African Mining Firms Pursuing Renewable Energy Partners

An interesting trend is taking hold within the traditionally conservative and closed African mining industry: They’re discovering renewable energy.

While reducing electricity costs has become a major strategic goal for the Africa’s mines, most have not traditionally been considered sympathetic to renewable energy.

“They’re all very conservative, so when mines hear about solar or wind, their first reaction is ‘that’s variable that sounds risky, so if my existing system works why should I change,’” Peter Asmus, principal research analyst with Navigant Research told AFKInsider. “But that’s changing and there is a lot of interest now in mines, but it’s just starting to happen.”

Since mining operations depend on steady electricity supply – in some cases running 24 hours, some experts see a boom in joining the two industries ahead for 2015.

Renewable investment by African mines expected to be between $600 million and $1.1 billion by 2016.

A Dec. 3 study from Munich-based consulting firm THEnergy indicates that solar-diesel hybrid systems are a big part of that boom, as are the “distributed energy” mini-grid systems used to dispense the electricity from diesel generators throughout the mining sites.

According to figures released Dec. 22 from Navigant Research, worldwide investment in microgrid enabling technologies is expected to total more than $155 billion through 2023.

In fact, the role of renewables in solving mining energy challenges is gaining traction at major annual mining conferences in Senegal, DRC, Zimbabwe, Zambia, Rwanda, Cote d’Ivoire and Mauritanian, which are including more and more sessions related to renewable energy.

To support this move towards renewables, the online platform Renewables and Mining launched a database in October that helps mining companies to hook up with renewable energy players already experienced in such projects. For renewable energy companies, the platform is a source of who the progressive thinkers are in the mining industry.

The irony is that the renewable energy industry depends heavily on many of the metals and minerals miners extract, including copper and silver.

An Evolution

As demand for mineral resources rises, mining companies are under increasing pressure from governments and stakeholders to operate in a sustainable manner.

“Commodity prices are low, and when commodity prices are low mines don’t want to invest in anything new,” Peter Asmus told AFKInsider.

But according to a Dec.15 report from Ernst and Young, price volatility, productivity and access to capital are weighing heavily on mining executives going into 2015. From Jan. 1 through Dec. 1, commodity prices have fallen dramatically, with iron ore down 47 percent, thermal coal down 25 percent and copper down 12 percent.

Nevertheless, as solar and wind prices have fallen dramatically in recent years, mining companies like Barrick Gold, Rio Tinto and Glencore have recognized renewable energy as an economically attractive respond to increasing energy costs, especially at remote mining sites.

Diesel electric generators has always been the power source of choice in remote mining regions, but increase costs of fuel and transportation of the fuel has impacted the bottom line of these mining sites where energy amounts to an estimated 30 percent of operational costs.

Replacing or supplementing those costly generators with renewable power is attractive since it is estimated that wind and solar energy is roughly 70 percent less expensive than electricity from diesel – even though the precise amount of diesel fuel consumed is not often disclosed.

“It’s very difficult to get data,” Asmus told AFKInsider. “Mines don’t like to talk to anybody; they’re worried about someone scrutinizing how they’re treating their employees, their pollution levels.”

Even African mining operations with power grid-connections are dealing with the uncertain energy supplies due to regulatory changes and price increases and are looking to lock in long-term fixed electricity prices and supplies. This is especially true in countries where the state-owned electric utility is a monopoly and mining firms don’t have any competitive options. The mining industry’s dependence on large amounts of energy can also be a significant drain on the fragile grid infrastructure in countries where mining represents the bulk of their gross domestic product, increasing the risk of power blackouts.

Untapped Market

Remote mines are well suited for renewable power because they already enjoy the crucial land for small solar and wind turbine farms. But one holdup to financing is that the investment for solar or wind projects are normally made when a mine is being developed, which can take years before it is actually operation and needs the electricity.

One way around that large upfront expenditures on solar or wind is to do what residential and small businesses do: seek out developers that are willing to invest through rental or power purchase agreements that allow miners to pay for power over time.

