El niño se convierte en hombre (The boy becomes a man)
El niño se convierte en hombre (The boy becomes a man) – A quick look at the increase in occurrences of “Super El Niños” and their impact on Anglo American Platinum
What are El Niños and why are they important?
El Niños occur when calm conditions in the Pacific allow tropical winds to concentrate large volumes of warm water in a relatively small area, usually the western Pacific around Indonesia. After several years of calm conditions and warm water build up, that build-up is eventually released and the warm water that was stuck in the west washes to the east.
El Niños are important because they cause a redistribution of rainfall on a global scale. As the warm water that was able to accumulate in the West Pacific washes to the east it brings with it the weather associated with the Indonesian portion of the Pacific, primarily the torrential downpours that come with the monsoon season, to the Western United States. The impact of this is that industries ranging from hydroelectricity generation to agricultural production are left without one of their most important inputs and regions that are not prepared for monsoon like rainfall are forced to handle dangerous levels of flooding.
This impact is exacerbated by situations that climatologists call “Super El Niños.” Super El Niños occur when these warm waters push most strongly eastward and bring more extreme weather shifts with them. Though the previous convention was to expect a Super El Niño once every 20 years, the warming of cool waters off the Pacific Coasts of the Americas (which has historically slowed the warm water) means that we could see that frequency increase. Following Super El Niños in 1982-3, 1997-8 and 2015-6, some experts are now postulating they could become a once in every 10-year occurrence (Yale Environment 360).
What this means for South Africa and Anglo American Platinum?
Southern Africa, including South Africa, is one of the regions that sees rainfall drop during El Niños periods, which has a dual effect on Anglo American Platinum (Amplats). In 2015 Amplats used 33.9 million m3 of water in a wide range of its business-as-usual operations, ranging from hydrating employees to fundamental operations in the mining process. As the majority of Amplats’ mines are located in water-stressed areas, the company is likely to immediately feel the impact of reduced rainfall. The second is that Amplats relies on hydroelectricity as source of power through Eskom, South Africa’s electricity utility provider. Although hydropower supplies less than 5% of South Africa’s power, it is one of the primary sources when demand reaches peak load, which refers to additional demand above the norm of the system (Eskom Fact Sheet 1, Eskom Fact Sheet 2). When Eskom is unable to meet peak demand it imposes rolling blackouts and requires industrial companies, like Amplats, to reduce electricity demand by up to 20%.
What should they do?
Luckily, Amplats has acknowledged the impact of El Niño on its operations and is taking steps to reduce its reliance on water. It decreased water consumption by 15.9% in 2015 and launched a 10-year water strategy in 2010 to impose stricter standards by 2020 that include commitments to:
- Make our operations water-resilient
- Invest in water treatment and relevant technological innovation
- Build water infrastructure for mutual benefit
- Partner proactively with key stakeholders
Additionally, Amplats has taken an active role in becoming a water source to water-stressed villages (Sustainable Development Report 2015). Although this move will go a long way towards making business-as-usual operations more sustainable and to endear itself to the local population, it does not address the impact of reduced hydroelectricity availability. I believe to address this power concern, Anglo American should build solar panels on the large swathes of land it owns and to allow that power to flow into Eskom’s grid. Though windmills provide another viable option, I am concerned that topography could provide a challenge to consistent wind availability. The panels provide Amplats with a long term, sustainable power option, that will benefit the public and give the company the ability to better react to power reduction demands by Eskom. Additionally, by making the power available on the local grid it will build good will with locals and the government at a time when tensions with both South Africans and the South African government have become tense. (718 Words)
Great post! Especially enjoyed the concept of more frequent Super El Ninos increasing weather and rainfall variability. The implication is that hydroelectricity supply will become less predictable. Given that hydro is an important part of the energy mix, we will need more backup generation capacity to deal with times when hydro is not available. In TOM parlance, will we need to increase the system capacity to address variability? You suggest increasing the share of solar generation to address the problem, but solar is inherently one of the most variable energy sources. To guarantee stable baseload generation and avoid the electricity rationing you speak of, I am afraid we may need to increase capacity of traditional carbon-based power supply.
