Falling oil price presents opportunity to miners to go solar

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While falling oil prices may be causing certain solar stocks to take a hit, mine operators stand to gain from adopting solar to supplant diesel supply. While the falling oil price may mean that the cost of diesel generation has fallen, THEnergy’s Thomas Hillig argues that the business case for renewables at remote mine sites remains persuasive.

“More and more investors are willing to finance large solar and wind power plants at remote mine sites and sell diesel reductions or electricity back to miners in so-called power purchase agreements (PPAs),” explains Hillig. “When the oil prices were high, the investors were looking at much higher electricity prices in these long-term PPAs.”

Given the falling oil and, therefore, diesel price, Hillig says that miners are now able to strike considerably better deals from renewable technology providers and financiers. Additionally, given that PPAs are often signed for periods of around 20 years or more, striking an excellent PPA deal today could deliver long-term benefits for mine operators.

“Their [miners’] negotiation positions for renewable energy PPAs have improved considerably through the recent oil price drop,” said Hillig.

Hillig notes that low oil prices, below US$30 per barrel, are likely to be short-lived, as OPEC adjusts the current demand-supply imbalance he describes as dumping.

The January 2016 edition of pv magazine features an interview with Thomas Hillig on the mining and renewables space.