Between capital markets’ drive for increased environmental, social and governance (ESG) investing, mounting investor preference for lower carbon producing assets, challenges around rising energy costs and resilience as assets become more remote, the mining industry is experiencing a paradigm shift.
One 2018 article estimated that the mining industry is responsible for 6.2% of all energy consumed in the world. As of 2014, 62% of that energy came from fossil fuels. Some reports estimate that the global mining industry alone is responsible for 4%-7% of global GHG emissions. For individual mining operations, the cost of this energy may make up one third of the total cost base. This expense is expected to only grow over time.
Investor pressure to move away from fossil fuels is huge. In addition many mines already operate in difficult or inhospitable environments. This is likely to become more difficult with even more extreme weather phenomena such as drought and record-breaking heat.
One strategy that any mining operation can use to reduce its costs and carbon footprint rapidly is to install microgrid infrastructure.
What is a Microgrid?
The U.S. Department of Energy defines a microgrid as, “a local energy grid with control capability.” In other words, a microgrid allows for a local area to control their own power supply and potentially separate itself from the larger grid.
During normal times, this small area is part of the electrical system and is managed by the utility power provider or in many cases diesel generation. In the event of a power outage,, either due to storms or other failures of the legacy power grid, a microgrid can allow a mine site to keep operating at full production while the surrounding area goes dark.
Two crucial elements of all microgrid systems are generators and storage. In order to provide power when disconnected from the grid, generators allow microgrids to create their own energy. When the microgrid is not in use, energy must be stored until it’s needed. Many systems also use smart technology to automatically transition from grid to microgrid energy whenever a dip in energy supply is detected.
Microgrids and Renewables
Microgrids can produce electricity using fossil fuels such as diesel or natural gas, but a growing trend amongst microgrids is to create electricity from renewable sources, such as wind or solar power. Renewable energy sources cannot be depleted or used up; unlike oil or coal, sunlight and wind will always exist.
Aside from reducing local carbon emissions, which has the added benefit of improving compliance with local environmental regulations, renewable energy sources also offer energy security. Energy security is a wide-ranging topic, but it is generally understood to be reliable, affordable, and consistent access to energy and energy services.
Any source of energy that comes from a source outside of the mining asset can potentially experience delays or uncontrollable spikes in price. The cause of these problems can be anything from international politics to bad days in the global markets. Mines in remote locations are particularly vulnerable due to potential transportation barriers. Microgrids that take advantage of local renewable energy can cut out all of those issues by enabling energy production at the point of consumption.
Another benefit of microgrids is the potential of “substitute industries” at mining locations where the desired resource has already been depleted. Rather than mining an asset with a finite life, microgrids offer depleted mines the opportunity to produce income again. With the addition of an array of solar panels or a small wind farm, a mining site can start to produce energy that it can sell back to the municipal grid. While this strategy may require additional costs, the cost of renewable energy infrastructure is expected to decrease over time. For example, the cost to store electricity in a battery may fall as low as $88/kWh by 2050.
Microgrids are an appealing option to mining companies for a myriad reasons, but they can be challenging to design, finance, and future-proof. VECKTA’s cloud-based market platform offers full, turnkey microgrid design and implementation solutions. Contact VECKTA today to learn more and begin planning how your company will adapt to a changing future.