I’ll admit, I don’t know much about metals and mining besides how water-intensive they are. This post helped me deepen that understanding. It’s incredible that Amplats was able to decrease their water usage by almost 16% in the first year of their efforts. This makes me wonder how much low-hanging fruit there is for other competitors / industries in the region. Given that regulation can be slow to develop in growing economies, Amplats’ leadership could be a good way of encouraging this to happen organically.
I also wonder what the broader impact of Amplats’ infrastructure investments will be. They really are being a pioneer right now, and this could have even broader (positive) ramifications than initially believed.
Thank you for the article and May the Force Be With You.
I agree with you assessment, as my home country just dealt with huge consequences due to the 15-16 Niño phenomenom. As with many companies, I am still grappling with understanding how the lack of water for generation should be dealt with. On one hand, the low hanging fruit should be to diversity energy sources. That being said, those projects are capital intensive and usually not in the core business of mining companies. What role role should the government play in these development projects? What role should utility (private) companies? energy intensive projects such as mines.
Recent studies by the world bank show how public private partnerships (PPP, see https://ppp.worldbank.org/public-private-partnership/sector/energy) can lay an interesting framework for these type of projects. They allow governments to incentive private companies to develop energy alternatives in order to meet a public need, create labor opportunities and ensure the financial stability of long term assetts such as mines.
Thanks for the post Mace!
The dependancy that mines have on water is certainly an increasing concern for most mineral-dependant economies, such as Chile. In the Chilean case, mining companies operate mostly in the Atacama dessert. In order to ensure water supply without having to rely on rains or compromise the water available to the population, several mines are developing desalination plants. I believe desalination plants are an environmentally friendly solution to the water dependancy, do you think Amplats could also explore this solution?
I would also like to comment on the electricity supply for the mine. I like your proposal to install solar panels, but I believe it will be insufficient to power the plant, specially since mines usually operate on a 24 hour shift, and during the night solar panels will not be able to supply the necessary electricity to power the operation. Hence, I believe that Amplats should diversify its generation source, and invest on a Natural-Gas fired plant or on wind turbines.
This is a really interesting perspective on the compounding growth of volatile weather conditions across the globe and how they are impacted by climate change. Clearly climate change has increased the veracity of such meteorological phenomena, such as El Nino. I think the largest impact, which you have brilliantly noted, is the increased volatility of such recurring weather patterns around the world. These impacts clearly impact more than just industry as we saw domestically in California over the past few years. I found the states approach of placing reflective balls in reservoirs to limit evaporation to be particularly interesting. Thank again for the insightful post!
I had no idea El Niño affected areas as far form the Pacific as South Africa. In Latin America, El Niño has been a constant preoccupation for many industries for years. Particularly for mining countries, such as Peru, most of the worries has been related to disruption of the supply chain problems due to problems with key infrastructure: blocked roads, power lines, among others. [1]
This does not mean that water is not a real problem for mining companies there. Most of the operations in these countries have already adapted to operate in areas with restricted water supply since they are located in remote, desert and high-altitude areas. No matter what the problems are, however, communities can play a significant role for the mining companies and its in their best interest to help them. [2] If the surrounding communities get affected by El Niño, they will ask the mining companies for help since government tends to be ineffective in remote areas. Mining companies should start working more with the communities in addressing climate change issues affecting not only their operations but the communities.
[1] http://semanaeconomica.com/article/sectores-y-empresas/mineria/169916-como-se-preparan-las-empresas-mineras-para-enfrentar-el-fenomeno-el-nino/
[2] http://www.portalminero.com/pages/viewpage.action?pageId=101646810
Que interesante, Mace (even though you cited Yale just before the big rivalry game).
I did not know that El Nino affected rainfall around the globe and I find it interesting that you chose to profile a mining company. Though necessary to provide the world with natural resources, mining is one of the more ecologically disruptive industries. Thus I find it refreshing that Amplats is working not only to reduce it’s water consumption, but also help bring water to areas that may not have reliable access. As with some other companies profiled, I would be encouraged to see Amplats take an even more aggressive approach. The company has a market cap of over $6B, and I would like to see it take a more active role in pushing for regulatory changes.
Yes, to address the ski resort related posts, it seems like El Nino has caused irregular weather patterns which has made establishments have a difficult time planning upcoming seasons when much of their business relies on such.