Solar PV for the mining industry

A guide to hybrid and utility scale solar power for the mining industry

Placed on the roof or on the ground, solar photovoltaic (PV) panels capture the sunlight and convert it into electrical energy, measured in kilowatt hours (kWh) – otherwise known as units of electricity.

When you group numerous solar panels together to form a complete solar power system, you can use the free solar electricity to power your business, being less reliant on expensive grid or diesel electricity.

The size of a solar power system is measured in kilowatt peak (kWp). This is the power the solar would produce under a set of standard test conditions*.

Many mining operations are located in places with abundant sunshine and solar power technology can offer the lowest cost power solution.

What are solar PV panels?

*Standard Test Conditions for solar panels is 1000W/m2 irradiance, AM 1.5 spectrum, 25ºC cell temperature.

How do solar power systems work

Solar power systems contain no moving parts and are well suited to fault free operation in industrial environments.

1. The solar panels are frames made up of solar (PV) cells (which are layers of silicon). The sun’s radiation hits these cells and is converted to direct current (DC) power.

2. This DC power travels to an electrical inverter, which converts DC power into alternating current (AC) power.

3. A distribution board and smart controls manage the operation of the solar power with the utility grid or generator power.

4. The AC electricity produced is just like the power supplied by your utility company or by standby generators. It can be used to power fans, pumps, lights, computers – all the things your business needs to operate.

5. Generator power can continue to be used when necessary.

6. Plant control can be integrated into your power plant control system; remote connection enables fault monitoring and diagnosis.

Solar is now

Myth to dispel – Scale and Maturity

As a result of these cost reductions solar is one of the fastest growing sources of power worldwide.

Source: SolarPower Europe, 2015

Source: BNEF

SolarPower Europe / GlOBAl mArKEt OutlOOK FOr SOlAr POwEr 2015-2019 / 27

For the fifth year in a row, Pv was one of the three mostinstalled sources of electricity in Europe together withwind and gas. Since 2000, these three energy sources

have topped cumulative installations while fuel oil, coaland nuclear experienced massive decommissioning.

FIGURE 13 POWER GENERATION CAPACITIES ADDED IN THE EU 28 IN 2014

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Renewables Solar PV Fossil Fuels Decommissioned

Renewables Solar PV Fossil Fuels Decommissioned

FIGURE 14 NET POWER GENERATION CAPACITIES ADDED IN THE EU 28 BETWEEN 2000 AND 2014

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Source: SolarPower Europe, EWEA.

Source: SolarPower Europe, EWEA.

Net power Generation capacities added in the EU 28 between 2000 and 2014

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Global PV capex benchmark, utility-scale

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Myth to dispel – Price

Solar technology is mature and increasing demand has driven price down and continues to do so.

The report ‘New Lens Scenarios’ published by Shell outlines two future world scenarios, one featuring low renewables (‘Mountains’) and the other high renewables (‘Oceans’).

Under the ‘Oceans’ scenario, distributed PV ‘grows rapidly, reaching fourth place [in the global energy supply] behind oil, gas and coal by 2040, and continuing to the number one position in 2100’.

This chart indicates all energy, not just electricity.

Source: Shell, ‘New Lens Scenarios’, 2013

Gas resource Base

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Biomass Gasified5.3%

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Hydro-electricity 2.2%

Biomass Traditional 0.3%

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despite its environmental impact, coal remains the most economic energy-security backstop for power generation, at least until mid-century. from that time, the increasing incidence of extreme weather events leads to sufficient international agreement on climate policy to drive significant investments in ccs and to put the brakes on coal. with the advance of ccs, global growth in coal demand returns again by 2050, as newly developing countries enter their most energy-intensive phase of development. in the absence of supportive policy regimes, nuclear power struggles to grow in most countries.

