Xavier Garcia de Quevedo
President
Grupo Mexico
/
Insight

Mining Industry Self-Supply Schemes

Wed, 02/19/2014 - 12:14

Renewable power sources are not only attractive for providing clean energy, but self-supply schemes can also be a good way for companies to reduce costs. Mexico’s largest mining company is working on several renewable energy projects aimed at increasing productivity while reducing energy costs.

Grupo Mexico is investing approximately US$810 million in five renewable energy plants for self-supply. Once these projects are operational, Grupo Mexico will become the first mining company to produce its entire energy supply. The company’s current energy costs rise above US$350 million per year, which will start to see substantial reductions by the end of 2014. Mexico Generadora de Energia is the Grupo Mexico subsidiary specifically created to manage and operate the group’s self-supply power plants, which will provide energy for mining and railroad activities.

The mining company’s plans include two combined cycle power plants in Sonora with a capacity of 500MW each, two wind farms in Oaxaca with a respective capacity of 124MW, and a 500MW hydroelectric plant at the La Angostura dam in Sonora.

Grupo Mexico is taking advantage of cheap gas imports from the US and generating power for self-consumption at the La Caridad mine and metallurgical complex and the Buenavista copper mining project expansion. The mining group is also developing wind power for medium and low-voltage use. “We are already investing in wind power because of the cost advantage. We will be able to supply our different locations at a competitive cost,” says Xavier García de Quevedo, President of Grupo Mexico. However, this strategy is not limited to self-supply as Grupo Mexico is looking to also supply third parties in any industry that might need it. The company started investing in the renewable energy market because it seemed like an attractive business opportunity.

The mining firm’s self-supply strategy is missing about 150MW, some of which are needed for the Buenavista mining complex. To mitigate this situation, the company plans to invest in combined cycle capacity once new pipelines are developed. Grupo Mexico will be a customer for the companies building the pipeline but will operate its own power plants. Although this project could be jeopardized if gas prices were to rise considerably, García de Quevedo and most of the market believe natural gas will remain competitive for the foreseeable future. Despite the company’s recent investments in renewable energy projects, García de Quevedo believes that reaching the target of generating 35% of Mexico’s energy from clean sources by 2014, as stated in the General Climate Change Law, remains a challenging task.