Photo Credit: Shutterstock.com
South Africa’s Energy Minister this month urged mining firms to embrace renewable energy, even though a growing number of companies are already on board.
Jeff Radebe said renewables could offer greener electricity at lower cost than grid supplies from South Africa’s troubled state utility Eskom.
Radebe has come under fire in South Africa for his family ties to billionaire Patrice Motsepe, who owns a renewable energy developer called African Rainbow Energy & Power.
Accusations of cronyism aside, the reality is that mining companies are increasingly adopting renewables of their own accord.
This month alone, the uranium miner GoviEx said it was planning a solar plant in Niger, Lion One Metals announced a PV-diesel hybrid at a Fiji Islands gold mine, and Gold Fields unveiled plans for a solar-plus-storage installation in Australia.
According to a paper this month from the renewable energy firm Voltalia and the German consulting group THEnergy, there could already be close to 80 megawatts of mining-related wind and solar capacity installed and announced in Africa alone.
Globally, the Rocky Mountain Institute (RMI) Renewable Resources at Mines tracker lists almost 1.2 gigawatts of capacity installed across 41 sites, and a further 714 megawatts announced.
Admittedly, these figures are still tiny compared to total energy consumption across the mining industry.
A report last December by the Columbia Center on Sustainable Investment (CCSI) notes that the sector could account for anything between 1.25 percent and 11 percent of total global energy demand, depending on which downstream activities are included in the assessment.
On average, 62 percent of this energy comes directly from burning oil, gas and coal. A further 35 percent comes from the electric grid, which in areas of high fossil fuel generation could contribute significantly to mining company carbon emissions.
The CCSI study claimed mining-sector energy consumption is due to increase by 36 percent in 2035, as demand for minerals grows and remaining ores become more difficult to extract.
Renewables win out on cost
The question facing mining operators is whether this increased energy demand should be met with traditional generation or renewable sources. For an increasing number of companies, renewables are already winning on cost.
Energy can account for around 15 percent of mining costs, according to the CCSI report. This level can rise to 40 percent in metal mines. Where fossil fuels are involved, this cost can be quite volatile.
In 2017, for example, Aristotelis Mistakidis, the director of Glencore's copper business, wrote to state and federal lawmakers in Australia complaining about a 100 percent hike in power prices over the previous three years.
Trucking the fuel out to remote or off-grid locations can add to the cost and potential risk. Yet these conditions are fairly typical in several major mining nations, including Australia, Chile and South Africa, where there are also abundant solar and wind reserves.
Mining companies not only tend to have access to significant renewable energy resources, but also often operate in remote locations where there is plenty of cheap land for the construction of wind and solar plants.
There are other synergies, too. For instance, mining operations usually require a high upfront investment and remain active for a period of a few decades, similar to wind and solar plants. This was of little consequence while renewable energy generation remained expensive, but now the these two areas of the energy industry are starting to align.
The plummeting cost of wind and solar this decade has sparked growing interest in their use in mining operations. THEnergy believes mining companies can now save up to 30 percent of their energy costs by switching to renewables.
As wind and solar prices continue to fall, the business case for deploying renewable energy plants on mines is improving. The mining sector’s appetite for renewables is closely correlated to this cost reduction.
RMI’s figures show that less than 11 megawatts of mining-based wind and solar capacity was installed before 2010. The level has increased more than a hundredfold in the last eight years.
And the amount of announced and commissioned capacity grew by almost 58 percent between 2017 and 2018. Furthermore, the RMI figures only account for plants owned directly by mining companies, not renewable energy power-purchase agreements.
A new market driver: Carbon pricing
Dr. Arnoldus Mateo van den Hurk Mir, general manager of the Renewable Energy and Mining International Observatory, believes this is still only the tip of the iceberg when it comes to the intersection of renewables and mines.
To date, most mining companies have simply viewed renewable energy plants as a cheap and handy alternative to having a grid connection, he said. In other words, renewables are mostly being used to complement above-ground electricity supplies.
Below ground, however, mining still relies extensively on fossil-fuel plants. And the vehicles used in mining, from crew buses to land movers, are all petrol- or diesel-based. Both areas offer massive scope for cost reduction through electrification, said van den Hurk.
Cutting energy costs is an obvious reason for mining companies to embrace renewables. And being able to avoid future price volatility in fossil fuels is an added attraction. But increasingly there is a third financial argument in favor of renewables: carbon pricing.
A 2017 note by Energy and Mines stated that carbon pricing developments in mining nations such as Canada, China, Chile and South Africa were giving mining companies an added incentive to invest in renewables instead of fossil fuels.
Companies including AurCrest Gold, Barrick Gold, Glencore, GMA Garnet, Goldcorp, Gold Fields, IAMGOLD, Kirkland Lake Gold, Tata Steel, TMAC Resources, Vale and Vedanta Resources had put cash toward renewables and electrification as a result, it said.
Mining giants are further drawn to carbon mitigation measures through a need to be seen as good corporate citizens, said van den Hurk. The mining industry carries a dirty image and yet relies on positive stakeholder relations to secure valuable concessions, he told GTM.
A shot at redemption
The mining sector could also struggle to attract new workers unless it can demonstrate increasing societal value. The fight against climate change offers mining companies a shot at redemption, said van den Hurk.
Companies digging minerals out of the ground could potentially claim they are delivering the metals needed to combat global warming, through the technologies these materials go on to create (batteries, for instance).
Such a narrative has to be backed by actions, though, since the environmental and social concerns leveled at mining groups are frequently well founded.
In the Democratic Republic of the Congo, for example, artisanal cobalt miners “work under extraordinarily oppressive and difficult circumstances,” said Loudon Owen, chairman and CEO of DLT Labs, which is working on a blockchain scheme to improve conditions.
Hence, the industry has a strong incentive to clean up its act. Cutting carbon emissions is seen as a high-profile step in this direction. And it has an added attraction if companies can reduce energy costs in the process.
Growing awareness of this fact is leading to a sea change in how mining companies view renewables, van den Hurk said. Just over a year ago, economics would have accounted for around 75 percent of any mining company’s decision to invest in wind or solar. “Now, there are mines where 50 percent of the motivation is economic and 50 percent is [related] to the carbon footprint,” he said.
Dr. Thomas Hillig, of THEnergy, agreed. “There definitely is pressure regarding sustainability,” he said.
Until recently, he claimed, mining firms would have to see at least a 15 percent to 20 percent savings to swap from fossil fuels to renewables. Now they are likely to take renewables seriously just as long as the price is the same, he said.
Cleaning up the supply chain
The pressure to move to more sustainable energy sources is not just coming from mining company commitments, said van den Hurk.
The businesses that rely on mining for prime materials, including tech giants such as Apple, are also being pressed to show sustainable supply chains.
Powering operations with renewable energy potentially gives mining companies an excuse to charge a premium for the materials fed into these supply chains, while at the same time helping attract environmentally and socially responsible investors.
All of this gives mining giants yet another motivation to eliminate fossil fuels.
It may have taken mining executives a while to look up from the ground and see what is going on in the world of wind and solar, said van den Hurk, but now they are starting to realize that “in 40 years, 90 percent of energy will be renewable.”
And they don’t want to be left out.