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Contract duration key to hybrid-power-for-mines investment case

The hybrid installation at the DeGrussa copper-gold mine in Western Australia

Alignment between a mine’s life and the tenor of a power purchase agreement (PPA) has been held up as the main consideration for those mining operations considering investments into hybrid power solutions, which combine renewable energy and battery storage with gas or diesel generators.

Speaking during a webinar on Thursday, juwi head of global initiatives Amiram Roth-Deblon said the business case for hybrid power systems was already compelling and would continue to improve as the cost of wind, solar and batteries declined.

However, he argued that timing such investments should be less dependent on tapping into anticipated further costs decreases, than on ensuring that the duration of the PPA was as long as possible, owing to the fact that mining, by its nature, was finite.

“In contrast to a utility-scale investment, where there is a 20- to 25-year horizon, a mine’s potential contract period reduces yearly, which can increase the power price by up to 25%. In other words, if only one year could be added to the PPA period, the renewable electricity could be 25% cheaper.”

Therefore, Roth-Deblon argued that it was advisable for those mines considering either offgrid or grid-linked hybrid solutions so as to save diesel costs and reduce carbon emissions, to make the investmen decision with an eye to the life-of-mine, rather than technology costs.

Nevertheless, he acknowledged that solar photovoltaic (PV), wind and battery costs were expected to continue to decline, which would dramatically improve the value proposition of further hybrid investments.

However, juwi argues that investing in solar PV and wind is already, in most cases, the lowest cost power solution for most mines, particularly those where there is not access to natural gas.

The company, which has invested $10.5-billion in building over 4 400 MW of wind and solar PV capacity since 1996, is particularly bullish about the prospect of deploying hybrid solutions at mines across Africa and Australia.

In 2016, juwi commissioned the world’s largest off-grid hybrid power plant at Sandfire Resources’ DeGrussa copper/gold mine in a remote part of Western Australia, some 900 km northeast of Perth.

The $40-million solution, which has been integrated with an existing 19 MW diesel-fired power station, includes a 10.6 MW single-axis tracker solar array, which covers the equivalent of 40 football fields, and a 6 MW/1.8 MWh lithium-ion battery.

Roth-Deblon reports that the system, which has a PPA of only five-and-a-half years, is delivering yearly fuel savings of 20% and has reduced the mine’s yearly carbon dioxide emissions by 12 000 t.

He says the potential to reduce electricity costs and extract fuel savings will continue to rise as the cost of solar panels, wind turbines and batteries, which are used primarily for system balancing, continues to fall.

However, he again stressed that, for mines, the key to hybrid power project success lay in making the duration of the PPA as long as possible.