Evaluation of Electric Power Supply Alternatives for Remote Mining and Mineral Processing Sites TT-193 Investigacin Minera

y Energa

Robert Griesbach P. Eng. CMC, Director, Energy Consulting y Anibal Carias, P. Eng., Managing Consultant - Power System Planning Lead

Ambos de Hatch Ltd. Sheridan Science & Technology Park 2800 Speakman Drive, Mississauga, Ontario L5K 2R7 Canada Tel: +1 905 855 7600 Fax: +1 905 855 8270 Correo electrnico: rgriesbach@hatch.ca acarias@hatch.ca

Hatch Asociados S.A. Av. Paz Soldan No. 170 Oficina 401 San Isidro, Lima, Per Tel: +51 1 422-8380 / +51 1 422 1034 Fax: +51 1 422 7152 Email: hatch@hatch.com.pe

Summary One of the important decisions in the development of new mining/concentrator projects is the electric power supply for the project. Key decision factors often include the production of power on site versus purchase of power from the grid, ownership of the power supply infrastructure and the choice of generation technology. Consideration of these factors early in the planning and development of a project is important to allow for sufficient time to put the preferred solution in place so that reliable and economic power supply is available at the time the mine and concentrator facilities are ready to begin operations. A key tradeoff analysis, particularly for projects in relatively remote locations is, to assess producing power on site versus construction of a transmission line to bring power from the grid. Expected life cycle costs, adequacy and security of supply, environmental and social factors, carbon footprint and institutional aspects are typically the factors considered in such analyses. For the production of power on-site option, consideration would normally be given to the development of any local hydroelectric resources but consideration should also be given to the use of wind, solar and other renewable resources to at least supplement on-site generation technologies that depend on fossil fuels. Objective The objective of the present technical paper is to introduce a methodology that will allow the evaluation of the various alternatives to supply electric power to remote mining and mineral processing sites in a consistent and equitable manner taking into account economic and technical considerations and providing the same degree of availability and reliability. The most employed evaluation method consists of carrying out trade-off studies between the various alternatives but care should be exercised so that the alternatives analyzed offer comparable operational results. Project and Demand One of the first steps in the proposed process consists in the definition of the location, size and type of demand to be supplied. Demand site meteorological and geographical conditions along with project layout and space use are a requirement to be defined and usually are an input to the power supply alternatives to be formulated. Often the demand to be supplied is not precisely known at the time the trade-off studies are undertaken and as such the demand needs to be analyzed to confirm the capacity and energy requirements. This can be done either by examining the proposed

equipment to be installed or by comparing the envisaged demand to similar mining and mineral processing sites. There are other determining factors and these include the daily load shape, the seasonal variability of demand and operation constraints. In order to define the supply one also has to have an understanding of the operations cycle (24/7) including annual shut downs, the critical and emergencies loads along with their withstanding outage times and the required level of reliability. Supply Options Once the project and demand are defined, the next task will be to consider all the options to be examined from a cost and technical point of view. The supply options will be divided into two main options: Local generation or supply from the grid. Local generation implies that generation facilities would have to be built close to the remote load centre and unless local resources would be used, fuel would have to be delivered some distance and fuel storage facilities probably would be required. Supply from the grid implies the construction of transmission lines to bring in the required power to the remote load centre and associated step down substation. An option considering local generation and connection to the grid is also possible, especially if there is excess local generation but this tends to be uneconomical. In this type of studies it is common to assume that both supply options would require similar equipment to deliver the power to the individual mining and processing facilities and therefore their costs are not included in the analysis. Generally, given the size of the demand to be supplied, only one supply or feed-in point is considered as multiple points would likely generate higher capital costs, more reserve would be required, additional personnel would be needed to operate the facilities, the machines would not be as efficient and would require higher operation and maintenance. Each of these two options has several alternatives. The local generation could be owned or outsourced with each presenting its costs and benefits. Outright ownership offers the most economic unit price of energy but requires capital outlay from the start and involvement is a non-core business for the project owner. Outsourcing often

