How Solar Can Future-proof the American Mining Industry

By Genevieve Kennedy and Matthew Butler 

American mining ventures are currently on the rise as the federal government seeks to boost domestic production of critical minerals. While an increase in American mining would have several positive long-term impacts on the U.S. economy, the industry still faces a variety of headwinds. Historically burdened by issues such as rising operational costs and environmental/regulatory challenges, an increase in mining operations in the U.S. will not be an easy feat. A typical mine site spends 20-30% of their operating costs on fuel and energy, and the source of that energy is a main driver of many companies’ sustainability goals. With electricity prices on the rise, mining companies in the U.S. looking to capitalize on the current push for more domestic mineral extraction should look to pursue clean energy as part of their core strategy to generate key operational, cost, and resiliency benefits for long term success.

Photo-Voltaic (PV) solar generation installations provide a suite of financial solutions for industrial customers looking to benefit from renewable energy sources. Traditionally, an effective strategy for solar implementation on mining operations has been to install a behind-the-meter (BTM) solar system on location. This reduces the amount of electricity purchased from the utility or co-op which enables energy independence. Mining operations often take place in remote areas where access to reliable electricity can be limited and expensive. By implementing BTM solar systems to generate power on-site, mining companies reduce reliance on local grid infrastructure and increase energy security for operations. Additionally, battery storage allows companies to shift their peak energy demand periods to more economically favorable times of the day. These solutions can be implemented at no up-front cost through Power Purchase Agreement (PPA). A PPA allows customers to purchase power generated by a solar array at a fixed cost per kilowatt-hour (kWh). Solar installations provide cost savings on high utility bills through these fixed energy payments included in the PPA, contracted between the mining company and the owner of the solar system.  (See Appendix 1)

Some mining operations are subject to time-of-use (TOU) pricing and/or demand charges by the utility. TOU electricity prices vary depending on the time of day. Peak hours usually have higher rates due to higher grid demand, while off-peak hours (often at night or during weekends) have lower rates. Demand charges are a significant component of utility bills for some mining operations because they are based on the maximum power demand during a specific billing period. Mines operating under TOU tariffs that are subject to demand charges are great candidates for implementation of solar paired with battery storage. This mechanism allows the customer to store energy that is generated during off-peak hours.Then, instead of purchasing power from the grid at peak hours when electricity is more expensive, the customer can simply draw from the energy stored in the battery and directly avoid purchasing high-cost electricity.

While BTM solutions can provide significant value to some mining operations, they are not always a feasible solution. The viability for BTM solar is contingent on on-site conditions.  Accessible land or suitable rooftop space may not always be available. Dust and debris generated from on-site operations may cause build up on the panels, reducing efficiency and increasing maintenance costs. Incases like these, mining companies can take advantage of offsite solar through Virtual Power Purchase agreements (VPPAs).  Simply put, a VPPA is a financial hedge on electricity. The generator and purchaser set an agreed-upon price per Megawatt-hour (MWh). When electricity is higher than the set price, the generator will pay the customer the difference. Conversely, when electricity is lower than the set price, the customer pays the difference to the generator. The customer ultimately gets a levelized and consistent cost of electricity without having solar on-site. This non-invasive, cost-effective solution for mining ventures guarantees their cost of electricity for the long-term.The economic factors that make BTM solutions with PPAs attractive still apply to VPPAs: energy independence, cost savings & certainty, and long-term sustainability.

Solar energy offers more than just electricity savings. Customers purchasing electricity through renewable sources can obtain Renewable Energy Credits (RECs) for each MWh generated by solar arrays. These RECs can be sold to other companies aiming to meet sustainability goals or kept by the customer to fulfill their own requirements. As regulations change, having RECs provides a competitive edge by avoiding fines and operational interruptions. Ultimately, offsite solar provides reliable and cost-effective power, with RECs serving as an additional revenue stream and regulatory protection.

Growth in the U.S. mining sector would be highly advantageous for the United States through the increase in American jobs, as well as a more secure supply chain for critical minerals and materials. Mining companies looking to take advantage of favorable economic and regulatory conditions imposed by the current Administration can increase their competitive edge by adopting innovative energy solutions with both on-and off-site solar and battery storage solutions. By combining all these factors, mining operations can ensure a stable and predictable energy supply for the long term with future-proofed, sustainable solutions that hedge against ever-evolving environmental regulations and increases in electricity costs.