Rio Tinto agrees to be the off-grid solar guinea pig

Ingenero in conjuction with First Solar will build a 1.7 megawatt solar PV project to serve Rio Tinto’s remote Weipa bauxite mining operation and associated town.

This will subsequently be expanded in a second stage to a total of 6.7 MW with some energy storage technology included (design of the energy storage component is yet to be determined). The project will be built with almost half the capital cost covered by support from the Australian Renewable Energy Agency, which is slated to be shut down by the Federal Government.

The first 1.7 MW stage of the project is expected to offset 20 per cent of existing diesel-generated electricity, during the middle of the day. The second stage with energy storage included is expected to be able to generate 100 per cent of Weipa’s needs in the middle of the day, completely supplanting diesel use with sunlight.

So what, you might ask? Last year Australia installed around 850 MW of solar PV and the year prior they installed over 1000 MW. Total global installations of solar PV for this year are on track to reach about 50,000 MW, or 50 GW.

What does a piddling 1.7 MW, or even 6.7 MW, matter?

Africa is why.

Now there is a 1000 MW-plus market opportunity in Australia with displacing diesel off-grid electricity with solar PV if mining companies can be brought on board. And this project is certainly aimed at breaking open that market in the short term.

But Africa is a continent of more than a billion people, and growing rapidly, for which a large proportion lack access to reliable electricity supply. That dwarfs the opportunity of powering Australian mine sites.

Why don’t these people have electricity? Well, it’s not for absence of coal or hydro or oil. Nor is it really a matter of money – plenty of very poor countries have rolled out widespread electrification, China being a prime example. And the World Bank has been very willing to lend countries money to help rollout electricity supply.

The core problem is one of corruption and dysfunctional government.  Rolling out traditional electricity supply needs some degree of robust government because it needs to be large scale.  Coal, hydro and even gas-fired power aren’t that cheap unless you can build the power plants at large scale of several hundred megawatts.  And then to consume that amount of electricity you then need to string up power lines over large distances to connect up lots of people and businesses that together are capable of consuming that large amount of electricity.  This kind of scale and organisation can’t be supported by the quality of governance in place in much of Africa and indeed across a large proportion of the developing world.

Contrary to the rantings of Bjorn Lomborg and the Minerals Council that an obsession with renewable energy will leave Africa in the dark, it may offer a more realistic and faster route to electrification. This is because renewable energy technology – and in particular solar PV – with its smaller, more modular scale, could allow communities in Africa and other developing countries to bypass dysfunctional governments in order to gain electricity.

It’s important to note that the Weipa solar project is a very long way from being the first site to show how renewables can help remote regions reduce their reliance on diesel and improve access to electricity. There are several communities around Australia and across a number of Pacific Islands where solar (and wind in the case of several remote WA towns) and also batteries are used to significantly displace the use of fossil fuels to meet the power needs of communities. 

But the Weipa project is one of the first that will also involve powering a major mining operation without the back-up of a major power grid to fall back on.  

For some time now it has looked like solar PV should be a financially attractive alternative to the use of diesel in the Australian off-grid/mini-grid electricity market. The cost of power from diesel is far higher than the $30 to $60 per megawatt-hour prices that prevail in Australia’s main grid wholesale markets. According to First Solar’s vice president of business development for the Asia-Pacific, Jack Curtis, $250 to $350 per megawatt-hour is the key benchmark for competitiveness. 

Solar has surpassed such benchmarks, with even small household gird-connected installations achieving such costs. However, it’s important to note that solar installations in remote locations involve considerably higher installation costs.

Yet in spite of reasonably attractive economics, solar PV has not really taken off in the off-grid market.

According to Curtis, but also other solar PV suppliers, this is to a large extent due to concerns about reliability of power supply. While diesel fuel may be expensive, a power outage that stops mine production has financial consequences that, within a relatively short period of time, can overwhelm any savings from avoided diesel usage. 

In reality there are myriad solar-diesel hybrid systems out there that demonstrate that reliability is not an issue. According to Curtis, he believes that you could have solar PV systems supplying up to 70 per cent of load without any issues over power reliability and without any need for battery storage.

But no mining company has so far been keen to be the guinea pig. 

This project is expected to finally put those concerns to rest. Especially given that Rio Tinto, one of the biggest and most respected miners in the world, is the customer. Also, you can’t get much more mission critical than having solar supply 100 per cent of electrical load in the middle of the day.

Provided this project goes smoothly then Curtis expects other mining companies will soon follow Rio’s lead in Australia but also potentially Africa, South America and South-East Asia. In addition he said that he would be “very, very surprised” if this solar project was a one-off for Rio Tinto.

I found this optimism quite surprising given that $11.3 million of the $23.4 million project has been funded from government money via ARENA, which is slated to be closed down. 

Curtis felt that closure of ARENA would make progress in off-grid slower and “less efficient” but ultimately would not be a showstopper. In the end the economics will become too compelling in his view.

If Curtis is right then we may see solar-diesel-battery hybrid systems become a powerful tool for making electricity far more accessible.