Energy and Mines Magazine Issue 27

Issue

27

December

2020

RENEWABLES IN MINING:

Industry snapshot and remaining barriers ENGIE HYDROGEN CEO: Hydrogen has the flexibility the mining industry needs KNOCKING DOWN POWER BARRIERS THE CHANGING DYNAMICS OF AFRICAN MINING AND ENERGY

Sukari Mine Image courtesy Centamin Mining 2

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review

Renewables in mining: INDUSTRY SNAPSHOT AND REMAINING BARRIERS MELODIE MICHEL Reporter, Energy and Mines

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s the global energy transition continues, the mining sector’s shift towards renewables is picking up pace. What are the lessons learned from existing projects, and what are the remaining obstacles to overcome?

2019 was heralded as a tipping point for green energy projects in mining, the year when the business case for solar and wind was finally deemed more attractive than fossil fuels. Last year broke records both in the number of renewable projects at mine sites and in the renewable percentage in the overall energy mix of mines. “In 2019, over 3,500 MW of projects either were announced or contracted. That’s a significant increase over 2018, when we only saw about 1,200 MW of installed capacity, and we’re expecting that trend to increase significantly over the next couple of years,” says Dave Manning, Global Head of Hybrid at juwi Renewable Energy.

He adds: “Several years ago the trend was generally around 20-21% renewable energy fraction, but now with the adoption of battery technology we are seeing that fraction move up towards 100%, with some projects around 80% now both viable and reliable.”

Business as usual

For many in the mining sector, renewable integration is now considered business as usual. In fact, it would seem abnormal for any new project not to look at renewable options in its feasibility studies. “Any project that needs new energy, we’ll consider renewables first - it’s become the go-to technology for energy supply for us,” says James Koerting, Energy Manager at Gold Fields Australia.

The company completed the second phase of its 56 MW Agnew hybrid project this year with the addition of 18 MW of wind power and a 4 MWh battery system on site in Western Australia. This 4

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“Several years ago the trend was generally around 20-21% renewable energy fraction, but now with the adoption of battery technology we are seeing that fraction move up towards 100%, with some projects around 80% now both viable and reliable�

DAVE MANNING Global Head of Hybrid juwi Renewable Energy

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“We’re looking to reduce our diesel use and carbon footprint.”

CATHARINE FARROW Non-Executive Director Centamin

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brought the renewable portion of Agnew’s energy mix up to 54% on average.

Koerting adds that he is currently studying the feasibility of a solar and battery project at another Gold Fields mine in Australia, where there hasn’t been renewables so far. He notes that this is not a greenfield project like Agnew was, but an augmentation to provide additional energy. “Renewable energy was preferred and it’s very viable.

It also brings additional benefits in terms of the quality of the electricity there. It could be up to three times the amount of solar that we installed at Agnew,” he says.

In another part of the world, Centamin announced this year that it would build a 30 MW solar power installation at the Sukari Gold Mine in Egypt, covering 25% of the site’s energy needs and displacing 18 to 20 million tonnes of diesel annually. Catharine Farrow, Non-Executive Director at Centamin, explains: “We’re looking to reduce our diesel use and carbon footprint. We looked at some of the massive, highly successful projects that have been undertaken in the Atacama desert for instance, and believe that the desert of Eastern Egypt also presents perfect conditions, with very high solar outputs. It’s not like this is new technology. It’s really now about grasping the opportunity 2019 was heralded to reduce our carbon footprint and as a tipping point take advantage of solar PV.” for green energy While installing renewables to reduce reliance on diesel at off-grid sites makes the most financial sense, grid-tied projects have also been moving in this direction. In Chile, Teck plans to have 100% of its elec-

projects in mining, the year when the business case for solar and wind was finally deemed more attractive than fossil fuels.

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tricity contracts sourced from renewables by 2030. In January this year, the company moved 50% of its energy contract from coal to renewables at the Quebra Blanca mine, and in September, it entered into a long-term power purchase agreement with AES Gener to source 100% of the power needs at its Carmen de Andacollo operation from renewables.

But Teck is also studying the option of adding some solar power behind the meter at Carmen de Andacollo. “There is huge solar potential there, so we have the opportunity to pilot some solar. At the moment, when you buy energy from the grid, you also buy other system services, like transmission and ancillary services. If you complement that with solar self-generation you can reduce system costs in your energy contract,” notes Marcos Cid, Energy Manager at Teck Chile.

