Turning to the green side

Anglo American’s Mogalakwena mine in northern South Africa is the largest open pit platinum mine in the world. It is also home to the world’s largest hydrogen-powered vehicle – a 220-ton mine haul truck which emits only water vapour. This is one of several hydrogen projects Anglo American is developing in South Africa as it seeks to cut its carbon emissions.

The adoption of green energy technologies elsewhere in the African mining industry is moving more slowly, but that change will come, says Chris Green, head of Hogan Lovells’ corporate team in Johannesburg.

“The mining sector is obviously an energy intensive one; in places like South Africa and southern Africa more broadly, the mining sector accounts for nearly 30% of energy demand,” said Green. “For that reason it is still predominantly reliant on traditional sources of energy. But there is going to be an increasing mix of different green technologies used throughout the sector.”

Wind and solar are likely to be the primary go-to renewable energy sources, mainly because they are relatively cost-effective and well understood from a technology perspective, Green commented.

Adopting renewables is not without its challenges. For starters, renewables come with inherent reliability issues – if it is cloudy or there is no wind, solar panels and wind turbines can’t produce any power. A bigger problem in Africa, however, is the regulatory landscape.

“Most jurisdictions don’t provide for a bespoke or self-standing regulatory framework for renewable energy – it all gets lumped in with energy regulation as a whole,” said Green.

Many of those regulatory frameworks are built around historical state energy monopolies, so private power projects established outside of the formal licensing regime are generally subject to very restrictive power generation thresholds.

“That has really limited the scale of renewables projects to a size which is not practical or feasible for what enterprises the size of mines need,” said Green.

South Africa recently scrapped its size limits for private power projects in response to the country’s energy crisis and increased rolling blackouts. Green says this overhaul of South Africa’s regulatory framework has resulted in a significant uptick in the development of utility-scale independent power projects.

Another lesson the African mining industry could learn from other regions is to adopt a diversified energy mix that incorporates different types of green power, as they have done in Western Australia, noted Green.

Aside from the obvious environmental benefits of using renewables, they can also help mining companies with their environmental, social and governance (ESG) reporting by outlining to investors and regulators what they are doing to become more sustainable.

Renewable energy projects can also create local jobs, supporting economic development in the communities where mining companies are operating. In the long run it will likely save money too.

“Once they’re operational, renewables provide relatively cheap energy, so it will have long-term benefits in terms of offsetting costs of buying energy from state utilities,” said Green. “For that to happen, the regulatory backdrop needs to change, but when it does, the uptake of renewables will be quick.”

To join Africa Legal's mailing list please click here