Energy and Mines Magazine - Issue 42 by energyandmines

Issue

Mitigating risk and maximizing opportunities of decarbonisation in mining Mining’s mission to net-zero A sustainable future for mining The challenge of 100% RE penetration

42 June

2022

Mitigating risk and maximizing opportunities for decarbonisation in mining

nternational law firm HFW advised on the landmark Sandfire Resources Degrussa mine solar project and is very active in the renewables, ESG and decarbonisation efforts of mines in Australia. Partner Jo Garland answers our questions on ESG, decarbonisation pathways, and the legal challenges and risks for mines and contractors in the industry’s energy shift. Energy and Mines: How is the increased focus on ESG influencing the energy, climate and decarbonisation strategies of Australia mines?

“I cannot emphasize enough the true opportunities to engage with indigenous communities in partnering to achieve decarbonisation goals”

JO GARLAND PARTNER HFW

Jo Garland: The increased focus on ESG, and in particular the links between ESG and longer-term performance of miners, is influencing the energy, climate and decarbonisation strategy of miners. Offtakers, shareholders, financiers, insurers and other stakeholders all expect to see a robust ESG strategy. Clearly, energy, climate and decarbonisation play a big role in any ESG strategy. Powering a mine is usually one of the largest sources of emissions – and therefore also one of the greatest opportunities to use renewable energy, decarbonise and reduce emissions. Keystones in any robust mine ESG strategy include a transition to renewable energy, replacement of diesel in heavy vehicles and greater supply chain oversight. EandM: What are some of the key decarbonisation ENERGY AND MINES MAGAZINE

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trends/pathways that WA mines are pursuing?

“There is a lot of corporate and stakeholder scrutiny around net-zero statements and an increased alert for green-washing”

JO GARLAND PARTNER HFW

JG: There has been an exponential increase in the number of greenfield mines pursuing renewable energy, and every year the renewable energy fraction ambition increases. The sophistication of the renewable energy systems is similarly increasing, involving multiple renewable resources – even with some overscoping of renewable energy to allow sufficient excess for green hydrogen production for heavy vehicles. There are also some really interesting things starting to happen in the tailings/stock-pile space, in the right conditions there is an ability to act as an effective carbon sink and creating the opportunity to generate carbon credits. At HFW, we advise on all legal aspects of renewable power arrangements, energy transition projects and decarbonisation strategies and it really is exciting to see the constant ambition (and success) in this space. EandM: What are some of the legal challenges with net-zero ENERGY AND MINES MAGAZINE

or zero-emissions mining that could come up for miners and suppliers? JG: Legal challenges with net-zero start with defining what netzero really looks like for a particular mine, how the miner will get there and how this can be monitored (and proven). There is a lot of corporate and stakeholder scrutiny around net-zero statements and an increased alert for green-washing. As a rule of thumb, net-zero statements should define the pathway and technologies relied upon, make any assumptions (including technology-based assumptions) clear and allow enough flexibility for the miner to evolve the strategy as technology and markets evolve. Statements should be truthful, clear and not misleading. Supply chain emissions will need to be traced and monitored and contracts with suppliers will need to ensure this can happen. Similarly, hybrid renewable power contracts will need to consider setting renewable energy fractions, renewable energy performance guarantees and allocate green rights to the miner. EandM: What are the main risks for project proponents and mining companies of larger-scale, more complex renewable energy hybrid solutions? JG: Eight years ago, hybrid power in mines in WA (or anywhere in the world) was at an embryonic stage of development. This all began with the efforts of Sandire and juwi on the Degrussa solar power station (on which HFW also advised). At that particular point in time, ARENA funding was needed to make solar hybrid projects be commercially viable and mine boards were wary of unknown risks to power supply. Technology was since proven; the market took comfort from success stories to the point where solar in mines became close to business as usual. We now see that similar cycle repeating, but with larger more ENERGY AND MINES MAGAZINE

“While there is a strong temptation for all risk to pushed onto contractors I find a true partnership model often works best with very new and unproven technology, with all parties having a stake in the game and rewards associated with success.”

