A framework to implement improved electricity cost budgeting systems on mines

Abstract

Electricity cost and consumption budgets are a key instrument for energy performance evaluation on mines. This allows mines to identify opportunities for improvements and to monitor ongoing energy management initiatives. Budgets are an important part of financial planning, providing insights into anticipated future expenses for strategic decision making and cost management. There is no existing standard for quality evaluation of electricity consumption and cost budgets developed and used by mines. Additionally, there is no framework to guide budget development in the industry. This gap has become problematic, as electricity prices are increasing well beyond inflation rates, highlighting the need for energy performance evaluation and cost management. The quality and availability of electricity consumption data on mines have significantly improved in recent years. The combination of improved data availability and pressure to manage costs presents opportunities for improved energy management strategies which rely on budgets as instruments for performance evaluation. This study develops a set of best practices and an evaluation survey to investigate existing budgeting methods in practice and identifies shortcomings of these methods and their results. Surveys of 41 mine business units led to the identification of four key barriers preventing the development of high-quality budgets in industry: Low resolution of input data and of budget results, lack of scalability of budgeting methods, inadequate costing of budgets and poor documentation of the budget process. In short, current practices do not produce budgets that can be of value for performance evaluation. The goal of this study is to develop a framework to overcome the identified barriers preventing the development and implementation of high-quality budgets in the mining industry. This was done through a synthesis of the developed best practices with existing electricity consumption forecasting approaches used in other industries and the findings from the surveys. A framework that can be used to develop and implement high-quality electricity cost budgets on mines is presented. The developed framework was found to effectively address each of the identified barriers and was verified through application to a case study mine. The framework produced a high-resolution budget that could be used to evaluate energy consumption for performance assessment purposes in near real-time. The method was also found to be scalable to large datasets and high interval data, reducing time spent on budget development. Both the cost and consumption values forecasted using the framework were more accurate (5% and 4% respectively) than those produced by industry standard methods, enabling more detailed future planning. This demonstrates that the framework produces improved budgets that are both technically sound and implementable in practice. The framework hereby enhances stakeholder confidence by enabling accurate, scalable, detailed and transparent long-term forecasting.