Mining with sunshine


Ray Wills is a man of considerable intellect and endless enthusiasm. Based in Western Australia, he has advocated the opportunities for solar and storage in supplying remote mine sites with reliable and clean electricity for a number of years. “Gigawatts of opportunities,” is how he describes it, having crunched the numbers.
Wills is familiar with wearing a number of hats, having been an academic, renewable association head, solar developer and lobbyist. He therefore knows both the energy and political realities facing the state when it comes to the ongoing support of its invaluable mining sector.
While way out west and separated from the population centers of Sydney and Melbourne by thousands of kilometers, the vast state of Western Australia (WA) is the center of Australia’s mining industry. From bauxite to iron ore, diamonds, mineral sands and natural gas, if something is of value and can be dug out of the earth, there’s a good chance WA has got it.
Over 90% of the state’s population of some 2.5 million people live in the southwest corner of the state, with much of the mining taking place in the sparsely populated inland or northwest. This makes manning mining operations a “fly in, fly out” affair, and additionally presents major challenges to the miners in supplying their operations with the vast amounts of power needed for the accommodation and facilities required, and to drive extraction and processing equipment on site. Much of this power comes in the form of piped natural gas or trucked diesel, which are neither cheap nor is their supply particularly reliable.Given the extreme weather in the form of sporadic flooding and extreme heat that can affect the remote mining regions, long energy supply lines can be stressed, and an explosion at a natural gas facility last decade brought the reality of these fragile supplies into focus.
“We know that there is at least 700 – 800 MW of demand in diesel alone, so there is at least that much and that is just for the miners,” explains Wills. “And then there are some of the remote towns that are operated by [regional utility] Horizon Power and they too will be up for the challenge of converting to solar as well.”

Utility role

Horizon Power itself has performed a remarkable about face when it comes to renewable deployment in recent years. The state-owned utility supplies power to remote communities and some of the larger population centers outside of the main southwest grid. Much of this has been supplied by diesel and gas fired generation, and some remote households and communities have been supplied literally at the end of extremely long and unreliable electricity lines. This approach required large subsidies, either directly from the government or through increased retail electricity prices paid by customers in the state capital Perth.
As renewable LCOE has fallen and at the behest of state Energy Minister and Treasurer Mike Nahan, a former colleague of Wills, Horizon Power is now embracing solar+storage in a range of both distributed and mini-grid applications. “New technology in the renewable and distributed energy space is presenting multiple opportunities and threats to energy utilities so I am delighted that Horizon Power is at the forefront of exploring these new opportunities,” said Horizon Power MD Frank Tudor, when announcing a new 2 MW battery array development to reduce the role of gas and diesel-fired spinning reserve in the town of Canarvon.
However, the uptake of solar has been slow at mining operations in WA, and elsewhere in Australia. While Chile has raced ahead in terms of solar deployment for mining, the Australian resource sector has taken a more conservative approach, unwilling to deploy anything that might detract from the core business of digging, processing and shipping. Short mine lifetimes, at least on paper, and the unstable nature of commodity prices have also further undermined solar deployment in the mining sector Down Under, with multi-year PPAs difficult to sign.
All of these factors make the AU$40 million ($30.5 million) DeGrussa solar+storage project in remote WA all xAdvertisementthe more exciting. The 10.6 MW solar and 6 MW storage project at the DeGrussa mine site reached full operation in May of this year. The copper and gold mine is operated by Sandfire Resources. On completion, the solar+storage array immediately achieved a number of records: the largest offgrid PV project in Australia, largest offgrid diesel-solar hybrid globally and the largest solar array to provide peak power at a mine site globally.
Germany-based juwi Renewable Energy was the developer and EPC on the project and secured government subsidies. It deployed 34,080 BYD modules and self-powered single axis tracking technology from U.S.-based Nextracker.
The 6 MW lithium ion battery system has been coupled with the PV array and integrated with a 19 MW diesel generator to supply the underground mine and mining processing operation. juwi selected French developer Neoen to provide the equity financing and secure some of the debt financing. Australian government bodies also played a significant role in the project’s realization with a AU$20.9 million ($16 million) recoupable grant from the Australian Renewable Energy Agency (ARENA), and AU$15 million ($11.45 million) in debt financing from the Clean Energy Finance Corporation (CEFC).