rising prices and demand promote continuing strong growth in renewable energy. Biofuels become increasingly significant in sectors like mobility where there is a continuing reliance on liquid fuels because of the lack of credible alternatives. in other sectors, renewable resources that need large-scale or popular consent – such as wind farms and geothermal energy schemes – continue to face opposition. these conditions favour distributed solar pv becoming a leading source of primary energy in the global economy. from its position today as the 13th largest energy source worldwide, it grows rapidly, reaching fourth place behind oil, gas, and coal by 2040, and continuing to the number one position in 2100. the sun rises to create solar energy dominance in the global system.

the rise of solar is due, in part, to public pressure that leads governments to prioritise it in the electricity ‘merit order’. Grid integration is accommodated by more variable running of other forms of electricity generation through the day – notably hydro-electricity, where it is available, but otherwise gas, coal, and biomass. As the scale builds, regulators are forced to pass on these higher grid-balancing costs to power consumers. in turn, this encourages end-users to develop local solutions to even out their daily energy supply and demand. while some focus on batteries and others start to store energy as hot water, certain household appliances, like fridges and washing machines, provide the capability to link with a household solar pv supply.

small communities build co-operative solar networks, providing further balance in supply and demand patterns.

Balancing the grid over the day is one thing. Balancing it over the seasons is altogether more challenging for solar pv. At the temperate latitudes of many oecd countries, 80% of solar pv electricity is generated in the summer months. local electrolysis and storage of hydrogen becomes a key part of the solution, particularly when combined with its industrial use. Given the difficulty of high-level international policy co-ordination, this proves more practical than plans put forward for continental scale electricity grids.

so while richer nations are earlier adopters of solar pv, it is in many of the emerging countries, that it thrives

LoNG Liquids aNd the rise oF soLarenergy in Oceans continues on its recent path, with a combination of exploration success and technology advances, supported by increasing oil prices.

the improved capability to drill in ever harsher environments enables access to deeper water and the Arctic; enhanced oil recovery techniques become increasingly viable; fracking and drilling technologies allow the development of light tight oil and liquid-rich shales in those rock formations that prove to be attractive. the high oil price environment and increased technical capability to produce extra-heavy oil in places like canada, venezuela, russia, and Kazakhstan unlock the potential for these resources.

in Oceans, the countries that produced more than 75% of current global oil production in 2012 find their share increasing even further. opec countries hold the majority of low-cost growth potential, and increase recovery further with more expensive technology. however, such developments are initially limited by geopolitical instability and a resulting underinvestment in most opec countries.

in time, opec’s spare capacity buffer is eroded, and markets adapt to higher price volatility and new commercial and strategic stock management. in the longer term, sufficient stability returns to opec for investment to pick up, but the stretch to meet strong demand growth keeps prices high, enabling the development of the higher-cost conventional and resources plays outside opec.

By the 2030s, the Us has seen a steady decrease in imports in overall oil volumes, partly because of the increase of supply and partly because of fuel efficiency standards. rising prices have helped moderate demand. there are, however, significant misalignments between the growing significance of liquid rich shales and the configuration of refineries and pipeline systems, so that imports and exports of refined products or crude oil are still required. price shocks still transmit to north America, and there remains a national interest in the stability of the global energy system for wider foreign policy reasons.

the production of natural gas continues to grow, building on developments in north America. however, the great expectations so many held for the development of tight/shale gas and cBM globally are not fully met as developments prove too difficult or economically recoverable volumes too low.

oVeRVIeW AnD FoReWoRD IntRoDUCtIon neW Lenses FoR A neW eRA MoUntAIns oCeAnsReFLeCtIons on DeVeLoPMent

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Why choose solar?

Reduced costs

As the cost of grid power continues to rise, the sun keeps shining for free. Advances in solar technology means that solar power is now cheaper than grid electricity in many parts of the world – especially where grid electricity comes from expensive “emergency” electricity sources such as diesel generators.

The lifetime cost of solar power -or the levelised cost of energy (LCOE) is in the range of $0.1-$0.15 per kWh depending on system size, location and local factors.

COP21

Following the Climate Change agreement in Paris many multinationals have signed up to a programme of de-carbonisation. Businesses deploying renewable energy technologies can benefit from cost reductions and certainty at the same time as contributing to the global efforts to reduce CO2 emissions.

