Mining Companies Can Help Turn On the Lights across Sub-Saharan Africa, Says World Bank

CAPE TOWN, SOUTH AFRICA, February 9, 2015 – Mining companies can play a key role in harnessing Africa’s abundant clean sources of energy to overcome the lack of electricity which affects at least one in three Africans, says a new World Bank report released here today at Mining Indaba.  

In its report, entitled “Power of the Mine: A Transformative Opportunity for Sub-Saharan Africa”, the Bank calls on the mining industry to work more closely with electricity utilities in the region to meet their growing energy demands. Rather than supplying their own energy on site, mines can become major and reliable customers for electricity utilities or independent power producers (IPPs) which can then grow and develop better infrastructure to bring low-cost power to communities.

Power is critical to mining companies’ operations and, by becoming “anchor customers” for electricity utilities, mines can save hundreds of millions of dollars in supplying their own power.

Sub-Saharan Africa, as a region, only generates 80 gigawatts of power each year for 48 countries and a population of 1.1 billion people. Two-thirds of people in the region live entirely without electricity and those with a power connection, suffer constant disruptions in supply.  Without new investment and with current rates of population growth, there will be more Africans without power by 2030 than there are now.

The report finds that mining’s demand for power in Sub-Saharan Africa will likely triple between 2000 and 2020 to reach over 23,000 MW. This could be higher than non-mining demand for power in some countries. Yet, many mining companies are still opting to supply their own electricity with diesel generators rather than buy power from the grid – often because of shortcomings in national power systems in the region.

According to the report, another 10 gigawatts of electricity will be added to meet mining power demand by 2020 from 2012 levels – and a part of this is projected to come from “self-supply” arrangements costing mining companies up to $3.3 billion.

But new models of power supply for mines are emerging across Sub-Saharan Africa – including mines self-supplying and selling to the grid or serving as anchor consumers for IPPs. The report estimates around $6 billion in potential public-private partnership opportunities for new power generation from clean energy sources (including natural gas and hydropower) in Guinea, Mauritania, Tanzania and Mozambique – countries with strong expected growth in power demand from the mining sector.  

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“Power-mining integration can bring substantial cost savings to mines, electrification to communities and investment opportunities to the private sector. But to be successful, we need governments, power utilities and mining companies to work together,” said the World Bank’s Vice President for Africa Makhtar Diop. “Lack of energy stunts the economic growth that’s needed to reduce poverty and boost prosperity for all Africans. Integrating mining demand into national and regional power systems – especially in mineral rich and energy-poor countries – can bring enormous benefits to countries and communities.”

The report cites the example of Guinea, where mining contributes more than half of the country’s total exports and provides more than 20 percent of all fiscal revenues – but where national electrification rates are among the lowest in Africa. For instance, by joining a number of mines together and contracting an independent power producer to generate and transmit electricity to the mines through a high voltage mini-grid, the mining companies would save an estimated $640 million in self-supply costs while bringing affordable and reliable energy to at least 5 percent of Guinea’s people.

“By choosing grid-based and cleaner power sourcing options, which are typically priced lower than self-supplied electricity from diesel or heavy fuel oil, mining companies will be able to meet their electricity needs while also helping to light up the community,” said Anita George, Senior Director of the World Bank’s Energy and Extractives Global Practice. “In turn, countries will benefit from improved competitiveness of the mining companies, greater tax revenues from mines and more job opportunities for local people.”

The report states that though there are risks associated with power-mining integration – for example from falling commodity prices or a shortage of transmission links – regulatory and financial solutions can help mitigate these risks. A key element is for countries across Sub-Saharan Africa to continue with their power sector reforms and create an attractive operating environment for IPPs, including renewable energy developers.

The report: “The Power of the Mine: A Transformative Opportunity for Sub-Saharan Africa” was funded by the Energy Sector Management Assistance Program (ESMAP) and the South African Fund for Energy, Transport and Extractives (SAFETE).