High energy costs in mining: How renewable energy is transforming the sector’s competitiveness

For decades, the cost of energy was considered just another component within the structure of high costs in mining. However, the scenario has changed radically. The increase in electricity and fossil fuel prices, the volatility of energy markets, the need to reduce carbon emissions, and the growing electrification of processes are turning energy into one of the most determining factors for a mine’s profitability.

Currently, mining operations face the challenge of maintaining their productivity in a context where energy represents between 15% and 40% of operating costs, depending on the type of mineral, the location of the deposit, and the energy intensity of the extraction and beneficiation processes. In mines located in remote areas, where generation depends mainly on diesel generator sets, this percentage can be even higher.

Added to this panorama is a phenomenon that is redefining the corporate strategies of the sector: the energy transition. What a few years ago was seen mainly as a response to environmental commitments, today constitutes an economic decision.

Mining companies are incorporating renewable sources, storage systems, and intelligent energy management platforms to reduce their dependence on imported fuels, stabilize operating costs, and increase resilience against energy market fluctuations.

Renewable energies: a strategic component

This transformation also responds to a technological evolution. The decrease in the cost of photovoltaic modules, the increase in the efficiency of wind turbines, the rapid expansion of battery energy storage systems (BESS), and the development of smart microgrids allow for the integration of multiple energy sources without compromising the reliability of the electricity supply. As a result, renewable energies have stopped being a complementary alternative to become a strategic component of modern mining operations.

In this context, competitiveness no longer depends solely on the quality of the deposit or the efficiency of the extraction equipment. The ability to manage energy intelligently has become a differentiating factor that directly influences production costs, operational continuity, and the fulfillment of sustainability goals.

Why do high costs in mining increase?

Mining is one of the industrial activities with the highest energy consumption in the world. From drilling and transporting the ore to the crushing, milling, concentration, and pumping processes, practically all stages require large amounts of electricity or fuels.

The comminution process; which includes the crushing and milling of the ore; concentrates a significant part of the electrical consumption of a processing plant. Added to this are auxiliary systems such as ventilation in underground mining, water pumping, air compressors, hoisting systems, conveyor belt transport, and high-capacity mobile equipment.

This high consumption means that any variation in the price of energy has a direct impact on the cost per ton produced.

The volatility of fuels increases uncertainty

Many mining operations continue to depend on diesel to power haul trucks, excavators, electric generators, and heavy machinery. When the international price of oil rises or disruptions occur in the supply chain, the operating cost of these mines increases immediately.

In isolated operations, where fuel must be transported hundreds of kilometers by road or maritime logistics, the costs associated with supply can represent a significant part of the annual energy budget.

This dependence also exposes companies to risks related to fuel availability, geopolitical conflicts, and regulatory restrictions on emissions.

The growth of electricity demand

The digital transformation of mining is driving a greater demand for electricity. The automation of equipment, the incorporation of real-time monitoring systems, industrial data centers, artificial intelligence applied to predictive maintenance, and the progressive electrification of machinery increase the energy consumption of operations.

Paradoxically, these technologies allow for improved productivity and reduced costs in other processes, but they demand a more robust and reliable electrical infrastructure.

Remote operations with limited access to the grid

A significant part of new mining projects is developed in desert regions, mountainous areas, or territories far from large urban centers. In these places, connection to the national electrical system is usually limited or economically unviable.

Traditionally, the solution consisted of installing thermal power plants fueled by diesel or natural gas. However, the cost of fuel, generator maintenance, and supply logistics have driven the search for more efficient alternatives.

Today, most companies consider that producing part of their own energy through renewable sources is more profitable than relying exclusively on fossil fuels transported over long distances.

Energy as a strategic factor

Energy has stopped being a support service to become a central element of mining planning. Decisions about where to install a new operation, how to design the electrical infrastructure, or what technologies to incorporate no longer respond solely to technical criteria, but also to economic and risk management variables.

Consequently, investments in renewable generation, storage, and energy digitalization are part of the corporate strategy of numerous mining companies seeking to maintain their competitiveness in an increasingly demanding market.

Renewables in the face of high costs in mining

The incorporation of renewable energies in mining has evolved significantly over the last decade. What began as pilot projects driven by environmental goals has transformed into a business strategy aimed at controlling costs, improving energy security, and increasing operational resilience.

Currently, large mining companies in Latin America, Australia, Africa, and North America integrate solar systems, wind farms, battery storage, and hybrid microgrids as part of their expansion and modernization plans.

This trend responds to an economic reality: the levelized cost of energy (LCOE) of renewable technologies has steadily decreased, allowing electricity to be produced at competitive costs compared to conventional sources in numerous markets.

More than sustainability a financial decision

Although reducing emissions remains an important objective, the main driver of the energy transition in mining is the optimization of operating costs.

A correctly sized photovoltaic installation can supply a significant part of the electricity demand during hours of highest irradiation, reducing fuel consumption in diesel generators or the purchase of electricity from the grid. When this generation is complemented by storage systems, renewable energy can be harnessed even after sunset, improving the utilization factor of the installed infrastructure.

Similarly, wind energy provides generation during periods when solar production decreases, creating complementary generation profiles that reduce dependence on conventional sources.

A transition driven by innovation

The adoption of renewable energies has also been possible thanks to the development of digital technologies that optimize the management of a mine’s electrical system. Energy management systems (EMS), integrated with SCADA platforms, analyze real-time demand, the availability of renewable generation, the state of charge of batteries, and the consumption of main equipment to automatically decide which is the most efficient combination of sources at any given moment.

