An on-site source of power offers miners the chance to keep control of their operating costs through wavering energy prices and changing market conditions
By Carly Leonida, European Editor
The term “on-site power” covers a multitude of different options. From mobile, diesel-powered gensets to hybrid microgrids and owned and operated solar plants, there are technologies available to suit every site and budget. The endless potential setups and combinations also allow solutions to be tailored depending upon the specific business drivers and goals of each mining company. All that is needed is a little expert planning.
“On-site power encompasses any and, in some cases, many, forms of technology that allow a facility to generate its own power. Whether that’s electrical power or thermal or some combination of the two,” said Justin Schnegelberger, manager of development engineering at Burns & Mc- Donnell’s Energy Group. “Typical generation technologies like gensets can be a component of that but, as you start getting into the specifics of the facility, and as those vary from site to site, that can change significantly. So, it could be generators, it could be larger reciprocating engines, you could be looking at combustion turbines. Of course, you can throw renewable energy sources into the mix and some types of biofuels as well.
“There are a lot of different considerations. Really, it’s a case of drawing a box around the facility and understanding its needs and energy inputs, and then matching those up with potential generation technologies.” Of course, grid connections can also play a part in that energy supply mix; a mine doesn’t need to rely fully on an onsite power supply. In many cases, on-site power plants, or microgrids, are used to backup unreliable grid connections or to supplement grid power during times of high loading or unfavorable pricing. By choosing to incorporate an on-site source of power, mines are able to gain a greater degree of autonomy over their energy supply; something that is infinitely valuable given the amount of uncertainty operations are likely to face over their life of mine.
Why Opt for On-site Power?
But before we delve into different technologies and their drivers, let’s look at some of the concerns that are driving mines towards these solutions in the first place. Schnegelberger’s colleague, David McLane, mining projects manager at Burns & McDonnell, explained that cost is one of the leading concerns they see from mining clients. “In the exploration phase of a mining project, it’s usually acceptable to have a higher cost for temporary power as you evaluate the property and before any large capital outlays for power infrastructure,” McLane said. “But, even early on, the cost of power is a large driver for project economics from the prefeasibility level all the way through execution of the project.”
It’s rare for mining power costs to comprise less than 15% of the overall project cost and, in some cases, it can be as high as 40%, so energy supply options can be a deciding factor in whether a project gets the go ahead or not. Availability and reliability of power are also key concerns as they link directly to safety; halting mobile or fixed assets mid-operation and without warning can endanger people working in the vicinity. Some surface and most underground mines have backup power, but that doesn’t cover everything, only the essentials like ventilation and pumping equipment.
“You’ve really got to be careful with ventilation and restarting fans,” cautioned McLane. “It’s easy to stall them out. Critical pumping items as well… any large fixed infrastructure items that go down quickly or often can cause major concerns.” And speaking of fixed infrastructure, if mills shutdown unexpectedly when full of rock, it can be very difficult and costly to restart them. The power draw required is phenomenal and there can be signifi- cant implications for revenue and maintenance costs or even loss of product. The shutdown of complex processes mean that power outages can cost mines upward of a million dollars a day.
The Tolerance Factor
Miner’s tolerance for power supply issues varies widely depending on the location of their operations, available infrastructure, and the reliability and quality of their power supply. But, regardless, interruption of power supply can seriously impact an operation, from critical processes all the way through the supply chain; intermittent and inefficient operations are rarely profitable ones. McLane said: “When talking about different localities, whether it’s how remote these mines are or which country they’re located in, it definitely plays a role in how mining operations are going to plan for this. When companies are operating in an environment with less stable power, they’ve got to plan for that and allow their working days to reflect that in the cost of mining. “Most mining operations are run yearround, 24 hours a day. It’s very seldom that a mining operation is shut down, and realistically, they can’t be shut down often. You at least have to have a skeleton crew on the site to man critical pumping and power operations. “When evaluating the economics and cutoff grades, it would be typical to see mines with less reliable power operating 340 or 350 days a year, whereas those with a more reliable power source would plan for more.”
And power supply issues don’t just impact mining companies’ wallets; disruptions can also seriously affect workforce morale and retention. “Typically, compensation in the mining industry is tied to production and, as you can imagine, if a mine site doesn’t have reliable power, that can be pretty detrimental to the folks working on-site,” McLane said. “Which circles back around to the safety aspect. When you do have issues and lose production, it’s hard to get away from that push to make up production. Things can go wrong when you get into ‘hurry up mode’ on a mine site, which is something that mining companies should take into consideration when looking at power options.”
