Mining is an energy-intensive industry and energy is an essential operational consideration. Energy access is becoming increasingly difficult and expensive in many regions of the world, with global energy prices leaping by 260% since 2000.
Falling grades require more energy to extract each tonne of mineral. Miners are grappling with these increasing costs while commodity prices tighten, resulting in ever-narrowing operating margins.
There are also other pressures on energy, such as increased opposition from communities to new conventional energy sources. Chile is at the epicentre of this conflict as:
- Environmental opposition exists for any new coal-fired power.
- Nuclear is not an option due to seismic risks.
- The community is opposed to expanding hydro power due to the loss of wilderness areas and the impact of high voltage transmission lines spanning the country.
In emerging and frontier countries, the need for alternative energy sources is further amplified as mining and metal companies have to compete with both governments and communities for these scarce resources. Rarely does the economic value created with energy use come into allocation decisions. This has a direct impact on the industry’s all-too-important social license to operate.
The role that renewables will play is not as remote or futuristic as you may think. The arguments for large investments in renewable energy go beyond sustainability and social responsibility, and have now become a solid economic reason for miners.
An alternate energy strategy can help companies:
- achieve energy security
- reduce exposure to energy price volatility
- improve energy price prediction.
Many of the world’s largest mining companies are evaluating greater use of renewable energy plants — a trend set to intensify rapidly. This is part of a broader strategy to lock in long-term fixed electricity prices and availability while minimising exposure to regulatory changes, market pricing and rising residential demand.
Companies can enhance reputation and brand by meeting the sustainability expectations of customers, investors and other stakeholders. They can also avoid long-term carbon and environmental penalties by complying with current and future regulatory requirements; and be well-positioned for regional or national carbon cap and trade programs.
Despite having extensive energy requirements, many mines are located in remote locations far from the power grid. Therefore, miners often deal with transporting diesel fuel over extremely long distances to feed on-site generators. The more remote the mine, the more likely alternative power solutions are required.
Chile is a key example, with operations being remote, at altitude, and a long way from electricity, making transport of energy onsite especially expensive. This has seen Chile’s mining industry emerge as one of the leaders in embracing the potential of renewable energy.
Trigger for change
The pace of innovation in energy today is incredible, in terms of sources, management technologies and financing solutions.
The innovations have led to annual declines in renewable energy costs, and increasingly, companies are taking control of their energy requirements through onsite renewable generation, efficiency technologies and micro-grids. This creates a real opportunity for cost savings and operational optimisation.
There are some in?exible attitudes in parts of the engineering community within the sector which are relatively dismissive of possible change as they’re thinking in an old paradigm of renewables being highly experimental and dif?cult to ?nance. However, rapid changes with regard to the substitution of conventional sources with renewables will challenge the engineering community to take a fresh look at the latter.
The big turning point will be improving battery technology in both scale and cost, so renewable energy from solar power and wind consistently power mining’s 24-hour operation.
What will really make an impact are the things that bring down the costs and improve the reliability — and they are the things that are more likely to be delivered in the next two to three years.
Global Mining & Metals Leader
Ernst & Young
This article first appeared in Mining Uncovered, Ernst & Young’s regular e-magazine for the resources sector. Visit http://www.ey.com/GL/en/Industries/Mining—Metals/EY-renewables-in-mining-futuristic-or-realistic for more information.