Energy and Mines Issue 9

APRIL, 2019 - ISSUE 9

MARKET ANALYSIS

RENEWABLES IN MINING IN AUSTRALIA

NEW PROJECT RENEWABLES IN MINING REPORT FIJI’S LARGEST UNDEVELOPED GOLD PROJECT GETS A SOLAR HYBRID PLANT

INDUSTRY Q&A

TACKLING AUSTRALIA’S POWER PRICE HIKE THROUGH GREEN INVESTMENT

Australian Miners’

R freshing approach to renewables

By Melodie Michel, Energy and Mines

Considering the lack of carbon policy in Australia, the mining sector’s drive to integrate renewables into its power mix is refreshing proof that going green is now simply smart business.

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REFRESHING APPROACH TO RENEWABLES

Photo credit: Casey Horner Unsplash 3

“I don’t think there would be any developer considering a substantial new building, subdivision or industrial estate in Australia who is not thinking about putting some renewable energy into their site” Matt Bowen, Partner, Energy and Regulation Practice Jackson McDonald.

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REFRESHING APPROACH TO RENEWABLES

In 2018 alone, 35 large-scale renewable projects were completed in Australia. The large majority are owned by renewables developers or independent power producers (IPP), with the exception of Sun Metals’ 125MW solar farm in Queensland. And although Australia still lags behind the United States in terms of corporate power purchase agreements (PPAs), the green electricity generated by these projects largely ends up in heavy industry’s operations, via a utility or grid provider.

In mining specifically, there’s been a flurry of renewables activity: just last month, Gold Fields announced a partnership with Aggreko to install a hybrid solar and battery generation system on its Granny Smith gold mine in Western Australia. In 2018, miners like Image Resources, South32, OZ Minerals and New Century Resources all invested in renewable projects or signed PPAs with solar or wind IPPs. And the green buzz is not limited to mining: oil and gas company Santos announced in December that it will roll out 100% renewable energy to power its oil well operations in the Cooper Basin, by converting beam pumps on oil wells to solar and batteries at 56 sites.

Food manufacturer Mars Australia has signed a PPA with Total Eren for the purchase of solar energy from the Kiamal project, currently in construction. And steel conglomerate GFG Alliance is making headlines with its US$1bn plan to transform the Western Australian town of Whyalla into a gigantic green industrial hub powered by a 280MW solar farm and the world’s largest lithium-ion battery (120MW).

“I don’t think there would be any developer considering a substantial new building, subdivision or industrial estate in Australia who is not thinking about putting some renewable energy into their site, running it as a microgrid, taking the whole site behind the meter and doing the

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“IPPs are coming in with fundamentally low costs of electricity, which happens to be from green sources. It’s not the miners who are mandating the IPPs to integrate renewables, it’s the IPPs themselves that have been very forward-thinking in this space” Dermot Costello, Regional Advisor, Western Australia, Clean Energy Council

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REFRESHING APPROACH TO RENEWABLES

various things that lets them do,” says Matt Bowen, Partner in the Energy and Regulation Practice of Jackson McDonald.

ECONOMIC DRIVERS Many factors have led Australia to this turning point. First, the country’s skyrocketing energy prices, partly due to rising commodity costs for natural gas and black coal, and partly blamed on poor management of its energy transition towards cleaner power, has undermined the competitiveness of its industry. The green transformation started with small to medium production sites in remote areas that had to truck diesel over hundreds of miles to power their operations, but it is now spreading to grid-connected facilities, which are benefiting from the renewable market’s relative maturity.

At the same time, solar and wind prices are the lowest they’ve ever been - cheaper than grid electricity. “The price of these resources has come down so much that we’re now at a point where the resources industry can not only viably look at using large-scale renewables for mining, but even for processing,” says Simon Currie, Founder and Principal at Energy Estate.

According to Dermot Costello, Regional Advisor, Western Australia, at the Clean Energy Council, the maturity of Australian IPPs is a key factor in de-risking renewable investment for miners and other industrial users. “IPPs are coming in with fundamentally low costs of electricity, which happens to be from green sources. It’s not the miners who are mandating the IPPs to integrate renewables, it’s the IPPs themselves that have been very forward-thinking in this space,” he explains.