implies a higher unit price of energy, as others are now assuming the power plant risk, but frees up initial capital and lets those with experience in the sector deal with the supply of electricity. For supply from the grid there are also several alternatives and these relate to the sourcing of the power and energy to be purchased as well as the ownership and payment of the transmission equipment. A particular mine owner could build a generating plant in a distant location to take advantage of fuel sourcing or other

advantageous inputs, buy from a generator or buy from the system. The legal and regulatory frame work of grid connections also has to be taken in account not only on the generation plant considerations but also on the transmission aspects as in some cases the remote load center could be required to pay for all the transmission costs but would not own the equipment and in other instances be responsible for costs associated with grid improvements. In some instances, there will be no capital cost outlays for the grid supply but the unit cost of electricity purchases is such that it incorporates tariffs to allow recapturing those costs by the supplier. Each option has its costs and benefits and one has to ensure that the each option and its alternatives are developed in such a way that the demand will be supplied with similar degrees of adequacy and security of supply (reliability). Local Generation For the local generation option one has the following factors to examine: Generation Technology Generator size Fuel type Fuel Supply Operation and maintenance considerations

Traditionally the supply of remote loads has been focused in the use of thermal technologies with a few hydroelectric installations. However, with the rise of green awareness this focus has shifted somewhat and now the use of renewable energy has been increasingly employed not only to supply new loads but also to complement existing generation. On the thermal side, several technologies are available to supply these remote loads and the size of the demand and other heat/steam requirements is one of the primary factors assisting in the selection of the technology. A relatively small demand without heat/steam requirements tends to favor the installation of diesels or single cycle gas turbines whereas larger demands and/or heat/steam requirements tend to favor combined cycle units or steam turbines using a variety of fuels. Within the same technology there are a variety of options to select from and for diesel this could amount to high, medium or low speeds each with a range of engine configuration which are better left to the next study stage. Meteorological factors, fuel supply and availability and operating conditions also play a role in assisting the technology selection even though sometimes they do not appear to be that relevant. In addition, availability of the technology in a given location or the

required equipment for that location, lead time for a particular technology can also play a role in the selection. It is not uncommon to determine the technology for the local generation solely based on lead time as the power will be required by a certain date and some technologies can not be installed on time to meet that requirement. In

selecting the appropriate thermal technology and sometimes due to the scarcity of water in a particular region, the cooling requirements associated with each mode of operation for the technology has to be taken into consideration as this could imply additional capital expenses as well as slight revisions in the output parameters. It should be noted that even though it is possible to supply a wide range of demand with a particular technology, economies of scale can only start to be realized after a certain demand or unit size. The size and number of generating units is dictated by the adequacy and security of supply requirements (reliability) as well as the demand to be supplied. To meet the demand and the reliability requirements in the most economic way one has to take into account the expected generators planned and unplanned outages as well as possible requirements for future expansions. The reliability can be determined in a deterministic or probabilistic faction. The deterministic method consists of determining the least cost way of meeting the demand such that a certain number of generators can be out of service and the demand can still be met based on the N-2 criteria (one generator on planned maintenance and another on an unplanned outage). The probabilistic method determines the probability of having a certain generation not supplied and one can use either loss of load expectancy (LOLE) (number of hours that the demand exceeds the generation in a year) or the frequency and duration method (number of times and duration the demand exceeds the generation). In order to meet the reliability

requirements, the overall total installed capacity can be significantly greater than the peak demand to be met. The selection of the fuel type to be used takes into account availability of a particular fuel within reasonable distance from the study area and the countrys general fuel usage policy. Depending on the size of units, Diesel units could use either Heavy Fuel Oil (Bunker C) or diesel fuel (No. 2) while gas turbines usually burn diesel fuel or preferably natural gas if available. Steam units can use several fuels including

petroleum derivatives (Bunker C, PetCoke), natural gas and coal (in its many forms). Of particular interest is the case where coal is available locally to supply the generating units and the demand is relatively large.

