BDO and Squire Patton Boggs recently hosted a breakfast roundtable on “Renewable Energy Powering Mining”. We brought together a cross-section of industry peers to discuss the current market and appetite for adopting renewable energy solutions in mining. Here we outline some of the key discussion points that were covered on the day.
Like most things in life, and renewables in mining is proving no different, there is no one size fits all solution. The biggest take away was that no two projects could be treated the same, and that the economics and the tech are going to be different for each. What emerged above all was the certainty of the life of the mine was the key deciding factor in whether renewable energy was adopted.
Our discussion circulated around three main deciding factors – cost, available solutions and the social license to operate.
It was acknowledged that there is a commercial lack of understanding of what can be achieved with renewables with not enough clarity around how to cost the power. LCOE “levelised cost of electricity” was mentioned as one of the measures in helping to decide whether the economics stack up. But with so many energy solution variations and assumptions clarity around how best to cost ‘renewables’ will be essential in selling a renewable solution over all others.
But with few on-the-ground examples with a proven track record, particularly in Australia, convincing mid-tier mining operators is challenging. And we are still hearing often that mid-tier mining companies are still reticent to taking on new technology.
However, with mining energy costs accounting for nearly a third of all costs, falling renewable costs and new technology more mining companies are seeking alternative solutions. Sandfire’s Degrussa Solar Plant, one of Australia’s ‘first-movers’ in establishing an off-grid renewable solution was discussed and is by all counts exceeding expectations. As more proof of concept projects come to life and costs decrease, we are likely to see more adoption.
Technology change in renewables
The technology in the renewables market is evolving at a rapid rate with new solutions being brought to market regularly. Many of these are solving the cost prohibitive legacy issues, however our discussion shifted to the over prescriptive tender process where companies specify specific equipment to be priced rather than seeking an innovative solution to a “need”. So suppliers are often in conflict between the old adage of “the non-complying bid never wins” scenario and the ability to effectively tender innovative energy solutions.
The lesson around the table was that even with new technologies, it will be the application and management of those technologies and its relevance to the project that will drive success.
BDO has hosted several round-table discussions throughout the year on a variety of topics and having a social license to operate is becoming an increasingly hot topic. This can take a number of forms but what was raised in our meeting was the benefits of ethical sourcing. Provenance of product is key. Knowing that the resource was extracted in the most environmentally friendly and socially conscious fashion is increasingly becoming more important.
Last month, Rio Tinto’s aluminium CEO, Alf Barrios spoke to the Australian Financial Review about an agreement they have with Aluminium Stewardship Initiative (ASI), an industry group responsible for tracking ethically extracted aluminium. Barrios says "There is a growing market for transparency and assurance in the supply chain of raw materials and this certification demonstrates our commitment to good social and environmental practice.” On the commercial benefits he continues “it does have a commercial aspect to it, it is good commercial sense to do this, it does benefit the industry's reputation and ensures a sustainable future for the industry, it increases the consumer awareness of sustainable sourcing and creates market differentiation for our products."
Market differentiation and ‘providence’ is driving IGO’s recent decision to adopt renewables at a Nova mine. IGO managing director Peter Bradford said: “At IGO we believe in the green energy future and are committed to renewable energy sources as we strive to reduce our carbon footprint. The development of this innovative hybrid energy solution (operated by Zenith Energy) will also improve our cost structure with targeted renewable power insertion of up to 50% of demand via the Solar PV facility.”
We also touched on the fact that the transition to renewables will likely be driven by the mining operators and investors, not the government, and foreign investment is likely to find its way into the country irrespective of government policy.
Energy supply is mission critical for mining operations, so quality solutions that reduce cost and emissions will be in demand. It’s undeniable that renewables will progressively play a bigger role in the energy mix as profit, technology and the social license to operate becomes more entwined.
Does your mining operation or project have an opportunity to adopt renewables to install or replace fossil fuel generated power?