For miners, procuring a renewable source of power simply makes good business sense, and carbon reduction is a nice bonus, or as Vincent Algar, Managing Director at Austra7

lian Vanadium Limited puts it, “a very helpful side effect”. “If you were going to propose that to an engineer or designer, there’s the extra benefit of carbon footprint reduction and road transportation; those two things are critical. If you reduce the diesel requirement by 30%, then obviously you are reducing the road traffic to supply that energy by 30% because all of that diesel is brought in by road,” he adds.

electric vehicle market is developing: it encourages companies to set up new mines, but is also making better, cheaper batteries available to them. There’s a very interesting circular economy going on here,” says Currie.

ELECTIONS AND EXPECTATIONS What is so unique about Australian industry’s tremendous investment in renewables is that it had nothing to do with regulatory requirements - in fact, Australia is surprisingly behind other developed economies when it comes to legislating for climate change.

“Australia’s climate and energy policy at a federal level has been the subject of terrible political controversy for the last decade - it’s caused the demise of five prime ministers - and we’ve been unable to get a coherent national policy; there’s a complete vacuum at the federal level,” explains Bowen at Jackson MacDonald.

Recent developments in the energy storage space should make for an even better business case for renewables. Investments in batteries and other technologies by utilities and renewable developers are abundant - think about Aggreko’s acquisition of battery firm Younicos, or Alinta’s installation of a 30MW battery at the Newman Power Station. And while lithium-ion still appears to be the preferred choice, many other options are likely to become more affordable in the near future. Sydney-based Gelion, for example, is revisiting the zinc-bromine chemistry and combining it with gel technology, to make Because Australia is such a huge coal probatteries non-flammable and more versatile. ducer, the idea of removing coal from the energy mix, or of doing anything to deter powAlternative storage methods are also being er providers from using it, has been seen actively explored: Toronto-based Hydrostor as posing a potential threat to the country’s has just received approval to repurpose the economic future. As a result, a small group Angas zinc mine outside Adelaide, where op- of high-profile conservative politicians has erations stopped in 2013, as a 5MW advanced successfully blocked the numerous climate compressed air energy storage facility. And in measures suggested by successive govNew South Wales, the government has an am- ernments over the years. Now, with federal bitious pumped hydro roadmap of 24 projects elections for a new parliament happening in totaling 7GW of storage to back the rising lev- May and November, and climate policies as el of renewables in the energy mix. a central campaign debate, many are hoping to see Australia finally taking a stand on envi“Australia is an incredibly exciting place ronmental regulations. around the storage potential, and miners will be beneficiaries. Look at how quickly the “It’s going to be fascinating to see what

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REFRESHING APPROACH TO RENEWABLES

“The price of these [renewable] resources has come down so much that we’re now at a point where the resources industry can not only viably look at using large-scale renewables for mining, but even for processing,” Simon Currie Founder and Principal Energy Estate

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comes out of the election: one side is promising a 50% renewable energy target, and the other side is practically denying that climate change is happening,” says Costello.

The Australian Labour Party, the current opposition, is largely leading in the polls, and plans to establish a new Australian Environment Act and create a federal Environmental Protection Agency in its first term. “We’re going to see a radical change in terms of the way Australia looks at renewables and incentivizes them, should the current opposition win the election,” explains Algar at Australian Vanadium. “But even if the current government was dealt a blow but didn’t lose, the message would still be clear that they need to switch to a low-carbon economy and encourage the use of renewable energy more than they currently do.”

The push for green regulations is not just coming from communities: even industry associations in the resources sector, such as the Minerals Council of Australia, are calling upon government to come up with climate policy.

“The fact that BHP has called for there to be a carbon mechanism - when it mines coal, produces oil and is a massive consumer of industrial electricity, all businesses you might expect to resist a carbon price - is an illustration of the strength of the support for a climate policy,” points out Bowen.

But if there was parliamentary resistance until now, there will likely still be some after the elections, especially as the result of the Senate poll in November is still unclear. Certainly, companies will continue to be able to enjoy financial support from the Australian Renewables Agency (ARENA), which has been a decisive factor in getting many existing projects

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REFRESHING APPROACH TO RENEWABLES

off the ground in recent years.