Community

As well as providing power for industrial operations solar can also play a significant role in community development. In remote locations solar is typically the simplest and most ecpst effective means of electrification. Providing clean electrical power at a fraction of the cost of alternatives.

Hybrid Power

Solar PV can work as part of a power supply system using multiple power sources allowing businesses to benefit from the low cost of solar power and provide the firm power required to operate mining facilities.

Control systems which integrate solar, generators, grid power and storage, can maintain stable power supplies as well as enabling demand side management tools to optimise the use of power 24/7.

There are so many reasons. These are a few of the most important:

• The solar panels which make up rooftop solar power systems can be arranged in many ways – they can fit around skylights, vents and other features on a roof.

• The solar electricity generated is close to the loads, so transmission loses are minimised.

• The building and roof is already in existence, so no land space is used up. The rough rule of thumb is that 1kWp needs 6.4m2.

• Often the roof structure can be used as part of the installation, without the need for bulky mounting structures. However some buildings may need reinforcement; the weight of a solar system is typically 15kg/m2. If necessary the weight can be spread out by making the panels less closely packed together.

• Rooftop solar is difficult to steal.

• Solar panels can reduce the thermal gains of a building and reduce air conditioning load.

• Rooftop solar panels reduce the noise caused by heavy rain on a metal roof.

Rooftop solar

Bentley Motors, UK

Uhuru Flower Farm, Kenya

Growthpoint, South Africa

USAID, South Africa

Zenprop, South Africa

Williamson Tea, Kenya

Williamson Tea, Kenya

Garden City, Kenya

Burntstalks, UK

Ground-mounted solar

• Solar panels can be used to provide shade – such as car parking structures.

• For very large solar systems, installing on the ground is often the only option since few roofs are large enough for utility scale solar systems.

• If you have spare land, a solar installation is an ideal way of earning an extra income, if an attractive feed-in tariff rate can be negotiated.

• The land and solar installation will need to be within a secure compound.

• The land space requirements are 1-1.5Ha per MWp.

Solar is often used as a power source where there is no utility grid. But solar can also be used where there IS a grid – in fact over 90% of the world’s solar electricity systems are connected to the grid.

The solar electricity system synchronises with the grid, reducing the amount of electricity you need to import. It is a simple and safe technology, requiring no batteries, and provides clean electricity as part of the overall energy mix.

If the solar system is sized so that the power output can be greater than the on site demand then this surplus power can be sold back to the local utility if local regulations allow.

Grid connected solar power systems can be thought of as a negative load, they can be connected into an electrical distribution network with appropriately rated cables and switchgear. Instead of drawing power however they deliver power at the point of use.

Modern solar inverters automatically synchronise with the grid and they ensure that the solar power is used in preference to grid power.

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Solar and the grid

This chart shows how a solar power source reduces the power drawn from the grid. The load is supplied by solar + grid (or solar + generator) and reduces energy bills and fuel consumption.

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Solarsurplus  power  from  the larger  solar  system can  be  sold  to  the  local  utility

solar  power  -­‐ reduces demand  from  the  grid

grid  power  -­‐ provides  power  at  night  and  the  balance  of  the  power  required

Solar and the grid

Many mining business are located in areas remote from the grid or suffer from intermittent or inadequate power supplies. The use of expensive diesel (or fuel oil ) generators have traditionally been the solution.

Solar power can be integrated into such power systems to reduce reliance on the grid (if available) and more significantly to reduce fuel consumption when operating on site diesel generators – without affecting the stability of the system.

Fuel saver controllers (FSC) are needed to ensure that the solar system can operate in parallel with diesel generators. The FSC may need to limit the power output from the solar system if the load is such that the demand on the diesel generator is too low.

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Solar with a standby generatorThe solar PV system can operate in parallel with the generator but a fuel saver controller is needed to ensure the optimum peformance of the system.

