PV powers resource sector

After numerous headlines and an expected boom for solar-diesel hybrid applications deployed at mining sites around the world, the development of this niche sector slowed for quite some time a few years back. This contraction of a fledgling industry was mainly driven by lower oil and diesel prices, which distorted many expectations – even though the business cases were still positive for the majority of large-scale remote mining applications. However, in the last few months, two off-grid solar diesel hybrid projects have made notable progress at a couple of large mines in Australia.
Sandfire Resources has recently signed a contract with the French IPP Neoen for their DeGrussa copper mine in Western Australia. German renewable energy specialist Juwi has developed the project and will provide engineering, procurement and construction (EPC) as well as operation and maintenance (O&M) services. Besides a 10.6 MW solar PV plant, the project will also comprise a 6 MW energy storage solution that will enable the diesel generators to be shut down during the day.
In addition to this development, the Australian resource company TNG has signed an inaugural memorandum of understanding (MoU) with an as yet-undisclosed battery manufacturer for supplying a vanadium redox flow storage solution to their Mount Peake project, which is located in the Northern Territory. The battery supplier will also be a vanadium customer of the vanadium-iron-titanium mine. In a second step, TNG signed a MoU with the renewables group Energy Made Clean (EMC) for constructing a solar plant and the storage system required to power the Mount Peake mining project.
Off-grid mines typically run on diesel gensets. Particularly in remote locations, electricity from diesel gensets is extremely expensive due to high transportation costs. Renewable energy can help to reduce this finite fuel consumption and improve the overall energy costs of mines. Although the mining industry has already seen a handful of solar-diesel hybrid projects realized, the majority of these have been deployed without storage backup.

Diesel’s shortcomings

In hybrid energy applications, storage allows for buffering electricity to balance the volatile output of renewable energy sources such as solar PV. When clouds cast shade over a solar array, the level of electricity production is affected immediately. Diesel gensets are not completely flexible and need a time to start up. If only diesel gensets are used to cover the energy loss, they have to provide a large spinning reserve. This means at the same time that the diesel gensets cannot be switched off and, in addition, that they are run below their optimal efficiency point.
To a rather small extent the diesel reductions from the solar power plant are lost again by using the diesel gensets inefficiently. Energy storage can assist as well in coping with reverse power and frequency issues. One of the main advantages of storage for hybrid systems is that it can increase the share of renewable energy in the power system considerably – up to the point that during sunny days diesel gensets are switched off completely. Then diesel is then only used to power the nighttime operations.
Both new projects in Australia show that storage is still in its infancy in the mining industry. The DeGrussa project is supported to a large extent by the Australian Renewable Energy Agency (ARENA). The Mount Peake projects is heavily driven by a bi-directional supply-buyer relationship. Therefore, it can only be speculated whether these projects would otherwise have been pursued as quickly.
If the projects are financed by external investors the return on investment (ROI) and internal rate of return (IRR) are the key drivers – given a minimum project size that is often in the range of at least a few million dollars. If the project is realized without energy storage, the investment is considerably lower. Extending the project size with storage requires a double investment: first, in the storage itself, and second, in higher generation capacity. This all means that, at the same time, the PV installation has to be increased accordingly. Taking into account that the price for the diesel electricity is stable throughout the day at off-grid mines, it becomes obvious that the ROI is considerably higher for the part of the project that does not require storage.
If attractive projects are too small to pass the threshold for external investors, storage might have some positive side effects as the investment volume is increased considerably. The main driver for energy storage at mine sites in the near future will, however, be falling production costs.
Storage might also become an attractive solution even for mining operations that lack a renewable energy power source. In the past, many mining companies have looked to renewable energy because they had problems with their power supply. Power outages or load shedding are common afflictions for many grid-connected mines. Often volatile renewable energy solutions do not provide an optimal solution.
Diesel gensets are used as backup power, but normally they run for short time periods. When this happens, diesel reduction through solar power is often not yet an attractive business case. In these situations, storage as back-up or bridge–to–backup might well provide quick solutions and would be benchmarked in some cases even against costs that are derived from production losses. At the same time, storage forms the basis for adding renewable energy generation systems at a later stage.