JO GARLAND PARTNER HFW

complex projects using multiple resources. But even those projects seem to have reached a tipping point in WA, with success from those such as Gold Fields paving the way. The mains risks remain the same, being (i) integration risk (ii) technology risk and (iii) performance risk. These risks can be effectively alocated in any power purchase arrangement – allocating risks proportionately depending on the party in the best position to manage those risks. While there is a strong temptation for all risk to pushed onto contractors – I find a true partnership model often works best with very new and unproven technology, with all parties having a stake in the game and rewards associated with success. EandM: How can mining companies and suppliers manage risk when trying to test or integrate uncommercialized, cutting edge decarbonisation technologies? JG: As mentioned above, partnerships or strategic alliances can work well when testing or integrating uncommercialized, cutting edge decarbonisation technologies. Both parties can share in the learnings from the trial (and both contribute to the success of the trial).True untested projects can prove a challenge to finance so often equity backing from the mine involved may be required to get the project off the ground. Risk is naturally managed through a smaller scale until proven (or at least demonstrated not to fail). OEM warranties can be relied upon to a degree – although warranties need to be carefully read and understood and not left to lapse. Insurance can play a large role and for what is left, contractual sharing of risks through liability caps and indemnities. EandM: What opportunities are developing for aligning

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indigenous engagement with climate goals for mining companies? JG: I cannot emphasize enough the true opportunities to engage with indigenous communities in partnering to achieve decarbonisation goals. Indigenous communities are often natural partners in decarbonisation, whether it is through land and contract opportunities for renewable projects, mutually beneficial partnerships that create development and job opportunities or other schemes. Aboriginal corporations are savy and well placed to work with miners in decarbonisation, and should not be overlooked. The combination of decarbonsation and community engagement is an ESG win for all involved. ENERGY AND MINES MAGAZINE

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Mining’s Mission to Net-Zero I

n advance of the Energy and Mines Australia Summit, September 6-7 at The Westin Perth, we interviewed Rod Saffy, Global Head of Mining, Aggreko, on supporting the mining sector’s path to net zero, the latest developments in renewable hybrids, and the potential for zero and low carbon fuels for deeper GHG reductions. Energy and Mines: How is the focus on decarbonisation and ESG changing energy procurement for mining, globally?

Rod Saffy: Firstly, there is a fair amount of hesitancy as general procurement habits and processes are under pressure to make the right decision about equipment and especially expensive capital equipment. Making the wrong decision on a piece of equipment that will take 10 years to pay off may be a bad decision if for example the technology changes.

“Making the wrong decision on a piece of equipment that will take 10 years to pay off may be a bad decision if for example the technology changes.”

ROD SAFFY GLOBAL HEAD OF MINING

Also, there are now pressures to consider where suppliers are sourcing their materials from and responsible sourcing is playing a bigger role across the sector. EandM: What has changed in the last six months in terms of the level of interest and scale of hybrid solutions for Australian miners, in particular? RS: First of all, there are not that many mining companies that have fully hybridised off-grid microgrids. However, that will change significantly over the next 2 years as we see rapid increase of activities in the market.

AGGREKO

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Gold Fields Granny Smith Solar Array

Hybrid solutions combine the advantages of renewable energy (such as wind, hydro power, solar) and battery storage with the reliability of thermal generators. They not only reduce emissions and fuel costs, but also provides dependable energy miners production hinges on, making the an attractive solution for mining companies. ENERGY AND MINES MAGAZINE

“Longer term, hydrogen will have an enormous impact on power generation as the logistical challenges are worked out and more can be made.”

ROD SAFFY GLOBAL HEAD OF MINING AGGREKO

EandM: Which key technologies are best supporting the transition to less fossil fuels for off-grid mines? RS: Solar and battery are taking centre stage at the moment. Wind technology is certainly increasing in consideration as miners look for higher renewable penetration. Longer term, hydrogen will have an enormous impact on power generation as the logistical challenges are worked out and more can be made. To seriously reshape the future of energy, the industry will need to step up its production, storage and 12

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Aggreko Storage and Wind Microgrid

distribution game. At the same time, it’s up to tech innovators – including temporary power providers like us at Aggreko – to invest and innovate in hydrogen power conversion technology, so that these producers have a market to sell to. End consumers also need to play their part, by increasing demand for green hydrogen and renewable energy in the first place. Hydrogen is a future energy carrier, but with the right innovation and investment, the potential can start to be realised.

“End consumers also need to play their part, by increasing demand for green hydrogen and renewable energy in the first place.”

ROD SAFFY GLOBAL HEAD OF MINING AGGREKO

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Bisha Mine (Africa)

EandM: What are some of the key takeaways from microgrid projects for global mining companies?

“The challenge with fuels across the mining sector is always around the proximity to the source and the cost of the fuel.”