“The core of a mining company is to produce metal, but the idea is to provide some examples of how we can integrate renewable energy into our operations,” he adds.

Lessons learned

In the few years since the first large-scale solar plants were installed on mine sites, both miners and developers have gained a lot of expertise. One thing that has become clear is that there is no one-size-fitsall for this type of project. Solutions must be developed to fit specific variables, particularly around geography.

According to Manning, there are many factors to consider for both solar and wind applications. “With integrating wind turbines, the logistics requirements are always a challenge: getting access to the lifting equipment, the size of the port, the access roads are one of the limiting factors for a wind turbine project. With PV, we’re limited by the topography, so depending on how flat the area is. And last 8

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“At the moment, when you buy energy from the grid, you also buy other system services, like transmission and ancillary services.

If you complement that with solar self-generation you can reduce system costs in your energy contract�

MARCOS CID Energy Manager Teck Chile

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“The use of renewables has to be very prescriptive and almost surgical: we should look very carefully at where and how we can get the best results and emissions reduction from our investment.”

RON MILLER Director of Asset Management, Energy Newmont

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but not least: mine site integration. Key to success for us has been to closely work with thermal engine providers and the mine to design the optimum solution.” A robust and reliable mine site integration requires a microgrid controller that can adapt to changing ore bodies, processing methods and future developments like electric fleets and hydrogen. This is why we have developed juwi Hybrid IQ, our mining focused micro-grid control system that is compatible with mine site communication networks and provides mining focused reporting.

He further explains that the process needs to start with a detailed site analysis. “If we deem a project and location viable for wind, we undertake a very detailed wind study, whether with a wind mast or sodar and lidar technology. For solar we use historic climate data and increasingly augment these with onsite monitoring. Battery size is usually determined by the thermal engine design, and the size of the solar and the wind as well as economic factors,” he adds.

Miners are very much aware of the granularity needed in feasibility studies, and are willing to engage in a detailed analysis to make sure they get the best result for their investment. “The use of renewables has to be very prescriptive and almost surgical: we should look very carefully One thing that at where and how we can get the best has become clear results and emissions reduction from is that there is no our investment. It’s about slicing and one-size-fits-all for dicing the energy data, digging deepthis type of project. er and deeper into the decision makSolutions must be ing process to make the best improvedeveloped to fit ment in the most efficient way,” notes specific variables, Ron Miller, Director of Asset Manageparticularly around ment, Energy at Newmont. geography.

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And for the most ambitious mining firms, the biggest lesson learned is that more can be done. Gold Fields now assumes that 54% renewables — its average at Agnew — is achievable anywhere, and is starting to look towards 75%. Koerting points out that as the initial investments are gradually amortized, it becomes easier to achieve higher penetration at low costs. He says: “When we started the Agnew project in 2018, getting to 54% required government funding. We are now investigating getting to 75-85% without government funding by 2023, at a similar cost of electricity. Once the project capital is paid off, you still have residual value in your energy assets and you’re not paying a fuel charge, so when that time comes, you’re paying a very low marginal cost of energy. This makes the long-term economics around renewables much more attractive than traditional thermal projects.”

Next frontier

While progress is undeniable, miners are still facing a number of challenges on their pathway to decarbonization. The most significant one in the short term revolved around the energy implications of fleet electrification, an avenue most large miners are now exploring. “We need to find cheaper sources of electricity generation because if our cost of electricity is high, the hurdle we have to overcome to electrify is much higher. The other thing is that we need better and cheaper energy storage technologies. As we see the cost curve come down on solar/wind and energy storage, that confluence will bring market opportunities in electrification. We have to get that confluence to align the economics and the ESG components for a chance to make those adaptations to the operating model,” says Miller at Newmont.

Along with the drop in renewable costs, another development that could assist miners in their green energy procurement for electrification purposes would be modularity. At Gold Fields, Koerting notes that mining operators need to make sure that the power plants they 12

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“Any project that needs new energy, we’ll consider renewables first - it’s become the go-to technology for energy supply for us,” JAMES KOERTING Energy Manager Gold Fields Australia

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Suppliers should understand constraints like life of mine when approaching industry with renewable technology solutions BRUCE ARMITAGE Energy Manager Lake Shore Gold

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are constructing today have got the flexibility to incorporate more generation in the future, in order to produce clean energy for mobility. “A lot of it is around emerging and redeployable technologies, so we need to start trialling and getting comfortable with them,” he adds.