This ensures that the generator is never operating below a pre-set minimum (usually 25-30% of the rated power).

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Minimum  generator  load  =  @30%  rated  power

Hybrid solar systems

When the grid is available the solar power system will operate n grid mode, when there is a power outage and power is coming from on site generators the solar inverters will synchronise with the generator and the solar fuel save controller will manage the output from the solar to maximise the fuel savings whilst allowing the generator to operate at or above a minimum load level.

Electrical Storage Systems (ESS) – or batteries – are fast becoming cost effective and can be added to hybrid power systems to increase the amount of solar power which can be used and to allow the generators to be switched off for periods of time.

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EconomicsThe present cost of solar power can make investment in this technology at attractive way to reduce OPEX and boost the bottom line.

Many banks now have experience lending for solar projects and will be able to provide finance for systems supplied by reputable solar installation companies using world class equipment.

The return on investment is clearly dependant on both the capital cost – which is project specific – and the existing energy supply costs at a given site.

One major benefit of a solar power system is that once purchased the on going operational costs are minimal and the energy costs for the life of the project are effectively fixed.

Project ROIs are typically in the range of 15-20% with paybacks of 5-7 years for equipment which carry long warranties. The solar panels themselves carry a 25 year warranty and have a design life much longer than that.

The chart above shows the cumulative net cash flow for a medium sized project in East Africa where the client is using the solar to reduce grid electricity use and standby generator fuel consumption.

The project runs on diesel power for @25% of the time, this investment has a post tax ROI of 20% and will payback within 6 years.

FinanceIn situations where your business has other calls on capital for investment it is possible to benefit from low cost solar power through a PPA – power purchase agreement. A third party IPP – independent power producer – will build and operate a solar plant on – or near – your business and sell you the power.

You will have to commit to buying the power for a period of time as well as providing access to a suitable area of roof or ground where the solar can be installed.

The IPP will look after the plant – and if it fails to generate power you don’t have to pay and the risk of procuring and operating the solar system is avoided.

Solarcentury Confidential 26/01/16 Page 1

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IntroductionThis calculator estimates cost and returns from a user-owned solar PV installation . All values should be treated as an initial estimate and followed up with a proper analysis where required.Return on investment is comparable against other uses of capital or savings.All financials in USD.

DetailsProject name Location

Inputs(i) system costs (iii) lifetime operating costs (v) site (vii) power pricesPV system size, kWp 6,696 PV operating costs pa, USD/kWp 30.00 Standby generator kVA 8,000 Grid electricity price ex VAT, USD/kWh 0.140Solar average installed system price, USD/Wp 1.453 Fuel saver operating costs pa, USD/kWp 0.00 Daylight load kW 12,000 Diesel electricity price ex VAT, USD/kWh 0.350Solar fuel saver installed system price, USD 80,000 Export operating costs pa, USD/kWp 0.00 Power from grid 98.5% Weighted electricity price ex VAT, USD/kWh 0.14315

Total operating costs pa, USD/kWp 30.00 Power from diesel 1.5% Grid inflation 3.0%Total installed system price, USD 9,809,288 Cost inflation 4.0% End user days operation per week 7 Diesel inflation 3.0%

Export days operation per week 7Solar fuel saver YES (iv) tax Export tariff ex VAT, USD/kWh 62.0% 0.087Export available NO Capital allowances 150% (vi) performance Export tariff inflation 3.0%

Tax rate 30% GridExpected system lifetime 35 years Losses carried forward 10 years Grid off set 100% (viii) economics

Losses/allowances transferable p.a. 0% Limit of export 0% Model currency USD(ii) yield Generator Kenya term forecast inflation 5.44%Yield, kWh/kWp 2,127 Diesel off set 60% US long term forecast inflation 2.25%Degradation p.a. 0.70%

