Mine with renewables to protect your balance sheet

Mine with renewables to protect your balance sheet

The energy crisis brought about by the instability in Europe and the resultant spike in fossil fuel prices have strengthened the case for alternative energy solutions and a diversified energy base.

 By Leon Louw

A mining or quarrying operation, no matter how big or small, that relies solely on fossil fuels, will always be exposed to market volatility and geopolitical instability. In most African countries, not only the prices, but the reliability of electricity supply, remains unpredictable, which makes planning and forecasting extremely difficult.

Installing a stable renewable system eliminates this uncertainty and reduces exposure to geopolitical risk. Renewables allow mines to forecast energy cost and reduce exposure to fuel prices and unpredictable energy security. But there are more than a handful of other reasons why mining companies should invest in renewable energy as the world moves into a transitional period.

There is more than enough research to prove that solar power is one of the most cost-effective energy solutions around. In paper thin marginal operations like quarries or small-scale diamond mines, where owners are always looking to reduce running costs, solar power is almost a no-brainer. This is especially true in the Northern Cape, where the sun shines for an average of between 272 and 300 hours per month.

Energy makes up 15-40% of a mine’s operating costs. A renewable energy solution like solar panels or a solar/hybrid system can reduce the energy cost significantly, while protecting the mine’s balance sheet by shifting capital expenditure to operating expenditure.

Investing in renewables does not only reduce operational costs. In a world where Environmental and Social Governance (ESG) standards are increasingly important, especially for investors and potential funders, having a mine run on renewables or some form of hybrid system, will go a long way in ensuring that the operation is in good standing in terms of its green credentials.

Generators guzzle diesel and increase carbon emissions

Running a mine on diesel generators could incur significant costs even if the generators are only used as back-up. This not only refers to day-to-day input costs like fuel, but also to carbon emission tax, which came into effect in South Africa earlier this year. Combustion emissions, process emissions and fugitive emissions could now potentially incur a tax depending on the threshold that is applicable.

The South African Treasury has set a 10MW installed thermal input capacity threshold for combustion activities that result in emissions. This means that regardless of utilisation or fuel type, if an operation has the capacity to combust 10MW (th) then the emissions will be subject to carbon tax. Many process and fugitive emissions have no threshold, and a mine will be taxed on it regardless of how small the operation is.

According to Hans Olav Kvalvaag, SVP Release at Norwegian based Scatec, the most important benefits for mining companies to invest in renewable energy are savings, energy security, meeting decarbonisation targets and carbon credit generation.

Scatec’s Release system is mobile and ideal for smaller scale remote mining operations in Africa. Depending on the logistics involved, a 1MW to 40MW Release plant will take about six months to set up from the time the client has signed the contract to the day commercial operations get underway.

According to Kvalvaag, Release will supply renewable energy solutions to any mine or quarry no matter how small the operation. “One of our Release design blocks is 1 MWac, so our target projects start from 1MW upwards. While we can offer solutions that are smaller than 1MW, it is more cost-effective to stay above the minimum size. Each facility and offering is based on customised design according to the customers electricity load and needs, and Release will engage the customer to satisfy that its production and operational needs are met,” says Kvalvaag.

The Release model is flexible and will benefit mines in remote regions of Africa. Scatec has extensive experience of operating in Africa and the company is capable of delivering their energy solutions (which includes a variety of hybrid systems) across the continent.

“Release is a great short- and mid-term solution to answer immediate energy needs pending the deregulation of the South African energy sector and increased ease of wheeling,” says Kvalvaag. Apart from the substantial monetary benefits derived from investing in renewable energy, the ESG benefits for any operation that installs a renewable solution will give it a competitive advantage, especially if it is a greenfields project that needs funding.

 

 

Leon Louw is the founder and editor of WhyAfrica. He specialises in natural resources and African affairs.        

WhyAfrica provides you with business intelligence that matters. Africa is our business, and we want it to be yours too. To subscribe to WhyAfrica’s free newsletter or digital magazine, and for more news on Africa, visit the website at www.whyafrica.co.za or send a direct message. WhyAfrica launched its first ever digital magazine in November 2021. The company will undertake a road trip through South Africa, Namibia, Zambia, Zimbabwe and Botswana in June and July 2022. If you are interested in sponsorship or advertising opportunities, please contact me at leon@whyafrica.co.za. We have a wide range of different packages and combo deals to give your company the greatest exposure to a rapidly growing, African readership.       

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