The interoperability of electric mobile equipment and the adoption of alternative technologies in the exploration stage are two other aspects that Centamin’s Farrow would like to see miners and suppliers focus on. “Interoperability has always been a huge problem, and it’s holding everybody back because everybody is so protective of their technology. We’re a pretty small industry and I don’t think that’s going to get people anywhere,” she notes.

And according to many miners, life of mine remains the biggest constraint when trying to implement renewable solutions, and energy suppliers could do more to provide miners with the flexibility they require. “Suppliers should understand constraints like life of mine when approaching industry with renewable technology solutions,” points out Bruce Armitage, Energy Manager at Lake Shore Gold. “Wind and solar projects require 15 to 20 years commitment minimums for return on investment. These projects will be ignored when typical North American mining operations only show 7 to 10 year mine life. Renewable technology companies design products to improve GHG emissions and then try to adapt or scale system to different environments, but they should collaborate with mining supply companies so low-carbon technology is designed for environments in which we operate.”

The only way to overcome these challenges and to push the industry further along its decarbonization ambitions is through collaboration between miners, energy suppliers and OEMs, not just for the development of new technologies, but also for the continuous improvement of commercial relationships.

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An effective 5-step approach to mining hybrids, according to juwi’s Dave Manning Hybrid systems with solar, wind and batteries already provide lower cash operating costs today and are an effective hedge against energy cost volatility. Reliability of supply is as good or better than of fossil fuel solutions.

And last but not least, solar and wind pave the way for electric fleets, green hydrogen and the long-term goal of carbon free mining.

An effective five-step approach to hybrids for mining would be: 1. Create scenarios for energy demand, traditional energy costs, contracting options and energy regulation (carbon pricing, green cer-

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tificates, renewable energy mandates, etc.)

2. Invite or contract hybrid specialists to provide expertise or proposals (determine early if wind resource is attractive) 3. Compare different mining and processing methods or hybrid optimization to current operation with different energy systems and integration solutions 4. Compare low, medium and high-penetration hybrid solutions 5. Compare contracting options: System purchase (EPC) vs electricity supply contracts options (PPAs) or other models

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G N I N I M GLOBTAS LIN PROGRESS PROJEC

NOVEMBER 2020

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interview MICHÈLE AZALBERT CEO Engie Hydrogen Business Unit

Hydrogen has the flexibility the mining industry needs

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MELODIE MICHEL Reporter, Energy and Mines

ith ambitious net-zero targets looming around the corner, miners are increasingly looking to renewable hydrogen for versatile solutions with the potential to decarbonize entire value chains. Energy and Mines speaks to Michèle Azalbert, CEO of Engie’s Hydrogen Business Unit, to understand why hydrogen is such an important part of the mining sector’s decarbonization pathway, and what is needed for this technology to become commercially viable.

Energy and Mines: Which recent hydrogen market developments and technological advances are most relevant for the mining sector?

Michèle Azalbert: Mining is truly at the centre of the energy transition: today, extractive industries are responsible for half of the world’s carbon emissions and more than 20

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80% of biodiversity loss, according to a UN Global Resources 2019 Outlook Report. Minerals are everywhere in our daily lives, so we need them to be extracted in a sustainable way, or the energy transition will not make any sense. It is crucial for us at Engie to develop solutions to decarbonize the mining sector, and we think that renewable hydrogen has the flexibility to address the processing and operational challenges of the mining industry.

Within the H2 market today, we see both electroyzer and fuel cell manufacturers taking their products to the next level, increasing scale and production capacity. This will bring the cost of the technical equipment down and contribute to accelerating the scaling up of the hydrogen economy. This is good news for mining companies, as it means that hydrogen solutions will soon be available at the required scale and price to reach a viable business case.

E&M: Which international markets hold the most near-term potential for hydrogen applications with mines?

MA: There are countries today that have abundant renewable resources in the same areas where mining operations are significantly present. That’s the case of Australia, where the mining industry is the fourth-largest consumer of energy. There are other examples, like Chile or South Africa, and these countries hold the most nearterm renewable hydrogen opportunities in our view, to produce renewable hydrogen for mines but also to develop the hydrogen ecosystem beyond the mines.

