Mining companies accelerating renewable energy investments – BMI

8th August 2023 By: Tasneem Bulbulia - Senior Contributing Editor Online

Mining companies are increasingly adopting renewable energy solutions to reduce their carbon emissions, lower their operational costs and improve their energy security, BMI, a Fitch Solutions Company, says.

It notes that this trend will continue, in line with volatile global hydrocarbon prices and growing consumer and shareholder pressure to decarbonise operations.

Those markets that face ongoing electricity supply issues will see a noticeable uptick in mining-related renewable energy projects, particularly across hydropower-dependent sub-Saharan Africa, BMI avers.

It expects this trend will accelerate over the coming years as mining companies look to reduce their reliance on volatile hydrocarbon prices, adhere to growing consumer and shareholder pressure to decarbonise and mitigate ongoing electricity supply issues in key mining markets.

BMI says there are two main approaches mining companies are taking to increase their footprint in the renewable energy sector – entering into power purchase agreements with developers and utilities or installing on-site solutions to generate electricity themselves.

The renewable-sourced electricity is then used across mining operations, from buildings, and electrified equipment such as electric vehicles (EVs) and battery-powered machinery, to cooling elements to deal with the immense heat at underground mines, and power for smelting and processing plants.

According to BMI, energy is one of the most significant expenses for mining companies, accounting for roughly 30% of total cash operating costs.

Therefore, it highlights that the potential gains from reducing energy use by even a fraction can be considerable.

BMI emphasises that renewable energy can offer a cost-competitive alternative to thermal power energy sources.

It points out that the need to reduce energy costs has become an even more pressing issue for mining companies over the last 18 months amid elevated global hydrocarbon prices, underpinned by the Russian-Ukraine conflict.

While prices have eased from the highs seen in 2022, mining companies will remain exposed to hydrocarbon price volatility, which will continue to threaten profitability for miners going forward and drive the acceleration towards renewable energy development, BMI explains.

BMI says that as mining operations are often situated in remote and challenging locations, this makes electricity supply difficult to establish and maintain consistently.

Therefore, this lack of reliable power can considerably hinder mining operations, causing frequent outages and forcing a reliance on costly diesel backup generators.

By self-generating renewable electricity, mining operations can enhance reliability, decrease dependency on an inefficient grid, and bolster energy security, BMI highlights.

It acknowledges that while renewable energy is often linked to intermittency issues, especially for wind and solar technologies, the incorporation of energy storage systems and hybrid thermal solutions effectively could mitigate this intermittency risk.

Over the last year, chronic electricity supply issues in key mining markets in Southern Africa, including Zambia, Zimbabwe and South Africa, have negatively impacted mining operations and highlighted the benefits of a self-generated renewable energy supply or secure renewable energy power purchase agreements, BMI posits.

BMI cites authorities from the Minerals Council’s saying that rolling blackouts from South Africa’s State-owned utility Eskom’s incessant loadshedding have damaged mining infrastructure and threatened the safety of over 2 000 miners.

It adds that Anglo American Platinum revised its South Africa’s platinum group metals production outlook for the next two years, citing power outages as a contributing factor.