Meanwhile, state governments have taken it into their own hands to legislate on the issue.

Tasmania and the Australian Capital Territory have a 100% renewable energy target set for 2022 and 2020 respectively.

Queensland and the Northern Territory have fixed an objective of 50% renewables by 2030, while Victoria aims to reach 40% by 2025. South Australia doesn’t have an official energy target, but is on track to reach 73% renewables by 2020. New South Wales and Western Australia are lagging behind in terms of targets, but both are seeing a strong pipeline of renewable projects, and Western Australia has come up with an ambitious roadmap for renewable hydrogen development.

WHAT DOES THE FUTURE HOLD? Regardless of the election result and future policy developments, Australia is set to continue its transformation into a clean energy economy. “There’s a sort of cross-pollination between mining and remote energy on one hand and distributed energy more generally on the other. The reason that’s relevant is that there is now a lot of technology sharing: they’re using the same technology, it’s modular, it’s scalable, and the coming together of the two sectors means that we get critical mass faster,” says Bowen.

This transition is likely to open up new opportunities for national industries: in a world where people are ever more concerned about the environmental impact of their purchases, putting a green certificate on minerals sourced in Australia will become a selling point - Apple’s decision to procure “green metals” for its equipment is a case in

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point. And while the country’s manufacturing base is currently small, it could grow significantly once powered by cheap green energy.

“When we started on this journey around small-scale mines to take them off diesel, it was just the very beginning of what I believe will rival what’s going on in Norway, where we’ve seen the large energy users swap to wind, or Iceland, where people bring their manufacturing because of hydro and geothermal resources - that’s what I think is the future,” says Currie.

Judging by mining giants BHP and Fortescue Metals’ forays into hydrogen technology, as well as the Labour opposition’s campaign promise to dedicate A$1bn to its development, it seems obvious that hydrogen will play a key role in Australia’s green future. In fact, the groundbreaking coal-to-hydrogen pilot project that just received a green light from the Environmental Protection Agency in the Latrobe Valley signals a willingness to move past the R&D phase. The project aims to transform 160 tonnes of brown coal into three tonnes of hydrogen over the course of a year, to then ship it to Japan via a specially-designed boat. This kind of innovation may well reconcile Australia’s coal interests and environmental future for good.

Photo credit: Karsten Wurth

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REFRESHING APPROACH TO RENEWABLES

“When we started on this journey around small-scale mines to take them off diesel, it was just the very beginning of what I believe will rival what’s going on in Norway, where we’ve seen the large energy users swap to wind, or Iceland, where people bring their manufacturing because of hydro and geothermal resources - that’s what I think is the future, Simon Currie Founder and Principal Energy Estate

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FIJI’S LARGEST UNDEVELOPED GOLD PROJECT GETS A SOLAR HYBRID PLANT

An aerial view of the Tuvatu plant site with bulk earthworks construction underway. Image credit: Lion One Metals.

The Tuvatu Gold Project is one of the highest-grade gold projects in the world.

Located on the South Pacific island of Viti Levu in Fiji, the site may hold more than 2.5 million tons of resource in the veins of the collapsed Navilawa volcano. The project is fully owned and permitted, with clearing for construction of the surface infrastructure underway. A key part of that infrastructure will be a hybrid solar-diesel power plant. Vancouver-based Lion One Metals is partnering with Swiss clean energy firm meeco group to construct the plant, which they estimate will produce more than 10 GWh of solar power.

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FIJI’S LARGEST UNDEVELOPED GOLD PROJECT

NEW RENEWABLES IN MINING PROJECT

Mann says. “And hopefully, the power plant will help other groups in the community in the long term.”

It’s not the first time that people from these two companies have worked together. A local meeco agent had previously done some consulting work for Lion One. When the agent approached the miner about building a solar hybrid plant for Tuvatu, Lion One saw an opportunity to reduce its carbon footprint in the short term and trim operating costs in the longer term.

