Renewables and Mining Summit explores energy options
Over 250 delegates from five continents attended the Renewable Energy and Mining Summit in downtown Toronto September 25 and 26. The summit brought together mining industry people who are responsible for procurement and planning of energy services with representatives from the renewable energy sector who develop energy projects.
The gathering was a bit like an engagement party for an arranged marriage with those present burdened with apprehension about whether or not the prospective bride (renewable developers) and groom (mining sector) could actually get on with each other. Bay Street financial analysts and investment companies assumed the roles of ‘the parents’ nervously overlooking proceedings.
In fact, the summit was all about business, the business of supplying energy to mine operators at lower costs than at present. It was also about exploring the potential for a new, non-utility market for the renewables sector.
Those representing the mining ‘side of the family’ on the various discussion panels seemed quite open to the idea that over the past two decades, renewable energy technologies have improved substantially such that many of the former criticisms about them are now untrue.
They are no longer that expensive, their reliability has improved significantly and the technologies have been proven at various scales and in diverse environments.
The miners were looking for energy with lower cost and lower price volatility, irrespective of the source – renewable or non-renewable. Hybrid energy solutions such as wind-diesel or mine micro-grid solutions (renewable + conventional + storage) were reported to offer opportunities.
There seemed to be some consensus developed at the summit that for offgrid mines the levellized generation costs from renewables could be appreciably lower than the cost of electric power generated from liquid fuels, and could offer a more reliable electricity supply.
The other side of the family, the ‘renew crew,’ seemed to not quite grasp or couldn’t quite accept the miners’ statements that capital is very, very tight across the mining industry at present, and thus, the number of mine owner-operator opportunities for the renew-crew was potentially modest.
Enter the energy services companies with offers to facilitate the bringing together of the parties with buy, lease, lease back, rent, or even $/kWh supply contracts matched to mine lives, rather than the conventional 20 to 25-year lives of their equipment.
However, the wedding was nearly called off completely when someone on the bride’s side suggested that their financial backers may view a longish-term contract with a mining company as something less than an asset.
Although wind energy and solar energy are approaching, or have beaten, grid parity at certain locations with good natural resources, the discounted costs of electricity produced from renewable energy technologies are still capital dominated, in contrast to conventional technologies where the cost of fuel dominates.
Several participants at the summit pointed out that by working together, mining operators and renewable developers should be able to realize appreciable value in the renewable energy supply chain so that capital costs can be significantly diminished.
Liezl Van Wyk of Rio Tinto illustrated this point beautifully with her presentation about the $31 million Diavik Wind Farm project.
As many of the engineering design and construction skills required to bring off renewable projects successfully already exist within mining operators’ facilities, capital costs can be saved by doing some of the work ‘in-house’.
Ian Nelson of Energia Llaima and Hans Grydehøj of Sunmark reported on a solar electrolyte heating system supported by Codelco in an electrowinning plant in Chile. Together, they designed, constructed, operate, maintain and own the 39,300 m2 flat panel solar heating plant for which they receive a fixed $/MWhth amount for energy supplied over 10 years. Energy procurement risk is substantially reduced for the mine operator with this type of deal.
Kevin Smith of SolarReserve also impressed with a concentrating solar thermal-to-electricity system that could operate with a sustained output for 20 hours each day with use of a heat store for “low teens” of cents/kWh. The quiet heroes of the summit were the team from Rame Energy Ltd. (http://www.rame-energy.com/). It was this Plymouth-based, UK SME that had big enough cojones to design, construct and commission the mining industry’s first three utility scale wind cluster projects at Veladera (2007), El Toqui (2010) and Punta Colorada (2011). Today, at over 4,100 metres above sea level, Veladera remains the world’s highest wind turbine.
Last time I looked in my renewable energy textbooks, hydroelectric power plants were classified as a form of renewable energy and the number of mining companies investing directly in the construction of hydroelectric plants to support their operations is appreciable. So the idea that renewable energy and mining can marry for mutual benefit is not a new one at all. Payback times for hydroelectric plant are long, IRRs are low and NPV/CAPEX ratios are low too, demonstrating the importance of resilience to electricity price volatility to mining companies. However, what was apparent from this summit was that new technologies are emerging that offer similar benefit with potentially improved financials and that more imagination is being used to think about the financing of these projects.
Dean Millar is MIRARCO Research Chair of Energy in Mining, Bharti School of Engineering, Laurentian University.
Tagged Bharti School of Engineering, Chile, Dean Millar, electricity supply, energy, Energy procurement risk, energy projects, energy technologies, Hans Grydehøj, Ian Nelson, Kevin Smith, Laurentian University, mine micro-grid solutions, mine operator, Plymouth, Rame Energy Ltd., renewable energy, Rio Tinto, Thermal-to-electricity, Van Wyk