2. 2
01/2012
Presentation topic
• Introduction to Renewable Power in Remote Mining
• Industry Trend
• What are the Challenges and How to address them
– Acceptability (Management Buy-in) – RP not core business to mining
company
– Significant upfront costs
– Project Risks - Technological and Delivery
– Wind and solar power variability
– Operating hybrid power (Operator Buy-in)
• Conclusion
3. 3
01/2012
Introduction – RP at Remote Mining Sites
Mining Project Cost
• Energy represents 25% of mining project CAPEX
• Energy represents 25% of OPEX
• Diesel, HFO, … cost : 30+ cents/kWh
RP - Proven technology - Excellent track record
• Wind (20 years), Solar PV (10+ years)… Hundreds of GW installed
• Reliable, High availability, very small OPEX.
• Wind/Solar cost : 15 to 22 cents/kWh (with good resource)
• Potential 10% to 20% Reduction in net cost of energy
• Price certainty for 20 to 25 years
4. 4
01/2012
Continued – RP at Remote Mining Sites
OPEX:
• Genset (30+ cents/kWh)
• Wind OPEX (2 cents/kWh, no-fuel)
• Solar OPEX (1 cents/kWh, no-fuel)
RP - Clean energy and Long term saving:
• Reduce carbon emissions; Carbon Credits
• Sustainable development for the environment
• More saving above base case as fossil fuel cost increases
Investment needed for Renewable Power – CAPEX
– 10 to 50 million (2.5 M$ to 4.0M$ per Installed MW)
– Typical return on Investment around 7 years
5. 5
01/2012
Industry Trend – Looking for solution to reduce
energy cost
In Canada: Companies that have (or still) actively reviewed wind
or solar power for their project:
• BHP,
• Seabridge,
• Agnico-Eagle
• Xstrata Nickel,
• Advance Exploration,
• Teck Resources,
• Dominion Diamond Corp/Rio Tinto - Diavik mine 9.2 MW wind farm
in operation since September 2012)
Globally:
• Barrick Gold (15% of RP energy, wind, solar, Jatropha)
• Vale (Biofuel, moving to expand wind/solar/hydro power)
7. 7
01/2012
What are the challenges and how to address them
• Acceptability (Management Buy-in) – RP not core business to
mining company
• Significant upfront costs
• Project Risks - Technological and Delivery
• Wind and solar power variability
– Estimating the energy production at a site
– Power Integration – wind and solar power variability
• Operating hybrid power (Operator Buy-in)
8. 8
01/2012
Acceptability of Hybrid Power
• We find that it is necessary to engage with mining companies
at the management level and with the operators
– Explain the benefits
– Review the risks and address how to mitigate them and accept that it takes
time to change minds.
– Demystify renewable power… accept that it is a different way to produce
energy but fundamentally not complicated.
– Review the project cost structure and where cost overrun can occur.
– Review impacts on mining operation
– Avoid just presenting a bottom line, turn key solution (naïve approach!) as it
is important to engage the organization to have full ownership of the project
In short it is not simply producing wind or solar power
• Renewable Power will progressively become a must to reduce
cost of energy and to meet reduction in carbon foot print.
9. 9
01/2012
Upfront Costs – Business model
• A 10 MW wind project can cost about 35 M$
• Annual fuel cost saving 5 millions
• Simple pay back 7 years
• Mining company can invest for long term benefits or ask a
third party to develop the wind farm and enter into a Power
Purchase Agreement at a fix energy price, say 20 cents/kWh
for 20 years.
• The PPA would be much different than a PPA with a utility
10. 10
01/2012
Power Purchase Agreement
Mining Company (MC) and Energy Producer
• Risk Sharing
– Mine closure risks (MC otherwise project not bankable!)
– Energy produced curtailed by mining company (MC above threshold)
– Energy production below expectation (No penalty, shared risks)
– Mining company seeks energy price certainty (pay higher price to lower
risk)
• Cost Sharing
– Maximize cost sharing by using existing mine resources
– Mining Company extend Energy Producer credit in case of long outages
(minimize insurance cost)
• Survival
– Force Majeure, MC buys back wind or solar farm.
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01/2012
Project Risks - Technological and Delivery
• Specific to Nordic Climate
– Operation needed at up to -40 °C (average temp. – 30 °C for 3 months)
– Blade De-Icing Systems
– Logistic challenges (ice road, port availability, large crane, etc)
– Compensate for thermal heat reduction from diesel engine due to wind
penetration
• During construction, constrained logistic with other higher
priority projects
• High cost of repair and loss revenue of major equipment failure
12. 12
01/2012
Wind and solar power variability
Estimating the energy production at a site
• Mesoscale study based on available data – go/no-go
• For wind power, installing a 60 m to 100 m MET tower, collect
data from 1 to 3 years.
• Feasibility study after one year (go/no-go)
• For Solar, typically work with satellite-derived data.
• Uncertainty on energy assessment decrease with the number
of year of measurement… after one year typically 12%
uncertainty to one sigma for wind, 5% for solar.
16. 16
01/2012
Wind Resource in Canada 2012 – 45 m
• Excellent wind
resource in
Nordic Canada
• Micro-sitting at
70 m yield
better wind
speed
• Wind power
higher during
cold season
17. 17
01/2012
World Solar Resource
• Excellent solar
resource in
mining areas:
• Nevada
• Chili
• Mauritania
• Tanzania
• South-Africa
• West-Australia
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01/2012
Wind and solar power variability
Power Integration – wind and solar power variability
• Grid stability
• Fault Protection
• Control Room Upgrade
• Dump Loads (Excess Wind/Solar energy)
• Trained operator to carefully operate the hybrid power plants
– Properly manage spinning to maintain grid stability (Mvar, Voltage and
Frequency
– Use the Genset spinning reserve and ramp-up and ramp-down capability to
maintain the grid stability.
• No need for Energy Storage for low penetration system
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01/2012
Typical normalized wind power production over
one month period
•Size wind farm to maximize revenue and minimize energy losses
•<20% low, <50% medium, < 150% high penetration
•Ratio of annuel wind energy to genset power generation
23. 23
01/2012
Conclusion
• Renewable Power can reduce cost of energy in remote mining
operations
• Provide energy cost certainty for 20 years
• Saving increase as fuel cost increase over the 20 years period.
• Mining company should have ownership of the project from
Management to Operators.
• PPA (Power Purchase Agreement)
– Yes but need shared risks, shared cost… all risk can not be
transferred to the IPP (Independent Power Producer)
• In the near future, High Penetration system with Energy Storage
will lead to 50+% saving… need to be considered seriously
