Improved energy budgeting process for mines using measurement and verification principles

Abstract

Budgets are a common tool used to determine the future income and expenditure of a mine. The operating budgets (largely focussed on the energy consumption of the mine) are also used to measure the mine’s performance. It is, therefore, crucial that this budget is a true representation of the expected energy performance for a financial year. The problem, however, is that the budgets are often drawn up by a financial resource of the mine who mainly focusses on financial aspects such as changes in inflation and electricity costs. Unfortunately, little detailed attention is given to the operational changes affecting the budget. The financial resource easily assumes that the mine will operate as in the past. However, it is very common for the mine to operate otherwise due to the implementation of growth and savings projects, different time-of-use (TOU) profiles, and the type of days considered within each month. This was established by evaluating the budgeting structures of eight South African mines. These changes influence a large section of the operating budget. Since these changes are not accurately accounted for, if at all, the budget becomes irrelevant early on in the assessment period. This affects both the cash-flow of the mine as well as the ruling of the mine’s performance, if it is measured against the budget. These effects can have drastic consequences on the sustainability of the mine if not managed properly. There is, therefore, a need to investigate and improve the methods used to develop the mine’s budgets. Additional attention should be given to operational changes as well and not just the financial changes of the budget. Established measurement and verification (M&V) principles are known for their unique methods to address operational changes of energy-related events. The suggestion is, thus, to integrate these established M&V principles in the budgeting process to successfully accommodate for the operational changes. To allow this integration, the M&V principles are altered into budgeting principles by developing parallels between the M&V and budgeting process. In order to develop these parallels, a critical analysis of eight South African mine budgets and 90 published budget-related literature references are conducted. The result of the critical analysis highlights the need for integration between these two fields of interest and provides a relation between well-established M&V principles as an alternative solution to budgeting for mines. With this knowledge and understanding, six new budget-related parallels were developed to integrate the two mentioned fields. These parallels are the measurement boundary, the measurement resolution, the data quality, the routine adjustments, the development of the baseline and finally, the assurance of the baseline. The new improved budgeting process was applied to the eight South African mines included in the critical analysis for validation.