E&M: Can you tell us about some of the projects Engie’s Hydrogen Business Unit is working on with mining operators?

MA: Engie is already deploying different bricks of the puzzle: ammonia nitrates for blasting services, renewable hydrogen-powered train and storage solutions, and we could replicate these solutions 22

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right now in many places. Two of the most visible projects we have in the mining industry is our project with Anglo American in South Africa and the Hydra project in Chile with a consortium of mining companies and partners. Both of them are focusing on the same application, which is to develop a renewable hydrogen-based solution for heavy-duty mining trucks. But hydrogen solutions for mines go well beyond that. We are currently working with customers and partners on solutions that could decarbonize the complete mineral value chain from the point of extraction to the end application. It’s about ammonia nitrate, but also transport by trains or by ships , ore carriers, processing and refining minerals, and energy storage E&M: What are the barriers to widespread adoption for hydrogen in mining?

MA: We see mainly three challenges ahead. The first one is advocate collaboration between all stakeholders, including technology providers and OEMs, to co-create the required technical solutions and to shorten the time to market. The second challenge is the scaling up of the equipment and the technologies to bring costs down. Third, we need to implement the relevant regulation at country level to accelerate the deployment of safe and affordable renewable hydrogen solutions. This is about solving the famous chicken-and-egg problem: we need to create demand so that manufacturers are able to scale up their solution to bring costs down.

E&M: How are the economics of hydrogen changing - when will the technology become affordable for mines without subsidization?

MA: When you look at cost, it’s not only the price of the hydrogen solution, but the total cost of ownership (TCO) you need to consider: how much does the hydrogen solution contribute to the cash cost of 24

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the minerals vs. conventional fuels, taking into account all parameters such as maintenance costs, productivity, system efficiency, logistics cost to transport minerals to the mine and all logistical issues. Based on this, some of the hydrogen solutions for mining heavy duty equipment could already be viable today in some places. They may become competitive in the next five years in other geographies.

What needs to be done today is to make sure that these technical solutions are available in the short term. Beyond that we need the cost of hydrogen to continue to fall significantly in order for all the other bricks to happen in the short term. The cost of electrolyzers went down 45% in the last five years already, the cost of solar power went down 80% over the last 10 years and is expected to continue to decrease, and it’s the same for wind power. So we estimate, and this is a widely shared view in the industry, that renewable hydrogen could be competitive by 2030 in the best geographies.

E&M: What advice would you offer a mining operator beginning to explore the role of hydrogen for mine power, transport or processing?

MA: The advice we give to mining companies is to start by developing a holistic approach, activating the technical integrated solution and then scaling it up, pulling different types of uses. Create a roadmap and deploy it step by step. That will allow the mining operator to define a clear pathway to net zero and to invest in the best and most competitive technologies in the short and in the long term, while ensuring compatibility of these investment with the selected technologies of clients. We are committed to supporting our clients in their pathway to carbon neutrality, by providing turnkey solutions and managing the complexity for them, as assembling all the pieces of a solution and ensuring a reliable supply of renewable hydrogen is not that easy.

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interview

Knocking down power barriers MELODIE MICHEL Reporter, Energy and Mines

Image courtesy Wartsila 26

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s hybrid power systems for mines become more and more widespread, tailored and reliable, Energy and Mines speaks to Mark Kennedy, Business Development Manager at Wärtsilä, about the remaining barriers for decarbonizing mine power.

Energy and Mines: What has changed in the last 6 months in terms of the decarbonization strategies of mines?

Mark Kennedy: We have seen more and more mines studying and implementing strategies to add renewables and energy storage.

This is largely driven by the increasingly favourable economics of clean technologies. A good example is energy storage where battery prices continue to drop year on year. Other factors contributing to favourable economics for clean energy are increasing carbon taxes and government legislation.

E&M: Have you noticed any impacts of the global pandemic on the operational energy strategies and decarbonization goals of mining operators?

MK: From Wärtsilä’s perspective the global pandemic has neces-

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sitated some changes in the way we do business. However, thankfully most of our projects and supply chains have not been adversely impacted by the pandemic. The main challenges related to the pandemic for our projects have been around travel restrictions and quarantine requirements. This has made getting people to certain sites quite a challenge. However, on the equipment side we have been able to manufacture and source equipment on normal schedules and timelines.

