Volcan Case Study: Solving the Energy

Challenge: Investing in Renewables to

Power Expansion

Jos Estela Ramrez

Energy Manager
jestelar@hotmail.com

September 26, 2013

INDEX

1.- Introduction to Volcan Mining Company

2.- Volcan hydroelectrical investment
3.- Volcan own electrical system
4.- Challenges to develop hydroelectrical plants
5.- Conclusions

1. INTRODUCTION TO VOLCAN MINING COMPANY

INTRODUCTION
Large Scale Peruvian mining company,
established in 1943, (70 years).
Located in the central highlands of
Per. Operations in Lima, Junn and
Pasco Regions.

It has 3 mining units: Yauli (50% of

the total sales), Chungar (32%) and
Cerro de Pasco (18%).
Volcan is a pollymetalic producer of
Zinc, Silver and Lead.
Volcan is an important energy
consumer. In 2012 it required 610
GWh and 80 MW of Power.

2. VOLCAN HYDROELECTRICAL INVESTMENT

INTRODUCTION

C.H. San Jos

1943
Volcan Mines
Company was
created, with Ticlio
and Carahuacra
mines.

1997
Volcan bought Mahr
Tnel, San Cristbal
and Andaychagua
mines.

1999
Volcan bought
Paragsha and Cerro de
Pasco mines including
08 small hydros
totalling 7.5 MW.

2000
Volcan bought
Chungar and Vinchos
mines with 2 hydros
totalling 9.7 MW.

2. VOLCAN HYDROELECTRICAL INVESTMENT

INTRODUCTION

C.H. Baos IV

2007

2008

2009

2009

Volcan bought
Zoraida mines in
Yauli.

Volcan bought El
Pilar mine and began
explorations in both
Alpamarca and Ro
Pallanga projects.

Volcan put into

operation a small
hydro with 3.3 MW
(Baos IV) totalling
13 MW.

Dec. Volcan did

an electrical
planning in the
long run.

2. VOLCAN HYDROELECTRICAL INVESTMENT

INTRODUCTION

Huanchor Hydro

2012
Feb. Volcan
bought a Hydro in
operation (called
Huanchor) with
19 MW, totalling
32 MW.

Baos V Hydro

2012
July. Volcan put
into operation a
new hydro called
Baos V with 9.2
MW, totalling
41 MW.

Rucuy Hydro

Belo Horizonte Hydro

2014

Medium Term

Jan. Volcan will

begin the
construction of a
new 20 MW
Hydro, called
Rucuy.

Volcan will put into

operation two hydro
projects called
Chancay II (40 MW)
and Belo Horizonte
(180 MW)

WHY DOES VOLCAN INVEST IN HYDROELECTRICAL PLANTS?

For energy availability:
Enough Energy close to its operations. Volcan
generates 300 GWh-year. It also has suitable
geographical conditions.
For a lower cost of energy and transmission
fee:
The energy production cost is the third part of
the total network cost. The trasmission fee is a
means of subsidies of the electrical system
exceeding costs.
For electrical reliability:
To have more supply connections with a
minimum of interruptions.

WHY DOES VOLCAN INVEST IN HYDROELECTRICAL PLANTS?

To diversify its investment: Volcan is
looking to optimize and diversify its
business.
To avoid Electrical System problems:
Energy prices increasing, load rejection,
overload of transmission lines, and
uncertain future in energy generation.
Its looking to be friendly with the
environment:
It takes care of the environment with
renewable energy (CDM) and contributes
to the social-economical development of
the nearby comunities.

WHY DOES HYDRO MAKE SENSE OVER OTHER FUEL SOURCES?

They do not pollute the environment.

It produces Carbon Bonds
Low operating cost.

No water consumption
Long lasting useful life
Low maintenance cost

ENERGY COST IN THE LATIN AMERICAN INDUSTRY

Energy Cost / Operating Cost

Large Scale Mining

Peru
Brasil
Chile
Colombia
Mexico

Year 2011-2012
5-10%
12-18%
15-20%
15%-25%
25%-30%

Source: Ministery of Energy and Mines

10

2012

3.- VOLCAN OWN ELECTRICAL SYSTEM

3.- VOLCAN OWN ELECTRICAL SYSTEM

HUANUCO
Belo Horizonte
hydro 180 MW

270 km in transmission lines

41 MW in operating Hydroelectrical plants
240 MVA in 25 electrical substations
2 Energy control centers with SCADA system (smart grid)

S.E. Tingo Mara

140 MM US$ investment in electrical assets in 4 years

S.E. Pachachaca

S.E. Paragsha II
CERRO DE PASCO

S.E. Shelby

25 km

PASCO

JUNIN

SEIN
S.E.
Carhuamayo

S.E. San Antonio

YAULI

S.E. Ticlio

S.E. Francoise
S.E. Pomacocha

S.E. Animn
CHUNGAR
S.E. Alpamarca

Chancay Hydro
60 MW
12

Baos V hydro +others

21 MW

LIMA

Huanchor hydro
20 MW

4. HYDROELECTRICAL INVESTMENT CHALLENGES

1. To have an experienced team
(Come from the Energy Generation Sector)

4. To be socially
responsible
(Work in harmony and
giving opportunities)

ENERGY

2.- To manage long

administrative
authorizations
(EIS 2 years)

3.- To have a good Stakeholders

Management (Identify and attend them)

Volcan Energy area works with 07 communities near its 11 hydros

13

EXPERIENCED TEAM: POWER HOUSE OPERATORS

C.H. Baos I

C.H. Baos IV

C.H. Huanchay/Shagua

C.H. Baos II

C.H. Baos III

C.H. Baos V

C.H. Cacray/Yanahuin

C.H. San Jos

C.H. Huanchor

EXPERIENCED TEAM: MANAGEMENT STAFF

Maintenance,
Supervision and
Control

Maintenance

Supervisors

Operator

Control Center
Management Staff

Total = 120 People for O and M and other services. 60% come from communities.

SOCIALLY RESPONSIBLE

Donation of Alpacas

Construction of Schools
16

Workshops for teachers

Construction of bridges

Helth Campaigns

Street sidewalk construction

5.- CONCLUSIONS

17

Volcan mining growth has been accompained by an energetic growth in

generation, transmission and transformation.
Volcan has 41 MW in hydroelectrical plants that represent today 40% of
its electrical demand.
Volcan will continue investing in hydros to cover 100% of its electrical
demand and it is now considering the energy business.
Volcan has invested 140 MM US$ in electrical assets in the last 4 years.
Volcan bets for renewable energy generation to optimize its energy
operating cost, give more reliability to its operations and assure the
electrical supply to its mining projects.
Volcan Energy contributes with the Sustainable Social Development of
07 communities around its hydroelectrical main plants.
Volcan hires 120 people for the Operation, Maintenance and Services for
its 11 hydroelectrical plants, of which, 60% are sorrounding communities.

VOLCAN ENERGY GENERATION VIDEO

(5 minutes.)

Jos Estela Ramrez

Energy Manager
jestelar@hotmail.com

September 26, 2013