Anglo American Platinum is stepping up its investigation of renewables now that South Africa’s main energy utility, Eskom,
is experiencing energy shortfalls. “This is a very big challenge for
us,” says Gerhard van den Berg, the company’s principal engineer,
energy. “With Eskom having shortages and not being able to supply, we’ve
run into what they call stage-two load curtailment.”
To meet this curtailment, the mining giant has shed 65 megawatts — or
10 percent — of its load by keeping the mines running but closing down
some operations, including furnaces and processing plants. “Renewables
are the right thing to do because of the lack of capacity in the system
at the moment,” van den Berg says.
Although the appetite for renewables among African mines
first originated with remote sites that relied on expensive diesel
gensets for their power requirements, grid-tied mines are now keenly
interested, as well. Gerhard Wernecke, senior project manager at
Cronimet Mining Power Solutions, Ltd., points out that the power crises
in South Africa, Namibia, Botswana, Zambia and Mozambique are tipping
the balance towards renewables in many African markets. “If African mining companies want to improve the security of supply
they need, they have to look at their own generation capabilities and
they need to look at generation capabilities in terms of a sustainable
option,” says Wernecke.
Reliability and Price
For mines coping with unreliable energy utilities, finding ways to
meet their companies’ energy needs is paramount. Nic Schoeman, general
manager, technical services, for Acacia Mining, says that “the biggest
challenge that we’ve got on our mine sites is the extremely poor quality
from TANESCO.”
Specifically, Schoeman explains that TANESCO, which is the electric
supply company wholly owned by the government of Tanzania, is causing
problems for Acacia in three ways: insufficient generation for current
demand, a failure to upgrade transmission lines, and distribution
problems. “This problem is difficult to cope with,” emphasizes Schoeman. Schoeman has commissioned studies on how renewables could help Acacia
meet one of its mines’ 40 MW energy needs, and has even completed a
tender and identified a forerunner among solar providers.
Similarly, Shanta Mining Company, Ltd., consumes 24,000 megawatt
hours of energy each year, and has installed a small pilot solar PV
plant in order to assess the feasibility of undertaking a larger scale,
hybrid scheme. Project Director Ian Fielding points out that Shanta is
also exploring the feasibility of hydro-electric power because the mine
operates near a river.
The energy problems confronting grid-tied mines in Africa are
profound and growing. That said, Ian Curry, managing director of BR
Energy, points out that South Africa is an anomaly within Africa for
having 85-90% of its population connected to the electricity grid. He
points out that most African countries have far less access to grid
power, with some countries having access as low as 20 percent.
Another new development is the more competitive prices for solar and
wind power. Anglo American’s van den Berg is actively evaluating
options. “We don’t think cost will be a problem by the time we implement
[solar energy],” he says. “Renewables are getting cheaper all the time
because of simple supply and demand.”
Finally, many mines struggle with calculating the true expense of
renewables projects. Shanta’s Fielding points out that one of the
greatest barriers to adoption of renewables is “obtaining an unbiased
and comprehensive understanding of the real cost and suitability” of the
various renewable energy solutions out there. Although there’s no
shortage of “enthusiastic salesmen” with renewables schemes, sorting
through the options is no easy feat.
As a result, Shanta has carried out its own feasibility study to
evaluate options and “determine the capital and operating cost of each.”
With a thorough understanding of the true life-cycle cost (LCC) of
energy, Fielding can make a more informed decision.
Revisiting Long-Held Opinions
Compelling advantages for solar solutions within the African mining
sector include an abundance of sunlight and the relative speed with
which solar solutions can be implemented. Jan Dewulf, senior investment officer at the International Finance Corp., points out that a solar solution
can often be deployed within six months after a mine finalizes a deal.
“If back-up power like diesel gensets are available, then the
integration with solar power is an easy one and can bring quite a lot of
advantages to mining companies,” he says.
And while the intermittency problem that plagues solar and wind power
providers has no magic-bullet solution, there are clever workarounds.
Cronimet’s Wernecke points out that “with renewables, storage will
always be an issue. However, recent strides in storage technology have
proven promising.”
