Transitions in Power Generation in the Mining Industry

The mining industry is one of the foundations of the global economy. Whether it be iron ore for construction, rare-earth metals for modern technologies, coal for power, or lithium for batteries, mining operations provide the necessary components to produce goods that are vital in driving the world’s economy.

The mining industry is also notoriously energy intensive. In 2017, the US mining sector represented about 11% of industrial energy consumption, which equates to roughly 710 TWh. In less diversified economies like Chile, where mining accounts for about 10% of GDP and 50% of total exports, access to affordable and reliable power is crucial to economic success. As a result, we have seen mining companies begin to use renewable energy to mitigate concerns.

US Industrial Sector Energy Consumption by Type of Industry, 2017

(Source: US Energy Information Administration)

Drivers of Renewable Integration

As the industry grows, mining companies are exploring new ways to power their operations and reduce costs. One key transition has been the shift to renewable energy. The mining industry views renewables like solar PV and wind as an opportunity for a variety of reasons. Cost plays a major role, as the world has seen renewable prices substantially decrease over the past decade. The regulatory environment in which mining markets operate plays a significant role as well. The Americas are poised to lead in renewable adoption due to policy measures like carbon pricing and familiarity with implementing renewables.

Reliability is another notable driver, as even the slightest down-time can be costly for mining companies. Mines are often located in remote locations and not attached to a major distribution grid. Having renewable generation onsite can provide mining companies with greater power reliability, especially in combination with energy storage systems.

To a lesser extent, the energy intensive nature of the mining industry has increased pressure to take decarbonization into greater account as environmental, social, and governance goals are becoming more attainable. For example, China is strengthening mining-related environmental regulations to meet countrywide goals of reducing carbon emissions, likely spurring greater adoption of renewables in its industry.

A Long Way to Go

While renewables in mines are trending upward, the mining industry is far from free of fossil fuels. Renewables still only make up a fraction of power generation in mines that still tend to be dominated by fossil fuels, particularly diesel, coal, and natural gas.

Nonetheless, the promise of a cleaner mining industry is real. It is certainly becoming clearer that the issue is more of a question of when rather than if renewables will make up a substantial portion of power in the mining sector. This is evidenced by the uptick in stories frequenting the news like a Zimbabwe firm choosing solar over coal and the Indian firm Neyveli Lignite Corporation (NLC) installing over 4,000 MW of solar, among others.