid-tied, how frequently do and social license to operate.
Fortunately, the opportunities Africa and Australia lead in power outages occur? How Particularly for mid-caps, adding
for mining companies to developing solar, while Canada does this compare to the a renewable component to
integrate renewables into and South America lead in uptime of the proposed plans for building a new mine
their new or existing practices developing wind-diesel hybrids24. renewable energy solution? or expanding an existing one
are becoming clearer. could unlock barriers in
securing project financing.
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Renewables in Mining | Though Leadership Series | Vol. 2 Renewables in Mining | Though Leadership Series | Vol. 2
Flexible
solutions
emerge
Understandably, many mining For example, the Sandfire On the technical side, developers communities29. The company
companies do not want to invest Resources’ DeGrussa copper are also offering miners greater is in the midst of proving out the
their own capital to cover the mine in Western Australia went flexibility. For instance, some concept at scale (1MW) in
large upfront costs or to commit live in 2016 with the largest solar are prototyping mobile renewable Australia, with support from the
to long-term power purchase and battery storage project to solutions that can be dismantled Australian Renewable Energy
agreements (PPAs) that match the date25. The $40 million project and moved to other sites after Association30. In many instances,
physical lifetime of the renewable was financed by the Clean Energy the mine closes. For example, developers are also willing to
assets, which can be 20-30 years. Finance Corporation and partly the Australian arm of UK-based work with commercial and
Investors, developers, industry through a grant from the builder Laing O’Rourke originally industrial customers, such as
associations, and governments Australian Renewable Energy developed a modular solar array mining companies, to create
are responding to this concern Agency26. The French renewable to cut diesel fuel costs at the innovative, customised solutions,
by offering customised financing energy firm Neoen owns the solar company’s own remote like the solar thermal energy
solutions and shorter-term PPAs. array and also put equity toward construction sites28. Based on system commissioned by Perth-
Furthermore, an attractive feature it27. The project will allow the its initial success, the company based Agrimin Limited for its
of some of these options is that mine to run fully on solar power formed a subsidiary called potash mining project in Western
they allow renewable plants to during the daytime if coupled SunSHIFT to target the large-scale, Australia31. The plant will be
be financed off the balance sheet. with battery storage. short-term power market, used to heat water, which is a
including mining projects, off- key part of fertiliser processing32.
meter applications and remote
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Authors Endnotes
Barbara Lewis, Miners increase green energy
1 19
Ibid.
use to power their pits, Reuters, May 16, 2017, 20
Sunshine for Mines: Implementing Renewable
http://www.reuters.com/article/us-miners-climat- Energy for Off-grid Operations, Carbon War Room
CatID=84&News_ID=1452, accessed August 2, 2017. to power their pits, Reuters, May 16, 2017, http://
NYRSTAR: Laguna Gold Buys Chile Project for $25M,
4
www.reuters.com/article/us-miners-climat-
Mining Business Media, June 27, 2016, http://www. echange-renewables-idUSKCN18C28B, accessed
miningbusiness.net/content/nyrstar-laguna-gold- August 8, 2017.
buys-chile-project-25m, accessed, August 2, 2017. THEnergy Analysis: Solar-diesel and Wind-diesel
24
David Cormack Michael Wood El Toqui Wind Farm, Chile, South America, VERGNET
5
Microgrids for Off-grid Mines Gain Momentum—
Groupe Website, http://www.vergnet.com/project/ New Projects Expected, May 15, 2017, https://www.
Partner Director
chile-el-toqui/, accessed August 2, 2017. th-energy.net/2017/05/15/thenergy-analysis-solar-
Consulting Services Risk Advisory
Ibid.
6
diesel-and-wind-diesel-microgrids-for-off-grid-
+61 423 861 116 +61 417 919 916 Ibid.
7
mines-gain-momentum-new-projects-expected,
CANADA Ibid.
10
Ibid.
11
26
27
Ibid.
w Finances Major Solar Storage Project at Remote
Ibid.
12
Mine, Clean Energy Finance Corp., July 15, 2015,
THEnergy Analysis: Solar-diesel and Wind-diesel
13
http://www.cefc.com.au/media/files/cefc-finances-
Microgrids for Off-grid Mines Gain Momentum – major-solar-storage-project-at-remote-mine.aspx,
New Projects Expected, May 15, 2017, https://www. accessed August 7, 2017.
th-energy.net/2017/05/15/thenergy-analysis-solar- 28
Sophie Vorrath, Mobile Solar Plants to Challenge
diesel-and-wind-diesel-microgrids-for-off-grid- Diesel for Use in Mines, Construction Sites, One
mines-gain-momentum-new-projects-expected, Step Off the Grid, April 20, 2017, https://
accessed August 2, 2017. onestepoffthegrid.com.au/mobile-solar-plants-
El Arrayan Wind Project, Chile, http://www.
14
challenge-diesel-use-mines-construction-sites/,
renewable-technology.com/projects/el-arrayn- accessed August 7, 2017.
wind-project/, accessed August 3, 2017 29
Ibid.
Jan Dodd. Remote Mines Add Wind, WindPower
15 30
Ibid.
Andrew Swart Adriaan Davidse Monthly, January 30, 2015, http://www. 31
Bridget Fitzgerald. Solar thermal energy to power
Partner Director windpowermonthly.com/article/1330527/ remote potash mine in western Australia, ABC
Consulting Services Consulting Services remote-mines-add-wind, accessed August 8, 2017. News, March 29, 2017, http://www.abc.net.au/
Ibid.
16
news/rural/2017-03-28/agrimin-potash-mine-
+ 1 416 813 2335 +1 416 417 3967 Campbell Simpson, All the details on Tesla’s giant
17
aims-for-70-per-cent-solar/8391136, accessed
[email protected] [email protected] Australian battery, GIZMODO AU, July 9, 2017, August 7, 2107.
https://www.gizmodo.com.au/2017/07/ 32
Ibid.
all-the-details-on-teslas-giant-australian-batteryt/,
accessed September 4, 2017.
18
Ibid.
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