New strategies and portability may help PV-for-mining solutions cross financing hurdle

The report, released online today, outlines where PV contracts and the environment of mining differ. And where renewables may be a good fit for mines, this is not reflected in current uptake.

One issue is that mines often have a shorter lifespan than most solar products and are subject to the vagaries of market pricing for what they extract.

Thomas Hillig, the author, writes in the report: “Traditionally, [renewable energy projects] are calculated for investment horizons of 20-25 years. This is another misfit for renewable energy projects and the mining industry. Renewable energy investors are used to these longer pay-back periods. They invest in projects that are long-term, low risk and they expect, as well, lower returns.”

Later, the report adds, “Many mines have a remaining lifetime that is much shorter. In addition, the operation of a mine depends to a large extent as well on the market price of the corresponding raw material. i.e., if for example copper prices are very low, certain copper mines cannot be operated profitably and they are closed down temporarily. This is actually the case for many different mining sectors in mining. As a consequence mining companies calculate internally with a much shorter payback period for investments, often in the range of 4-6 years, sometimes even shorter.”

Hillig told pv magazine that traditionally the fuel expense for mines using diesel was spread over the lifetime of the mine’s operation. With solar, that expense comes at the start. Hillig said, “That’s something that many mining companies, which were struggling financially, were unwilling to do. Now, many third party investors are leasing rental or PPA solar panels to mines who only have to pay rental or leasing rates, or for the electricity provided in the PPA.”

Funding, acknowledged Hillig, is one of the bigger problems but not one that is insurmountable. One solution, he said, was for the mine to pay a higher price for the electricity generated at the start, with this price decreasing over time. The beginning price could be set at the same price of diesel.

“In extremis, the mine would get the electricity for free after the amortization of the plant,” he said. Another solution he outlined was for installations at mines to be those with higher mobility, meaning that they could be transplanted elsewhere if needed. “The electrics are in the container so the cost for dismantling the power plants and reinstalling it somewhere else is lower. If the mine is completely shut down, there is a Plan B and the installation can be built elsewhere, with less cost.”

The report, which looks at opportunities for external investors, is drawn from a study involving face-to-face and phone interviews with 21 anonymous experts in the finance and investment, renewable energy, and mining industries.