“Overall, it helps us become more environmentally friendly. And on top of that, FINANCING TUVATU’S HYBRID PLANT obviously we’re going to be reducing our costs, and, potentially, improve our ability meeco will provide the initial capital financ- to supply power to other places in the reing for the hybrid power plant, reducing gion,” Mann says.

Lion One’s upfront capital. “That will provide the power for the entire mine on an across-the-fence basis,” Lion One Managing Director Stephen Mann explains. “Having meeco design, construct, and operate the power plant significantly de-risks the power supply at Tuvatu for Lion One by partnering with a solid company with specific expectations for solar power.”

Ultimately, Lion One will own 50 percent of the power plant, with meeco owning the other half. Lion One’s power cost will be the same as using diesel gensets for the initial five to six years of operation, as the company applies the cost reduction that solar generation will provide to paying meeco back for its share of the capital financing.

“After Lion One completes the capital payback, the projected reduction in power costs will be 20 to 25 percent as provided by the solar panels. This translates into a minimum 10 percent reduction in overall mine operating cost for gold production,”

View of the Navilawa Caldera, western Viti Levu, Fiji. Image credit: Lion One Metals.

REDUCING LION ONE’S CARBON FOOTPRINT At full production, a traditional approach to power generation at Tuvatu would have required about a million litres of diesel per

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years before the infrastructure is in place and the mine begins to produce gold. Lion One is currently nearing contract awards for its prime mining contractor, equipment suppliers, and EPC contractor.

Tuvatu project location and license areas. Image credit: Lion One Metals.

In the meantime, the company is exploring the surrounding geology. Its exploration licenses cover the entire Navilawa volcano.

The process facility will be ready to handle the throughput. Designed to run aroundthe-clock, it has been upgraded to produce 1,000 tonnes per day, or over 320,000 tonnes per year. Ultimately, Lion One aims to build production of 100,000 oz. of gold per year at the site over ten years.

month. The solar panels will reduce diesel use by 25 to 30 percent, depending on weather. Based on an estimated annual energy production of 10.31 GWh, solar generation will displace more than 6,000 tonnes of carbon dioxide emissions per year.

PROJECT TIMELINE While a firm date hasn’t been set, Mann says that the power plant will likely be completed in 2020. There are still details to finalize, such as access to native land.

Because the plant will be situated four kilometers away from the mining operation, Lion One is negotiating access to ground Stephen Mann, Managing Director, Lion One Metals for the plant itself, and also for installing the power line to the mine site.

“We’re aggressively advancing to production and have progressed significantly in “The landowners have been very support- recent months on preparation of the mill ive of the project, as has the government,” site and infrastructure,” Lion One Chief DeMann shares. “So we’re quite positive from velopment Officer Ian Chang stated. “We that point of view that we can move forward remain focused on delivering Fiji’s next really quickly, but there’s still a process to high-grade, underground gold mining opgo through to make sure we get it all right.” eration while continuing to qualify the upside of Tuvatu’s district-scale exploration However, it will probably be another two opportunity.”

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6 NEW RENEWABLES IN MINING PROJECTS

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Ta c k l i n g A u s t r a l i a ’ s p o w e r

pri¢e hike through

green inve$tment Q & A w i t h G a ry B rya n t, General Manager, Asset S t r at e gy, A l i n ta E n e r gy

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ALINTA ENERGY Q&A

Photo credit: Shutterstock 21

Australian electricity prices more than doubled in the past decade, leaving energy consumers of all sizes to demand cheaper alternatives from their providers. For utilities, the pressure is on to deliver low-cost solutions, and for Alinta Energy, it means investing in renewables and storage. “The focus for us is really on our customers and the energy challenges they are facing,� says Gary Bryant, General Manager, Asset Strategy at Alinta. Last year, the company purchased a 30 MW battery from Kokam to improve reliability and mitigate peak grid prices for mining customers in the Pilbara region. Since then, many other renewable projects have been green-lit.

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ALINTA ENERGY Q&A

Energy and Mines spoke to Bryant to understand the drivers behind Alinta’s renewable strategy, what targets the company has set itself, and why investing in green energy in Australia is not always an easy task.