Market impact

“Because DeGrussa is being funded by the ARENA, that data will become public,” says Wills. “Once that data is public I think that many mine sites will start to move very quickly.” Wills notes that the sharp decline in the Australian dollar in 2014 and 2015, which pushed up the cost of imported solar components, coupled with a fall in some key commodity prices, may have delayed the uptake of renewables by mining operators, but he says the financials for such projects pencil out regardless.
“And at a time when miners are hurting because costs are high, even though the price of diesel has fallen, it has not fallen relative to the Australian dollar and solar is still competitive,” Wills notes.
Thomas Hillig is the founder of the renewables consultancy THEnergy, specialized in the industrial offgrid market segment. Hillig says that while DeGrussa “helps erase doubts on the technology side,” in proving that solar+storage can power a mining operation fully during daylight hours, he cautions that a battery system of this size is not yet commercially viable.
“Today, I see that most renewable energy projects under development in mining are planned without or with small-scale storage solutions,” says Hillig. “However, the DeGrussa project prepares the ground for the future.” Hillig adds that the falling diesel price globally has undermined somewhat the business case for solar+storage at mine sites.
“When storage prices come down or diesel price go up again, we will see many similar configurations,” Hillig notes. “At that time, DeGrussa will serve as a proof of concept for high-penetration solar+storage concepts in the mining industry.” Until then, Hillig sees “renewable ready uninterruptible power supply” solutions as having “better chances.”

Storage expands project and possibilities

There is little doubt that the incorporation of the 6 MW battery system on the DeGrussa project has increased its cost and the LCOE it delivers. However, as a trailblazing project supported through some recoupable government funding in the form of debt and a repayable grant, it has demonstrated at scale battery storage technology to the mining sector. The Clean Energy Finance Corporation (CEFC) provided AU$15 million ($11.5 million) in debt financing for the project and CEFC’s CEO Oliver Yates noted the important role the storage system played.
“DeGrussa has delivered a unique combination of an offgrid high capacity solar power array and battery storage fully integrated with an existing diesel-fired power station,” said Yates. “Soon remote communities and mines will be able to reduce the need for expensive trucked-in diesel used in dirty generators.”
Developer and EPC juwi adds that the battery system can allow for the solar+storage array to provide additional services to the site in terms of the quality of power supply.
“Essentially it allowed us to export more PV power than if we didn’t have the storage system,” says juwi Australia MD Andrew Drager. “It also allowed the provision of auxiliary services like frequency support and power factor correction.”


Juwi looks forward

The DeGrussa project has also pointed the way forward in terms of how offgrid solar projects can reach financial close. While the project was well advanced by the time Neoen stepped in as the equity investor, juwi Australia’s Andrew Drager believes it may forge the path for traditional investors to take an interest in similar projects.
“Providing the underlying mine asset is good, then I think we will see traditional financiers start to look at these opportunities,” says Drager.
The DeGrussa solar+storage power will sell electricity to Sandfire under a six year PPA and while a relatively short electricity supply contract makes it difficult for the financials to stack up, Drager says that a diesel-tied solar system is competitive today with diesel generation at mine sites over seven or more years in Australia, and less in other countries.
To exploit these opportunities, juwi Australia has entered into a strategic alliance with Pacific Energy Limited’s KPS. The companies hope to roll out similar solar solutions to other miners. KPS supplies traditional electricity solutions to mine sites and the two companies worked together on DeGrussa. Building on this an alliance agreement was signed in June which will see large scale solar added to the company’s power offerings.
“The experience and expertise of juwi leap-frogs us ahead in terms of delivering utility scale solar,” said Pacific Energy MD James Cullen, in announcing the alliance. “Importantly, we have developed the know-how behind successfully integrating and operating the hybrid system in the challenging and changing conditions encountered in mine site operations.” KPS operates around 230 MW of diesel and gas fired generation at mine sites in Australia and the companies will be looking to add solar to some sites in Australia and internationally.
In Australia alone, juwi estimates there is around 5 GW of offgrid gas or diesel generating capacity and Drager calculates LCOE around the range of $0.12 up to $0.25/kWh as being typical for this form of generation. Somewhat ironically, while the Australian federal government has scrapped its world-leading carbon tax, which would have made PV deployment more competitive at these sites, it continues to subsidize diesel for farmers and miners through a fuel tax rebate.
“The rebate is the equivalent of AU$0.40/liter in subsidies, meaning diesel is very cheap,” says Drager. “Obviously not all of the [mining] sites are suitable [for solar deployment]. But I think the opportunity is there and certainly will increase as costs of solar systems decrease and as oil prices continue to go up, as they have over recent months, and as mining companies become more focused on sustainability and social responsibility.” One thing is clear, DeGrussa is leading the way.