Prepared for the Standing Senate Committee on Energy, the Environment and Natural Resources
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PREPARED FOR THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES ENERGY USE AND SUPPLY IN CANADA’S NORTHERN TERRITORIES Witness(es): Northwest Territories Power Corporation [BY VIDEO CONFERENCE]: − Emanuel DaRosa, President and CEO Meeting(s): Tuesday, 24 March 2015 Sam N. K. Banks Marc LeBlanc Resources and Environment Section Parliamentary Information and Research Service 18 March 2015 LIBRARY OF PARLIAMENT PAGE 1 NORTHWEST TERRITORIES POWER CORPORATION The Northwest Territories Power Corporation (NTPC) is a wholly owned subsidiary of NT Hydro, which is entirely owned by the Government of the Northwest Territories (N.W.T.). “NTPC distributes electricity to end-use consumers in 26 of the 33 communities in the N.W.T. and supplies electricity on a wholesale basis to two distributing utilities which, in turn, retail electricity to customers in Yellowknife and the Hay River area.”1 The two distributing utilities are called Northland Utilities (N.W.T.) limited and Northland Utilities (Yellowknife) limited which are owned by ATCO.2 Figure 1 – Electricity Infrastructure in N.W.T. Source: Northwest Territories Power Corporation, A Vision for the NWT Power System Plan, December 2013. 1 Northwest Territories Power Corporation, Corporate Structure. 2 Northland Utilities owns and maintains power poles, power lines, insulators, transformers and streetlights within its distribution system. Northland Utilities also supplies electricity via diesel generators to four communities of Wekweeti. LIBRARY OF PARLIAMENT PAGE 2 ELECTRICITY GENERATION In 2013, the electricity generation mix in the N.W.T. was 34% hydropower, 64% thermal generation (mostly all diesel) and the rest is mostly wind with a small amount of solar which supplements existing diesel generation. Figure 2 – Northwest Territories Electricity Generation, 2013 MW/h Hydro 34% Thermal Generation 64% Wind 2% Solar 0.01% Note: MW/h: Megawatt per hour. Source: Figure prepared by the authors using data obtained from Statistics Canada, Table 127-0007. “Electric power generation, by class of electricity producer, annual (megawatt hour),” CANSIM (database). A. Diesel A majority of the communities in the territory are electrical islands, meaning they are unconnected to an electricity grid and they are nearly all served by diesel generators. Diesel generation is also used as backup for hydro power. Notably, most of the diesel generation in N.W.T. is not produced for communities but by private companies for mining sites in remote regions of the territory. This production accounts for roughly 80% of the total thermal generation produced in the N.W.T. B. Hydro While most communities are served by diesel generation, most of the population is located in the southern region of the territory (for example Yellowknife) and is served by hydro power, which is connected to grids. There are two multi-community grids: the Snare grid and the Taltson grid. Both grids are located along the Great Slave Lake but they are not connected to each other. The Snare grid serves Yellowknife and surrounding communities north of the lake with hydropower from the Snare Hydro System3 (30 MW) and the Bluefish Hydro plant (7.5 MW) while the Taltson Hydro plant (18 MW) 4 is located south of the lake and is connected to the Taltson grid. 3 The Snare Hydro System consists of four separate hydro plants on the Snare River feeding into the Great Slave Lake. 4 Northwest Territories Power Corporation, “Hydro,” How We Supply Power. LIBRARY OF PARLIAMENT PAGE 3 N.W.T. is exploring options to expand its hydro generation including small to medium sized run of rivers projects and large scale hydroelectricity facilities. Most projects are not feasible unless they connect to one of the territorial grids. Linking the Snare and Taltson grid systems would allow for better load management especially since there is excess energy at the Taltson hydro plant while the Snare plant often does not have enough energy during peak winter months and must rely on more expensive diesel backup generation. In fact, the Snare River experienced extremely low water levels in the summer of 2014 which lead to a $20 million shortfall in revenues for the corporation.5 However, the cost of the build-out of the N.W.T. transmission grid is beyond the financial capacity of the territory. C. Liquefied Natural Gas In 2013, N.W.T. installed its first liquefied natural gas (LNG) generation facility in Inuvik.6 Its installation was hastened by the need to provide generation to the community which had previously relied on natural gas sourced from nearby production wells which stopped flowing in 2012. LNG is transported by truck from southern Canada along the Dempster Highway. The territory is exploring the potential of expanding LNG generation to other communities that have road access.7 D. Solar The N.W.T. is promoting the use of solar energy through its Solar Energy Strategy 2012–2017. Small diesel powered communities that have