ROD SAFFY GLOBAL HEAD OF MINING AGGREKO

RS: While interest is very high, the uncertainty in the market and shorter life of mine commitments from investors can make the economic case more challenging. To mitigate risks, a flexible and scalable approach is ideal whereby the miner partners with an energy provider to ensure not only security of supply but also alleviate the threat of future technology. EandM: How are low and zero-carbon fuels developing to drive additional GHG emissions savings for mines? RS: The challenge with fuels across the mining sector is always around the proximity to the source and the cost of the fuel. There are alternatives such as biofuels and hydrogen, however the cost to source and store can be prohibitive at this stage. ENERGY AND MINES MAGAZINE

EandM: Which “breakthrough technologies” do you think will likely play a role in the next stage of carbon savings for mining customers? RS: The race is on to commercialise and make available hydrogen. However, batteries will play the biggest role in the energy transition in my opinion. Currently, battery life is not long enough, however that is the challenge that lies ahead of us.

Gold Fields Granny Smith Mine

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A sustainable future for mining

s mining companies pursue net zero carbon emissions, renewable and hybrid technology is central to achieving this goal. Geoff Hobley, General Manager Remote Energy at EDL, talks about the future of sustainable energy at mine sites. Energy and Mines: We’ve seen an increased uptake in renewables and storage for mines - what are the main trends driving project uptake? Geoff Hobley: There is global momentum to decarbonise all industries, including the mining sector. Generally, companies are experiencing pressure to reduce carbon emissions as quickly as possible. Many also want to distinguish themselves as decarbonisation leaders to gain a competitive advantage. The mining industry were pioneers in the decarbonisation space and moved early to reduce their carbon footprint. Many mining companies have committed to net zero carbon emissions by 2050 or earlier, with aggressive cuts by 2030. This landscape is driving them to find alternative and sustainable energy sources that meet their requirements now, and into the future.

“Don’t try hybrids at home!”

GEOFF HOBLEY GENERAL MANAGER REMOTE ENERGY EDL

EandM: What lessons can be drawn from operational projects and hybrids under development? GH: The biggest lesson is that while hybrid power solutions may appear simple, our experience shows they are technically complex and challenging. For example, each renewable technology included in a hybrid solution requires careful interfacing with the existing or backup thermal power station to ensure ENERGY AND MINES MAGAZINE

Agnew Wind Farm

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“The long-term decrease in battery costs has facilitated a higher renewable energy penetration, reducing the need for fossil fuel—including diesel—as an energy source.”

optimal power performance is achieved. We have found that hybrids deliver outstanding performance—matching or often exceeding main grid reliability. For example, the Agnew Hybrid Renewable Microgrid provides the Gold Fields mine with more than 50% renewable energy without compromising power quality or reliability. The Agnew microgrid is the largest of its kind in Australia—and the first to utilise wind generation on a large scale at an Australian mine site. At Jabiru in the Northern Territory, the hybrid power station provides the township with at least 50% renewable energy—helping it transition from its mining legacy to a tourism and services hub. Such systems require the right expertise from partners with proven and reliable solutions. Don’t try hybrids at home!

GEOFF HOBLEY

EandM: How are the economics of energy storage changing and increasing diesel displacement?

GENERAL MANAGER REMOTE ENERGY EDL

GH: Energy storage with batteries is a major enabler for hybrid energy power stations and renewable energy production. Lower battery costs and increased availability have revolutionised multiple sectors, including the power generation industry. The long-term decrease in battery costs has facilitated a higher renewable energy penetration, reducing the need for fossil fuel— including diesel—as an energy source. EandM: How are miners navigating the challenge of financing higher penetration renewable energy for sites with shorter mine lives? GH: Hybrid energy systems involve a wide range of solutions. They can be a battery supporting thermal power station efficiency, or a system optimising solar and/or wind electricity generation. When we engage with clients, we can find a solution that provides value for any project, regardless of the mine size or life. Mining companies look beyond the initial mine life when

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Geoff Hobley (left) with EDL CEO James Harman

considering hybrid solutions. Mine sites tend to expand due to new resource discoveries, so mine planners account for this scenario. A long-term approach can deliver improved economics and benefits for our customers. EandM: Which other low-carbon solutions are mining companies implementing and planning for? GH: There is much discussion on electrification, especially for underground mining operations. Electrifying all systems reduces the need for diesel-based power sources and associated ventilation requirements. If energy for the entire mobile fleet is delivered from renewable sources, including batteryelectric vehicles or overhead lines (like that used by trams or trolleybuses), carbon footprints will reduce significantly. Additionally, having electrified ancillary equipment such as mobile lighting will also help. Overall, making sure that all energyconsuming assets operate at maximum efficiency is an ongoing focus for mining companies.