E&M: Which disruptive technologies do you think will likely be the most effective in terms of displacing diesel for mines?

MK: What we are seeing is that renewable power, combined with batteries (energy storage) is the most effective way to reduce diesel consumption at mine sites. The type of renewable power differs greatly from country to country. We are also seeing some cases where natural gas is replacing diesel consumption, mainly through LNG. We have seen strong growth in our Dual Fuel engines which have the capability to run on liquid fuel (eg diesel) and also natural gas.

E&M: What are the main challenges of trying to lower emissions from power while maintaining production targets?

MK: The main challenge for miners is reliability and quality of power. It is one thing to have access to renewable energy but the system needs to be reliable and ensure that production is not impacted. We believe the key to ensuring this is having an energy management system (EMS) that can incorporate renewable power with thermal power and maintain reliability at all times. This is why Wärtsilä has been very focused on GEMS, which is Wärtsilä’s Greensmith Energy Management System. This state-of-the-art software manages the energy at the site, incorporating thermal, batteries, renewables in an optimal way — to ensure a reliable system that optimizes the lowest use cost of energy.

E&M: Wärtsilä has been involved in landmark renewable energy and storage projects for mines including Resolute, B2Gold, and IAMGOLD — can you tell us about the lessons learned from those projects?

MK: The one consistent lesson is that hybrid-powered mines re28

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What we are seeing is that renewable power, combined with batteries (energy storage) is the most effective way to reduce diesel consumption at mine sites.

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sult in significant savings and emissions reductions for the owner.

If we take the B2Gold project, the hybrid concept is expected to reduce CO2 emissions by almost 18 tonnes annually and cut processing costs by 7%. At that mine in Mali, Wärtsilä is designing a cutting-edge 17.3 MW/15.4 MWh energy storage system with GEMS energy management technology. GEMS will not only control the energy storage system, but also integrate a new 30 MW solar plant under construction at the mine. The GEMS software platform interacts with and manages every part of the system to optimize performance, essentially operating as a conductor running a symphony.

E&M: How is the approach changing in terms of mines’ investments in renewables and low-carbon technologies?

MK: One of the noticeable changes is how mines are embracing energy storage. One of the many benefits of energy storage is that it converts an intermittent source of power, such as solar and wind, into a predictable one. Not only does this allow the use of renewable resources to be maximized, but it also allows a reduction in the spinning reserve — the amount of overproduction of electricity by the generators that is needed to ensure the power supply is main-

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tained in case of a generator going down or a dip in solar production.

In this way, having a “renewable battery” removes the uncertainty of solar and wind and allows the conventional part of the hybrid plant to run more efficiently.

E&M: What are the remaining barriers for integrating renewable energy and storage solutions?

MK: We do not see any barriers anymore. The prices have come down to a competitive level, the technology is proven and most importantly we have the energy management systems such as GEMS to ensure reliability.

E&M: What do you think would assist mines in addressing the challenges of low-carbon energy solutions?

MK: One of the important ways to assist mines is to run simulations and modelling of the power system to see if the project makes sense.

Wärtsilä can help with this type of analysis.

Mark Kennedy can be contacted at mark.kennedy@wartsila.com

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story

The changing dynamics of African mining and energy MELODIE MICHEL Reporter, Energy and Mines

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he business case for adding renewables to the energy mix should be a no-brainer for African mines: solar generation is widely available and has the potential to improve the reliability of power systems and reduce the risks associated with transporting diesel over thousands of kilometres, all the while reducing costs.

But renewable projects on the continent remain few and far between, especially compared to other regions. Among recent initiatives, one can name B2Gold’s 30 MW solar plant at the Fekola Mine in Mali, Iamgold’s 15 MW solar hybrid at the Essakane Mine in Burkina Faso or Resolute Mining’s 20 MW solar plant at the Syama Mine in Mali.

“In 2012, there was a first 1 MW solar hybrid implemented at a mine in South Africa and everybody felt like this was breaking the resistance of miners to implement renewable energy,” says Martin Schlecht, Chief Operating Officer at Suntrace. “But then it took a couple of years for the next projects to be approved. Miners are conservative in their thinking. Solar energy fluctuates and they didn’t want to risk losing production time. The reliability of the power supply is way more important than cost for them.”

