On the way to net-zero

MELODIE MICHEL REPORTER Energy and Mines

Achieving net-zero mining operations will take time, but that doesn’t mean miners are waiting to act. With many renewable power decisions to be made in the coming years, Martin Schlecht, Chief Operating Officer at Suntrace, tells Energy and Mines about the challenges ahead for the industry.

Martin Schlecht: I think it’s becoming more and more obvious that companies need to address decarbonisation in their overall strategy, and come up with plans to demonstrate how they’re going to handle this to shareholders and the markets. So they are developing their strategies covering scope 1, 2, and 3 emissions, as well as ESG goals. Some companies start bottom up, implementing solutions at specific sites and then integrating them into an overall strategy. And others are looking at it from a helicopter vision, trying to figure out what the best way to start is. No one is better than the other: it’s very specific to each company, how it is handling its operations and assets, and how it wants to achieve decarbonisation.

MS: Reaching carbon-free or net-zero operations is a longterm process. At the moment, 100% renewable power supply, including a huge amount of batteries, is not an economic solution compared to thermal. But it might be in a couple of years. So you have to start looking at it in stages. With today’s technologies and costs, you can design up to a 50% reduction in emissions, depending on your available wind and solar resources. And that can substantially save energy costs compared to fossil fuels, in particular for off-grid mines. But the way from 50% to 100% is more complicated, and it will depend on the individual mine, regulations, resources available and existing energy costs.

MS: I think that will take 5 to 10 years, maybe 15. Technological solutions are developing fast, in terms of efficiency and reliability. At the same time, costs are decreasing, particularly for energy storage. What isn’t yet factored in the discussion is a possible CO2 pricing on a global scale. This would improve the business case for renewable technologies, because then you would not only be offsetting fuel costs, but also CO2 costs.

MS: In the case of B2Gold’s Fekola Mine, the hybrid is achieving production targets, and using batteries in the network has actually increased power stability. So there’s a shift in the perception that solar will affect power stability and security of supply: if you design the system properly, it actually helps. HFO prices have gone up, partly due to shipping cost, and the mine’s fuel and cash savings are much higher than we anticipated in the original business case. The few years payback period from the initial business case has become even shorter now.

MS: I think that the quick wins are off-grid, and many of them are in Africa, but there are also many in Asia, South America and some even in Australia. It’s always worth checking what options are available to you. Even if your life of mine is limited, there are leasing systems available in the market. You don’t have to buy it or enter into long-term agreements. “I think that the quick wins are off-grid, and many of them are in Africa, but there are also many in Asia, South America and some even in Australia. It’s always worth checking what options are available to you.”

MS: I think the challenge is that most organizations don’t yet have real experience in renewables. It’s not rocket science, but you may have to adapt your thinking around energy for your operations. The market is really diverse and there is no clear-cut option that everyone should be implementing, so it’s very difficult to make a judgement if you’re not an expert in the industry. To understand what is best for you, it can be helpful to get help from neutral advisors that don’t have ties to specific suppliers or developers. Advisors can also help mines choose between signing a PPA or owning the assets. Once you know what you want, it’s easy to ask the right people and avoid confusion.

MS: Because of decarbonisation, mines now need to carefully consider what kind of energy they use, not only from the cost side, but also from the emission side. And then they need to create reporting about their carbon emissions and their ESG achievements. So I think there’s a whole new administration element coming up for companies. And of course, they also need to execute, because writing is not enough: you have to deliver.

Rules are evolving, and they vary across different geographies. So you have to be location-specific. A project in Latin America will be totally different from one in Canada and another one in Africa. And yet, as a company that is working in different geographies, you still have to consolidate your carbon reduction actions into a strategy and eventually into a reporting scheme that makes your stakeholders happy. To comply with all requirements, achieve cost-efficient results and on the same token keep doors open for future decarbonisation steps, more and more miners rely on independent implementation experts.

MS: Technically, 100% is feasible, but today this can hardly be achieved without a significant energy cost increase. To save or hedge energy cost, most of our clients opt forsolar PV as it is quick and easy to deploy. In most cases, solar PV can thus supply 20% to 30% of energy, up to 50% when adding a larger battery.

Every location will have its own renewable profile, but if you have good wind, you may achieve 60-70% renewables without the need for huge batteries. Without wind, using only solar PV & battery, it may not be cost efficient to go beyond 40-50% renewable share at today’s prices for storage. With future reduction in battery prices, the share that can be integrated cost efficiently using PV & battery will grow, thus expanding the system will be an increasingly attractive option.

Our recommendation is a stepwise approach, taking advantage as technologies and cost improve: e.g., starting with a 20-25% of renewables and start saving cost as soon as possible while keeping technology options open to do the next step to e.g. 30-50% thereafter.

Over the last ten years, equipment prices have continuously fallen steeper than anticipated in projections. Looking at the developments and dynamics in the renewable industry, we believe this is likely to continue and will overcome the current surge in prices for modules, steel and logistics.