The «real» Renewables for Mining Market Size Potential
Sources of information
In a broader, global energy context, the worldwide mining industry currently consumes 8 to 12 percent of global primary energy and according to experts as CIRCE , this is expected to reach 15 to 20 percent by 2030 – 2035.
The International Energy Agency forecasts that by 2035, global energy demand will increase by one-third, while the share of fossil fuels in the world’s energy mix will fall from 82% to 76%. Renewable energy will account for nearly half of this increase in global power generation. In other way IRENA (International Renewable Energy Agency) Remap 2030 points to a 36% share for renewables by 2030.
NCRE for mining market size
Based on the precedent sources and according to our experiences, we have developed a research on the real size of renewables energy consumption in mining, which includes not only mines, but also utility companies in mining regions. First conclusions point to a worldwide renewables for mining (r4mining) market needs in a deployment between 957 GW and 1270 GW of new renewable energy capacity by 2035, which translates to a market of 1.9 – 2.54 trillion USD of Capex investment for the next 20 years. This huge amount of Capex upfront investment will require collateral financial costs of about 727 to 965 billion USD. Therefore global r4mining’s market will demand a total amount investment between 3.64 and 3.51 trillion USD by 2035. Supposing a standard average leverage of 72% for these investments, the capital structure for non-conventional r4mining market (only for NCRE) will show up the following figures:
Equity Investment market between 536 to 711 billion USD
Debt Investment market between 1.38 to 1.83 trillion USD.
So over the next 5 years (to 2020), this market will represent of between 118 GW and 171 GW of new renewables energy capacity for mines, which translate, to the Capex upfront investment market between 236 to 342 billion USD and collateral financial costs between 90 to 130 billion USD. Based on an equivalent leverage, the capital structure for renewable and mining by 2020 will show up equity investment market between 66 to 96 billion USD and a debt investment market of 170 to 246 billion USD.
Renewable energy options in mining will grow along with the volatility of oil and gas prices. Demand for enough space in facilities location and upfront investment capital expenditures are the main handicaps for renewables in any industry. However, in mining space is not an issue, and NCRE value proposal based using finance innovation would solve and really convince miners generating mining assets and mitigating risk about upfront investment Capex.
Why these huge numbers never have noted by other research?
There are three key points producing research mistakes because a certain type of marketing myopia:
- Mining executives don’t really know what NCRE means: Most of the studies related to mining are based on interviews with top executives. The procedure is to ask about the expectations in the use of NCRE for future plans, however it seems a wrong approach if we need to really detect the potential size market. We could compare this situation with similar market studies experiences related to the needs of personal computers, mobile phones or, even better, solar photovoltaic in other industries. If we elaborate a similar question to these professionals only 5 years ago about the use of mobiles, Twitter, LinkedIn or Facebook in their companies, the answer would be alike confused as well.
- The “mining statistics”, mining versus mining industry: Another problem to determine a good approach to the mining “industry” is linked to statistics. For the UN (and for IEA and / or IRENA), mining is simply the extractive part and a small portion of the physical preparation of mineral (sometimes named “Comminution”). Every process related with smelting and electrochemical metal separation is classified as «Industry», is not considered «Mining». While this definition would be correct in steel industry because is the combination of several sources of mineral and metals as of coal, iron, manganese and other metals related to specific industry to create alloys. But in the case for copper and other metals (Ni, Pb, Zn, Au, Ag, Pt), smelting is a part of the mining «cluster». This is a KEY POINT to understand current misunderstandings about mining and energy. Let me show a good example, Copper in Chile. For miners, for Chileans, for the power grid, smelting and purifying copper is a part of mining. On the opposite way, international organizations consider them as industry, big mistake. Other examples of statistics misunderstandings on mining would be the Canadian Tar Sands. Are they oil or mining industry?
- Last but not least, mining will use utilities to develop NCRE. At North Chile, the 94% of power demand is linked to mining tasks. But usually mines do not produce electricity; the utilities generate and transport power for them. Let me show you a comparable example: If we measure the residential PV market size of renewables in Spain based on residential rooftop installations, the market size measured would be significantly lower than the real market. This is because the residential market consumes most of the PV power production of solar land installations, solar land PV plants represent close to the 95% of total PV plant capacity and the rooftop less than the 5%. So, if we want to measure the residential market size we need to measure the «indirect» market represented by utilities. The mining market has similar disposition.
In future posts we will show details about this research survey.