Diesel risks

Diesel and heavy fuel oil (HFO) are the most popular way to ensure continuous production on the African continent, seeing as electricity grids are rarely available for their operations, and even when they are, reliability is not guaranteed.

Ronald Halas, Chief Operating Officer at Global Atomic Corporation, explains: “Challenges for African mine operators can include the complete lack of nearby grid power, the reliability of grid power if it is available, as well as the cost of grid power. For many remote sites where grid power is not available or too unreliable to depend on, mine operators must install their own generators and the transport

The misalignment in commercial structure between the mining and energy industries makes negotiating cost-effective renewable contracts difficult.

MARTIN SCHLECHT Chief Operating Officer Suntrace 33

of diesel or heavy fuel oil over hundreds or even thousands of kilometres, is extremely expensive and contributes to GHG emissions.”

For its new Dasa Mine in Niger, Global Atomic Corporation plans to have a mixture of grid power and on-site solar power. Halas points out that while the mine is conveniently located just a few kilometres from a main power line, the installation of additional solar generation onsite is seen as an environmentally responsible and cost-effective solution to hedge against periods of higher oil prices. “It is our intention to enter a Power Purchase Agreement for our mine in Niger and pay for our monthly usage of solar power generated on site.

We consider this the appropriate approach to manage the capital and operating costs of our new mine to be built. It gives the investors or lenders confidence that the power costs can be fixed over a significant period of the mine life, and that there should not be any spikes in power costs once the mine is built, as would be the case where a mine is built based, on, say a $50/barrel oil cost and oil unexpectedly rises to $100 per barrel,” he adds.

Oil price volatility is an obvious deterrent for miners, who like to have visibility over their long-term energy costs since these are a very large portion of their overall production costs. But the fact that oil has to be transported by truck over very large distances — and sometimes across borders — brings other kinds of risks, too.

Suntrace is supporting B2Gold in the implementation of a 36 MWp solar plant and 15 MWh battery at the Fekola Gold Mine in Mali, a project currently under construction and due to be completed next year, that will displace 13.1 million litres of HFO annually. Schlecht explains that the oil used at the mine has to be transported over 1,000 km from a port in Senegal to landlocked Mali. In August 2020, political turmoil in Mali led members of the Economic Community of West African States, or ECOWAS, to close all their borders with the country, leaving cargo stranded for a few days until borders reopened. “If something like this is not resolved quickly, it can impact the mining 34

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operations a lot. Fossil fuels present a supply challenge that could be resolved by putting renewables on site,” Schlecht adds.

Life of mine

Despite the obvious benefits of adding renewable to the energy mix, it remains difficult for many African miners to find the appetite for such projects — namely because of life of mine limitations. Oliver Milambo, Responsible Sourcing Manager at AngloGold Ashanti, takes us through the decision process his company went through in 2014, when it decided to upgrade its power station at the Geita Mine in Tanzania. “We put out a solar tender, we wanted companies to bid for renewables as well, in line with ESG principles and as a way of reducing costs,” he says. “In terms of price it was competitive, but for us to do solar by ourselves, the capital requirement was too high. There was also the issue of security in the area of a potential PV plant. So we looked at a solar PPA as an alternative. The price was competitive, but most of them wanted a contract of minimum 15 years, and our life of mine was less than that, so again we didn’t have the appetite to commit to that.” In the end, the mine went from relying on HFO to diesel.

Since 2014, AngloGold Ashanti tried to source renewables again in Ghana, and then in Guinea. But both times, the size of the capital investment or the length of the PPA sank the business case. Still, Milambo is hopeful that things are changing for the better.

“Now because of ESG requirements from investors, there is a ground shift, and we somehow have to make it happen. We are connecting with developers and other stakeholders, putting our heads together to find a mutually acceptable solution. The second change from 2014 to now is the unit cost for the solar technology that has gone down.

But the impediment of life of mine still hasn’t improved,” he notes.

To overcome the life of mine challenge, miners in Africa are looking for commercial innovation and flexibility on the part of IPPs. Halas

Challenges for African mine operators can include the complete lack of nearby grid power, the reliability of grid power if it is available, as well as the cost of grid power RONALD HALAS Chief Operating Officer Global Atomic Corporation 35

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names “creative financing solutions based on a short mine life” and “easily installed and then removed renewable solutions that make economic sense over short periods of time” as two of the potential avenues for improvement.

