Yukon energy policy wonks are once again debating the merits of a megaproject to connect our electrical system to the B.C. grid.
Last September the territorial government announced it was receiving $40 million from the federal government to do a pre-feasibility study on a 765-kilometre high-voltage transmission line from the Yukon down the Stewart-Cassiar highway.
Note that the $40 million just pays for a study, not any new electricity supply.
This will update the previous 2015 study done by Midgard Consulting for the Yukon government’s former Next Generation Hydro project.
It will be fascinating to see if the new study comes up with a different answer than the 2015 one, which was worded about as negatively as a government consultant report can be.
“Midgard cannot see a plausible scenario, given the assumptions, where Yukon profitably imports electricity,” the 2015 consultants said, calculating that the capital cost of a line would be $1.7 billion in 2015 dollars. Meanwhile, Statistics Canada says construction cost inflation in Canada has raised building costs 79 percent just since 2017. That is for general construction, not remote power line projects, which have seen costs skyrocket across North America as everyone connects more wind farms and solar to the grid.
So, pending the $40 million study, for now you can probably take that 79 percent cost inflation figure and get to a very rough estimate for the project of around $3 billion in today’s dollars.
Midgard also took a dim view of the riskiness of the scheme, saying importing large amounts of electricity would require “that the Yukon be willing to accept that it will be dependent on an external jurisdiction for critical winter energy supply and reliability questions.”
Midgard went on to calculate how much electricity we would have to import for how many years for the investment to make financial sense. To put these megawatt (MW) figures in perspective, when I first read the press release on a Saturday afternoon in September, the total Yukon grid was using 42 MW.
Coincidentally, Midgard estimated that “Import volumes of 42 MW for every hour of the year or 150 MW per winter peaking hour for 60 years are required to defray the cost of a transmission interconnection to British Columbia.”
So we would have to buy as much electricity as the whole Yukon grid was using that Saturday, for sixty years, for Midgard’s math to work.
Of course, much has changed since 2015. Some things have become more challenging. In addition to higher construction costs, interest rates -- critical for a long-lived project -- are higher today than in 2015.
On the other hand, there are some more favourable developments too. The biggest tailwind for the project is the surging need for critical minerals, both to support the climate transition and to de-risk our allies’ supply chains in an era of geopolitical competition with China and Russia.
This is why the federal funding comes from Ottawa’s critical mineral program.
So let’s assume that the new study’s financials come in much more positively than the 2015 study. And that BC has enough spare power after their own future mines, heat pumps and electric vehicles to accommodate us. And that the BC grid transmission line has an easier time getting buy-in from the First Nations governments along the route than the stalled Atlin Hydro Expansion Project’s line has. And that Ottawa is willing to make a ten-digit contribution to the construction costs.
If all that happens, what would a BC grid interconnect get the Yukon and Canada?
The key win is an always-ready source of power for big new mines. There are some potentially huge Yukon mines in the planning stages. If the interconnect exists, the mine’s owners would not have to build their own power plant and truck in liquefied natural gas (LNG). Instead they could connect to the grid and use low-carbon electricity from BC.
This has multiple benefits. First, they can tout their low-carbon power source to increasingly climate-sensitive buyers around the world. Second, it will be easier to get a big mine approved if it does not jack up the Yukon carbon emissions with a big new fossil power plant. Third, they won’t have to raise extra capital to pay for that new power plant or pay carbon taxes.
The alternatives for a big mine to get clean power in the Yukon, such as small nuclear reactors, geothermal or renewable LNG, face their own stiff technology, permitting and cost challenges.
You might ask why a mine wouldn’t just connect to the Yukon grid today, like smaller mines in the past. The reason is that the Yukon’s legacy hydropower dams are at capacity. Of that 42 MW being used in the Yukon as I researched this column, 11 MW were from diesel or LNG. Adding a new mine would cause carbon emissions to spike.
The Yukon has struggled, as the Yukon News has reported regularly, to push forward renewable energy projects such as Atlin and Moon Lake. From a national point of view, a BC grid interconnect would allow mines to ramp up in the Yukon even if we continue to flounder building our own generation projects.
The grid interconnect would also support the Yukon’s own climate transition. Even though electric cars and heat pumps are still cleaner overall than gasoline or heating oil, I have heard Yukoners say they have hesitated to buy them since the incremental electricity demand would just cause more LNG or diesel to be burned.
Another benefit -- or drawback, depending on your point of view -- is that access to always-on clean BC power would eliminate the need to build new power projects in the Yukon. NIMBY activists would ask why the Yukon needed a new windfarm or microhydro project when we could just turn up the dial on the BC interconnect.
First Nation development corporations, Yukon businesses and workers looking for economic development opportunities, on the other hand, would say the BC interconnect, in effect, replicates our current fossil energy dependency. In 2022, Yukoners imported around 200 million litres of fossil fuels at a cost of over $300 million per year. With the interconnect, instead of outsourcing all those jobs, profits and tax revenues to the Alberta oil and gas sector, we would outsource them to BC’s electricity sector.
The Yukon government press release doesn’t say when the new study will be released. In the meantime, I suspect the sales teams for small modular nuclear reactors and geothermal will be firing up their spreadsheets to tell us what they could do instead with that $3 billion. Or, in geothermal’s case, even just the $40 million from the study.
Keith Halliday is a Yukon economist and the winner of the 2022 Canadian Community Newspaper Award for Outstanding Columnist. His most recent book Moonshadows, a Yukon-noir thriller, is available in Yukon bookstores.