diesel powered

This week's column is diesel-powered. Literally. As Yukonomist boots up the laptop at 10 a.

This week’s column is diesel-powered. Literally.

As Yukonomist boots up the laptop at 10 a.m. Sunday morning, Yukon Energy’s handy energy consumption website shows that diesels are already firing in Whitehorse.

The Yukon used to have lots of spare hydro-electricity, thanks to the closure of the Faro mine and the big dams we built in the old days. But gradually growing numbers of people and gadgets have eaten away at our buffer. A few years ago, the diesels came on only in severe cold snaps when every vehicle in the Yukon was plugged in and the baseboard heaters were maxed out. But last Sunday morning it was nowhere near 40 below.

This is no surprise. The folks at Yukon Energy told us it would happen in their Resource Plan back in 2005. In the last five years, we have busily added houses and juice-hungry machines to the grid, but we haven’t added much new generation capacity. The Mayo B generator and a few other projects were worthy (and expensive), but not big enough to meet our growing power demands.

In a recent strategic planning document, Yukon Energy estimates total electricity demand will go up 81 gigawatt hours from 2010 to 2012. Mayo B adds just 36 gigawatt hours to the system.

So now, with increasing urgency, the discussion is turning to how to generate more electricity.

Many ideas are circulating, including big dams, micro hydro, wind, geothermal, wood, garbage and even mini-nuclear.

The last may seem surprising, but National Geographic magazine reports that Galena, Alaska, has been working on a scheme for a small reactor for years. The idea is that if they can make a reactor small and self-contained enough for a submarine, then they can make one for an isolated town.

It is clear that the Yukon needs more electricity – a lot more – given our relentlessly growing demand and the strong possibility that a few more mines will open. The likelihood of Yukoners dramatically reducing their electricity demand through conservation and demand management seems, well, highly unlikely. Any government that tried to raise electricity prices enough to force significant behaviour change by Yukoners would get kicked out of office faster than Hosni Mubarak.

The big question is how to pay for new generation, no matter what technology gets chosen. Power is expensive, as Mayo B shows. Yukon Energy says the project was “made affordable by contributions from both the federal government and Yukon Development Corporation.” That kind of federal money won’t always be available.

Fortunately, there are two sources of cash we can tap into.

The first involves a paradox: the best way to fix the looming electricity shortage is for Yukoners to use more electricity. Seems strange, but the key point is that if Yukoners used more electricity in the spring and fall shoulder seasons, that would generate more cash to pay for more windmills and micro-hydro projects to give us the power we need in peak season.

Consider the Yukon Energy chart that showed diesel burning at 10 a.m. last Sunday. From 11 p.m. to 9 a.m. the night before, there was actually a hydro surplus. At that time, most of us were burning home heating oil to heat the house. We were paying a buck a litre to Big Oil, while free power was coursing untapped through the Whitehorse dam.

The same thing happens for months at a time in the fall and the late spring. Boaters know the water is high in the fall, and our dams are whirring as a result. But back in Whitehorse we are starting the costly annual six-month heating-fuel flare off.

If more Yukoners used heat pumps and other forms of electrical heat, then they would be paying money to Yukon Energy instead of Big Oil. Some savvy homeowners and institutions in town are already doing this. Since Yukon Energy’s costs are mostly the same no matter how much power they sell in the shoulder seasons, it would be pure profit. And considering that Yukon households spend around $1,900 per year heating their homes, according to Statistics Canada, if even just one household in six switched over to primarily electric heat it would mean more than $3 million a year in extra profits for Yukon Energy.

A few million bucks a year doesn’t sound like much, but it would add up year after year. It could then be plowed into generation projects.

The other source of cash is Yukon Energy itself. With a normal utility, the profits are split between dividends for the shareholders and retaining some earnings to invest in growing capacity. Yukon Energy, however, has recently paid out more than 90 per cent of its earnings as dividends to the government company that owns it.

One reason for this is that a big chunk of the profits are used to subsidize rates. This used to be called the Rate Stabilization Fund, but was recently rebranded as the “Interim Electrical Rebate.” In 2009, $2.5 million was spent on the electrical rebate. It’s important to remember that this is a universal program, so by definition around half the cash goes to benefit people with above-average incomes.

Selling more power in the shoulder seasons and making well-off Yukoners pay the true cost of their electricity could add $5 million or more per year to YEC’s investment budget.

This would be a good thing, since it would mean we could build some of the power projects that have been on the drawing board rather than just talking about them year after year.

Keith Halliday is a Yukon economist and author of the Aurore of the Yukon series of historical children’s adventure novels.