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What's next for Next Generation Hydro

It is easy to generate electricity. I know engineers will be appalled by that statement, but what I mean is that with enough money to invest we could build plants to generate power here.

It is easy to generate electricity. I know engineers will be appalled by that statement, but what I mean is that with enough money to invest we could build plants to generate power here with wind, solar, hydro, diesel, wood, garbage methane, geothermal or other methods. These technologies operate already from Norway to Alaska.

The challenge is generating cheap electricity. And this is what we need in the Yukon. Energy is a huge part of our cost of living in the North, and also a major cost item for businesses. It limits the attractiveness of investing and creating jobs in the Yukon.

Thanks to the cheap power from the Schwatka and Aishihik dams built a generation ago, my last bill worked out to a retail price of around 14 cents per kilowatt hour. This is far cheaper than our friends in the N.W.T. or Nunavut pay.

However, we face a problem for two reasons. First, we aren’t competing with the N.W.T. and Nunavut. Instead, northern Alberta and B.C. are more relevant comparisons. Will investors find a business case to be more economic near Fort St. John or near Carmacks? Would a high-income knowledge worker find the cost of living cheaper in Nelson or Whitehorse?

B.C. and Alberta have much cheaper power than us. The wholesale electricity rate in Alberta averaged about five cents in 2014. Remember that number because we’ll come back to it later.

Our second problem is that our population and gadget usage means that our surplus power from the 1970s is getting used up. If population and energy usage per person keep rising, we will need more generation.

Which gets us to the government’s “Next Generation Hydro” project, which recently released some interesting reports from the first phase of its work.

Sixteen potential dam sites made it through the screening so far. The key point, however, is that the price filter was 18.3 cents. That’s more than triple Alberta levels. The team estimated the long-term cost of power from each site, and passed it if it was below 18.3 cents, which is based on the cost to generate electricity with liquefied natural gas (LNG) from Yukon Energy’s new plant near the rapids.

I suggest that they set the price filter much lower than this. How smart would it be to invest hundreds of millions of dollars, ten years of effort, and flood a beautiful Yukon valley to get power that was just slightly cheaper than LNG? If the project suffered cost over-runs, which is pretty common with dams, then we might end up with a nightmare scenario where we get environmental impacts plus more expensive power.

If Steve Jobs were in charge, he would set them a target of five cents power. Or maybe 10 cents if he was feeling soft. Jobs, you’ll remember, didn’t tell the engineers at Apple to design a phone that had a screen 10 percent bigger than a Nokia or Blackberry. He told them to throw away conventional wisdom and think big.

This is how you do things that most people think are impossible. Nor is it something that only geniuses like Jobs do. It is a common approach at corporate research centres. Apparently the stove people at Viking have set themselves an objective to make an oven with “zero preheat” so you don’t have to wait so long for your frozen pizza. Sounds like it violates the laws of physics to me, but they just might surprise us.

The important thing, from the point of view of citizens and power bill payers, is that someone needs to put strong pressure on the Next Generation Hydro team to do something better than bring forward a proposal that is 10 percent cheaper than LNG. The only people who can really do that are the premier and our MLAs.

Does anyone want to be the politician that signed Yukon families and businesses up for generations of economically-crippling high power rates?

If it hasn’t been done already, they should give the hydro team some stiff instructions to bring forward some projects with less than 10 cents power or else. Yukon Energy’s resource plan in 2012 had some estimates that showed several hydro sites below this level. If the team comes back at the end of the next phase with a bunch of proposals in the 15 cents range, then coffee cups should be thrown, officials transferred to the Snag weather station and consultants told to stop billing and get a cab to the airport.

And, to further pile on the pressure, they should put out a call for proposals for anyone else who thinks they can do it. If local wind or micro hydro-experts can generate cheap power, or the people that run Whitehorse’s methane-generating dump, then they should be given the chance to make a pitch. The same for Yukon First Nations with power generating potential in their traditional territories, or Yukon Energy or Yukon Electric.

The government has some buffer around the 10 cents target, since they can always subsidize the capital cost with transfer payment dollars or even ask Ottawa for some infrastructure money. But by far the best way to get cheaper power is to force the design team early to focus on cheaper options.

Furthermore, if they are clever, they can use some of the more than $100 million that Yukoners spend on fossil fuel every year to pay for the project. One of the problems with new dams is that the big ones often have cheaper power per unit, but end up spending their first decade at half-capacity as usage ramps up. Part of our plan should be to use the new power to replace home heating fuel. If we end up building 5,000 homes in Whistle Bend with individual oil furnaces, we will look really silly. Of course, it only makes sense to replace oil with electricity if the electricity is cheap.

Maybe, unlike the iPhone and the zero-preheat oven, cheap power really is impossible in the Yukon. But we should make the Next Generation Hydro team and their consultants try anyway.

Keith Halliday is a Yukon economist and author of the MacBride Museum’s Aurore of the Yukon series of historical children’s adventure novels. You can follow him on Channel 9’s Yukonomist show or Twitter @hallidaykeith