Why mines in Africa should invest in renewable energy

By Leon Louw, founder and editor at WhyAfrica

19 July 2021 – Mining companies have been grappling with the question of fossil fuels versus renewables for more than a decade. But it does seem that the pendulum has swung in favour of renewables.

There are several reasons mining companies should incorporate renewable energy into their future operational plans. For one, it has become extremely cost-effective to purchase and install some form of renewable energy source to drive operations.

According to Hans Olav Kvalvaag, SVP Release at energy specialist Scatec, the cost savings can be as high as 40%. Scatec, a Norwegian headquartered company with a global footprint, has developed, built, financed, and operated more than 1GW of solar PV and hydro projects in African countries such as South Africa, Mozambique, Rwanda and South Sudan.

Kvalvaag says that regardless of whether the renewable supply consists of only solar panels or wind turbines, or solar/wind backed up with battery storage; or whether it is a hybrid system including diesel or gas-driven generators, solar/wind generation and/or battery storage, the cost of operating a mine will be significantly reduced compared to an operation driven solely by fossil fuels.

The challenge of delivering fuel

There are a handful of reasons it has become more cost-effective to run a mine on renewable energy. Relying on fossil fuels as the main source of energy, means that diesel, petrol, or gas needs to be transported to a mining operation.

In many parts of Africa, it remains a key challenge to deliver fuel safely to site (considering the often-dilapidated road infrastructure).

Not only that, but the security risks are extremely high, especially in fragile regions where fuel is a scarce commodity – such as the eastern parts of the DRC, certain areas in Mali, or in CAR or Mauritania.

Moreover, operations often need to contain theft and syphoning of fuel after it has arrived on site. Additional security measures to prevent this from happening have to be implemented, which, again, impacts profit margins.

In most fragile and unstable countries, it is often necessary that fuel tankers are accompanied by armed security personnel and armoured vehicles, which has additional cost implications.

If the tankers do make it through safely and without damage, the fuel is often dirty or diluted, which obviously causes a knock-on effect in terms of shortening the lifespan of working plant and equipment on site.

Any operational manager worth his or her salt is well-aware of the impact on the balance sheet when one is forced to shorten the maintenance intervals because of inferior quality fuel. The repercussions of dirty fuel are immeasurable, and a discussion for another day.

Not only does operating a renewable system stem the bleeding balance sheet in the ops column, but it strengthens the triple bottom line, substantially reducing a mine’s overall carbon emissions.

Striving for carbon neutrality

In a rapidly changing business environment, where Environmental and Social Governance (ESG) should be top of mind, and where in many countries the introduction of carbon tax is imminent, running an operation powered by carbon neutral generation will not only bode well in terms of abiding to a country’s regulations and reducing carbon tax, but might make it easier to be awarded initial environmental licenses.

Last week, Barbara Creecy, the South African Minister of Forestry, Fisheries, and the Environment, announced her intention to publish a national guideline for consideration of climate change implications in applications for environmental authorisations (EA), atmospheric emission licences (AEL) and waste management licences (WML) (CC Guideline). This might serve as an example, and it is likely that other African countries will follow suit.

According to Paula-Ann Novotny and Lerato Molefi from law firm Webber Wentzel, the CC Guideline will provide guidance on the implementation of the Environmental Impact Assessment Regulations, 2014 and their minimum assessment and reporting criteria, where climate change considerations are relevant.

“The international, cross-jurisdictional recognition of climate change impacts has highlighted climate change regulation from an Environmental, Social, and Governance (ESG) perspective.

“The recent Hague District Court decision, published in May 2021 and hailed as ‘ground-breaking’, ordered Royal Dutch Shell to reduce the CO₂ emissions of its group’s activities by 45% by 2030, relative to 2019 levels.

“This is the first time a court has imposed a legal obligation on a company to reduce its CO₂ emissions. It is expected to be the first in a wave of strategic climate change litigation seeking to influence corporate behaviour,” says Molefi.

This, of course, is good news for suppliers of renewable energy products in Africa.

