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Despite barriers to adoption, cost pressure driving renewed mining interest in renewable energy

Despite barriers to adoption, cost pressure driving renewed mining interest in renewable energy
October 23
08:28 2015

Mine operators are in the current subdued economic reality increasingly looking at renewable electricity sources as a way to reduce current and future costs at operations; however, lower commodity prices hinder the widespread adoption of renewables, as falling profits and lower fuel prices maintain certain barriers.

This had resulted in miners shifting their primary motivation for implementing renewable projects to being a financial solution to drive down costs and improve productivity. Previous “softer” motivations involved the improvement of a project’s environmental footprint or satisfying social responsibility commitments, AngloGold Ashanti global VP of energy management and electrical asset integrity Bill Allemon told an audience during the third annual Energy and Mines summit, in which Mining Weekly Online participated.

Speaking during a panel discussion examining energy priorities, timelines and new technologies, he noted that while the company’s activities were mainly focused on the African tropical belt, where hydropower generation was impacted by ten-year drought cycles, the company had highlighted that each cycle was getting worse and more punctuated. Allemon advised that while the region seemed to be “coming off the trough” of one such a cycle, this, combined with ageing infrastructure and maintenance backlogs, had created a “perfect storm”, since decreased hydropower generation capabilities had to cope with increased load demand as the region expanded economically.

Further, he remarked that AngloGold’s operations in Ghana, Tanzania and Brazil were suffering as a result of ageing and crumbling electricity infrastructure. Many of the current generating stations either needed to be fully rebuilt or replaced, which had prompted the company to consider third-party, over-the-fence solutions, Allemon said.

In Ghana, the company was looking at ways to work with the country’s power utility to ensure power security, while in Tanzania, where AngloGold’s operations were in remote regions not connected to the grid, the company was looking for a flexible power solution.

The power density of an installation was also something the company took seriously in Ghana, specifically at the Obuasi mine, which was flanked by a national forest which restricted the amount of ground space available for implementing renewable-energy projects.

COMPETING NEEDS

Kinross Gold’s director of energy strategy, Sunil Kumar, pointed out that renewables were seen as a solution to certain business needs, such as the reduction of cost, improved productivity or lower environmental footprint. However, special factors, such as the cost of expansion, that could be offset by future energy cost savings, or a short mine life, competed with these needs.

“Renewables help derisk projects by eliminating or reducing ongoing energy costs going forward. [However,] with the low commodity prices and lower profitability, it [has become] tougher for miners to renew their commitments to renewables,” he pointed out.

While renewable-energy technology had been proven today and derisked, compared with a decade ago, it would still take time before the right business climate returned that would enable renewable projects at mine sites to truly take off. “I think it will happen, but with oil prices having declined, it has brought relief to miners and is working against renewables adoption at the moment,” Kumar noted.

Barriers to adopting renewables included the economic parameters and commercial site-specific demands that renewable-energy projects had to conform to. Also, while the technology had been substantially derisked, execution risks remained where projects were located at particularly remote or extreme locations.

Kumar said renewable-energy sources could be packaged more attractively to miners through integrated renewable power solutions, where the risk was carried by a third party. “But then again, the question is at what price would that risk mitigation come. It’s always better to pass the risk on to someone else, but the risk is then priced into the cost of the solution.”

Hudbay Minerals VP of corporate social responsibility David Clarry advised that every miner was trying to reduce the complexity of operations, which sometimes – ironically – added to the complexity of projects.

“Permitting renewables projects alongside mining projects could prove daunting to some proponents, with divergent permitting timelines sometimes working against renewables adoption. It adds to the risk,” he said.

Hudbay would not be getting into renewables unless it had a location that truly warranted it, Clarry pointed out, highlighting the construction process of the Constantia mine, in Peru, where at its peak the company supported about 6 000 workers on diesel-generated electricity. “There was no available model for renewables to be employed to see to our short-term needs before the grid connection became active,” he stated.

In Manitoba, Hudbay ran its smallest operation – the Reed mine, with a life cycle of about six years – on diesel. The mine was within a provincial park, which complicated the implementation of electricity provision solutions. Clarry said that, at the operation, the competing interests of using renewables and limiting the environmental footprint were working against the adoption of renewable sources, while the relatively short mine life did not support the investment in alternative technologies either

Via: Mining Weekly



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Pablo Crespo

Pablo Crespo

Journalist and Corporate Communications Professional

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