Fuel supply/transportation to the remote location also plays an important role in the overall selection of the technology as well as the supply option. In the Peruvian

context, liquid fuels (Bunker C, diesel fuel) can be transported by truck from a central distribution facility or by building a dedicated pipeline. Natural gas is available in

certain regions through a network of pipelines and if a pipeline passes close to the remote location, a spur line could be built, if found economic to supply the power generation equipment as well as any other requirements. Unless there are

considerable local requirements for fuels, in addition to those for electricity, electricity by wire is usually more economic than bringing fuel by pipeline to generate electricity. Due to remoteness of the location to be supplied and most likely lack of the infrastructure requirements (railroads or ports) it is not common to supply coal to these locations but coal could be used if available nearby. Regardless of fuel supply

alternative, the costs associated with bringing the fuel to the mine will have to taken into consideration. Other items such as those related to operation and maintenance need to be addressed so that there will be few issues once the generating plant will be in operation. Operational modes and duty need to be predefined so as to correctly size the fuel storage (if any), overall generating plant dimensions need to be established to ensure that it will not infringe on the processing site or be such that it will require special excavation or other requirements that could increase the plants capital cost significantly. Coordination between the mining, the processing site and the generating plant are required in terms of annual maintenance periods and this provide an opportunity for the generating plant to carry out some, if not all, of its maintenance. Operation and maintenance staff requirements and their availability in country to cover particular technologies or need to obtain training need to be defined. One recent aspect that has to be brought into the overall analysis is the associated carbon foot print for each of the alternatives analyzed and this can be quantified by estimating the Green House Gas (GHG) emissions and placing a monetary value on this which can be obtained from several markets such as the Chicago Climate Exchange or the European Climate Exchange. Responsible companies are always looking into reducing their carbon footprint and thus alternatives that could assist them in achieving this are most valuable.

Environmental and social factors for power supply by traditional ways are relatively small when compared to the overall factors for the all development but still have to be taken into account. Grid Supply For the option considering supply from the grid, one has to take the following items into consideration: Distance to the main supply point Grid adequacy to supply the load Voltage level for the transmission line Reactive requirements (both load and system) Price for energy from grid supply

Adequate, reliable and quality of supply of any remote load from the grid is dependent upon many factors but amongst the main ones we can mention distance between the supply point and the load, strength of the supply point and size of load to be served. Taking this in consideration, one of the first tasks required for the grid supply options is to identify the location of the remote mining and mineral processing facilities relative to the existing or committed future grid. Once this is identified, the next task is to identify the substations that are closest to the remote facilities and that could be used. Because of the high voltage normally associated with the supply of these remote loads and security and safety issues it is not recommended to simply tap-off a transmission line to supply the remote loads. Sometimes additional information may be required as a remote load could be supplied from one or more substations and it is not that clear which substation is the better choice or which is more loaded and thus offers a lesser quality of supply. In this case more in depth analyses are required to select the best alternative but this is not critical at the trade-off stage since in later stages the transmission company requires detailed studies from which it is easily determined the best point to be connected to. Should the supply from the closest available high voltage network be judged inadequate, one has to consider a supply from a higher voltage or strengthening/reinforcement of the existing system. Other times, transmission lines operating at higher voltage than

required by the load pass relatively close to the load to be supplied and in that case one has to consider building the higher voltage step down substation to supply the load. The selection is dependent upon a series of factors ending up with the total life cycle cost of supply to the load.

