Sourcing new energy solutions at mine sites

Despite this, mining companies are still actively looking for solutions and reinvestment opportunities that will drive operational efficiencies - whilst assisting them in meeting some of their social commitments to stakeholders. Sourcing new energy solutions at mine sites is one such example.  

Given how power intense mining operations are, access to reliable, efficient and cost-effective power is imperative. It’s not surprising then that mining companies are beginning to realise the full potential benefits of off grid and standalone power solutions. 

For instance, we are seeing a growing interest by mining companies in adopting hybrid energy solutions that incorporate diesel generators and some form of alternative, or renewable, energy option such as solar or wind. Their aim is to reduce their risks associated with grid power interruptions. Alternatively, and where grid power access is not available – as is often the case with remote mine sites – to offset the unstable costs and risks associated with their reliance on and access to diesel. So doing also assists the mine in better managing their OPEX costs.

Added to this, in times of economic volatility – and often stifled business growth as a direct result - greater focus is placed on the need for efficiency; to reduce possible business risks, streamline processes and/or drive possible cost savings. This is particularly true in the case of mining, where there is growing pressure to improve production intensity while reducing energy and capital intensity; and also addressing and adapting to regulatory changes, requirements for social licenses to operate and climate change.

Renewable power plants can be deployed, far easier, close to the source of demand, through microgeneration – to feed the mine with the power supply that it needs for its operations - and at a locked-in price, over the long-term. 

Such onsite power solutions also hold potential to provide power for the communities and small industries in the surrounding areas. This can be aligned with the mine’s strategic approach to stakeholder engagements on re-investment and driving socio-economic development, as is often required to maintain the obligations of the mine’s social license to operate.  

Furthermore, pursuing such innovative growth can also provide a mining company with opportunities to commercialise such assets to generate additional income – by selling any excess power into the regional or national grid.

Different Business Models

Taking this all into consideration; currently there are different business models that are being explored and used – to different degrees of success – around the world that can be successfully implemented in an African context. Some of the key models include, for instance:

• Self-generating – where a mine funds, builds and operates a renewable power plant onsite.
• Self-generating and powering communities – local community nearby the power plant obtain support (either from government or the mining company) to construct a transmission line.
• Net metering – mine can sell any excess capacity generated by the renewable plant into the local grid.
• Industrial pool – this is where a group of industrial companies enter a long-term power purchase agreement (PPA) and collectively fund, build and operate a shared power plant.

In Africa currently, we are starting to see more take up in the first two models mentioned here and the reasons for this are threefold:

1. Increasing pressure on mining companies to reduce their carbon emissions and impact on the natural environment – as well as growing pressures by stakeholders for mining companies to increase their socio-economic dividends through re-investments.
2. Much of the existing power grid infrastructure throughout Africa is aged and insufficient to be able to safely and reliably allow net metering, and;
3. Poor co-operation between industrial companies, in terms of potential industrial pooling, around control and operational preferential use rights to the infrastructure.

There is definite interest in investing in alternative energy sourcing at mine sites across Africa, however – and like with most new investments and infrastructure builds – this interest would be encouraged further by more open engagement with governments, and enabling environments that are led by steadfast policy to incite investor confidence. 

In terms of the policy frameworks themselves, keen consideration should be given to – though not limited to – tax and carbon tax breaks, subsidies, and allowing mining companies to sell excess power capacity back into the regional or national grid. Essentially these policies need to be conscripted with the aim of helping the alternative energy sector grow – and to overcome up-front capital costs on individual projects towards long-term gains.

That being said, policy and the legislative environment in South Africa, and many African countries, continues to mature. And, leaders in government and the mining sector, alike, continue to realise the potential and return on investment of renewable power in the medium- and long-term. To my mind, microgeneration and hybrid solutions have a key role to play powering African mines in the future.