Andreas Boes has been focused on microgrids for mining clients for a number of years and, as Sales Head of Hybrid Solutions, Americas, for Siemens, is overseeing business developing in Chile and across the region. Here Boes offers his unique perspective on the evolution and customization of hybrids for mining customers and the many benefits they can offer beyond diesel-savings. Interestingly, as Boes explains, lower oil is actually providing the right environment for mines and renewables to collaborate on reducing and securing mining’s energy costs over the long-term.
Q: Since we met in Santiago last year, oil prices have dropped significantly. What are some of the reasons to invest in hybrid power plants at a time of low oil pricing?
A: Initially, the drop in oil price in the last 12-18 months put some pressure on hybrid power plant solutions. However, when you take a closer look, this phase of low oil prices can be regarded as an excellent opportunity to implement a hybrid power plant.
Now is the time to make anti-cyclical investments. Lower fuel bills provide more free cash flow for investing in new hybrid generation assets. Another reason to invest now is to hedge against high future oil prices by fixing a significant portion of your generation costs. Furthermore, despite the situation with the fossil fuels market, it is a good time to leverage low global interest rates and the global momentum towards environmentally-friendly initiatives.
Last, but not least, hybrid plants take time to develop and their potential lifetime spans a long time. It makes good business sense to make decisions on such investments on a medium to long-term basis, independent of short-term low oil prices.
Q: While we seem to be close to the bottom of the low-commodity cycle, many mines are still not in a financial position to invest in hybrid power. How are you addressing this particular challenge?
A: We address this hurdle by diversifying the business model. Many alternatives are possible. One example is helping the customer avoid tying up investment money in generation assets. It is no longer a given that everything has to be in one hand. We’re finding that in many cases our mining customers do not necessarily want to be owners of the power generation assets. They want to focus on their core competence: mining ore.
This means that a third party can come in to act as an Independent Power Producer (IPP) and focus on cost effective and reliable power generation. They look to invest in hybrid power plant assets and enter into a long-term relationship with the off-taking entity, which in this case is the mining company. Siemens has built up good relationship with many such IPPS, and this can be leveraged here. The important point is that this is a win-win relationship which suits the complex needs of the mining industry. Experts focus on their specialty to bring value to each other.
Q: What has been the response from mining energy decision-makers in South America to renewables integration?
A: The South American market, especially in Chile, has embraced renewable energy power generation. Many players have explored their opportunities and, together with a very favorable market design, this has boosted renewable energy projects in the mining sector, be it wind or solar. However, a big portion of the projects with mining participation are grid-connected renewable generation with Power Purchase Agreements (PPA). With some projects we are starting to see a more market-orientated approach, where merchant plant business cases are in focus.
Not many off-grid projects for own consumption have been seen yet. This is because of the good grid coverage in the country, which is connected to most mines. However, we are seeing initial promising developments of miners looking into projects for self-consumption in off-grid locations. This is a very good sign for hybrid solutions, which combine renewables together with conventional fossil generators such as diesel gensets. Eventually some political support will be needed here as well to help make such arrangements attractive for the mining sector.
Q: The conversation around hybrids for mines has moved on from solar-diesel solutions to integrating a wide variety of technologies including storage. What technologies can be integrated into Siemens’ hybrid solution for mines?
A: Siemens is a front runner in incorporating new technologies into hybrid solutions. The spotlight needs to be put on several areas here. On the one hand, there is the generation technology, which especially for the renewable part needs to be chosen and sized according to the resources available on site. Here we serve not only solar PV and wind, but also small hydro and biomass. The latter two have very special aspects that differ from wind and PV. They both inherently provide storage, which is a key element for Siemens’ high peak penetration plants.
Regarding storage, Siemens focuses on using the most appropriate technology, with a focus on commercially available and technically proven systems such as Lithium Ion based solutions. Last but not least, there is the control and automation, which is the heart of the hybrid system. We have developed the Siemens Hybrid Energy Resource Optimizer (HERO), which optimally dispatches the different generation assets in the hybrid plant.
What is “optimally”? This is a complex algorithm that focuses on minimizing the overall generation costs for a system. This depends on many factors and is adapted from project to project according to the needs of each customer. Elements like forecasting of generation for renewable generation are important elements for ensuring the optimal control system for hybrid plants.
