Hybrid Power - Hatch Leading the way

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Hybrid Power Generation Delivering renewable energy for less than the levelized cost of fossil fuels

Approximately one quarter of the cost of mining is energy. Accordingly, much of the uncertainty regarding a mining program’s future profitability is related to contingencies associated with energy costs. Eliminating these contingencies can offer more certainty to shareholders, and if the price per megawatt can be lowered along the way, return on investment can also be improved. Nonetheless, many mining companies are operating on the premise that not much can be done to convert variable energy costs into more manageable fixed ones—especially since more and more mining programs are being developed in remote, underserviced areas. This reality often compels companies to install captive thermal generating assets to meet their power requirements, which in turn exposes them to the logistical hurdles and variable costs associated with acquiring a steady stream of fossil fuels.

Hatch was responsible for project management, procurement and construction management for the first two cogeneration units built on the Alcoa World Alumina Pinjarra refinery in Western Australia.

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Renewable power, in the form of solar and wind installations, is increasingly proposed as an alternative for generating electricity in distant locales, yet these sources too have their challenges such as high upfront capital costs, intermittency, and questions about the efficacy of novel technologies. It’s no wonder then that most mining companies are biting the bullet when it comes to energy and profitability. They are accepting the variable costs of fossil fuels, which are poised to rise over the long run due to global economic growth, and forging

ahead with building captive thermal plants believing that no preferable alternatives exist. However, the sun is about to set on this antiquated view.

A new approach developed at Hatch is quickly demonstrating that the profitability of mining operations can be improved by integrating renewable (solar and wind) with conventional thermal (fossil fuel) generating facilities. This hybridized approach delivers renewable power at a cost that is less than the levelized cost of liquid fuels, such as oil or diesel.

Hatch completed full EPCM services for the Kent Breeze wind power project, which included the first installation of the GE 2.5xl machines in North America

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Intrinsic Value Proposition: Be Seen in a Better Light Mining operations often encounter community resistance due to the environmental stigma associated with their activities. The intrinsic value proposition of hybridized power generation provides a strong counterpoint to this opposition and helps to demonstrate a corporate commitment to sustainability. In addition to the obvious benefits of environmental stewardship and green energy participation, renewable power assets typically outlive the economic life of the resource extraction process and form a legacy contribution to the community. They also help to diversify the local economy by providing sustainable and differentiated employment opportunities. Renewable power may also offer the potential for future monetization of carbon credits.

Lower Energy Costs Hatch’s approach to hybridization offers mining clients a viable way to lower their energy costs while addressing the main concerns associated with use of renewable energy.

Flexible deal structures to remove the burden of renewable CAPEXRenewable assets have large upfront capital costs but minimal operating expenses over their lifetimes. In some instances, deals can be structured so that direct capital investment is feasible, with paybacks typically within 5-7 years. In others, the burden of renewable CAPEX must be removed in order to create an attractive alternative to fossil-fuel-fired generation. Hatch designs and oversees the construction of the renewable installation, which is financed, owned and operated by the special-purpose entity. Renewable energy is then delivered to the mining company via a customized power purchase agreement at a price that is lower than the levelized cost of fossil fuels. In this way, the mining company removes the burden of the renewable energy CAPEX from its balance sheet, thus freeing up capital,

decreasing risk, and making the predictable, lower cost of renewables more attractive than the variable cost of fossil fuels. It also allows Hatch to remain independent so it can deliver the most appropriate and cost-effective energy solution available.

High-quality implementation and proven technologies lower risks

Hatch designs and implements its hybridized generation solutions with the same degree of care and control that it brings to other types of engineering projects—and indeed for which it is widely recognized within the mining industry. Our growing energy practice has an extensive background in the delivery of renewable energy assets including large, utility-scale wind and solar installations. Accordingly, all of our proposed solutions are vetted based on economic viability and field history, and only technologies with extensive track records are used for base case assumptions.

Smart installation design offsets the most fossil fuels and ensures sufficient energy supply The intermittent nature of solar and wind power often raises fears of energy deficiency and subsequent operational disruptions. Smart installation design that incorporates load shifting and energy storage techniques ensures adequate energy supply while lowering costs by offsetting the maximum amount of fossil fuels. For instance, Hatch’s resource measurement, tracking and forecasting models are widely used in the renewable market today. These models allow us to size the renewable power capacities to address peak loads during primary hours and to maintain sufficient load at other times to allow for the efficient and appropriate use of thermal assets. Our installation designs also include energy storage through compressed gas, water reservoirs, and other methods, as well as time-shifting loads in a manner that is transparent to the process, such as running desalination facilities at off-peak hours.

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Hatch is working on a hybrid wind-diesel integration study for the remote Inuit village of Kangiqsualujjuaq in Canada’s arctic north to minimize energy costs and maximize the utilization of wind energy to offset diesel-fuel costs

Hatch acted as Owner’s Engineer for Peterborough Utilities Inc’s 10-MW Lily Lake solar farm, one of the first utility-scale solar farms built in Ontario, Canada

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Project ExperienceHybridization of renewable and traditional power generating assets may be relatively new, but Hatch’s reputation for high-quality engineering services is not. Our track record in the renewable power space reaches back nearly 100 years to the advent of hydropower in North America, from which it now extends across the development of major wind and solar installations throughout the world. Our global reach and longevity allow us to devise cost-saving renewable energy solutions for our industrial clients and deliver them with confidence. A list of representative projects is available upon request.

Carry On (As If We’re Not Here)

Due to its novelty and upfront resource requirements, renewable energy projects can sometimes be perceived as a distraction in the context of a full-scale mining program. When Hatch undertakes a renewable energy project, it does so in a way that does not interfere with the company’s program-management process. This means securing independent resources and working unobtrusively, thus avoiding internal competition and preserving program integrity.

Hatch is an employee-owned, multidisciplinary professional services firm that delivers a comprehensive array of technical and strategic services, including consulting, information technology, engineering, process development, and project and construction management to the Mining, Metallurgical, Energy, and Infrastructure sectors. Hatch has served clients for over 80 years and has project experience in more than 150 countries around the world. With 11,000 people in over 65 offices, the firm has more than $35 billion in projects currently under management.

ContactCanada Rob Lydan Director, Solar Power +1 905 403 4374 [email protected]

Michel Carreau Director, Renewable Power +1 514 864 5500 [email protected]

Chile Mario Marchese Energy Director +56 2 430 2627 [email protected]

South Africa Dieter Matzner Principal Power Consultant +27 (0)11 231 6325 [email protected]

This publication contains information in summary form, current as of the date of publication, and is intended for general guidance only. We make no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Hatch Ltd. excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising therefrom. This publication is the copyrighted property of Hatch Ltd. © 2012. All rights reserved.

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