SA mining companies, which are ploughing billions of rand in renewable energy projects to keep their operations running during blackouts, should consider the insurance risks that come with the increasing reliance on renewable energy.
This is the view of Sophie Maggs, head of renewable energy and infrastructure at insurance broker Crawford Dougall.
Maggs said renewable energy facilities carried significant insurance risks, with unique risk factors that are not shared with mines or other private off takers, such as a manufacturing facilities or heavy industrial users.
“Energy usage accounts for 30% of total cash operating costs for most mining companies. Renewables can reduce operating costs by 25% in existing mining operations and up to 50% for new mines. By not investing in renewable energy, mines risk being left behind by their competitors as they slide up the cost curve of ever pricier and unpredictable electricity supply,” Maggs said.
“To appreciate the change of risk to mine, consider Barrick Gold’s 16MW farm with battery energy storage systems to augment the Kibali Gold Mine hydropower supply for the dry season.
“Once completed, the mine will run solely on renewable energy for six months of the year. This means for half the year one of the biggest risks to the mine’s continuing operations is its renewable energy facility. If the facility is inoperable, the mine’s production is jeopardised.”
Renewable energy projects
According to the Minerals Council SA, 100 renewable energy projects to the value of R150bn are in the pipeline in various SA industries.
Sibanye-Stillwater announced in December the start of two utility-scale renewable energy projects in SA as part of its decarbonisation.
Sibanye’s Witberg Wind Energy Project in the Western Cape will have a contracted capacity of 103MW.
The second project is a multibuyer 150MWac solar photovoltaic project developed and financed by Sola Group in a deal that will cause Sibanye to procure 75MW of the plant’s capacity over a 10-year power purchase agreement.
Other notable projects in SA include the Lephalale Solar Power Project, which provides about 30% of the energy needs to Exxaro’s Grootegeluk Coal Mine, made up of 129,000 solar panels covering an area the size of almost 450 football fields.
Maggs said the danger for a mine with a large renewable energy infrastructure is in not recognising this and assuming that the mine’s general insurance policy adequately caters for the risks associated with a renewable energy facility.
“While it makes sense to strive for greater energy independence, the addition of renewable energy resources to a mine’s operation represents a significant change to the mine’s fundamental business activities,” Maggs said.
“It poses the question whether independent power production is now a core function of a mine’s operation activities. And if so, are mines responding to the change in their risk profile correctly in terms of managing the risks of a new type of hybrid mining/energy business? It demands a disparate skill set. It means the way we think about a mine has to change.”
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.