Renewable-energy deployment by mining companies to wean themselves off Eskom’s erratic and costly supply is highly nuanced and complex, but under SA’s mineral resources and energy minister there are finally signs the logjam is about to break.
Mining company CEOs wanting to deploy renewables in SA have spoken of their frustration in recent years at lack of movement on securing state permission to build solar, wind or gas projects to supply their operations.
This has been a big talking point in SA’s mining industry since 2008 when Eskom in an unprecedented notice told mining companies they could not guarantee power supply, prompting every underground mining company to haul tens of thousands of workers to the surface and keep them there until the crisis passed.
This event was seen largely as a major contributor to the rapid shrinking of SA’s gold mining industry, once the world’s largest and now ninth and falling.
Talk at the time from big miners such as Anglo American and then-Xstrata to construct coal-fired power stations for their large furnaces in platinum group metals (PGMs) and ferrochrome respectively, and taking pressure off the national grid came to naught.
Vedanta Resources, which operates power plants in India, had wanted to build a power plant on SA’s coalfields and use Eskom’s transmission infrastructure to send power to its zinc mining complex in the Northern Cape, but that too came to nothing.
As environmental awareness and investor pressure on mining companies have increased in the past 12 years, the talk has turned exclusively to renewable-energy projects, particularly as SA has introduced a carbon tax and Eskom’s ability to provide a sustainable electricity supply remains dubious and increasingly expensive.
There’s also the consideration of how much carbon goes into mining SA’s minerals, which are exported around the globe in competition with those of other resources countries where advances in renewable energy stand in contrast to SA’s. Undoubtedly, this will become an increasingly important factor for domestic miners to consider if they want to compete for markets.
Consider the irritation felt by Gold Fields CEO Nick Holland, who told Business Day earlier this year he was personally taking on the company’s push to implement a renewable-energy project at its South Deep gold mine west of Johannesburg. And this in his remaining time at Gold Fields before he retires.
The irritation would stem from the vastly different experience Gold Fields had in Western Australia, where the federal and state governments did all they could to ensure the Agnew mine moved quickly into a solar, wind, battery and gas energy solution to become a flagship example of what could be done in that part of the country.
If Australia can do it, why can’t we?
The federal government body, Arena, stumped up A$13m towards the A$112m project, an act that factored heavily in the Gold Fields board’s decision to approve the project.
It has now brought renewables to its Granny Smith mine, again with the timeline, commitment from officials in West Australia and a regulatory environment enabling this project to be concluded with the least fuss and political ideology bogging down progress.
Like Agnew, this was all concluded — from concept to the generation of power — within three years. Amazing.
There are differences between Western Australia and SA, yes, most notably in the lack of use of grid power compared with the monopoly Eskom holds in SA and its supply to all mines.
But the willingness of state and federal governments to enable these projects in Australia is a far cry from the dead hand of the SA government on renewable energy projects over the past decade and longer.
Eskom, which has more than R440bn in debt, does not want to see its large paying customers find other sources of energy, leaving its revenue stream exposed to dysfunctional municipalities and towns not paying their bills.
The government, despite hearing repeated pleas, representations and plans from mining companies, is also unwilling for the industry to come off the grid in a meaningful way. The new catchphrase in talk between the two sides is “a just transition”.
This is intended to be a gradual reduction in reliance on coal-fired power stations in favour of renewable energy sources, with reskilling of employees dependent on coal mines and associated Eskom plants.
All role players talk of the difference Gwede Mantashe has made in the department of mineral resources & energy, a willingness to listen and engage constructively. But some of the hurdles are outside his portfolio, such as reclassification of land to allow construction of renewable-energy plants.
The lesson from Gold Fields in Australia is the need for speed and, if possible, a small capital injection from the state. However, this is tricky in SA where there are any number of demands on the fiscus — ignoring for a minute the R32bn municipalities spent irregularly.
Eskom is just one factor mining companies must consider. To spend hundreds of millions of rand, either off company balance sheets, or via tariffs to third parties which would build, operate and sell electricity at agreed prices over a set period of a decade or more to recoup the large investment, there are a lot more moving parts to factor into the decision.
Speed is critical for renewable projects
First, there’s the life of mine. Is there enough life left in the assets to justify the renewable-energy investment, which industry players talk of as 20 years or more?
Adverse regulatory developments and uncertainty, for which SA has a horrible history in the past two decades of inflicting on the mining sector, count against long-term investment decisions.
Sibanye-Stillwater has for years wanted to install a solar array at its Driefontein and Kloof mines, but negative developments in SA on these issues and delays pushing the project back by years have worked against these plans.
Sibanye is considering options, mostly now focused on its giant platinum group metals footprint near Rustenburg. But CEO Neal Froneman is deeply disillusioned with SA’s trajectory, and has spoken openly of the board’s unwillingness to invest large amounts of capital in SA.
Then the energy regulations edging towards including other players outside Eskom with frustrating slowness are eating into lives of mines and eroding the investment case every year.
There is further concern among mining companies on having stranded energy assets that regulations prevent from easily selling power to third parties when the mines they’re serving are closed.
The most important development for the renewable-energy model for mines and other industrial users is the splitting of Eskom into three parts, which players want to see creating a competitive market for transmission and supply outside the state-owned entity.
But now is the time for speed: enough of excuses, prevarication and delaying the inevitable. The state really has to move quickly now or lose the chance to have green mineral production, take pressure off the national grid and make a change for good.
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