Chile mines use renewable energy – profits increase

CALAMA — Chile mines are using renewable energy, increasing profit in the process.

As the cost of solar and wind power declines, renewable energy has become increasingly attractive to power-hungry mining companies. Nowhere, though, is it more prevalent than in resource-rich Chile, where companies have been pioneering alternatives to conventional power after years of shouldering some of the world’s highest energy costs.

Here at the Codelco mine, named after the late Chilean poet Gabriela Mistral, a thermosolar plant run by Chile’s Energia Llaima SpA and Denmark’s Arcon-Sunmark has replaced about 80% of the diesel that Codelco previously trucked up 8,700 feet to the mine. Copper produced by Corporación Nacional del Cobre de Chile, or Codelco, the world’s biggest producer of the metal, goes to China and other global markets.

“This blue sky makes me happy,” said plant manager Rodrigo Aravena, as he inspected rows of panels, shining in the sun and installed over an area the size of eight football fields. “It means we are generating more, and it is much better for business.”

Ernst & Young recently estimated that mines in Latin America—a region that produces copper, iron ore, oil and coal used world-wide—will invest more than US$1 billion in renewable energy projects by 2022, up from US$37 million in 2013. Much of that development will be in this sliver of a country, which produces a third of the world’s copper.

Electricity prices for Chilean mining companies doubled in the last decade to about US$100 per megawatt hour, according to the Santiago-based Mining Council industry group, an amount that is twice as much as neighboring Peru. Chile is overly dependent on energy imports, while Peru taps a large, inexpensive domestic supply of hydropower and natural gas.

Solar- and wind-power companies say they can provide power to mines for as little as US$80 per megawatt hour, still costly in Peru and other countries, but competitive in Chile.

“The scale of what is happening in Chile is currently unique in the world,” said Mike Elliott, Ernst & Young’s head mining analyst. “It’s occurring in Chile because the economics just make sense, while in many other countries it doesn’t yet make the same commercial sense.”

President Michelle Bachelet is encouraging alternatives to natural gas, coal and diesel imports, with the government aiming for 20% of total electricity capacity to come from renewables by 2025. In May, renewables could generate 2,273 megawatts in Chile, about 11% of electricity capacity, according to Cifes, a government agency that promotes sustainable energy. Last year, Chile added 982MW of renewable capacity to its power grid, compared with 244MW added in 2013.

The government’s energy agenda means mining companies need to increasingly rely on renewables. In the north power grid, about 90% of consumption comes from industry, most of which are mining companies. And the state copper commission, Cochilco, expects copper mining companies to double electricity consumption over the next 10 years, when companies are projected to invest US$74 billion expanding mines or building new ones.

“Unlike in developed countries where the main driver of renewable energy development has been the reduction of greenhouse-gas emissions, that isn’t the principal driver here, but rather energy security and competitive prices,” said Fernando Hentzschel, the director of development and technology at Cifes.

Chile reconsidered its energy policies after 2004, when Argentina’s decision to curb natural-gas exports to meet its own demand caused a power crisis here. Plans for coal-fired plants and hydroelectric dams in Chile’s deeply forested south were canceled because of community opposition and protests by environmentalists. The government briefly considered nuclear energy, but shelved that option after Japan’s Fukushima meltdown in 2011.

The Atacama’s blue sky emerged as an alternative.

Solar radiation levels in the Atacama are some of the highest anywhere, making it ideal for producing solar power.

“You have to be very careful. We use sunscreen every time we go out and we always use sunglasses,” said Sebastián Carmona, Codelco’s head of external affairs at Gabriela Mistral.

Renewables still have limitations for mining companies, and few experts believe they will completely replace conventional energy soon. Companies require a steady supply of power to mine 24 hours a day, and solar and wind can be intermittent.

“If you are producing [energy] eight hours, that is an issue,” said Carlos Barrera, the Latin American vice president for SunEdison Inc., a U.S.-based firm that supplies solar power to Chilean iron-ore company Compañía de Acero del Pacífico. “With those eight hours, you can still reduce the cost of mining in a big way, but obviously that is not the full solution required.”

At Gabriela Mistral, Codelco still uses diesel when it needs extra power for generating heat at night, when temperatures in the Atacama can drop below freezing.

Other mines are trying both wind and solar to provide a more stable energy supply. Last year, Antofagasta Minerals’ Los Pelambres copper mine began receiving about 20% of its power from 50 wind turbines operated nearby by California-based Pattern Energy GroupInc. Antofagasta now plans to receive solar power from SunEdison.

“A lot of times the stronger winds are not when it is the peak sunny times,” said Hunter Armistead, Pattern’s vice president of business development. “If you add the two types of generation profiles together, you end up with a much more stable profile of generation for selling that to the mine.”

Indeed, here in southern Chile, winds can be so strong that they can overpower and even shut down turbines, said Dominic Duffy, the chief operating officer of Mandalay Resources Corp., which will start receiving power from a wind farm this year at its Cerro Bayo mine in the Patagonia region.

“The wind is constant, all-year round,” he said. “It’s good we aren’t the first doing this project as we’ve seen the issues of having too strong wind conditions.”