Commercial and regulatory hurdles

For remote operations, there are two main ways to integrate renewables: self-generation, whereby the miner owns the renewable resource that can either be self-built (as in the case of the Fekola Mine) or delivered through an EPC contract; and renewable PPAs, where the mining company buys electricity from a renewable IPP, which owns the facility on-site (like at the Essakane Mine).

Justifying the CAPEX investment required for self-generation is hard for many miners, but Halas points out that future power costs should be taken into account in the decision. “If the renewables can reduce the mine operating costs, then the mine life may potentially be extended, thus providing a longer time to amortize the investment in renewables. From a strategic planning point of view, cut-off grades for mining decisions are typically calculated based on future operating costs, and not on sunk capital costs. If one can take the future power cost, or some fraction of the future power cost, out of these calculations, then cut-off grades decline, while mine reserves and the life of the mines increase. This is yet another way that renewables can provide benefits to the company and country by increasing the life of mine, while reducing carbon emissions,” he says.

On the PPA side, Schlecht admits that the commercial goals of miners and IPPs may not be on the same line. “The misalignment in commercial structure between the mining and energy industries makes negotiating cost-effective renewable contracts difficult. For example, 20-year power purchase agreements — the predominant contracting mechanism used by renewable energy developers — are not well aligned with the life-of-mine projections and the energy flexibility re-

Creative financing solutions based on a short mine life and easily installed and then removed renewable solutions that make economic sense over short periods of time are two potential avenues for improvement.

OLIVER MILAMBO Responsible Sourcing Manager AngloGold Ashanti 37

quired for off-grid mine operations,” he says. Furthermore, adding a solar hybrid at an existing mine means having to deal with existing energy infrastructure and operations.

It may be considered easier to switch to renewables for grid connected mines: PPAs could be more flexible on the basis that, should the mine shut down, the IPP would be able to sell power to the rest of the grid. But even on the grid, things are not as easy as they seem. First, miners have to wait until their current contract expires before they can change providers. And secondly, the integration of renewable energy into national grids has to be approved by local governments.

Tsakani Mthombeni Executive, Sustainable Development at Impala Platinum, explains: “Grid-tied renewable energy systems inevitably require some level of regulatory change — in most cases these are new developments and disruptive to conventional energy supply systems. This is a challenge, particularly for developing nations. For both grid-tied and remote operations, the size of the proposed renewable energy system required is an issue. For example, in South Africa, the regulator has a set 10 MW limit on the size of the proposed plant, which is too small to service the energy needs of many mines.”

Shifting priorities

Like everywhere else in the world, miners in Africa are under increasing scrutiny from all stakeholders but particularly from investors, who expect to see environmental measures taken at all levels of the operations. This is changing the way miners see renewable integration, from a nice ESG addition to a business necessity. Luckily, the continuous drop in solar prices make the business case much more attractive today than a few years ago.

“Solar is currently the lowest-cost energy generation technology you can have. It’s lower than anything else. The problem is it’s fluctuat38

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ing. Then comes batteries in the picture, where the price has also come down, but it’s still expensive. A large battery to substitute all fossil fuels doesn’t make economic sense today, but with battery prices dropping, this economic situation will improve continuously,” says Schlecht.

Eventually, each mining company will have to find their own approach for implementing, structuring and financing renewable projects. For off-grid mines, each mine requires its individual solution, considering mine management and existing infrastructures. For on-grid mines, industrial pooling, where several mining companies commit to buying renewable electricity from a producer to ensure the viability of the construction of a plant in their area, could be an interesting solution to explore, he adds.

At Impala, Mthombeni takes comfort in the fact that commercial innovation is starting on the continent. “It is encouraging to see that in parallel to technology improving, so too have business models and commercial deal-structuring models. For example, we are now seeing rental systems on shorter PPA tenures, as well as innovations such as re-deployable energy systems. These developments are designed to reduce the conventional technology and commercial hurdles,” he says.

The mining sector’s energy transition may be slower in Africa than in other regions of the world, but like everywhere else, its success will depend on miners’ commitment, energy providers’ creativity and the realization that every mine requires a different technical and commercial solution. And with each new project that comes online and proves the viability of renewable integration on the continent, these conditions are improving.

Editors note: Renewable energy in African Mining is a key theme at the 8th Energy and Mines World Congress - https://worldcongress. energyandmines.com/, Dec 8-9, 2020 39

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