Energy and Mines: What are the top energy challenges that Alinta’s operations are facing?

Gary Bryant: Our retail consumers tell us that the number one issue for them is affordability and we work across our business to try to find ways to make energy more affordable. There is also an increasing focus on green power.

For our large commercial and industrial customers, of course affordability is also key, but they need to know that they have a reliable supply.

Reliability was one factor behind our Newman Battery Storage Project. In 2018 we switched on what was the largest Australian battery to be developed for an industrial application at our Newman Power Station in the Pilbara – which provides energy to large mining operations.

For the iron ore industry, generating hundreds of thousands, if not millions of dollars’ worth of output an hour, a reliable energy supply is crucial. This battery helps us better handle peak demand periods and also improve our efficiency and lower our greenhouse gas emissions.

E&M: Can you give us an update on Alinta’s renewable energy and storage portfolio?

GB: We have a 2020 target for 1,000MW of owned and contracted renewable energy and we’re well on our way to delivering that target.

Earlier this year we announced plans to build West Australia’s biggest wind farm by mid2020. The 214 MW Yandin Wind Farm will comprise 51 Vestas 4.2 MW wind turbine generators – with a capacity factor around 50%, this

Photo credit: Chris-Barbalis 23

facility could provide power for up to 200,000 customers and the environment. homes a year. The wind farm will be located near the town of Dandaragan, around 175km E&M: What are the main challenges you face north of Perth. in integrating renewables into your business model?

It’s a high-quality wind resource and the project is expected to cost approximately $400 mil- GB: We’re focused on selecting low-cost, lion and will generate around 150 jobs during high-quality renewables projects that can construction. complement our generation portfolio. Given affordability is the key issue for our customThere’s also our 35 MW Battery Storage Project ers, low-cost renewables projects like the and we have off-take agreements for several Yandin Wind Farm make sense. renewables projects including the Badgingarra Wind Farm in WA (130 MW).

The stable policy environment in WA also made a difference in making an investment E&M: What opportunities do you see emerging decision on Yandin. Policy stability (or instain Australia, for your industry and others, as a bility) will continue to be a key determinant result of the current shift towards clean ener- for renewables investment. gy?

GB: As a business we try to do things a little differently. Our storage project in the Pilbara is an example of this because we wanted to develop a battery that was fit for purpose. We focused on ‘grid-forming’ capability – which hadn’t been done before. The fast dispatch means we don’t need to run an additional gasfired turbine for spinning reserve. This helps reduce emissions and will have applications in the energy industry beyond our power station.

We’ve also invested in a geothermal business as we see a growing appetite for geothermal heating and cooling in Australia. While this technology has already been embraced internationally, the acquisition and launch of the Alinta Energy Geothermal business represented the biggest commercial backing of geothermal heating and cooling in Australia.

In terms of renewable generation, Yandin will drive more affordable and cleaner energy for us, and with our gas-fired power stations it will also help us use gas more efficiently. We are actively developing other renewable sites around Australia. That’ll be good for us, our 24

Photo credit: Luca Bravo

ALINTA ENERGY Q&A

E&M: What makes Australia different from other markets in terms of renewable integration?

GB: The biggest challenge in Australia has been policy uncertainty and differences between East and West government policy – which has caused investment uncertainty for over a decade.

Our business can support and work towards whatever the Australian community decides is an appropriate target for renewable energy.

The most important thing is that this is done in an environment with stable policy, so longterm investment decisions can be made and we can deliver at the least cost solutions to customers and taxpayers.

Given affordability is the key issue for our customers, low-cost renewables projects like the Yandin Wind Farm make sense.

Photo credit: Gustavo Quepon

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With growing momentum behind hydrogen technology and deployment in Australia and the mining sector uniquely positioned to benefit from these developments, Perth is the ideal destination for the inaugural Hydrogen and Mines event.

Hydrogen and Mines will bring together senior mining leaders with key decisionmakers from all parts of the hydrogen value chain to explore opportunities and applications for mining. Along with critical insight on regulatory and technological updates, this event will address key questions for mines around the timescale, commercialization, economics, and real-world applications of hydrogen in mining.

CLICK HERE FOR DETAILS