Q: Aside from the significant benefit of diesel-fuel savings, what other challenges can renewables address that fit with mine’s power priorities?
A: Fuel savings are a central element of hybrid solutions. However, there is much more to these solutions which are of benefit for the users, the miners. For example, there is the energy supply reliability: well-designed hybrid systems provide a certain redundancy which is of benefit for the overall generation process. Here the different generation assets complement each other to a certain extent, providing a more resilient power supply system.
A further benefit is the stringent design for stability: a hybrid system is designed to meet the system stability requirements of the microgrid at any moment in time. This can help minimize power system failure and therefore avoids expensive tripping and restarts of the mine’s process plant. Another aspect is the reduced dependency on fossil fuel transport and supply. This can include environmental risks from transport accidents and spillages, commercial risks due to theft, or supply restrictions associated with difficult logistics or limited logistic windows due to weather.
Q: In Argentina, there are grid-connected mines that are trucking in diesel to compensate for unreliable grid power. How can a hybrid solution solve this challenge?
A: This is a very special use case for hybrid plants, so thank you for bringing this topic up. Many mines suffer from a weak grid connection, meaning that unplanned grid interruptions have a major negative effect on their operations. Hybrid plants can help to overcome this hurdle due to their storage systems. These can bridge power losses, allowing backup generators to start until the grid returns.
The storage system helps maximize the benefits of renewable generation, providing affordable, reliable power with 24/7 availability. The total cost of ownership for the hybrid plants make them an excellent choice to meet the requirements imposed by a weak grid connection. We have investigated several such cases already, and have identified impressive returns for the customer due to both reduced process system downtime and lower fuel bills.
Q: While each mine site is different, can you give us a general idea of the potential operational cost-savings renewables integration can offer mining customers?
A: This is a tough question. Especially, as you mentioned already, given the uniqueness of each mining site and the tailored solution a good hybrid plant design implies. However, what we can see from the projects we have investigated is that a key parameter is the actual fuel price managed by the mine. And here is meant the all-in price of the fuel in the genset supply tanks. This includes wholesale prices, logistics, risks, storage, etc.
The second major factor is what renewable resource is used. PV is a great source, but is obviously optimal in locations with good irradiation and is only available during daytime hours. A PV-based hybrid system can be economically feasible with renewable shares of up to 25-30%. For wind based projects, we have seen systems where 60-70% of the energy comes from the wind park. And then of course it’s possible to combine renewables to further optimize. This is huge and needs to be leveraged by a proper hybrid design, especially due to the unique operation of high peak penetration hybrid plants. At Siemens, we analyze each project specifically, as only in this way can all benefits of such hybrid plant configurations can be leveraged. This detailed analysis is a must if you want to benefit of the overall potential of a hybrid project.
Q: Can you provide us with an update on your project in Wildpoldsried, a small German town which has decided to go completely off-grid with the cooperation of its local utility. How is this testing case for your hybrid solution evolving?
A: Wildpoldsried is an incredible project. Not only does it help us demonstrate the viability and benefits of an off-grid microgrid operating with a Siemens HERO system, it also shows the capabilities of a grid connected microgrid to supply ancillary services to the grid. We expect that, in some areas, the proliferation of microgrids will ultimately reduce the need for grid extensions and upgrades due to the large amounts of renewable and distributed power generation.
In Wildpoldsried, we will open the breaker and meet the demand for a big part of the community of 2,532 people this year. We will start testing next month. This is a microgrid comprising diesel generators, wind, solar PV, biogas and small hydro generation. Storage is a central element in the design; here we are using a Li-ion based energy storage system supplied by Siemens. Our partners in this project, the local utility AGÜ (Allgäuer Überland Werk and AllgäuNetz), the Institute of High Voltage at the RWTH Aachen, the Institute for Electrical Energy Systems at the Kempten University and ID.KOM Networks GmbH are doing an incredible job in making this idea of a power island in the middle of Germany come true.
Wildpoldsried project is a good example of how Siemens can leverage its wide portfolio range to make the difference in mastering such complex project challenges: providing electrical equipment, innovative control solutions, and energy storage systems on the one hand and on the other engineering expertise in all relevant sectors of the project.