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Renewable Power at Remote Mining Sites

Michel Carreau, Ph.D.,

CIM, May 8, 2013

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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

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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

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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

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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)

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Market Outlook of RP in the Mining Industry

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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)

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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.

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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

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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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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

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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.

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Win

d M

ET

To

wer

Hatch

• 60 m MET tower

• Wind turbine as power

supply to instrument

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Hatch in remote area

• 60 m MET tower

Wind and solar as power supply to instrument

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Arctic conditions

• Heated anemometers

needed

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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

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World Solar Resource

• Excellent solar

resource in

mining areas:

• Nevada

• Chili

• Mauritania

• Tanzania

• South-Africa

• West-Australia

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Typical normalized wind power production over

one month period

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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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Typical normalized energy load for remote

community over one month period

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Typical normalized energy load for mining site

over one month period

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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

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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