New Ground, New Technologies
With the majority of new mining projects being built in remote, harder to access locations and, with new technologies such as electric fleets in mind, many mining companies are looking to on-site power solutions as a way of securing their operations. “We’ve seen exploration and mining technologies advance over the past decade or so, but we are operating in more remote and challenging areas,” McLane said. “This technology is also allowing us to develop deeper mines that are more challenging to cool and heat. These are all challenges that rely on power.
“Also, we’ve seen a big push recently for electrification. As battery technologies advance, as manufacturers put out better electric mining equipment that can perform with the same capabilities of diesel equipment, that is also going to push more operations into looking at options for on-site generation.” Remote locations are a prime candidate for on-site power, but the combination of aging infrastructure (both for on-site generation and grid transmission) and greater pressure on grids in some long-standing jurisdictions is another key driver. “There comes a point where money has to be spent to either maintain that existing infrastructure or replace it,” Schnegelberger said. “When you’re looking at big capital expenditures to maintain and upgrade equipment, that presents a prime opportunity to look at introducing new generation sources and maybe going partly or all down the path of onsite generation, rather than just spending money to maintain what is already there.”
McLane added: “Mining is very much a global business. A lot of mine operators operate in multiple countries in different environments. And it’s not just the capital cost or the operating cost for these operations that concerns them. It’s the variability in cost as well. “When mining companies are operating in areas where they are unsure on the reliability, they do take that into consideration. Although it might mean higher capital costs upfront, in the long run we do see that variability — being able to project what type of power reliability mines are going to have in the future — goes a long way. It can defi- nitely persuade them one way or another.”
Thorough Evaluation is Key
Schnegelberger explained that the first step when investigating on-site power as a potential supply option, is to properly assess and understand the unique drivers for a given site or facility. “Those include the expected life of the facility, what the operation looks like, whether it needs electrical and/or thermal power, and really understanding what the key drivers are,” he said. “From there, we would identify potential generation technologies, whether those are fossil fuel based or renewable, and look at how those options fit the needs of the facility.
“Things such as cost, environmental considerations, reliability, availability, water usage, fuel consumption goals, all of those aspects need to be evaluated to put together an overall picture on what specific generation options look like from an overall lifecycle cost standpoint. “Then we home in on the options that make the most sense for that facility as it moves through the development process. This is especially important when it comes to larger on-site generation options, because mining companies may not be interested in taking on ownership or operation of a power generation facility.
“So, we also look at alternative structures that will still allow them to meet their power requirements, but not necessarily have to assume the entire burden of the project cost and operation. For example, by incorporating partnerships with utilities or other independent power producers (IPPs) that could own and operate those facilities and sell the energy to the mine site.” There are other considerations that play into that, too, like identifying the right types of partnerships, and if there are opportunities for whoever owns or operates the facility to upsize the project or make it more cost effective for the mine, potentially with excess generation being sold back into the utility power grid.
“Initially, assessment is about taking a look at what the facility needs, but then looking at the bigger picture too to see if there are opportunities to make the project more viable for all parties involved,” Schnegelberger said. “Mining companies also take their social license to operate very seriously,” Mc- Lane added. “It’s important when consultants are looking at solutions for individual sites, because we do have the opportunity to present some of these larger power generation projects to companies, to factor in where they can add value for local communities. Particularly in areas that don’t have reliable power or accessibility to power. “Mining companies have the opportunity to work with utilities and communities to establish that, and often they can leave that area much better off than they were from a power standpoint.”
Schnegelberger pointed out the social license piece plays back into miner’s sustainability and decarbonization efforts. “Everybody is feeling the pressure to go with greener technologies, and some of these remote locations lend themselves well to the integration of renewables,” he said. “Again, it all comes down to finding the right fit. The cost and economics are the biggest deciding factors.” McLane jumped in: “I have seen more push towards renewable energy in the mining environment, coming from a couple different points of view. One being, mining companies own a lot of land, and I’ve seen power generation from renewables on mine sites, but also offsite. “For example, the company might be putting in renewable energy installations elsewhere on their land as a way of reducing the overall carbon footprint from their mining operations.
“On the actual property, it might not make sense, but they might have an exploration property where they have a great area for hydro or solar generation. I think that trend will continue to increase as a lot of renewable power sources come down in cost.” “I agree,” Schnegelberger said. “I think everybody’s probably seen forward- looking cost curves for renewable technologies. All of those are becoming more prevalent and cost competitive. “Five years ago, what may not have made sense from a renewable energy point, might make sense now... It’s not the same environment that it was five years ago or that it will be in five years from now. That is having a big impact on the viability of renewable technologies in specific applications as costs continue to decrease.”
