why is transformation important? how could we accelerate...

© Deloitte & Touche LLP and affiliated entities. 1

Pathways 2 Transformation

• Why is transformation important?

• How could we accelerate adoption?

• What could sustainable mines 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 EXTINCTION SOCIETY: 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

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•  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


Growth of exponential technologies follow a predictable path

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

Projec'ons

1

10

100

1,000

10,000

100,000

1,000,000

1980 1985 1990 1995 2000 2005 2010 2015 2020

mW

Installed Capacity

700,000 mW

0

1

10

100

1,000

10,000

1980 1985 1990 1995 2000 2005 2010 2015 2020

Pro

duct

ion

(bill

ion

kWh)

Electricity Production

1,349 bkWh

$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

Levelized Cost

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

Value Return/Risk

Fuel Storage

Fossil Generation

Load Following

Work / Load

24/7

Mechanical/Electrical

Fuel Storage

Fossil Generation

Work / Load

Renewable Generation

Energy Storage

24/7

Electrical

Load Following

Demand-Side Management

Time

Work / Load

Energy Storage

24/7

Electrical


Load Following

Demand-Side Management

Optimized Load Synchronization

Work / Load


Energy Storage

Electrical

Work Storage


Modeling and simulation become key to optimizing return/risk relationship

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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

Opportunity Assessment Economic Feasibility Technical Feasibility Portfolio Optimization

Evaluation of the renewable energy potential and site suitability l  Site solar and wind data l  Land use restrictions l  Closure vs. Operating sites l  Energy requirements and

LOM

Detailed risk assessment and cost-benefit analysis of economic drivers l  Installed cost and LCOE l  Energy requirements and

LOM l  Energy costs and market

pricing l  Ownership structure l  Regulatory risks

Simulation modelling to evaluate performance of the integrated system l  System optimization l  Sensitivity and scenario

analysis l  Energy system integration l  Intermittent energy supply

Renewable Energy strategy based on market and opportunity assessment l  Prioritization of opportunities l  Risk assessment l  Portfolio evaluation


RES LCOE Levelized cost of electricity

from RES

Economic Feasibility Model Components

Labor Cost Cost of construction labor

Investment Credits

Cost offsetting investment

credits

Annual tax Benefits / Penalties

Related to GHG

Operating Cost

Annual operating cost

Sales Revenue

Determined by price and quantity

kWh sold

Base-less RES Base site demand minus

RES contributed kWh

RES Energy Cost New energy cost with RES

contributed reduction

System LCOE Blended system LCOE with

RES

Base Case Demand Electrical demand under

original operating scenario

Base Energy Costs Determines price and amount revenues from electricity sales

Installed Cost Total installation

cost

Modules & Materials

Cost of equipment purchase

Losses Wiring,

Temperature and snow factors, etc.

Weather Solar irradiance / wind

speed Events: clouds, storms

RES Maintenance

Total annual maintenance

Supplemental Costs

Insurance, security, facility HVAC, lighting,

etc.

Tie in Costs Substation

modifications, grid tie-in

Resource Assessment

Solar irradiance / wind

speed

LOM Annual operating cost

Energy Production RES electricity

Install Specs Size, efficiency, etc.

%

$ $

$ / kWh

$ / kWh

Construction Cost $

%

Project Life Annual operating cost





The components of LCOE


Technical Feasibility: Multi-time domain simulation

1/15min Intervals





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


Techno Economic Feasibility: Business Model and Simulation

Demand data

Generator Specifications

RES design

Simulation Tool

? $

Weather Data

l  Solar production (Mwh) l  Solar to grid/battery/demand

(Mwh) l  Total Energy Cost ($) l  Average Unit Cost ($/Mwh) l  Total Energy Revenue ($) l  Average Unit Revenue ($/Mwh) l  LCOE of solar l  Probabilistic economic outcome l  Performance issue identification

l  Solar Irradiance (kwh/m2/d) l  Equipment costs l  Install costs l  Operating Costs l  Plant size (Number of Panels) l  Panel size l  Panel rating l  Panel efficiency l  Life expectancy

Multi-period Economic Model

System Behaviour

Sensitivity Analysis Results

Inputs Business Model and Simulation Outputs






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

CAPITAL capacity through partnerships

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

Reduce STRATEGIC risk Create value

Reduce OPERATING risk Validate value

Reduce FINANCIAL risk

Capture value


Finding ways to get started: Yesterday, today and tomorrow

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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


Innovation to ZERO will enable a radically different future mine

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ZERO FATALITIES

ZERO EMISSIONS

ZERO ENERGY MARKET RISK

LOWER & STABLE COSTS

#WOMEN = #MEN

COMMUNITY SUPPORT

LOWER CAPITAL

SUSTAINABLE VALUE CREATOR

Renewable Energy Impact


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 penetration Diesel haulage


<<20% RE penetration LNG Fuel substitution


100% RE ecosystem


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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why is transformation important? how could we accelerate...

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