SEPTEMBER 24 - ISSUE 1
SHIFT TO RENEWABLES IN MINING
WHY ARE MORE MINES MOVING TO RENEWABLES?
TOWARDS 100% RENEWABLES IN MINING JOIN THE MINING AND ALTERNATIVE ENERGY SECTORS AT THE 6TH ENERGY AND MINES WORLD CONGRESS, DECEMBER 10-11, 2019, HILTON TORONTO. CLICK HERE TO DOWNLOAD BROCHURE
KIM TRUTER CEO De Beers Canada
TSAKANI MTHOMBENI, Group Head of Carbon & Energy Company Gold Fields
PETER SINCLAIR Chief Sustainability Officer Barrick Gold
RON MILLER Principal Advisor Energy Growth & Innovation Rio Tinto
RODRIGO CARO Director of Energy Transition Codelco Tech
JOHN MULLALY Vice President Corporate Affairs and Energy Goldcorp
CHRISTIAN SOUCY Superintendent, Nunavut Energy Optimization Agnico Eagle
MIKE AIRE Environment Director, Sustainability & External Relations Newmont Mining
PAUL CHAWRUN, Chief Operating Officer Teranga Gold Corporation
TONY MAKUCH President, CEO and Director Kirkland Lake Gold
SAMANTHA ESPLEY Technical Director for Mining and Mineral Processing Vale Canada
PETER XAVIER Vice President Sudbury Integrated Nickel Operations Glencore
SHIRLEY NEAULT Manager of Environment and Systems Hudbay Minerals
IGOR KLIMANOV Development Projects Director Norgold
LINDA WRONG Corporate Director of Sustainability and Regulatory Affairs, Lundin Mining Operations Glencore
WELCOME TO THE NEW LOOK ENERGY AND MINES NEWSLETTER Energy and Mines has been connecting the mining and alternative energy sectors for the last 6 years. At our first event in Toronto in 2013, the conference agenda was dominated by technical discussions on renewables power quality and reliability. Since then, it is fair to say, the discussion has moved on and the convergence of alternative energy and mining has taken off. To underline this acceleration, the Energy and Mines World Congress in Toronto in December will showcase numerous new renewables for mining projects and will be headlined by De Beers Canada CEO Kim Truter discussing 100% renewable energy for mining. It is an exciting time to be working in this area. We hope you enjoy the refresh. Adrienne Baker Director Energy and Mines
Energy and Mines, 2450 Lancaster Rd, suite 4, Ottawa, Ontario, Canada, K1B 5N3 email@example.com , +1 613 627 2787 3
INDUSTRY TREND ANALYSIS BY
SHIFT TO RENEWABLES
TO BECOME A
TREND IN MINING
KEY VIEW FROM FITCH SOLUTIONS: • Renewable energy will play an increasingly important role in powering mining operations worldwide over the coming years. • The reduction of renewable power costs and the prospect of more reliable power supply will be the key drivers of the shift away from traditional fuel sources to renewables among miners, ahead of ESG concerns. • Mining markets with more favourable regulations and policies towards renewables will be ahead of the curve in the adoption of renewables in mining, with countries in the Americas standing out.
INDUSTRY TREND ANALYSIS
At present, most mining operations globally continue to rely on traditional power sources, mainly fossil fuel-based grid power or off-grid diesel-generated power. However the share of renewables powering the mining industry is set to rise, driven by an increasingly favourable regulatory environment in key mining markets, combined with fast-falling renewable energy costs as well as a growing strategic importance given to reducing
costs and improving ESG standards among miners. Countries and companies operating in the Americas, are best positioned to lead the way in the adoption of renewables in mining, aided by carbon pricing measures and an already significant integration of renewables in key operations. We expect Solar Photovoltaic (PV) and wind capacity will dominate the share of renewables favoured by miners moving forward.
WIND AND SOLAR POWER BECOMING INCREASINGLY COMPETITIVE EMEA - LEVELISED COST OF ELECTRICITY BY TYPE, USD/MWH
50 30/06/2014 31/12/2014
30/06/2016 31/12/2016 Coal
SOURCE: BLOOMBERG, BNEF, FITCH SOLUTIONS
Despite increasing social pressure to improve ESG s tandards, we believe that the price motive will remain the driving factor behind mining companies’ decision to increasingly shift their energy consumption towards renewables in the short term. Currently, Energy and Mines research estimates that energy costs, primarily made up of grid electricity, coal, diesel or natural gas, account for up to 30% of miners’ balance sheet costs and we expect this to increase over the coming years as ore reserves are
depleted, forcing companies to adopt more energy intensive mining methods. In an environment where miners will remain committed to keeping costs down, the use of renewables offers significant cost-reduction potential ahead as technology improvements and larger scale being achieved among equipment manufacturers lead to falling prices, while maintenance costs are negligible compared to conventional generation (See ‘Global Renewables Capacity To Almost Double Over Next Decade’, August 21 2017).
