Last week, Yukon Energy put on a workshop to look at wind energy as a possible electrical-generation option for the territory. Yukon Energy presented a background paper that went through a blizzard of scenarios and numbers, relating to renewable energy options.
The analysis revolved to a large extent around what happens if a capital-intensive source of generation is built, and the mining load forecasts don’t turn out as hoped, stranding the new generation without a market to absorb the construction costs. This was shown to put at risk any capital-intensive renewable energy, whether it be wind, biomass or hydro.
Much of the analysis by Yukon Energy was based on guesstimates on mining industry electrical load requirements to the year 2039, as future mining loads are the major element of potential load growth. Looking at the ups and downs of Yukon’s mining industry over the last few decades, forecasting mining load growth is a pretty speculative exercise at best. With the uncertainties in the world’s commodities market and the uncertainties around the product of our exploration efforts we may as well be using a Ouija board to forecast mining industry electrical requirements beyond the immediate future.
The issue to be decided first is not what type of renewable energy we want, or when it is to be built, but a determination of Yukoners’ appetite for risk, and whether that risk should be shared by the mining industry. If Yukoners don’t want to absorb the risk, and the need for new generating capacity arises because of mining-industry demands, then that leaves the mining industry to absorb the risk.
This would have to be accomplished by take-or-pay contracts, parent companies’ guarantees, bonding, rates that reflect accelerated depreciation, or other forms of security, and while not fool-proof, these would serve to transfer the risk.
Once this basic issue is decided, then Yukon Energy can decide what type of renewable generation is appropriate. Judging from the budget speech, the government has decided that hydro is the best option for the long term. While this may or may not be the best option, it has to be recognized that hydro is the most capital intensive option and so the most risky. Also it will require the better part of a decade to work through water flow and environmental studies, negotiate with First Nations, clear the various regulatory hurdles, and construct the facility. This could mean a decade of burning diesel or natural gas.
The issue of risk absorption is not one to be decided by Yukon Energy, or the Yukon Utilities Board. It is a decision to be made by Yukoners, through their government, the best vehicle for integrating energy and environmental policies. The decade-long dithering on energy policy has only served to make energy planning more difficult.
While most Yukoners want a healthy mining industry, it should be realized that whatever option is chosen, including burning more diesel, there will be pressure on electrical rates for all of us, and a notional subsidization of the industry. This may be as far as we want to go and the quid pro quo would be having the industry absorb the risk.