the least efficient diesel systems and consequently high fuel costs are being targeted for solar installations.8 As of 2013, there were 15 solar installations providing over 5 kilowatts (kW) of power to N.W.T. communities. The largest site is a 104 kW installed photovoltaic (PV) facility in Fort Simpson; it is roughly the size of a football-field. The latest solar installation project is being constructed in Colville Lake which is expected to have an installed capacity of 135 kW. E. Wind N.W.T.’s first large scale wind facility became operational in September 2012. The hybrid-diesel facility was entirely funded and is operated by the private sector to supplement diesel generation at a remote mine site. The facility is located at the Diavik Diamond Mine site nearly 400 km north east of Yellowknife. It has an installed capacity of 9.2 MW and in 2014 it supplied 11% of the mine’s power needs, displacing 4.9 million litres of diesel fuel.9 Wind energy plays a minor role in supplying electricity to N.W.T. communities. The government is investigating certain regions with favourable wind resources but the primary challenge is the cost of constructing transmission lines that link the wind resource to the nearest community power connection. 5 Northwest Territories Power Corporation, “Low Water at Snare increases costs,” News release, 3 September 2014. 6 Norman Wells relies on purchased electricity from a natural gas powered oil facility operated by Imperial Oil Resources Limited and diesel generation is maintained for backup purposes. 7 N.W.T., Department of Industry, Tourism and Investment, Northwest Territories Energy Action Plan, December 2013. 8 Ibid. 9 RioTinto, Global home, “Innovative and efficient wind farm delivers,” Our commitment, Features. LIBRARY OF PARLIAMENT PAGE 4 F. Biomass Several commercial biomass heating projects are currently burning wood pellets in the territory. The main use of biomass is for space heating and not electricity generation, although there is opportunity to use biomass heat loads to produce electricity as a by-product. The NTPC has stated that it is “unlikely that biomass can be a large-scale option for territorial scale generation.”10 ELECTRICITY RATES Electricity rates reflect how electricity is generated. For example, communities that depend on diesel or natural gas are called thermal communities, and their rates are higher than those in communities supplied with hydro-electricity. The Government of the N.W.T. subsidizes the cost of power for residential consumers through the Territorial Power Support Program. The Territorial Power Support Program ensures that thermal communities receive the residential rate attributed to Yellowknife, a hydro community, for the first 1,000 kW/h per month between September and March and for the first 600 kW/h per month for the remainder of the year. The current Yellowknife rate is 28.53 cents per kWh. There are four thermal rate zones with varying non-subsidised rates; the highest thermal residential rate is 57.28 cents per kW/h.11 SUGGESTED QUESTIONS 1. The N.W.T. faces significant financial obstacles in meeting its energy needs in an affordable, reliable, safe and secure, flexible manner while achieving environmental objectives. • What role should the federal government play in addressing the energy needs of the N.W.T. and other northern territories? • Do you believe that the federal government should develop a northern energy strategy which lays out long term energy goals for the region and conditions for funding? • Why should the federal government assist the energy needs of the northern territories as opposed to other regions of the country? 2. The NTPC released a Vision for the NWT Power System Plan in December 2013 which made several short, medium and long term investment recommendations. • Could you outline to the Committee, the current priorities and major projects being contemplated by NTPC? 3. N.W.T. has one LNG generator operating in the territory. It was installed in 2013 in Inuvik which is in the Beaufort Delta region of the territory. • Are the costs of operating the Inuvik LNG project in line with projections? • Do you have plans to expand LNG generation to other communities? • What are the challenges in transporting and storing LNG? • Do you believe LNG generation will have a significant impact on the territory’s future energy mix? • What role, if any, should the federal government play in advancing LNG generation in the north? 10 Northwest Territories Power Corporation, A Vision for the NWT Power System Plan, December 2013. 11 Northwest Territories Power Corporation, Residential Electrical Rates. LIBRARY OF PARLIAMENT PAGE 5 4. In September 2014, the N.W.T. announced that it was providing $20 million to the NTPC to cover costs resulting from extreme low water conditions on the Snare hydro system in the summer. • Why were the shortfalls in revenue not recovered by raising electricity rates? • How significant is a $20 million dollar shortfall for NTPC? • What is the likelihood that Snare River will experience low water conditions in the future? 5.