Energy

Eskom forces South African miners to go green

Eskom’s failure to meet the country’s electricity demand has significantly impacted South Africa’s mining companies, which are increasingly turning to alternative energy solutions.

This is according to Crawford Dougall CEO Simon Dougall, who said that to stay alive, miners are being dragged into the renewable energy business.

“South African mines are faced with a major challenge of how to keep their operations running during rotational load-shedding and blackouts, the response to which has far-reaching implications,” he said.

He explained that energy usage accounts for 30% of total cash operating costs for most mining companies. 

In South Africa, electricity tariffs have surged by 650% since 2007 – four times the increase in inflation. 

Renewables are cheaper in comparison and can reduce miners’ operating costs by 25% in existing mining operations and up to 50% for new mines. 

“By not investing in renewable energy, mines risk being left behind by their competitors as they slide up the cost curve of ever pricier and unpredictable electricity supply,” he said.

The Minerals Council of South Africa estimates that 100 renewable energy projects worth R150 billion are currently in the pipeline in various industries in the country. 

Mining companies alone are poised to invest $3.8 billion (R70.56 billion) in renewable energy projects, with 585 MW of solar projects either in the planning stages or already operational.

However, investing in renewables comes at a high initial financial cost and increased operating risk for the miners.

“While it makes sense to strive for greater energy independence, the addition of renewable energy resources to a mine’s operation represents a significant change to the mine’s fundamental business activities,” Dougall said.

“It poses the question of whether independent power production is now a core function of a mine’s operation activities.” 

“And if so, are mines responding to the change in their risk profile correctly in terms of managing the risks of a new type of hybrid mining/energy business? It demands a disparate skill set.”

He said this means “the way we think about a mine has to change”. For example, from a scale of operations perspective, solar installations are typically significant in size. 

The Lephalale Solar Power Project, which provides about 30% of Exxaro’s Grootgeluck coal mine energy needs, is made up of 129,000 solar panels covering an area the size of almost 450 football fields. 

“This is a whole new paradigm of type and scale of operation,” Dougall said. 

In addition, from an asset value perspective, solar PV facilities that are being commissioned by mines range from 10 MW on the lower end to 80 MW and more, as in the case of Sibanye-Stillwater’s Rustenburg Platinum Mines Complex. 

To illustrate the risk this poses to miners’ operations, Dougall used the example of Barrick Gold’s 16 MW farm with Battery Energy Storage Systems to augment its Kibali gold mine Hydropower supply for the dry season. 

“Once completed, the mine will run solely on renewable energy for 6 months of the year,” he said. 

“This means that for half the year, one of the biggest risks to the mine’s continuing operations is its renewable energy facility. If the facility is inoperable, the mine’s production is jeopardised.” 

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