If something isn’t done, the Yukon will soon be facing a shortage of electricity.
It’s a problem everyone recognizes, but deciding how to best solve it is another matter.
“There is no magic solution here,” said David Morrison, the president of Yukon Energy.
Right now, the territory consumes more than 400 gigawatt hours of power a year.
Most of that is used by the commercial and residential sectors. Only about 50 gigawatts is used by industrial customers – all of which are mines.
But over the next few years, the demand for power from the mining sector is expected to more than quadruple.
Yukon Energy figures that by 2015 mines will need 237 gigawatt hours a year.
Most of that increase is expected to come from Victoria Gold’s Eagle Gold project, Carmacks Copper and the Whitehorse Copper tailings reprocessing project. None have yet signed power purchase agreements with the utility.
If they do sign an agreement, the Yukon Energy Act obligates the utility to provide the power. But the act does allow the utility to refuse if providing power to those customers would create an unreasonable financial burden on the utility or on ratepayers.
Ultimately it’s the Yukon Utilities Board that signs off on all the power purchase agreements and decides if a request for power meets its test.
There is no strict formula for figuring that out, said Morrison.
“(The utility board) is not going to let us take a risk at the expense of ratepayers nor would we want them to,” he said.
But while Yukon Energy is not necessarily obliged – at least not yet – to provide power to these new projects, hooking them to the grid could help offset some of the cost of new power projects needed to meet growing commercial and residential demand.
“There really are economies of scale with energy projects as they get bigger,” said Morrison. “We have to balance that really fine line.”
Most of these new mining projects have a limited life so getting them online could also help create surplus energy in the end. That’s something that’s a challenge in the Yukon with its self-contained grid.
“It’s really difficult in this kind of environment because it’s hard to justify building too much spare capacity because there’s nowhere to sell it,” said Morrison.
“I’m kind of hoping that we’d get a situation where we get a couple of hundred gigawatt hours on the system and we wouldn’t use all of that for a few years.”
The industrial sector has taken a bit of flak from the public for its reduced power rates.
It’s up to the utilities board to set the rates, but the Yukon government, through an order-in-council, exempted mining from that process and set the industry’s rate about 50 per cent lower than residential rates.
Although industrial customers do pay a pay a lower rate, they are still paying more than their fair share, said Morrison.
“The industrial sector actually pays about 114 per cent of the cost of service,” he said. “It’s a really difficult thing to explain to people. They just go, ‘That sounds dumb to me. They’re paying less than I’m paying so they can’t be paying their fair share.’”
But because the industrial sector is, for now, a small part of the overall energy use, it takes far fewer assets and costs less to provide them with power, said Morrison.
“If the Yukon Utilities Board set the rate, it would be lower because they’d set it closer to 100 per cent of cost,” he said.
With the combined projected demand from the commercial and industrial sector, the Yukon will have to almost double its capacity over the next couple decades, but no one knows how it’s going to get there.
“The issue for us is that things are coming down to a crunch and we also have to get a lot of things in place before we can make a decision,” said Morrison.
Yukon Energy has been studying the problem for some time. Almost every option is being explored.
Last week the utility ruled out burning municipal waste to generate electricity after a feasibility report found it would be too expensive.
Liquefied natural gas has been looked at as a temporary option.
“It’s cheaper than diesel,” said Janet Patterson, spokesperson for Yukon Energy. “And while it’s not clean, it’s cleaner.”
Although the Yukon government recently backed away from oil and gas exploration in the Whitehorse Trough, there is still a large domestic supply of gas, six trillion cubic feet of it, sitting under Eagle Plains.
But price is a consideration.
While proponents of LNG say the price of natural gas is at about 50 per cent of the cost of diesel, that isn’t necessarily true.
That 50 per cent figure is predicated on a cost-based price model. If the price of natural gas is left up to the local market, the price would be closer to 85 per cent of the cost of diesel, warned Hector Campbell, Yukon Energy’s director of resources planning and regulatory affairs, in a 2010 memo to the Yukon government.
“If natural gas is priced at 85 per cent of the diesel price, it may actually be a more expensive option than continuing to use diesel due to all the additional cost of natural gas-related infrastructure required,” wrote Campbell.
At the time, he said a local market-based pricing model was a likely scenario.
Currently there are no territorial laws that govern how the Yukon’s natural gas would be priced.
But Yukon Energy isn’t just looking at new ways to generate electricity, it’s also working on ways to save power.
Conservation has a lot of potential, says a report on residential and commercial use it released last week along with Yukon Electric.
“We’ve concluded that between 32 and 48 per cent of new power consumption can be met through conservation and efficiency programs,” said Laura Carlson, spokesperson for Yukon Electric.
While the biggest efficiency gains are to be had in the commercial sector, there are also many that can be found around the house, she said.
The electricity demand from home entertainment electronics and computers is expected to explode over the next 20 years.
“We always encourage that people be aware of their electricity use and to educate themselves about what is used in our home,” said Carlson.
“For example that (cable box for the television), most people don’t realize how much electricity that consumes,” she said. “It takes almost as much electricity to run that every month as your refrigerator does.”
But by far the biggest jump in demand over the coming decades will be for heating homes.
“Everyone who worked on this project was really shocked at the amount of growth that’s going to happen with the space heating,” said Carlson. “For the purposes of this study, we used 50 per cent of new home construction would be heated with electric heat as its primary source and 70 per cent commercial construction going in was primarily electric heat.”
However that projection might be low.
Morrison said the number might be closer to 80 per cent.
“Electric heating is a big issue,” he said.
Morrison couldn’t say exactly what the solution to the territory’s energy woes will be, only that there would be more than one.
“It’s going to be a series, a basket of solutions over a period of time,” he said. “We don’t have all the answers yet, but we’re pretty close.”
Contact Josh Kerr at firstname.lastname@example.org