Annual cash flowsYear 0 1 2 3 4 5 6 7 8 9 10 35 year totalMax generating capacity, MWh p.a. 14,242 14,143 14,043 13,943 13,844 13,744 13,644 13,545 13,445 13,345 … 439,164Grid power saved, MWh p.a. 14,029 13,931 13,832 13,734 13,636 13,538 13,440 13,341 13,243 13,145 … 432,577Diesel power saved, MWh p.a. 127 126 125 125 124 123 122 121 120 119 … 3,923Generation for export, MWh p.a. 0 0 0 0 0 0 0 0 0 0 … 0Actual total generation, MWh p.a. 14,156 14,057 13,958 13,859 13,760 13,661 13,561 13,462 13,363 13,264 … 436,500Grid costs saved, USD 1,964,026 2,008,786 2,054,464 2,101,075 2,148,634 2,197,155 2,246,653 2,297,144 2,348,643 2,401,164 … 102,155,385Diesel costs saved, USD 44,535 45,549 46,585 47,642 48,721 49,821 50,943 52,088 53,256 54,447 … 2,316,386Export income, USD 0 0 0 0 0 0 0 0 0 0 … 0Total costs saved / income, USD 2,008,560 2,054,335 2,101,049 2,148,717 2,197,354 2,246,975 2,297,596 2,349,232 2,401,899 2,455,611 … 104,471,771Operating costs, USD -200,880 -208,915 -217,272 -225,963 -235,001 -244,401 -254,177 -264,344 -274,918 -285,915 … -14,795,259

Equity returns - unlevered

Net cash flow - pre-tax, USD -9,809,288 1,807,680 1,845,420 1,883,778 1,922,755 1,962,353 2,002,574 2,043,419 2,084,888 2,126,981 2,169,696 … 89,676,513Capital allowances -14,268,975 Taxable profit 0 0 0 0 0 0 468,765 2,084,888 2,126,981 2,169,696Losses/allowances transferred 0 0 0 0 0 0 0 0 0 0Currency depreciation on carried forward -3.0% -3.0% -3.0% -3.0% -3.0% -3.0% -3.0% -3.0% -3.0% -3.0%Losses/allowances carried forward -12,461,294 -10,239,038 -8,045,627 -5,879,568 -3,739,414 -1,623,758 0 0 0 0Tax (Group impact) 0 0 0 0 0 0 -140,629 -625,466 -638,094 -650,909 … -23,003,189 Net cash flow - post-tax*, USD -9,809,288 1,807,680 1,845,420 1,883,778 1,922,755 1,962,353 2,002,574 1,902,790 1,459,422 1,488,886 1,518,787 … 66,673,323

* Tax treatment subject to specific tax advice Return on investment (pre-tax) 20.4% 0 - year 10 pre-tax net cash flow, USD 10,040,255 Payback pre-tax (yrs) 60 - year 25 pre-tax net cash flow, USD 79,867,225

Upfront payment, USD 9,809,288 Return on investment (post-tax) 18.4% 0 - year 10 post-tax net cash flow, USD 7,985,157 Payback post-tax (yrs) 60 - year 25 post-tax net cash flow, USD 56,864,035

Equity returns - levered

Equity investment, USD 30.0% -2,974,014 Debt fees/costs, USD 104,090 1.50%Interest paid on debt, USD 7.0% -485,756 -401,287 -310,906 -214,198 -110,721 0 0 0 0 0Debt principal repayment, USD 5 years -1,206,691 -1,291,159 -1,381,541 -1,478,248 -1,581,726 0 0 0 0 0DSCR (standalone) Min. 1.07x 1.07x 1.09x 1.11x 1.14x 1.16x n/a n/a n/a n/a n/aNet cash flow - pre-tax, USD -2,974,014 115,234 152,974 191,331 230,308 269,906 2,002,574 2,043,419 2,084,888 2,126,981 2,169,696 … 81,214,280Capital allowances -14,268,975 Taxable profit 0 0 0 0 0 0 0 1,256,840 2,126,981 2,169,696Losses/allowances transferred 0 0 0 0 0 0 0 0 0 0Currency depreciation on carried forward -3.0% -3.0% -3.0% -3.0% -3.0% -3.0% -3.0% -3.0% -3.0% -3.0%Losses carried forward -12,947,050 -11,111,391 -9,202,505 -7,215,660 -5,145,823 -2,987,636 -853,869 0 0 0Tax (Group impact) 0 0 0 0 0 0 0 -377,052 -638,094 -650,909 … -22,614,146 Net cash flow - post-tax*, USD -2,974,014 115,234 152,974 191,331 230,308 269,906 2,002,574 2,043,419 1,707,836 1,488,886 1,518,787 … 58,600,134