WIND AND SOLAR TO DOMINATE
SHARE OF INSTALLED RENEWABLES GENERATION AMONG MINING COMPANIES (%), 2017
SOURCE: ENERGY AND MINES AND FITCH SOLUTIONS
INDUSTRY TREND ANALYSIS
Renewables also offer grid-tied miners the opportunity to mitigate the risks that come with volatile power supply in the countries in which they operate in. Power outages and exorbitant electricity prices are common place in key mining markets with immature or inefficient energy sectors. For instance, Zambia’s overdependence on hydropower resulted in a tariff dispute between the government and the country’s key copper miners last year that led to power outages and productions toppages at Glencore’s Mopani Mines, one of the country’s largest. Even in more devel-
oped and diversified power markets such as Australia, hikes in power prices over the past years have impacted margins for miners including Glencore and Rio Tinto, putting jobs and production rates at risk. As a result, investing in self-supplied renewable power which is not dependent on national grids will become increasingly attractive propositions for miners over the coming years. Solar and wind power generation in particular will be the renewables of choice for the mining industry, due to their rapidly falling costs and prevalence as an energy source across the globe.
FOSSIL FUELS REMAIN DOMINANT SOURCE OF ENERGY RIO TINTO - SOURCE OF ENERGY USED (%), 2017
18% 28% Coal
SOURCE: ENERGY AND MINES AND FITCH SOLUTIONS
Countries that are already implementing widespread regulatory and policy changes in anticipation of a shift to a low carbon economy will be at the forefront of adopting renewables in mining. In light of the Climate Change Pact adopted by 195 countries at the COP21 UN conference in Paris on 12 December 2015, important mining hubs have implemented significant measures to reduce their emissions progressively, that have subsequently incentivised mining companies to shift towards renewables. For instance, in Chile and Canada, the introduction of carbon pricings chemes, at USD5/tonne and USD10 /tonne, respectively, is pushing miners to increasingly consider ways of limiting their carbon exposure as a corestrategic objective and attracting interest in renewables investments. In Canada, mining companies includ-
ing Barrick Gold, IAMGOLD, AurCrest Gold and Goldcorp are already investing in renewables and/or mine electrification in order to reduce greenhouse gas emissions. Chile meanwhile will remain a global outperformer in regards to the number of mines adopting renewables and the total installed wind or solar capacity (see ‘Global - Installed Wind And Solar Capacity By Mine’ table below). Up to nine different mining companies have installed either wind or solar-generating capacity in the country to date, including copper mining giants Codelco and Collahuasi and Antofagasta Minerals which boasts 191.5MW of installed Solar Photovoltaic (PV) capacity at its operations. Chile’s Association for Renewable Energy has projected 100% of the national grid in Chile could be powered by renewables by 2050 .
