Renewables and mining: overcoming challenges

Mining plays a vital role in Africa's economy, contributing significantly to gross domestic product (GDP) and providing employment opportunities for millions. The sector is at a crossroads, however, caught between its economic significance and the pressing need for environmental responsibility. As the clamour for sustainability grows louder, mining companies face significant pressure to adopt renewable energy sources and reduce their carbon footprint. At the same time, rising electricity costs, a lack of grid availability and unreliable electricity supply (such as in South Africa, currently) are driving mines to explore alternative and least-cost energy sources, such as renewables.

Several key challenges need to be addressed to expedite the mining industry's transition to renewable energy, however.

The first is the prevailing perception that renewable energy systems lack reliability. It is understandable why this perception exists – after all, who hasn't been caught off guard by a sudden downpour, despite the weather forecast promising a sunny day? However, the reality is quite different. Technological advancements have made renewable energy systems highly reliable and this has been proven in practice.

Panellists at the AEF unanimously agreed that reliability was no longer a concern. Photovoltaic (PV) projects have proven their success, both on-grid and off-grid, leveraging stable grid infrastructure and cost-effective battery energy storage systems respectively. Yet, the challenge for manufacturers lies in dispelling the lingering perception of unreliability among stakeholders downstream. There is a need for greater product awareness and knowledge dissemination to bridge this gap. At the same time, mines need to do their homework and ensure they engage a competent and experienced engineering, procurement and construction provider to construct their plants.

Traditionally, mines have been hesitant to adopt new technologies, preferring to follow the lead of others. Mines like to be “first to be third” and generally don’t take technology risk. In some instances, this “third mover” advantage saves mines the time and cost of conducting their own feasibility studies as they can replicate other successful projects. However, the tides are turning, and the industry is gradually becoming more receptive and mines are now open to the idea of incorporating captive solar PV solutions into their power supply.

Unfortunately, a lack of updated information still poses challenges. Many industry professionals, including consultants, have limited updated knowledge of renewable energy products and the performance of early adopters. Further complicating the issue is the availability of accurate and updated information which sees mines and consultants making decisions based on incorrect or old information.

Ultimately, things are moving in the right direction. Africa has now seen a sizable group of “first movers” mines such as Centamin, Tronox, Gold Fields, Harmony Gold, Pan African Resources, Sibanye-Stillwater and Anglo American. As more successful renewable energy projects emerge, the economic value proposition has become stronger, and is encouraging others to replicate these initiatives. Additionally, mounting pressure for decarbonisation, including impending carbon emissions-based import taxation in Europe, is compelling mining companies to embrace renewable energy solutions.

Financial considerations have long posed a hurdle for renewable energy projects in mining. The high initial costs, with a 10 MW solar plant costing between $8-million and $12-million, potentially compete with capital allocation to accessing the orebody. Furthermore, the limited lifespan of mining operations does not align well with long term project financing or the expected useful life of renewable assets.

However these challenges are mitigated by a number of developments.  The commodity boom and increased costs of other electricity sources have seen a number of mining companies opt to self-fund renewable energy projects due to free cash and increased savings. Further, a number of leading independent power producers (IPPs) have stepped into the space offering funded solutions and removing the capital barrier and power purchase agreements (PPAs) with tenors of 15 to 20 years or shorter were becoming more prevalent.

To tackle the challenge of mismatched PPAs and mine life, IPPs are looking increasingly to aggregate demand from multiple energy consumers and/or wheeling excess electricity. Additionally, the introduction of redeployable systems will revolutionise the landscape for many mines, as these systems can be relocated and repurposed once the mine reaches the end of its lifespan.

Project timelines and negotiation challenges often impede the progress of renewable energy projects in the mining sector. In South Africa, mining industry project timelines are subject to delays caused by the national power utility Eskom's Cost Estimate Letter and Budget Quotation processes. Delays in these processes significantly affect the financial close and the project's commercial operation date. The new Grid Queuing Rules just announced by Eskom will mitigate this significantly.

Outside of South Africa, slow negotiations, concerns about bankability, and tenor-related issues often impede the progress of renewable energy projects in the mining sector and in some instances these negotiations simply fizzle out.

Despite the challenges, there is immense potential for renewable energy in mining, mostly by integration with current solutions (grid or thermal). By addressing perceptions of reliability, improving access to up-to-date information, overcoming financial considerations, and streamlining project timelines, mining companies can seize the economic and environmental benefits offered by renewable energy. Each mine's unique requirements should be considered to ensure optimal value and sustainability in the mining industry's energy transition. With concerted efforts from industry stakeholders, the momentum behind renewable energy in mining will continue to grow.

The time has come for mining companies to recognise the undeniable benefits offered by renewable energy. By embracing these technologies, the mining industry can cut costs, access reliable energy, protect the environment, improve its public image, and secure its long-term viability. The opportunity is ripe, and it is up to the mining sector to seize it.

*As the AEF was held under Chatham House Rules, experts aren’t quoted.
* This article was firt published on miningweekly.com