* Tax treatment subject to specific tax advice Return on investment (pre-tax) 26.5% 0 - year 10 pre-tax net cash flow, USD 8,413,297 Payback pre-tax (yrs) 70 - year 25 pre-tax net cash flow, USD 78,240,266

Upfront payment, USD 2,974,014 Return on investment (post-tax) 24.1% 0 - year 10 post-tax net cash flow, USD 6,747,242 Payback post-tax (yrs) 70 - year 25 post-tax net cash flow, USD 55,626,121

LCOE* NPVLCOE of project (at WACC) USD 0.089 Project cost of equity 16.0% Project leverage 70.0% NPV of project (at WACC) USD 10.0m Project WACC 8.2%

LCOE of current power (at WACC) USD 0.193 Project cost of debt 7.0% Tax rate 30.0%Project WACC 8.2%

*Assuming export income to be a cost saving

User-owned PV return calculator

Tata Chemicals Magadi Kenya

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What we do

Development

• Feasibility study and site planning appraisal

• Grid liaison

• Detailed modelling and scheme design

• Preparation and submission of permits

• Community liaison

EPC

• Superior in-house engineering

• Performance guaranteed technologies

• Network of contractors

• Sustainable construction processes

O&M

• Real time remote monitoring

• Reactive and proactive maintenance

• Environmental management

• Flexible approach to suit budgets and aims

Financing

• Portfolio of equity and debt providers

• Support for community-owned projects

About SolarcenturyNo substitute for experience

Developing a positive health and safety cultureOur objective is to develop a positive Health and Safety culture across the company, involving and engaging our employees, subcontractors and suppliers. To achieve a level of health and safety performance equal to that of the best performers within our industry, we have set out objectives and management plans to prevent injury and ill health and to continually improve our H&S performance.

We are one of the world’s most trusted, respected and longstanding solar companies. With our headquarters in London, we have offices across Europe, Africa and Latin America.

In fact, being founded in 1998, we have been around since the early days of the solar industry and have been part of the evolution that has made solar the attractive investment it is today.

We are an end-to-end provider of utility scale solar power systems, for the roof or ground-mounted. We’ve put solar on more types of sites than any other company in the industry, and have won multiple awards for product innovation.

Our people’s knowledge is unmatched. Our international project team includes some of Europe’s most experienced solar engineers, investment experts and legal specialists, and our engineers have designed and delivered grid-connected and isolated grid services all over the world, from the UK to Africa to the South Pacific Islands.

So when you choose Solarcentury, you know you’re in very good hands. We have installed over 600 MW globally. Our largest being a 48MW solar farm, installed in 2015 for Primrose Solar.

What’s more, we’re in it for the long-haul. This isn’t just our business, it’s our mission. Our commitment to making solar accessible is deep-rooted and long-term, and our solidly established business is growing steadily worldwide.

A selection of our clients

Find out more Call

+44 (0)20 7549 1000Email

InternationalEnquiries@solarcentury.comVisit

www.solarcentury.com

Solarcentury is in business for a purpose

to make a big difference in the fight against climate change through widespread adoption of solar power.

We are a big believer in helping solar change our world for the better, and we contribute 5% of our net profits every year to our sister charity SolarAid, which aims to eradicate kerosene lamps from Africa by 2020.

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Chile | Germany | Ghana | Kenya | Mexico | Netherlands | Panama | South Africa | UK

Head office: Solarcentury, 50 Great Sutton Street, London EC1V 0DF, UK

www.solarcentury.com

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