Business models for renewable energy applications at mines

There are many different business models how mining companies can generate profit with renewable energy. Some are not even linked to mining itself. Some big mining companies such as MSPL Limited or Essel Mining & Industries Limited have extended their business field and have built wind parks. Their activity in renewable energy is not directly related to their mining business. They do not generate electricity for self-consumption. There are many other business models in which the electricity generated at wind or solar installations is directly consumed at mines. As many mining companies do not consider electricity generation as one of their core competencies, opportunities for external investors or for rental / leasing models occur.

Factors influencing the renewable energy application at mining sites

Various factors are influencing the optimal electricity generation at mining sites. Some of these are external factors such as sun and wind conditions, grid-availability or grid stability. Some are directly related to the mining company, e.g. environmental sustainability policies, availability of capital or whether or not energy is considered as a core competence. Other factors are rather related with the mining site. Almonst these are the remaining lifetime of the mine, the load-profile or the need of process-heat.

Complex decision space for renewable projects of mining companies
Complex decision space for renewable projects of mining companies

Depending on several internal or external factors a mining company may apply various business models for renewable energy:

  1. Self-consumption (plant ownership)
    The power plant is constructed on-site and the mine consumes the energy (electricity or process heat)
    • optional: selling excess electricity to the grid or to adjacent consumers
  2. Power Purchase Agreement (standard PPA)
    The mine purchases the electricity at a predefined price from an Independent Power Provider (IPP)
    • off-grid or grid-connected
    • might contain flexible mechanisms such as link to diesel price or spot market price etc.
  3. Synthetic PPA
    The IPP sells at market price, power marketers provide a guaranteed price and compensate from certain deviations on. This business model requires a grid-connection and a functioning spot-market, which is not the case for many mining applications.
  4. Co-ownership (joint venture)
    The mining company and a third-party investor found a joint venture, which then acts similar as an IPP and sells under an PPA energy to the mine
  5. Leasing or rental agreements
    The mine has no investment costs, pays a leasing rate, operates the renewable energy plant and consumes (or sells excess energy) that is produced by the power plant
  6. Energy-metal-SWAP
    Basically it is a PPA, but the electricity is paid with mining products. This may eliminate some of the metals market price risk.

Especially at remote locations which are diesel-powered there is often an excellent business case. So called hybrid-power plants generate solar or wind energy when the conditions permit. If there is not much wind or sun diesel gensets contribute to a larger extend to the total electricity generation. For more details see the hybrid power plant section.

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Dr. Thomas Hillig Energy Consulting
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