RENEWABLES SECTOR TO BE KEY FOR LOW CARBON MINING
SELECT COUNTRIES - RENEWABLES INDUSTRY REWARDS AND MINING INDUSTRY VALUE SCORES
Mining Industry Value
Renewables Industry Rewards
SCORES OUT OF 100, HIGHER SCORE = MORE ATTRACTIVE MARKET. SOURCE: FITCH SOLUTIONS RENEWABLES RISK/REWARD INDEX
INDUSTRY TREND ANALYSIS
Government policy support will be instrumental in boosting renewables in the mining industries of other major mining markets moving forward. In India, the Modi government’s ambitious renewable energy growth targets will drive radical changes in the energy economics of the mining industry, where coal firms like state-run Coal India plans to generate 20 GW of solar power generation energy nationwide over the next ten years. Similarly, China will ramp up environmental regulations that will focus on curbing the use of coal and metal smelting as part of the government’s commitment to reduce 40 -45% of greenhouse gas (GHG) emissions by 2020. A key element of this objective is the national carbon tradings cheme announced in July 2017 and set to be fully rolled out by
2020. Argentina and South Africa are set to follow suit and have already proposed carbon trading schemes of their own, with the latter’s set to be implemented by 2019. These countries accordingly outperform on our renewables industry rewardss cores measuring renewables growth and capacity, while less regulated markets in Africa are set to lose out - posing challenges to the adoption of renewables in mining operations there. Article courtesy of
BHP MAKING GOOD PROGRESS
GLOBAL DIVERSIFIED MINING COMPANIES - TOTAL GHG EMISSIONS INTENSITY PER SALES (TONNES)
While secondary to cost-efficiency, ESG considerations will have a growing influence on mining companies’ decision to shift their energy consumption away from fossil fuels and into renewables. The rapidly growing electric vehicle (EV) sector, underpinned by lithium-ion batteries, and consumer electronics sector will become increasingly valuable customers for top metal and mining companies, leading to rising pressure to reduce environmental impact in the industry (See ‘Miners Under Pressure To Improve Environmental Reputation, Transparency’ May 17). We believe mining companies will intensify their investments into renewable energy, battery storage, energy efficiency and carbon capture and storage (CCS) in order to improve their social license to operate over the coming years. Already, key deals between metal producers and EV or
consumer electronics firms this year reflect the trend toward environmental sustainability and social accountability in the metals and mining industry: • In May, US electronics firm Apple and top aluminium producers Rio Tinto and Alcoa announced plans to invest in carbon-free aluminium through joint-venture Elysis. Along with the Canadian and Quebec governments, the firms will invest CAD188mn in the venture. • In January, BMW and top Chilean copper miner Codelco announced the ‘Responsible Copper Initiative’, aimed at improving the commitment to ecological and social responsibility in the copper industry. In 2017, BMW purchased 42kt of copper and expects this figure to increase by 20kt by 2025 as EVs are rolled out.
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research. www.fitchsolutions.com firstname.lastname@example.org
INDUSTRY TREND ANALYSIS
INSTALLED SOLAR PV CAPACITY
INSTALLED CAPACITY (MWP)
Barrick Gold Corp
Compania Minera Dayton
Cronimet Metals AG
INSTALLED WIND CAPACITY
Grupo Mexico Barrick Gold Corp Rio Tinto SNIM Glencore Mandalay Resources Nrystar Nv Galaxy Resources SOURCE: ENERGY AND MINES, 2016
WHY ARE MORE MINES
WHY ARE MORE MINES INTEGRATING RENEWABLES?
By Melodie Michel Energy and Mines ROB SCHUEFFNER, HYBRID ENERGY SOLUTIONS MANAGER FOR CATERPILLAR ELECTRIC POWER, EXPLAINS HOW THE FINANCIAL BENEFITS AND RELIABILITY OF RENEWABLE ENERGY SOLUTIONS AVAILABLE FOR MINES TODAY ARE QUICKLY MATCHING THE ENVIRONMENTAL BENEFITS.
As costs continue to fall, mine operators see a strong business case for adding renewable energy solutions to the power mix at their mine sites. While solar power may not completely replace more traditional means of generating power in the short term, mining companies see the increasing benefits. Renewable energy combined with emerging energy storage, control, and management technologies can not only achieve a mineâ€™s sustainability goals, but also substantially reduce their operating costs while improving system reliability and resiliency. As Schueffner reports, mines can realize energy savings starting at 5 percent for easy and quick solutions that can extend up to 50 percent for installations that employ the full array of the latest fuel-saving power technologies available today.
“We have some mine operators who tell us they know the economic case for renewables may not quite be there yet, but they want to hedge against anticipated future fuel costs and start implementing large-scale projects phase by phase.” “The ability to check many boxes is what makes hybrid energy solutions so attractive for many mines,” Schueffner says. “Mine operators who analyzed hybrid solutions a few years ago are now surprised when they learn that the economics have improved so much because of cost reductions and system improvements. For one recent customer, their analysts discovered that the payback period is now roughly half what it was only three years ago.” SOURCE: CATERPILLAR
AN INTEGRATED APPROACH One key to realizing these returns is advanced technology and systems integration, and this is where Schueffner believes Caterpillar and the Cat dealer network stand out. While many early microgrid installations were disparate components cobbled together by multiple vendors, Caterpillar now brings all the latest technology and market expertise in renewables under one roof to design, install, and commission a seamlessly integrated system that starts delivering returns immediately. 16
Caterpillar has decades of experience in providing solutions for thousands of surface and underground mine sites around the world, including power solutions that run on a variety of fuels. As Schueffner reports, knowledge of the rugged environments where Cat products operate has enabled engineers to develop hybrid energy solutions used by the U.S. military over the past decade. “We draw on a potent combination of mining knowledge, engineering expertise in harsh environments, and a broad mix of power solutions to help us develop the right hybrid energy solution for mines,” Schueffner adds.
