Tuesday, July 14, 2015

DeGrussa mine installation

Big announcement today!

Sandfire Resources NL, an Australian mining company, has taken the plunge and invested in a major PV installation with battery storage at its DeGrussa copper and gold mine.  This project will set new worldwide benchmarks for integration of renewable energy into mining operations.

In this post, I’ll do a little detective work to look behind the media reports that are available here.  (At the link, you’ll find reports from ARENA, CEFC, juwi, Neoen, OTOC and Sandfire Resources.)

But first, some facts.  The DeGrussa mine is remote (900 km from Perth) and currently served by a 19 MW diesel generator.  The new PV installation will be integrated seamlessly with the existing diesel plant; it will have peak capacity 10.6 MW with “short-term” battery storage to deliver 6 MW.  There will be 34,080 PV panels with single-axis tracking installed on a 20 Ha site.  The project will be complete in early 2016.  Each year, the installation will offset 5 million litres of diesel fuel usage and 12,000 t CO2 emissions.

The actual owner of the project is Neoen, a French renewable energy firm.  juwi Renewable Energy Pty Ltd will develop and operate the project, with OTOC Ltd responsible for procurement and construction.  Sandfire Resources will purchase the electricity “at a fixed rate that is lower than the historical cost of diesel-generated power”.

The project is financed by CEFC (debt, AUD 15 million), ARENA (grant, AUD 20.9 million) and equity (mainly from Neoen, “less than $1 million” from Sandfire Resources).  The total project cost is AUD 40 million.

We all know about the trend with PV prices – namely down, with an experience curve that shows 22% price reduction in module costs per doubling of global installed capacity.  That trend has been in place for more than 30 years.  Data is also starting to emerge about the cost of battery storage, see for example my blog post on recently published data.

What can we infer about the cost of the batteries?

Let’s work backwards from an estimate for the cost of the PV component.  According to my recent analysis of the Nyngan & Broken Hill project, the capital cost there was AUD 2.84 per peak Watt.  At the same capital cost, the PV component of the DeGrussa project would be AUD 10.6 × 10^6 × 2.84 = AUD 30.1 million.

That leaves AUD 9.9 million for the battery component, which is to deliver a peak power of 6 MW.  If the “short term” storage is for 1 hour, the battery storage is priced at AUD 9.9 × 10^6 /6,000 kWh = AUD 1,650 per kWh.  If the storage is for 2 hours, the cost is AUD 9.9 × 10^6 /12,000 kWh = AUD 825 per kWh.  For 3 hours it would be AUD 9.9 × 10^6 /18,000 kWh = AUD 550 per kWh.  You can make your own calculation based on your interpretation of “short term”.

Presumably other companies bid for the DeGrussa project, amongst them companies using Concentrated Solar Thermal power generation with storage.  So, it’s interesting that PV/battery technology has won the contract.

The other salient feature that emerges from the media reports is that this is a big market segment.  According to ARENA’s media release, “remote industries in Australia currently rely on 1.2 GW of power from diesel fuel”.  Based on the price tag for the DeGrussa mine, I estimate the market niche to be AUD 1.2 × 10^9 × 40 × 10^6 / (10.6 × 10^6) = AUD 4.5 billion.  Worth pursuing, and perhaps the DeGrussa project represents a pivotal moment.

Whatever, I congratulate all those involved in this development.

Note added one day later: 
I was also able to make an estimate for the Levelised Cost of Electricity for the DeGrussa installation.  See www.sunoba.blogspot.com, post for 16 July 2015.

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