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Solar interview with project manager Cesar Beláunde on low energy prices and renewables for Chilean mines

Cesar Beláunde

In Chile, low energy prices and commodity pressure have challenged new renewables partnerships with mines. However, this environment is changing, and local experts report that now is the time to form partnerships with mines because the business case for renewables is strong and the sector is recovering.

This solar interview is with Cesar Beláunde, Project Manager, Energía Llaima, who offers his local expertise on the business environment for renewables for Chilean mines. Energía Llaima has completed projects with mines in Chile and Mexico and is currently in discussions with Peruvian mining operators.


Although energy prices in Chile have historically been some of the highest in South America, in recent months prices have dropped. How would you describe the country’s current energy landscape?

CB: The situation in the last few months has changed and with it the challenges faced by mines and renewables. Previously, demand exceeded supply, generating higher energy prices. Recently, the development of several renewables projects and the global energy situation, have reversed the situation by notably reducing energy costs. Additionally, the low commodity price has reduced energy demand.

However, we can’t limit ourselves to the short-term view. Mining and renewables companies need to look to the future, understand energy cost projections and try to stabilize energy prices in the market.

How does the the fall in energy prices impact renewables providers’ prospects with mines?

CB: The energy prices are currently low and we expect this situation to remain for two or three years. But after that, prices will experience a significant rise. What we offer is energy price certainty over the long-term.

Additionally, the lower cost of several raw materials reduces our plant development costs. Therefore, now is a perfect moment for mines to sign deals with renewables companies and obtain excellent pricing and conditions – better than what was on offer a year ago and better than what we will be offering in a few years time.


What are the challenges facing Chilean mines in the future and what can renewables do to help?

CB: Mines need to have a more flexible attitude when it comes to renewables. Achieving this is an essential challenge facing both sectors.

There are also some structural issues that need to be tackled, in particular, the lack of water on the continent. Copper mines consume enormous quantities of water in their processes that also require huge amounts of energy. Additionally, the water shortage is forcing mines to pump seawater. This major challenge for the copper industry is a great opportunity for renewables.

Renewable providers should be prepared to find the right energy mix that combines renewables with storage and hydrocarbons to help mines face these challenges.

One of the themes of the 2nd Energy and Mines Santiago Summit, May 16-18, is the likely impact of the new transmission law on the integration of renewables in Chilean mining. How do you think the new law might help drive further collaboration between the two industries?

CB: Firstly, the new law will stabilize energy costs and secure supply, improving the situation for both sectors. However, this is not just about connecting the two main systems, it is also about creating a proper connection that reinforces key grid points, increasing the flexibility of the routes and reducing the dependence and limitations of the two main lines.

Connecting the lines and increasing their capacity will facilitate the supply of renewables around the country. But what is even more interesting is that it will allow Chilean companies to export renewables to neighbouring countries that lack renewable resources – such as Peru, Bolivia, Argentina and Uruguay. Additionally, the time difference will allow Chile to offer more competitive prices than local providers in those countries at certain times of day.

Energía Llaima has successfully signed and developed two renewable projects with mines in Chile and Mexico. What’s the one piece of advice you would give to a renewables provider starting a conversation with a mine?

CB: The most important thing is to convince the mine that the project will almost certainly guarantee long-term savings and profitability.

Additionally, and here is where I see the real value of the project, a sustainable supply agreement emphasises a fundamental business value for the mine. The company is demonstrating its entrepreneurial courage, looking ahead to the future, reducing its environmental footprint and sending a clear message of sustainability to its clients, stakeholders and employees.


Your company has operated in Mexico and Chile and is currently negotiating with some mining operators in Peru. What are the main differences in the mentality of the mining professionals in Chile compared with other Latin-American countries?

CB: I would say that the diversity of the Mexican mining industry gives them a long-term vision and they are more open to dialogue. Conversely, the strength of the Chilean copper sector and the lack of diversification in the industry make Chilean miners more resistant to change.


What are the main barriers that arise during your conversations with mines in Chile?

CB: Currently the principal barrier to closing a deal is pricing. Mines ask for price reductions particularly in the next few years when the prices of traditional energy sources are expected to remain low.


What could mining executives do to better support renewables integration for their operations?

CB: As I said before, the Chilean mining industry tends to think in the short-term due to the susceptible and sometimes unpredictable commodity prices. However, in mining, the best optimization comes in the long-term, especially if you cut production costs, because we surely know that commodities won’t fall to certain limits.

Also, we know that solar, for instance, has different pricing depending on the time of day, so it could be feasible to adapt certain mining processes to this time variation. It is not that complicated to execute processes that generate bigger energy consumption during the day, when renewables have lower cost.

Additionally, transferring some of the site preparation and installation costs to the mine could be another interesting option. For instance, the mine could be responsible for the soil and site preparation, a process that is expensive for us. It would be a lower operational and financial impact for the mine. It would increase our margin, allowing us to offer a more competitive contract.

Finally, mines could also offer space on their camp when renewable projects are developed exclusively for their operation. This would allow us to reduce production costs and again offer better prices on the contract.


Courtesy: Energy and Mines