Building a Business Case
To learn more about renewables and how they can contribute to on-site power solutions for mines, E&MJ spoke to Dr. Thomas Hillig, managing director of THEnergy. “The viability of renewables, from a cost standpoint, is linked to diesel pricing,” he said. “Seven or eight years ago, everyone was talking about solar power for mining, the figures were really good. But then the price of diesel fell, and nothing worked. Even though there was an investment case on paper, the people who were driving the decisions were in a pretty comfortable position. And there was no pressure on them. “During the past 12-18 months, we’ve seen a lot of pressure on mining decision makers to do something regarding renewables. Plannability and cost are very important for mine power supply. Whenever diesel contracts run out, then renewables become an option for cost improvement.”
Renewable technologies require a different investment model than more traditional sources of mine power. Technologies like diesel gensets and coal fired power plants require greater OPEX, factoring in the cost of diesel or coal. While for renewables like wind or solar, the business model is very much CAPEX driven. Companies must lay out for the generating equipment and storage capacity, or, in the case of power purchase agreements (PPAs), pay the electricity bill for the contract period upfront. Equipment warranties are generally in the region of 20-25 years, and there are very few associated operational or maintenance costs.
While the upfront cost for an onsite renewable solution can be staggering, in the long run, mines are distancing themselves from uncertainty in diesel or coal prices, and also the impact of regulations on carbon emissions. The feasibility of such a long-term investment depend very much on the life of mine, its resource base and how long the mining company is willing to commit to a contract. “Is that mining company in a position to sign a 20-year contract?” Hillig asked. “In some jurisdictions, you even have to put the power purchase agreement (PPA) on the balance sheet with commitments that are this long. There are no early exit clauses in these contracts. It’s very different to committing to a two-year diesel supply agreement. If you don’t use diesel you can store it. You cannot store solar electricity in the same way.
“The downside of technologies like solar is that it takes away some of the mining company’s flexibility,” he explained. “On the other hand, if there are no significant interruptions, the business case is very favorable. For example, for an offgrid mine in Africa, payback time can be four or five years or even less. “If a mine experiences a significant interruption to operations, for example, due to a pandemic, it’s not the end of the world if it loses 2-3 months of prepaid solar generated electricity. “If you want to build a 15-megawatt solar plant in say, Africa… not too remote (very remote locations carry extra logistics costs), pricing would be in the range of 4-6 cents per kilowatt hour (kWh) if you use the equipment fully over its lifetime. Compared to electricity prices from diesel that’s very low.
“Even if you only use the equipment for five years, you would have a price of roughly 12-15 cents. Which is still very competitive.” There are also leasing options for mobile (containerized) solar plants, but these tend to be more expensive because the equipment cannot be utilized as fully — the price depends on the internal calculation of the renewable energy IPP and the expected lifetime of a mine. “With mobile options there’s a plan B if operations at a particular mine do not continue or, if a PPA is not signed or prolonged, then they have the theoretical option to relocate the solar plant. However, there are not that many projects out there to relocate to,” Hillig stated. “Right now, committing long term is difficult for mining companies. It’s the solar business model that is not fully compatible with the mining business model really.”
Risk Versus Reward
Solar is the most widely applicable onsite renewable option for mines at present and, when it comes to experience with the technology, there are two markets that are leading the way: Africa, with the exception of South Africa, because most of the mines there are grid connected and there is still no legislation to allow IPPs to sell electricity through the grid to mines. And the other is Australia, particularly western Australia and Queensland.
Because humans like to err on the side of caution, every renewable installation thus far has been a hybrid plant incorporating both diesel and solar/wind/hydro power to guarantee supply in all scenarios. “Almost all the projects we see at the moment are pretty basic,” explains Hillig. “They mostly do not have storage and the diesel always runs as a backup. So, diesel at a low load provides spinning reserve in case, for instance, a solar area is shaded during the daytime; the diesel engines don’t have to be switched on, you just ramp them up to fill the deficit.
“The next step would be to add a little bit of storage and say, okay during sunny days, or during daytime, you switch the diesel gensets off and the storage is a bridge to back up. If the solar area is shaded, then storage is used for a couple of minutes to provide a buffer for the time that you need to restart the diesel gensets. “The next step, which we don’t see in mining at the moment, would be to add significant storage and run a mine 24 hours on renewable energy. To get there, you have to have 24 hours of energy supplied to a mine through solar or wind storage. It’s a question of price and also seasonality. If you are in areas where, if you have plenty of rain and no sunshine for a couple of months, then you will always need backup gensets.”
The viability of the final option depends very much on storage prices decreasing in the future. It also requires a significant element of trust; for mines to de-risk such a setup they would still require diesel capacity on site to provide a fallback in case the solar plant or storage technologies fail.