ROLE OF SOUTH AFRICA’S MINING SECTOR IN DRIVING RENEWABLE ENERGY INVESTMENTS

Wilco de Villiers, Energy Solutions Director of Yellow Door Energy, recently shared his insights on how the South African mining sector can drive renewable energy investments in the country. 

The original interview was published in Mining Review here.

How load shedding has affected the mining sector

South Africa’s mining sector, a vital contributor to the country’s GDP, faces a significant threat from recurring power blackouts that have plagued the nation for years. Among the most severely affected subsectors is platinum mining, a critical component of the country’s economy due to its prominent role in catalytic converters for vehicles. Platinum production relies heavily on electricity, given its intensive underground mining and surface processing requirements.

Contracting models

In the pursuit of renewable energy projects, mining companies have three primary contracting models at their disposal:

• Power purchase agreements (PPA)
• Engineering, procurement and construction (EPC)
• Engineering, procurement and construction management (EPCM)

Among these, EPC stands out as the preferred choice for outright procurement. Under the EPC model, the contractor assumes responsibility for the entire project, from design to procurement and successful integration. This approach places the project risk squarely on the contractor until the system has been delivered successfully and warranties have expired.

Conversely, many mining contracts are executed through EPCM models. While this approach may be comfortable for mining companies, it shifts more risk onto the mine, leaving only engineering man-hour risks with the EPCM contractor.

On the other hand, power purchase agreements (PPAs) offer a compelling alternative, allowing mines to focus on their core operations. When executed in partnership with a team that comprehends the mine’s specific requirements, PPAs can provide additional value beyond mere cost savings. This approach permits the incorporation of system enhancements that might have been capital-intensive if delivered through EPC or EPCM models.

Additionally, the different return expectations of renewable energy investors compared to traditional mining investors can make such transactions more cost-effective. Independent power producers, in particular, absorb project risks and negotiate risk-sharing arrangements with off-takers (mining companies).

Leading the charge in renewable energy investments

Energy security has become a critical concern for mines, and renewable energy solutions offer a pathway to address this challenge while simultaneously delivering cost savings and environmental benefits.

By exploring contracting models like PPAs and EPCs, mining companies can embark on a sustainable energy journey that not only strengthens their operations but also contributes to the overall economic and environmental wellbeing of the region. Embracing renewables is not just an option for our mining sector, it is a strategic imperative for the industry’s future.