LNG to the rescue?

We burned a lot of diesel last week, despite some big power outages. It wasn't even that cold. Nowhere near Whitehorse's record low of 61.

We burned a lot of diesel last week, despite some big power outages.

It wasn’t even that cold. Nowhere near Whitehorse’s record low of 61.6 F below back in 1947. In Celsius, that’s minus 52, a temperature so low my Mazda’s dashboard thermometer doesn’t go that far.

Nonetheless, the Yukon’s hydro dams were maxed out. According to Yukon Energy, as this article was written, our hydro facilities were working at 100.3 per cent capacity. This power mostly comes from the big dams the ancestors built at Aishihik and Schwatka.

While a lot of people have criticized these facilities for damaging fisheries and blotting out historic rapids, their upside is that they produce a lot of cheap power. In fact, as Yukon Energy’s website data above shows, the ancestors were so clever they appear to have built dams that could function at more than 100 per cent capacity.

This is why we pay around 30 to 40 per cent less per kilowatt hour than people unfortunate enough to live in Yellowknife.

What Yukon Energy really needs is a time machine to go back to 1960 to build another big dam that pumps out power costing less than a dime per kilowatt hour.

When the so-called legacy hydro assets are at 100.3 per cent capacity, we have to burn diesel. We also have some windmills, but they didn’t show up on the chart last week. On Friday, for example, we burned diesel to generate 136,000 kilowatt hours of power, about eight per cent of the daily need.

We have two problems here: cost averaging and climate change. Averaging is a problem because the price you pay for electricity on your monthly bill is a blend of hydro, wind and diesel. Hydro is cheap for the electricity companies and diesel is expensive, and you get charged somewhere in the middle. The problem is that as population and gadgets and mining grows, they have to burn more diesel.

Every winter, demand goes up. We even burned diesel in the summer a few times this year. This will put ever growing upward pressure on electricity rates in the Yukon over the next few years, pushing us in the direction of Yellowknife.

This will be bad for business and jobs, because expensive power raises the cost of doing business and makes it relatively more attractive to invest in other places. It will also be bad for Yukoners because more of our disposable income will go to power bills. This will hit poorer Yukoners hardest.

It’s also bad for climate change, because burning diesel generates carbon emissions.

The cold snap was appropriately timed for last week’s public meeting on Liquefied Natural Gas (LNG) power generation. According to the background paper released by Yukon Energy, the idea is to get our hands on some of the natural gas our friends in Fort Nelson are drilling like crazy for. Instead of going to China or Houston, it will be chilled to minus 162 so that it takes up just 1/620th of its normal volume and be trucked to the Yukon from Fort Nelson. We would then warm it back up and burn it to generate power.

The good news about this is that LNG could be way cheaper than diesel. The fracking and shale gas revolution have caused a surge in gas production in North America, pushing prices to under three dollars a unit around Christmas.

According to estimates in the Yukon Energy paper, a major mine project in the planning stages like Casino would pay over 30 cents per kilowatt hour generating power with diesel. LNG would be in the 11- to 15-cent range. Similar math would apply to power for the rest of us, although the fact that we already have diesels in place means we could avoid capital costs. This would put diesel in the 25-cent range, at least until the existing engines had to be replaced.

LNG also produces a lot less carbon dioxide per unit of power than diesel. However, it is not carbon-free. From a climate-change point of view, switching from diesel to LNG is a bit like when your doctor tells you to quit smoking Marlboros, and you switch to Menthol Lights.

The Yukon Energy paper portrays LNG as a “transition option.” Because our Yukon Party government didn’t plan ahead enough over the last five years to invest in enough cheap and renewable energy, we are going to be burning something for power in the medium term. The Mayo B upgrade added some capacity, but it was expensive and didn’t add enough megawatt hours to solve our problem. The collection of other upgrades to Aishihik and other facilities were also valuable, but just not big enough to cope with burgeoning demand.

So we need something fast to tide us over until the next wave of dams, windmills, industrial wood pellets or whatever can be planned and built.

Someday, it may even be economic to liquefy Yukon gas from the Dempster or elsewhere so that our power generation keeps more jobs, taxes and royalties at home. Environmentalists will note that this implies drilling and gas infrastructure in wilderness areas.

Kudos to Yukon Energy for putting out a thoughtful discussion paper on LNG options. It will spark a debate over capacity, generation sources and how ambitious we should be on climate change.

Of course, people who have quit smoking will have noticed the problem with “transition options.” If climate change really is this century’s big issue and the ultimate objective is to get off fossil fuels altogether, is it better to switch to menthol or go cold turkey?

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