Consultancy firm SRK issued a short analysis following a talk by South Africa’s Minister of Mineral Resources and Energy, Gwede Mantashe, at the Mining Indaba conference in Cape Town, where he highlighted the importance of renewables for the mining industry.
According to SRK director Andrew van Zyl, given the positive movements in some commodity prices, there is no better time to consider investing part of miners’ windfall gains to create their own renewable energy generating capacity.
For SRK, investing in renewables relates to issues of rising electricity prices from the grid, as well as to mines’ environmental commitment and future carbon tax liabilities
“The mining sector continues to struggle with costs rising faster than productivity – and the administered price of electricity from Eskom has clearly been an important and unavoidable contributor to this headache,” Van Zyl said. “As renewable energy technology has lowered the cost of solar and wind energy, for instance, private producers now have the opportunity to peg a portion of their future energy costs. Being partially off-grid will also make mining companies less vulnerable to the full impact of load shedding which is very disruptive to continuous operations in the mining industry.”
In the expert’s view, the mining industry’s commitment to a greener environment and reducing its carbon footprint should play a role in companies’ decision to invest in green power.
Van Zyl believes governments’ application of a carbon tax should also be considered as it will soon have a more direct impact on mining’s bottom line.
“It, therefore, makes sense for mines to be considering alternative sources of energy to augment coal-fired power,” Van Zyl said. “While contributing to their environmental goals, it could also potentially reduce their carbon tax exposure.”
Van Zyl emphasized that the world’s leading financial institutions are also looking carefully at how mines address their climate change impacts, for example, before approving loans.
“Building internal energy generation capacity from renewable sources is likely to become a more popular mechanism for mines to send the right message to lenders,” he said. “Even if mines are not – for now – able to sell any of their own power back into South Africa’s national grid, there are still many good economic reasons to consider renewable self-generation options.”
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