This operational intelligence allows for reducing losses, stabilizing the internal grid, and maximizing the use of available energy resources.

More than a fuel substitution, the energy transition in mining represents a paradigm shift: moving from consuming energy passively to managing it as a strategic asset capable of improving competitiveness, strengthening operational resilience, and preparing operations for the energy challenges of the coming decades.

Solar and wind energy for mining operations

Solar photovoltaic energy has become the fastest-growing renewable technology within the mining industry. Its rapid cost reduction, the high availability of the solar resource in mining regions, and the ease of integration with existing electrical infrastructure make it one of the most competitive alternatives for reducing electricity consumption from the grid and fossil fuels.

In countries like Chile, Peru, Australia, South Africa, and Mexico, where a significant part of mining activity takes place in areas with high levels of irradiation, photovoltaic systems allow generating a significant fraction of the electricity demand during hours of highest production. This energy can be directed straight to power processing plants, pumping stations, crushing systems, or auxiliary buildings.

However, the true economic advantage of solar energy does not lie solely in producing clean electricity, but in reducing companies’ exposure to the volatility of the electricity and fuel markets. By generating part of their own energy, companies reduce the uncertainty associated with long-term operating costs.

Another model that has gained relevance is the contracting of Power Purchase Agreements (PPA) with renewable energy developers. Through these agreements, companies secure electricity supply at predictable prices for periods that can exceed fifteen years, reducing the financial risk associated with energy market fluctuations.

Wind energy complements this model by providing generation during hours when solar production decreases. In many regions, the greatest wind resource occurs during the night or in seasons with less solar radiation, generating a production profile that improves the utilization of the electrical infrastructure.

This complementarity makes it possible to build hybrid systems capable of offering a more stable generation throughout the day, decreasing the need to continually resort to conventional generators.

Nevertheless, both solar and wind energy share a common characteristic: their production depends on meteorological conditions. Irradiation varies with cloud cover and the daily cycle, while the wind changes intensity according to atmospheric conditions. This variability makes it essential to incorporate technologies that allow managing the energy supply flexibly.

Smart microgrids and energy storage in mining

The true energy transformation of mining does not consist solely of installing solar panels or wind turbines. The most important change is the evolution from a traditional electrical system towards smart microgrids, capable of integrating multiple generation sources, storage, and advanced control systems.

A microgrid is a local electrical network that combines different energy resources —such as solar energy, wind, conventional generation, and batteries— under a centralized supervision and control system. Its objective is to guarantee a continuous supply, optimizing the use of each source according to demand and operating conditions.

In a modern mine, the Energy Management System (EMS) constantly analyzes variables such as photovoltaic production, wind speed, the state of charge of batteries, the consumption of main equipment, and the availability of backup generators. With this information, the system automatically determines which is the most efficient energy combination for every moment of the day.

Integration with SCADA (Supervisory Control and Data Acquisition) platforms allows for supervising the behavior of the entire electrical infrastructure in real time, detecting deviations, programming automatic maneuvers, and facilitating the predictive maintenance of energy assets.

One of the components that has taken on greater prominence in these microgrids is the Battery Energy Storage System (BESS).

Decarbonization of mining without losing competitiveness

One of the biggest challenges for the mining industry is to reduce its carbon footprint without affecting productivity or increasing operating costs.

For years it was assumed that sustainability involved investments that were difficult to recover. However, technological evolution shows that both goals can advance simultaneously when energy decisions are based on technical and economic criteria.

Decarbonization should not be understood solely as a reduction of emissions. It also represents a strategy to decrease financial risks, strengthen energy security, and improve the competitive position of companies before investors, clients, and regulatory bodies.

International markets increasingly demand minerals produced with lower carbon intensity, especially those destined for industries such as the manufacturing of electric vehicles, batteries, electrical infrastructure, and renewable energies. This trend turns energy management into a differentiating element within global supply chains.

Furthermore, numerous financial institutions incorporate environmental, social, and governance (ESG) criteria into their evaluation processes. Companies that demonstrate progress in energy efficiency and emissions reduction usually access better financing conditions for new projects.

Conclusions

Energy has become one of the strategic factors that will determine the competitiveness of mining in the coming decades. Faced with rising energy costs and the need to reduce emissions, mining companies are adopting models based on solar and wind energy, storage, and smart microgrids that allow them to operate with greater efficiency and resilience.

Far from solely representing a response to environmental demands, the integration of renewable energies constitutes a business decision aimed at optimizing costs, strengthening operational continuity, and preparing operations for an increasingly complex energy environment. The mining of the future will not be distinguished only by the richness of its deposits, but by the ability to manage energy as a strategic resource to create sustainable value.

References

1. https://www.worldenergytrade.com/energias-alternativas/energia-solar/la-mina-los-bronces-de-chile-instala-innovadores-paneles-solares-flotantes
2. https://www.agenciaandaluzadelaenergia.es/es/informacion-energetica/energias-renovables/energia-eolica
3. https://www.power-technology.com/features/what-is-geothermal-energy/
4. https://www.deloitte.com/es/es/Industries/mining-metals/perspectives/futuro-mineria-inteligencia-artificial.html
5. https://energia.gob.es/REI/relaciones-energeticas-internacionales/organismos-internacionales/Paginas/agencia-internacional-energias-renovables.aspx

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