The Yukon government has released its long-awaited independent power production policy, designed to help communities, First Nations and small businesses generate electricity from clean sources that they can sell into the grid.
According to the policy, 10 per cent of the territory’s new electrical demand is to be met by independent power production (IPP), and half of all IPP projects must be at least partly owned by Yukon First Nations.
The policy, released late last month, is an updated version of a draft published in May 2014. That draft was met with criticism for including natural gas as a form of clean energy.
But in the new policy, little has changed. Natural gas will still be eligible for larger IPP projects.
Anne Middler, an energy analyst at the Yukon Conservation Society, said the decision to keep natural gas in the policy is “disappointing.”
“Natural gas is not a clean energy source by any stretch of the imagination,” she said. “We need to acknowledge that methane, which is natural gas, has a huge global warming potential.”
The government recently published a “What We Heard” document based on a 100-day review period of the draft policy that ended in August 2014.
According to that report, “there was a very strong… preference for renewable sources to be the only eligible energy sources.” A large number of responses were uncertain about or opposed to including natural gas in the policy.
“If non-renewable energy sources were eligible, then YG would need to account for the social and environmental costs of the resulting greenhouse gases,” one respondent wrote.
Shane Andre, the director of the energy branch with the Department of Energy, Mines and Resources, said natural gas was included as “a source of energy that could produce lower local emissions and greenhouse gas emissions than diesel fuel.”
He added the government doesn’t currently have any natural gas projects in mind.
“I think that it would be rare that a natural gas proposal would be considered,” he said.
Energy Minister Scott Kent has previously suggested that mines choosing to fuel their operations with liquefied natural gas could sell excess electricity into the grid through the IPP policy.
Still, it’s unclear whether there are mining companies in the Yukon with plans to do that.
Western Copper and Gold has plans to power its massive Casino project, northwest of Carmacks, with natural gas. Selwyn Chihong, a mining company in eastern Yukon, has also recently said it wants to build a natural gas facility to power its operations.
But Andre said if mines choose to build transmission lines to connect to the grid, it’s generally cheaper just to buy electricity from the grid rather than to generate electricity independently and then sell excess into the grid.
The new IPP policy includes three separate programs. The first is a standing offer program, which would apply to projects between 30 and 1,000 kilowatts. To put that in perspective, Andre said the smaller of the two wind turbines on Haeckel Hill has a capacity of 150 kilowatts. He said the standing offer program is ideal for small businesses or communities that want to generate some of their own electricity.
The program is capped at a maximum of 10,000 megawatt-hours per year for the Yukon’s main grid, and 2,100 megawatt-hours per year in Watson Lake.
However, the territory’s isolated communities – Old Crow, Destruction Bay/Burwash Landing and Beaver Creek – are not eligible for the program.
Andre said that’s because too much independent power production could overwhelm such small grids.
“If you have a very small grid system, you could only allow so much of that power in that form,” he explained. And because producers under the standing offer program will be guaranteed rates for their electricity, it would be very difficult to control how much they produce and when.
Instead, those communities and any larger producers can submit unsolicited proposals that will then be negotiated. The policy also includes a third program that will allow the Yukon Energy Corporation to request proposals for large-scale IPP projects. Andre said there are no such requests currently planned.
Natural gas is eligible for the two latter programs – the unsolicited proposals and the calls for power – but not for the standing offer program.
The rates offered to independent producers have yet to be determined. In the draft policy released last year, rates varied from 21 cents per kilowatt-hour for producers in areas where hydro power is available to 64 cents per kilowatt-hour in Old Crow.
Andre said rates will be determined in the next year, but said they won’t be allowed to drive up costs for ratepayers.
“We’re not going to allow the IPP standing offer program in any way to adversely affect rates,” he said. “The other two (programs) will be evaluated to ensure that they’re in the best interest of the ratepayer.”
He also said producers in the standing offer program will be offered higher rates in the winter than in the summer. That will be an incentive for them “to invest in technologies that would produce more in the winter,” when the territory experiences a shortfall in hydro power.
Middler said the new policy does hold “some promise.”
But she said the government needs to develop policies to encourage more electricity generation for the heating sector, which is currently dominated by oil.
She also worries that the government’s planned next generation hydro project could flood the market and eliminate any real need for new power production.
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