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Renewable Energy as a Leverage for Mining Companies in Negotiations with Utilities and Diesel Suppliers

2015

The business case for renewable energy projects in mining is very positive, especially for remote locations. Nevertheless, the number of solar and wind installations that have already been built does not reflect this fact. In February, two major announcements triggered huge interest in the topic of renewable energy and mining. Sandfire Resources have declared their intention to build a 10.6MW PV plant at their DeGrussa copper mine in Western Australia. The project would be approximately 10 times as big as the largest existing pilot solar-diesel hybrid power plant in the mining sector. Just a week later, South African-focused Sibanye Gold announced plans to build a 150MW solar plant to gain control over their energy costs, which make up 20% of the total costs. It can be expected that this is only one step in a major shift toward renewable energy application in the mining sector. A recent THEnergy study has already given more factors beyond pure cost advantages, which are in favor of renewable energy. Among the most important are communication potential of the sustainability effects, avoidance of stigmatization, and positioning as a progressive company. The study shows how renewable energy can contribute toward increasing the shareholder value of mining companies. The new study at hand focuses on a more operational topic. Expert interviews have shown that many mining companies are not very satisfied with their electricity providers — as well as diesel suppliers in the case of remote off-grid locations that are powered with diesel gensets. In negotiations with their current suppliers they can use renewable energy as an excellent leverage. The study analyzes where the discontent with their utilities and diesel providers comes from, and examines how mining companies can use renewable energy best in contract negotiations.

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