pathways 2 transformation - energy and...

Pathways 2 Transformation

Accelerating the adoption of renewable energy through a better understanding of risk

Dr. Adriaan Davidse (Ph.D., MBA)November 2016

© Deloitte & Touche LLP and affiliated entities.1


• Why is transformation important?

• How could we accelerate adoption?

• What could sustainable mines look like?

© Deloitte LLP and affiliated entities.© Deloitte LLP and affiliated entities.

Why does transition to renewables matter?

3

OUR BIOSHPERE: Carbon intensive economy, Climate Change – THE NEXT EXTINCTIONSOCIETY: Fossil fuel resources will eventually run out – NEED TO TRANSITION IN TIME

MINING COMPANIES: Lower grades, Lower margins – THE GREAT VALUE DESTRUCTION

Too soon(loose money)

Too late(can’t avert climate crisis)

Too late(no value creation)

Too soon(waste resources)

ADOPTION OF RENEWABLES

Need to decarbonize

SCALE

Need to create value

PROFIT

Timekeeper

Need time to change

SUSTAINABLE ENERGY FUTURE

GOLDILOCK ZONE?


Evolution has hard-wired us for survival with cognitive biases

4

• Loss aversion: Losses stronger than gains

• Regret avoidance: Stick with bad choices

• Framing: Presentation affects perception

• Planning fallacy: Underestimate task effort

• Overconfidence: Familiarity with the past

• Confirmation bias: Only hear what we believe


Reason to be optimistic: The Law of Accelerating Returns

5

• Solar module cost decrease

20% for each 2X increase in

volumes

• Volumes double nearly every

two and a half years

• Growth becomes exponential• 2016


Growth of exponential technologies follow a predictable path

Are you prepared to take advantage of the benefits of a future you CAN predict?

Projections

1

10

100

1,000

10,000

100,000

1,000,000

1980 1985 1990 1995 2000 2005 2010 2015 2020

mW

InstalledCapacity

700,000mW

0

1

10

100

1,000

10,000

1980 1985 1990 1995 2000 2005 2010 2015 2020

Pro

duct

ion

(bill

ion

kWh)

ElectricityProduction

1,349bkWh

$0

$1

$10

$100

1980 1985 1990 1995 2000 2005 2010 2015 2020

$uS

D/W

att

Cost/Watt

0.35$/W

$0.01

$0.10

$1.00

$10.00

1980 1985 1990 1995 2000 2005 2010 2015 2020

$uS

D/k

Wh

LevelizedCost

0.03$/kWh

Ray Kurzweil: Here's

Why Solar Will Dominate

Energy Within 12 Years

– Fortune Magazine, 2016


Think DIFFERENTLY

• Bigger is Better

• 24/7 Utilization of all assets

• Increase recoveries

9

INNOVATION is about breaking tradeoffs

•?•?•?


Expand the portfolio of options across the whole system

10

Energy Supply

Energy Demand

ValueReturn/Risk

Fuel Storage

Fossil Generation

Load Following

Work / Load

24/7

Mechanical/Electrical

Fuel Storage

Fossil Generation

Work / Load

RenewableGeneration

Energy Storage

24/7

Electrical

Load Following

Demand-Side Management

Time

Work / Load

Energy Storage

24/7

Electrical

RenewableGeneration

Load Following


Optimized Load Synchronization

Work / Load

RenewableGeneration

Energy Storage

Electrical

Work Storage



Modeling and simulation become key to optimizing return/risk relationship

11

Anticipate

Allocate

Act

Assess

Past Present Future

<15mins

<Daily

<Seasonal

<LOM

<LOC

<LOB

Economics

Technical

Combinatory complexity

Dynamic complexity


Deloitte developed a structured approach to evaluate the potential of renewable technologies at mines

Portfolio Optimization

Economic Feasibility

Technical Feasibility

Opportunity Assessment

Evaluation of the renewable energy potential and site suitabilityl Site solar and wind datal Land use restrictionsl Closure vs. Operating sitesl Energy requirements and LOM

Detailed risk assessment and cost-benefit analysis of economic driversl Installed cost and LCOEl Energy requirements and LOMl Energy costs and market pricingl Ownership structurel Regulatory risks

Simulation modelling to evaluate performance of the integrated systeml System optimizationl Sensitivity and scenario analysisl Energy system integrationl Intermittent energy supply

Renewable Energy strategy based on market and opportunity assessmentl Prioritization of opportunitiesl Risk/Return assessmentl Portfolio evaluation


Technical Feasibility: Multi-time domain simulation

1/15min Intervals

Portfolio Optimization

Economic Feasibility

Technical Feasibility

Opportunity Assessment

Hourly/Daily Intervals Monthly/Annual IntervalsWeather anomalies Optimal portfolio of assets Seasonal effects


Think BIG Test small Scale FASTCOLABORATIVE & INTEGRATIVE capacity to drive learning at great speed and lower cost

CAPITAL capacitythrough partnerships

Innovative energy solutions should be approached with consideration of all the risks involved

Reduce STRATEGIC riskCreate value

Reduce OPERATING riskValidate value

Reduce FINANCIAL risk

Capture value


Finding ways to get started: Yesterday, today and tomorrow

15

Closed sites Operating mines New projects

• Scared land / Permits• Existing infrastructure• Market access

• Revenue potential– Sale of power– Ancillary services

• Carbon credits• Community support• Experimentation

• Available space• Existing infrastructure• Significant loads

• Cost reduction• Volatility reduction• Energy security• Reliable supply• Emission reduction• Carbon credits• Community support

• Reduce footprint• Plan infrastructure• Significant loads

• Value maximizing• Eliminate market risk• Energy security• Reliable supply• Zero emissions• Carbon credits• Community support

Advantage

Focus


Renewable Energy Impact

Innovation to ZERO will enable a radically different future mine

17

ZERO FATALITIES

ZERO EMISSIONS

ZERO ENERGY MARKET RISK

LOWER & STABLE COSTS

COMMUNITY SUPPORT

LOWER CAPITAL

SUSTAINABLE VALUE CREATOR


Innovating to ZERO may be more possible than we can even imagine


Energy needs to be viewed as part of an integrated system of flows


0% RE penetrationDiesel haulage


<<20% RE penetrationLNG Fuel substitution


100% RE ecosystem100% Electrified operations


Energy and Work synchronization

© Deloitte & Touche LLP and affiliated entities.

"The difficulty lies not so much in developing new ideas as in escaping from old ones..." - John Maynard Keynes


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