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Aurecon 360 Issue 8 - Thinking in action

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Page 8 of 43

OFF-GRID RENEWABLES FOR MINING Renewable energy is becoming accepted as an important energy supply for large electricity consumers worldwide. In particular, the mining sector offers significant opportunities to both mine operators and renewable energy developers. In South Africa, reliability of electricity supply has been a major issue for the mining sector, with electricity shortages in 2008 severely impacting operations and financial performance at a number of mine sites. The South African government is addressing electricity supply issues through a renewable energy procurement programme and construction of two large coal-fired power stations with World Bank funding. However, it will take a number of years to improve the reserve margin and increase security of supply. Of the 400 operating mine sites in Australia, 170 are either off-grid or connected to a smaller distribution network and needing to supply their own electricity. Natural gas and diesel dominate as fuel supplies for electricity generation and other energy uses. However, rising prices of both natural gas and diesel are leading mining companies to consider alternatives. Other countries with significant mining operations in Asia and South America are facing similar challenges. Historically, mining companies have treated electricity supply as a secondary consideration to resource extraction, in a similar category to accommodation and water supply. However, with increasing fuel prices, greater fuel price volatility and more focus on sustainability, mining companies are realising that energy supply is a more strategic consideration. Renewable energy and, in particular, solar photovoltaic (PV) can offer significant benefits to mining companies. The unit cost of energy from solar PV is now below USD200/MWh in many locations compared to typical diesel generation costs of around USD300/ MWh. This provides an opportunity for mining companies to reduce energy costs by reducing diesel consumption and maintenance costs with solar generation, particularly at sites with high daytime loads. The diesel engines are retained for night-time generation and as backup to the solar panels. Their operating life is extended through lower annual operating hours. Mining operations are strongly influenced by international commodity prices and operational focus can change rapidly in response to market signals. Diesel generators support this flexibility through their modularity and ability to be relocated to other sites if required. Solar modules also offer a degree of flexibility. With simple foundation systems and electrical reticulation, solar installations can theoretically be redeployed to other sites if mining operations need to close down. Recent trends in lease financing of solar modules provide further alignment with mining operations. As panel prices continue to decrease and panel efficiency continues to increase, expect to see greater focus on renewable energy as a strategic consideration for mining operations. You can contact Blair at blair.walter@aurecongroup.com Aurecon Thinking in action 9

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