He notes that while the price of lithium batteries has started to
come down, other challenges remain. “Our concern with batteries are the
warranties,” he says. “If you step out of the line to the slightest
degree, you won’t be able to cash in on your guarantee. Having said
that, we do see the value that batteries pose and we are working on
clever ways to incorporate them into our value proposition.”
Manuel Duggal, managing director of MCD International Energy, points
out that batteries add considerable cost to the renewables equation. He
estimates that running a diesel-fired power plant in east Africa costs
around 40 cents a kilowatt hour, while running a solar plant only when
the sun is shining costs 22-24 cents a kilowatt hour. However, running
that same solar plant 24/7 using battery storage would cost 58 cents per
kilowatt hour. Finally, the steep decline in the price of oil is affecting African mining companies’ appetite for renewables.
For Shanta, which has historically supplied all energy through its island power plant, lower oil prices do
play a sizable role in making decisions about renewable energy going
forward. “Yes,” says Fielding, “lower oil prices have impacted greatly
upon the viability of renewables, where they supplement base load island
power plants at off-grid mines, as the total cost of the renewable
energy must compete with the variable cost (i.e., fuel cost) of the
island power plant.”
For other mines, however, the effects of lower oil prices are relatively minor. Curry points out that delivery costs constitute a huge part of the
overall energy equation and so the net effect of lower oil prices isn’t
as dramatic as some might imagine. What’s more, lower oil prices might persist a year or two, but the
energy challenges that African mines face are ongoing. “For the time
being, solar is less attractive than it was a couple of years ago with
the higher oil prices,” says Duggal. “But if you look at long-term
trends, the price of oil really is only going to go up, isn’t it?”
Financing Options
“Mining power generation is not a core business for mines,” says
Cronimet’s Wernecke. “The biggest stumbling block is basically financing
the plants on the mine’s balance sheet. That is why we generally opt to
offer our clients a fully financed, risk-wrapped PPA as a solution.”
Richard Brody, vice president, business development and sales, for
Primus Power, points out that while renewables may be less expensive
than relying on diesel gensets, some mines balk at the up-front capital
costs. For reasons like this, Anglo American’s van den Berg is exploring
IPPs and is eager to find ones “fairly close to the current Eskom price
point.”
Acacia’s Schoeman is also hoping to work with an IPP and pay a
per-kilowatt-hour rate that’s comparable to local utility charges. That
said, he has found that negotiating financing can be a tricky business:
“Often, you don’t know what the bottom-line costs are until you get far
down the road — and then you have to do a U-turn because you find it’s
coming out too expensive.”
BR Energy’s Curry points out that the scale of the projects currently
being undertaken by African mines can make them less bankable. When it
comes to “raising debt to finance these projects with a single offtaker
such as a mine, the financing institutions are not falling all over
themselves to come to the party,” he says.
What’s more, IFC’s Dewulf points out that “there’s quite a lot of
work still to be done on the cultural level.” He characterizes mining as
a conservative industry that resists change. Dewulf also detects a fundamental mismatch between mining companies
and solar and wind developers: While mining companies are pushing
developers for lower prices, mines are reluctant to commit to contracts
that extend beyond five years.
What the Future Holds
Although a number of unknowns are affecting the outlook for
renewables among African mines, many of these unknowns stem from the
fact that renewables are relative newcomers to the market. “One of the biggest obstacles is proving that the technologies are
dependable and can save money and result in cleaner power, while meeting
the same standards for reliability that these mines absolutely need,”
says Primus’s Brody. “It’s important to remember that it’s still early
days.”
MCD’s Duggal agrees: “People come to solar and say: ‘I want a solar
Ferrari.’ We’re not building solar Ferraris yet. We’re building Model
Ts.” He concludes: “There are still more evolutionary steps between
where renewables are now and where they’re going to be.”
http://www.renewableenergyworld.com/articles/2015/05/powering-african-mines-what-role-will-renewables-play-in-addressing-mining-s-current-power-crisis.html