WHY ARE MORE MINES INTEGRATING RENEWABLES?
SCALING UP Every mine is different, and many variables must be considered when determining which renewable energy solution will work best for a particular mining operation. Geographic location, peak sun-hours, government subsidies, and energy production costs – including the purchase, transport, and storage of fuel – all must be factored into the equation. Given the long period of time that mines are typically in operation, customers are also considering projected costs over the entire life of the mine, according to Schueffner. “We have some mine operators who tell us
they know the economic case for renewables may not quite be there yet, but they want to hedge against anticipated future fuel costs and start implementing large-scale projects phase by phase,” Schueffner observes. In sharp contrast to the substantial capital investment required for building or updating traditional powerhouses, hybrid energy solutions allow for a scalable approach. Schueffner said that it is fairly easy to achieve fuel 17
savings of 5 percent simply by adding energy storage to mitigate fluctuations in output power by regulating ramp-up controls, absorbing spikes in power demand, and injecting power for sudden power needs.
PROJECTING COST BENEFITS “One customer has projected the cost benefits of using the Cat Energy Storage System (ESS) as a virtual spinning reserve that enhances the efficiency of the entire powerhouse,” Schueffner says. “By taking advantage of the reserve to optimize energy usage for the varying loads across the site’s 24-hour cycle, the customer has projected a payback period of under two years.” At the next level, solar photovoltaic panels can be installed to reduce fuel consumption by about 20 percent without making significant modifications to the powerhouse. This can serve as a simple and effective way to hedge against future increases in fuel costs, Schueffner says. By adding the Cat Microgrid Master Controller, mining customers can increase solar PV
production and more energy storage for grid stability to achieve fuel savings of more than 40 percent. Finally, the addition of Caterpillar’s latest, most efficient diesel, natural gas, and HFO generator sets can help mining operators cut their fuel costs by more than half. Even greater fuel savings may be achievable as renewables increase in efficiency and drop in cost. “A mine can install some PV now, and then install a little more later along with energy storage and a master controller as prices continue to fall,” Schueffner says. “This phased-in approach can help mine operators enjoy immediate savings while progressively reducing fuel consumption as the economics improve.”
“A mine can install some PV now, and then install a little more later along with energy storage and a master controller as prices continue to fall.”
WHY ARE MORE MINES INTEGRATING RENEWABLES?
DEMONSTRATING SAVINGS AND RELIABILITY Africa is an attractive market where Caterpillar is introducing hybrid energy solutions for mines. Recently, Caterpillar and Cat dealer Barloworld were selected by Vancouver-based B2Gold Corp., to supply 7 MW of solar power at the Otjikoto Mine in the Republic of Namibia. The full system, including Cat photovoltaic solar modules and the Cat microgrid master controller (MMC), is being used to reduce reliance on a heavy fuel oil (HFO) power plant. B2Gold executives and government officials celebrated the opening of the facility in May. Company officials have reported that the introduction of solar power is expected to reduce Otjikoto’s HFO consumption by approximately 2.3 million litres and lower its associated power generation fuel costs by approximately 10 percent in 2018 alone. “B2Gold is a very progressive company that plans for the long term. Not only are company executives looking to improve the performance of the mine and the company’s bottom line, but they are also supremely focused on improving the lives of residents in nearby communities,” Schueffner observes. In the near future, Schueffner believes renewable microgrids will become increasingly commonplace in the mining industry. While fuel prices will dictate the speed of the transition, the capital expenditure required to install hybrid systems will continue to fall, making a stronger business case for renewables. “As hybrid technology advances, improvements in efficiency and power density will continue to enhance system reliability, resiliency, and overall performance while driving the accelerated adoption of these solutions in mining,” Schueffner says.
DO YOU NEED TO UNDERSTAND THE MINING INDUSTRY? â€œThe workshop provided our engineering and business development teams with a comprehensive overview of the mining cycle in an open and collaborative environment. With an enhanced understanding of performance metrics in the mining industry, we can now better articulate our services to mining companies at all stages of the mining cycle.â€? - SunSHIFT
If you are an energy professional that needs to effectively communicate to miners but are new to the mining industry, you should attend: An Essential Introduction to Mining for Energy Professionals, Dec 9, Hilton Toronto. Download the workshop brochure. Contact email@example.com for more details.