Depending on specific site requirements and the location within the site of individual principal loads, there could be several supply alternatives including supply from a central point within the remote site and individual low voltage feeders from a utility substation. The selection of grid supply alternative is made once the requirements of the individual principal loads are known and depend on the envisaged relative strength of the system at the connection point, the relative cost of power at each of the connection points, the capital cost of each alternative and the associated cost of losses. Due to the distances from the principal generating points and the system voltage level, it is possible that the fault levels could be minimal at the connection point which in turn could make the remote loads larger motors more difficult to start. This has to be investigated since it could imply additional costs for this supply option. While one particular voltage level may appear a suitable supply voltage for the demand level envisaged, studies have to be undertaken to ensure that it is an appropriate voltage level taking into account the distance to the main grid point, the level of demand and the relative strength of the main supply point. This also has to be repeated for lower voltage alternatives. The transmission voltage from the grid to the deposit sites is selected in order to minimize the overall cost including the cost of losses, and to ensure adequate performance of motor loads at the remote site. Depending on the reliability requirements, the alternative considering supply from the grid may require some form of local generation to back up the transmission supply in case of unplanned outages and since distances to the grid could be considerable the construction of a second circuit could be is deemed to be a very expensive measure and other alternatives need to be found to ensure adequate performance. In order to carry out a meaningful comparison of supply options the alternatives to be analyzed are required to offer the same or similar performance relative to adequacy, security of supply, quality of supply and technical performance. Quite often, when analyzing the grid supply option, the analysis does not consider the capability of the system to supply the existing and future demand. This is a necessary task since the existing and committed generation in the system may not have the capability of supplying existing and future demand in an adequate and secure manner. At least capacity and energy balances should be carried out for the overall system

considering the forecasted system peak demand and energy and the expected system capability to meet this demand. Renewable Energy Local renewable resources, if available, could be used to fully supply the demand or to supplements/complement other sources of supply be it local generation or supply from the grid. Local hydroelectric resources could be used to meet the remote demand but usually this resource could have seasonal variations in its output, unless large storage facilities are built, and thus there is often a requirement for this resource to be supplemented by other sources especially during the dry season. Due to variable (seasonal, annual) nature of the hydroelectric resource and the demand characteristics of remote mining and mineral processing facilities, this resource has not been widely used. However, in view of greening effects, the call for clean and renewable energy and the reduction of the carbon footprint, this resource should be reexamined when considering supply sources for this type of loads. In some instances it should be possible to supply the load from the hydroelectric resource during a certain part of the year and obtain the required load energy complement during other parts of the year form a variety of sources including other local generation or supply from the grid. Should the

complement be from the grid, one could then build the hydroelectric resource to its optimum size which would continue operating after the remote mine and associated mineral processing facilities would cease operations. The decision to proceed with a given hydroelectric resource development is dependent upon the overall economics and the expected mode of operation and life. Wind, solar, geothermal and other renewable energies are becoming more and more viable alternatives as technologies mature and in addition many countries are now offering incentives for their development and emission credits can be traded and sold to entities requiring them. Mining companies are looking into this type of energy

generation to assist them in reducing their carbon footprint, reduce energy costs and at the same time improve their image as a user of clean and renewable energy. Some of the renewable energies are also variable in their nature and require other sources to provide firm capacity and as such hybrid systems have been implemented to supply loads in an adequate and secure way. These hybrid systems rely on the renewable energy component to supply energy at relatively low cost and employ other fuels when

the renewable component is unavailable providing an overall reasonable cost of energy for the process. Evaluation Once the options are fully defined, analyzed and costed, they are compared based on the companys financial criteria. This typically involves comparing the present worth of capital, operating, fuel and purchased power costs over an assumed operating lifetime using an appropriate discount rate. The option presenting the lowest discounted value is usually selected. Care has to be exercised when the operating life of the remote mining and mineral processing site is less than the life of the generating asset and other uses could be found for them after the mine has ceased operations. Once the supply option is selected and regardless of the supply option (local generation or supply from a grid) specialized electrical system studies will have to be undertaken since the nature of the load to be supplied could pose challenges to the electrical generators. Should the supply from the grid option be selected, additional compensation equipment may be required to obtain adequate system performance.