Power costs contribute to a significant portion of the operating costs for mining, circa 30% industry average, regardless of whether the mining company provides its own power through onsite power generation or via offtake from utility providers. As such, mining companies have always been looking at ways to reduce their power costs.
In more recent times however, mining companies are also having to take into account the growing trend towards reducing their environmental impact, whilst still striving for ways to reduce operating costs.
Whilst adopting more environmentally friendly power generation options, like gas and/or diesel hybrid power stations, tick both boxes of lower operating cost and a reduced carbon footprint they don’t meet the growing expectation of the broader community to move away from fossil fuels to renewable energy sources. This is driven in part by the notion that the mining industry is regarded as energy intensive. The International Energy Agency (IEA) estimates 11% of total energy consumption is attributable to the mining sector.
Whilst there are a range of factors to be considered, mining operations have two key criteria when it comes to power supply for their operations:
- Reliability (certainty of supply).
- Cost effectiveness.
Historically speaking renewable energy has not been synonymous with either of the above two criteria, so mining companies have been slow to adapt their thinking on how to transition to renewable energy sources. However, this is changing as new renewable power is now approaching cost parity with traditional fossil fuels.
Cost effective energy storage has been a key enabler for renewable energy technology as the renewable energy sources typically available to mining operations such as solar and wind are not effective ‘base load’ power sources. The situation is placed to improve further as the cost of energy storage will continue to fall and simplify the process of effectively integrating the solar power generation into the distribution power network. For example, the Newman battery has shown it can provide sufficient inertia to the local grid in the absence of thermal generators.
Renewable energy solutions typically make more economic sense as the economies of scale increase. This has been one of the reasons individual mining operations have struggled to build business cases to adopt renewable energy solutions. However, with the increased pressure from the broader community and shareholders for mining companies to take direct action and reduce their carbon footprint, mining companies are collaborating with each other and the industry to force change.
A perfect example of this is the rapidly maturing solar energy project being embarked upon by Alinta Energy to provide up to 60MW of generation capacity through a solar farm to be installed in the Pilbara region of Western Australia. Whilst plans for this project were released in the public domain during 2018 Renew Economy, a web site focused on clean energy news and analysis, published an article in June of this year stating that Alinta Energy had confirmed plans to build the above facility adjacent to Fortescue Metals Group’s Christmas Creek Iron Ore Operations.
This project is a great example of how the energy sector can team up with the mining sector and take a holistic approach to improving the uptake of renewable energy, in a sector that has been slow to adopt.
This collaborative approach will see a project characterised by:
- An energy utility company providing a power solution born from a renewable energy source to replace equivalent gas-fired and diesel-fired power generation.
- A significantly reduced operating cost for the mining companies.
- A multi-company solution that will see Alinta Energy service multiple mining operations within the region through a new transmission line.
- Anticipated (but unconfirmed) co-investment from the Northern Australia Infrastructure Facility (NAIF) and the Australian Renewable Energy Agency (ARENA).
One of the major advantages of this particular initiative is the benefits extend past the current mining companies themselves who stand to benefit from the reduced cost of supply. Alinta are of the view it will enhance opportunities for investment in future projects.
In addition, one of the most important outcomes of this particular initiative is the likely increased community and shareholder support for future mining projects, which are able to leverage this trend and therefore continue to drive investment in Western Australia’s extremely important mining and resources sector – the ‘power house’ of our economy. This is particularly important given the headwinds the sector is currently facing as society continues to challenge its social license to operate.
Further emphasising the increased synergies between the resources industry and renewable energy solutions, ARENA published an article in May 2019 stating that Rio Tinto announced it’s planning to trial solar energy solutions at 20 of its global operations. This is on the back of successful implementation of a solar facility at Rio Tinto’s Alcan bauxite operation in North Queensland (2015), which also received funding support from ARENA.
The Australian mining industry has proven it can be a fast adopter of technology and technological shifts into operations. Finding ways to make renewable energy not just work, but to bring enduring value to their operations is something the industry will commit considerable resources towards to ensure it’s done the right way. ARENA funding, whilst a bonus, is not a prerequisite.
Engenium has extensive experience in power generation and distribution systems. Coupling this with our pedigree in the mining and resources sector, we have an innate understanding of the industry drivers and typical constraints to adoption of renewable energy within both projects and operations. Our view is it’s not just a cost and technology consideration, but a ‘mind-set’ on rethinking operational processes to maximise the value proposition.
Engenium’s team of specialists would welcome the opportunity to discuss how we can add value to your existing assets and future projects through renewable energy alternatives.
Business Development Manager, Perth WA
Engenium Pty Ltd