Renewable energy in mining: On the cusp of greater integration?

Mining companies have been buzzing about the potential of renewable energy for some time, while more than a few have begun to take a serious interest in incorporating the energies into their mine plans. While mining companies’ interest in utilizing renewable technologies historically came from an environmental or public relations direction, market conditions have impelled many to view the incorporation of this energy from a more economic angle.

“Five years ago, I recall when people talked about renewable applications in mining, it was almost more of a feel-good PR, environmental imperative perspective, not from an economic perspective,” Sussex Strategy Group principal Chris Benedetti told SNL Metals & Mining. “That’s changed,” he added. “As the price of renewable technologies has diminished significantly, then it starts to become not only an environmental attribute but is also just a smart economic perspective.”

Solar prices, for instance, were C$26,000 per kW of solar photovoltaic energy in 1990, but have dropped to C$2,500 per kW in 2013, Mining Energy Advisors co-founder Osman Sediqi said.
“That’s helping to reduce the cost of energy from renewables, most of the renewable energy can compete with fossil fuel, with wind energy costing between C$50 and C$160 per megawatt hour, while biomass can be from C$30 to C$240 per megawatt hour.”

Coupled with falling and depressed commodity prices as well as the soaring cost of diesel for mining projects located far from the nearest electricity grid, mining companies are more likely to look toward renewable energy to offset fuel expenditures. Just how much the incorporation of renewable technologies will impact a project’s capital expenditures and costs remains hard to say, Benedetti said.

“The capital costs to install renewable energy technology — such as wind or solar projects — are diminishing, and these are generally smaller when it comes to capital requirements. It’s not something that is cost prohibitive for a lot of entities to consider,” he noted. However, using renewable energies may add to capital costs if it entails creating a larger footprint, where the generation, transmission, and distribution centers for this energy are widespread.

“That can be cost prohibitive and create difficulties with permitting,” Benedetti said. “There are issues with ecosystem and wildlife protection in Africa, for instance, where there are many areas reserved for caribou crossings. The bigger the footprint [of the energy project], the more difficult it can become” to implement it. Renewable energies more likely to be implemented in remote regions Check out also this post about Hwange Colliery Company Ltd.

Renewable technologies are most attractive to mining projects in remote regions with little or no access to established electricity grids. “As long as [mining projects] have relatively cheap, plentiful power, they don’t need” to adopt renewable energy initiatives, Chad Eggerman, a partner at Miller Thomson LLP’s Energy and Natural Resources practice group. In other words, if grid electricity is available, it diminishes the likelihood for mining companies to look into renewables.

“The U.S. and Canada have one of the lowest electricity prices in the world,” Mining Energy Advisors’ Sediqi noted. “It just is very hard for grid-connecting mining companies to think about alternative solutions, as they have access to stable grid power and don’t have to fear blackouts.” Mining companies are looking to a pilot project implemented by Rio Tinto at its Diavik diamond mine in Canada’s Northwest Territories, where the company has installed four wind turbines that generate between 8% and 9% of the project’s power needs.

“All of our energy needs are diesel-driven because we’re located on a remote island 300 kilometers northeast of the closest town,” Diavik’s business improvement manager, said Liesl Van Wyk.  The project needed to truck in between 60 million liters and 70 million liters of diesel fuel per year to power its operations. “Fuel costs are extremely high, so we were looking at ways to, first, get our energy costs lower, and [second], not put all our eggs in one basket and diversify our energy mix,” she said.

The project considered several options for renewable energies, including solar and a dedicated transmission line, but opted for wind power as it provided the best financial returns. “A lot of these technologies have been de-risked,” she said. “Solar and wind projects have been running for a long time, so the initial risk doesn’t exist anymore.” Though mining projects in remote areas will likely remain the largest target for renewable energy companies, decreasing grid capacity in grid-connected regions may also create opportunities for greater consumption of renewables.

Mining projects in Saskatchewan may soon face constraints on their consumption of grid power, Eggerman said. Cameco Corp. and Western Potash Corp. have uranium and potash projects in the province. “Demand [on the Saskatchewan grid] is increasing rapidly, and there are competing demands for power,” Eggerman noted. “SaskPower doesn’t have enough power” to provide electricity for large mining projects, while wind farms and biomass projects have been proposed to generate additional power for mining operations, he said.