Barriers to greater adoption of renewable energy by mining companies in South Africa

Abstract

Mining companies are currently operating in a challenging business environment and are confronted with significant cost pressures in a strained commodity price market which negatively impact on operating margins. Moreover, continuity of electricity supply and escalating electricity costs in South Africa are significant risks facing mining companies today. Notwithstanding the drivers and attractiveness of renewable energy for mining companies, adoption remains low due to the negative impacts of various socio-technical barriers that exist. The aim of this research was to identify barriers to greater adoption of renewable energy by mining companies in South Africa from the perspective of mining companies. This exploratory study employed qualitative methods to explore barriers to greater adoption of renewable energy by the mining sector in South Africa. The research was conducted through ten semi-structured interviews with decision-makers from various mining companies that represented the major mining sectors in South Africa, using openended questions. Both deductive and inductive approaches were used to interpret the findings against existing literature as well as to identify new barriers emerging from the data. The study identified a number of technical; economic and financial; institutional; and behavioural barriers that contribute to the low penetration of renewable energy in the mining industry in South Africa. The research found that the intermittent nature of renewable energy was a significant barrier that makes it unsuitable for continuous applications, such as mining operations. Mining companies find it difficult to develop a viable business case to invest in renewable energy projects due to the relatively cheap Eskom electricity prices. Other contributing factors to the unfeasible business case include the high capital costs of renewable energy, which translate to long payback times, and a return on investment that is lower than mining companies' expectations. A lack of supportive policy for investment into privately owned renewable energy projects for own consumption (not delivered to the grid) also presents a further challenge. A key finding was that there is an entrenched mindset within mining companies that results in a preference for grid-connected electricity provided by the utility. Mining companies would rather focus on their core business of mining and view renewable energy as supplementary power that does not warrant their attention. Based on the findings, recommendations were made to address the barriers in order to increase the penetration of renewable energy in this industry.