“The costs of energy resources, especially power, impact considerably upon KGHM’s competitiveness,” reports 
Herbert Wirth, President and CEO of KGHM Polska Miedź S.A. “The price of energy is among the key factors when taking investment decisions and drafting long-term production plans.”
KGHM is among the world’s top copper and silver producers and currently uses around 2,6 TWh of power and around 200 million cubic metres of natural gas annually. Energy security is also a concern due to recent issues with grid power reliability in Poland. As Wirth reports, “The priority is now on the development of our own power sources, with a clear focus on low-emission and renewable ones.”
Here, he provides critical insight into the mining leader’s operational energy challenges and priorities.
Q: What are your top three energy concerns?
A: Firstly, energy security is a top concern. KGHM’s mining and smelting divisions demand top power security, in order to provide workers and machinery with the proper level of safety. For many years, this security was guaranteed by the Polish Electricity System, based on the country’s large power plants and transmission lines. However, increased changes in weather conditions and more frequent breakdowns of baseload power plants and transmission wires, have made KGHM modify its view on strategic energy security. The priority is now on the development of our own power sources, with a clear focus on low-emission and renewable ones.
Secondly, the cost of energy is a concern. The costs of energy resources, especially power, impact considerably upon KGHM’s competitiveness. An unfavourable legal environment which imposes a number of levies on energy makes Poland’s energy prices one of the highest in Europe. Another challenge is the lack of proper tax allowances dedicated for energy-intensive industries. Without such mechanisms, the cost of energy is a considerable burden for KGHM, which decreases its competitiveness in the global markets.
Another concern is energy effectiveness. A significant challenge for KGHM is the consistent decrease in energy consumption due to the usage of energy-effective technologies, machineries, and organisational solutions (e.g. ISO 50001). We believe that the company’s further development, with such projects as Deep Głogów or metallurgy modernisation, will not foster considerable energy consumption. Our aim is‘zero-energy’ development. The challenge is the lack of a proper legal environment – another bill on energy effectiveness is being prepared, as the previous one failed to meet the industry’s expectations.
Q: How have changes in commodity prices affected your energy strategy?
A: KGHM Polska Miedź S.A. is among the world’s top copper and silver producers. In its technological processes, on a yearly basis, the company uses around 2,6 TWh of power and around 200 million cubic metres of natural gas. With such a level of consumption, any change in the energy markets may have significant impacts upon our energy strategy. The price of energy is among the key factors when taking investment decisions and drafting long-term production plans.
At KGHM, we aim at optimizing production costs and maintaining top working security. We therefore work on gaining competitive advantage based on the newest technologies.
Q: What is the biggest misconception that energy companies have about the ways that mining leaders think about power?
A: Energy companies are interested predominantly in low commodity prices, which may result in high profits when selling energy. It is the other way round with miners. Miners are interested in a high commodity prices, and low energy prices. Energy is an important cost-factor for all miners. This is especially true for coal miners, who are suffering from low coal prices. These prices may endanger the future of coal mines in Poland.
Wirth is speaking at the upcoming Energy and Mines London Summit on January 28-29 which focuses on building collaboration between global mining operators and renewables experts to provide energy security and affordability for mines.