Today, a growing number of solar companies and investors see the mining industry as an untapped market for new renewable rental and power purchase agreements.

And the rental model works nicely with the latest trend in the African market of solar-diesel-hybrid power plants, which combines the technologies of the existing diesel generators with “added-on” solar or wind power systems.

“And once you add solar to diesel, you’d probably need a more sophisticated control system,” Asmus told AFKInsider.

The Dec. 3 report, Solar-diesel-hybrid power plants at mines: Opportunities for external investors from Munich-based renewable industry consulting firm THEnergy lays out several solutions of mitigating the risk to external investors, including mounting solar panels on sub-structures to reduce the costs of dismantling the panels and reinstalling them at a different location.

An earlier March 2014 report, Sunshine for Mines: Implementing Renewable Energy for Off-Grid Operations, from Carbon War Room and the Johns Hopkins University School of Advanced International Studies notes the use of solar-diesel hybrid systems should be a key focus for “various industries where such systems can be used, and the solar industry itself, as these systems show the greatest potential for developing the market for solar energy technologies” and “generally increasing solar’s economic competitiveness in a global market.”

While deploying solar hybrid systems to supplement existing power sources can help mining companies tackle their power challenges during the day, combining solar with wind power at the same site can also decrease the power “intermittency” problem at night while extending the life and decreasing the maintenance costs of diesel generators even further.

“So, it’s a promising market, but most mines are sort of waiting for someone to go first and prove that you can integrate the solar and wind with diesel,” Asmus told AFKInsider.

Several mining companies in Africa have initiated pilot projects to assess the practicality of renewable energy.

“If you look at IAMGold, they have put solar panels in South America and they’re looking at putting solar panels in Bukino Faso,” Benoit La Salle, Canadian-based Windiga Energy’s President and CEO told AFKInsider.

Toronto-based IAMGOLD is currently assessing solar options to help power their Essakane mine in Burkina Faso where energy represents nearly 25 percent of their costs and African Barrick Gold, which has three gold mines in Tanzania, is exploring the possibility of using solar energy for its Bulyanhulu mine and

Australia-based has been experimenting with solar and wind in other countries and is considering deploying renewable energy at its African locations as well.

“Rio Tinto is trying to be as green as possible in the mining sector,” Alexander Ochs, director of the Climate and Energy Program at Worldwatch Institute told AFKInsider.

Canadian-based Windiga Energy announced Oct. 22 it signed a 25-year “power purchase agreement” with the National Electricity Company of Burkina Faso (SONABEL) for a 20 megawatt solar power plant in Zina located in the Province of Mouhoun.

“The solar project we have in Burkina Faso goes to the grid, but we know some of the energy is going to be sold right back to the Mana mine,” Windiga Energy’s President and CEO La Salle told AFKInsider.

The Mana gold mine is operated by Canadian-based mining company SEMAFO.

“When we originally put the solar project together, I worked as CEO of SEMAFO and that’s why we put this project together, so it could service the local community and also the mine could buy some of the energy,” La Salle told AFKInsider.

Some noteworthy pilot projects have also popped up in South Africa, including a solar-diesel hybrid electric plant that supplies 60 percent of the energy for Cronimet Mining Power Solutions’ chromium ore mine in Thabazimbi, and the Anglo American Mines PV Project in Mpumalanga.

In fact, when the mining sector and the global renewable energy industry met in South Africa during the June 2014 Renewables and Mining Summit, the conference drew AngloGold Ashanti, African Rainbow Minerals, Gold Fields, Anglo Platinum, ArcelorMittal South Africa, Anglo American, Cronimet Power Solutions, PPC Ltd., and REVINSAMB Mineral Mining Holding.

While renewable energy may be strictly an economic decision for mine operators, it has its environmental and social perks.

According to the THEnergy, though renewable energy can be an important part of improving energy costs at mines, it also “sends a strong signal of forward orientation, progressive management and corporate governance.”

It is also about legacy: When the mine runs dry, the mining company could leave the renewable energy infrastructure in place as a “thank you” to the local community.