“Making sure that all energy-consuming assets operate at maximum efficiency is an ongoing focus for mining companies”

GEOFF HOBLEY GENERAL MANAGER REMOTE ENERGY EDL

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EandM: Which disruptive technologies will be critical to the next phase of mine decarbonisation? GH: Once the main source of a mine’s power is met by renewables and hybrids, the next decarbonisation phase is the electrification of the entire mobile fleet and all other equipment, as mentioned previously. Electrification is already happening for private vehicles and public transport, with uptake rapidly increasing around the world. This technology is available here and now. The challenge for miners is to source a range of reliable electric plant that can replace diesel-powered vehicles and equipment. This will occur in the not-too-distant future.

Drone shot of Agnew wind turbines

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EDL’s Agnew renewable hybrid grid

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The challenges of 100% RE penetration

ntura’s Hybrid Energy Solutions Specialist Ray Massie goes deep in to the details on the limits of renewable energy penetration for mines in this Energy and Mines Q&A. Energy and Mines: What has changed in the last six months in terms of the scale and adoption of renewable energy hybrids for off-grid mines?

“The integration of multiple interconnected mine site power systems are in the conceptual phase, with first phases of execution likely to begin in the near term.”

RAY MASSIE HYBRID ENERGY SOLUTIONS SPECIALIST ENTURA

Ray Massie: We’re seeing the number and size of hybrid power systems being considered, growing significantly, with systems in the order of 50 MW and 70 to 80% renewable energy for a single mine. The adoption is becoming more confident, with the challenges and risk becoming more widely understood. Though, there is still significant scope to make technical advances, the conversation has turned to more about optimisation of economic sizing rather than concerns over making it work. The integration of multiple interconnected mine site power systems are in the conceptual phase, with first phases of execution likely to begin in the near term. EandM: What are the main drivers for this shift to bigger and more complex hybrids for mines? RM: I see three main drivers: possibly increased confidence based on several successfully implemented projects; fuel costs presently, as well and the risk of future increases; and the social license to operate: for those lagging in adoption of renewable generation there is a risk to reputation and public perception. Further to this there is increased interest in carbon emissions in the supply chain for all goods, so low-carbon minerals and metals will become ENERGY AND MINES MAGAZINE

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increasingly important. EandM: What are some of the key technological considerations when moving to a higher percentage of renewable energy for a mining power system? RM: To exceed 70% RE, it is necessary to have a zero-thermal mode of operation. During operation in this mode, the power system’s stability is in the hands of inverters or artificial inertia. This comes with a set of technical challenges to meet system 24

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requirement and responsiveness, considering both the supply and load sides. Additionally, wind, as well as solar with wellintegrated storage and control is required to meet high RE targets. Otherwise night time operation will always require thermal generation since there isn’t as yet a truly economical large ‘deep’ storage solution for solar only systems. EandM: For mining companies, what are some of the common questions they encounter in trying to determine the right combination of renewable energy and storage technologies to

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meet carbon and energy savings goals? RM: Here are some of the common questions that mines are encountering 1. How large does the battery storage (BESS) need to be? In terms of MW, MVA, MW hr 2. How can we know if the short circuit performance of a BESS is enough? 3. Is it okay if my wind farm is 20 km away? Do I need to step up the voltage to connect this?

“To exceed 70% RE, it is necessary to have a zero-thermal mode of operation. During operation in this mode, the power system’s stability is in the hands of inverters or artificial inertia.”

RAY MASSIE HYBRID ENERGY SOLUTIONS SPECIALIST ENTURA

4. What is the worst case for sudden reduction in renewable energy output? That is, if the wind suddenly reduces, or a cloud covers the sun, how much will the generation output be reduced? 5. I’ve got a huge mill that runs off a variable speed drive. The manufacturer of this machine needs a short circuit level ten times the power rating of the mill. I’m not going to get that with renewables and BESS, what can be done? EandM: What’s next: When do you anticipate 100% renewable energy mining will be business as usual? RM: It’s reasonable to expect 60-80% RE as business-as-usual within the next five years though the difference between 80% and 100% renewables in a power system is significant. To bridge the gap, a mixture of the following is required: deep storage, oversized wind and solar generation, discretionary loads that can be run intermittently with stockpiles on the input and output such as hydrogen electrolysers. These things are being talked about theoretically at present but we probably will not see them implemented for a while. ENERGY AND MINES MAGAZINE

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