The initial capital costs to install solar or wind generation have over the years, gradually been reduced, and pay-back time today can be anything from one to five years.

That is a big chunk less than 10 years ago, when it still made sense to run an entire mine on fossil fuels, because of the high initial capital cost of introducing a renewable system.

The idea of using fossil fuels as the only energy source to drive mining operations is frowned upon today. More and more multinational mining companies, as well as junior and small-scale miners, and even quarries, rework the sums and opt for 100% renewables, or some form of hybrid system, where renewables play a dominant role.

Mining houses like Barrick Gold, Goldfields, Anglo American, Sibanye Stillwater, B2Gold, Resolute Mining, to name a few, have incorporated some form of renewable system in their energy mix.

Synergies between mining and renewables 

There are several other synergies between mining and renewable energy, especially in Africa, where there are abundant solar and wind reserves.

Mining companies operating in remote regions of Africa, not only have easy access to renewable energy sources, but also operate where there is an abundance of land available for the construction of wind and solar plant.

Not only that, but mining operations also usually require a high upfront investment and most remain active for more than a few decades, as do wind and solar plants.

When it was still cost-intensive to install renewable energy a few years ago, this fact was often ignored. However, as it became cheaper to run off a renewable grid, these two factors are starting to align.

The mining sector’s appetite for renewables is closely correlated to cost. As the price of solar PVs and wind turbines continues plummeting, more mining companies have switched to renewable or hybrid systems.

According to RMI, less than 11MW of mining-based wind and solar capacity was installed before 2010. “That level has increased far more than a hundredfold in the past 11 years.”

Cutting exorbitant energy costs and eliminating the price volatility of fossil fuels make renewables, and especially solar PV’s, extremely enticing.

According to Kvalvaag, reducing costs and CO₂ emissions remain the main drivers for mining companies to install renewable solutions.

“We have also seen a great push from an ESG compliance perspective from mine executives and investors, which helps to accelerate the energy transition further.

“However, with solar and storage, the main advantage is to create redundancy in the energy supply, and the ability to obtain better reliability of power. Fewer outages typically do not only impact the cost of power, but more importantly reduces the cost and increases the predictability of their core mining operations,” says Kvalvaag.

Scatec’s modular Release system is the ideal flexible solution for remote mines in Africa. Release is designed specifically for the hybridisation of mining operations. Release works in tandem with any substantial life-of-mine changes, and because of the ability to quickly install and decommission the moveable equipment, it is able to adapt rapidly to extreme changes in load that the mine might experience as a result of expansions or closures.

The solar part of the system only produces power during the day. Currently, the combination of PV and storage needs to off-set 25-40% of the mine load to be cost efficient.

“With lower battery storage costs going forward, we foresee that the renewable penetration will increase as we can install higher capacities to replace more of the thermal or alternative existing power.

“The assessment of the optimal hybrid solution encompassing power stability and lowest LCOE is very much customer-specific, also depending on the site-specific access to wind or bio-mass or other renewable energy sources. We work with our clients through the process. We were recently awarded projects with customers targeting 100% renewable energy, says Kvalvaag.

Release recently installed a 20GWh solar PV system at the Media Luna Gold mine in Mexico, which the mine says has resulted in great cost savings. Media Luna’s main source of electricity is from the Mexican national grid. The mine decided to invest in solar primarily because it wanted to reduce the cost of electricity and decarbonise its operations.

Solar PV is arguably the cheapest renewable energy generation source. Therefore, it is key to maximise the utilisation of the system’s active energy (kilowatt hours) to take advantage of the savings.

However, the reduction in battery energy storage costs allows for an increasing number of applications, which includes, amongst others, spinning reserve replacement, peak shaving, load smoothing, frequency control, constant dispatch, or energy arbitrage.

While the cost of storage has dropped in recent years, it remains a relatively expensive system component. “To assess the economic and technical benefits associated with it, is important to identify the specific applications for which storage is considered. For Release, storage is completely integrated in our solution alongside solar PV and within the terms of the leasing contract. Storage for Release applications typically enables additional savings,” concludes Kvalvaag.

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

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