Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 26 - Evidence - March 31, 2015
OTTAWA, Tuesday, March 31, 2015
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 5:04 p.m. to study non-renewable and renewable energy development including energy storage, distribution, transmission, consumption and other emerging technologies in Canada's three northern territories.
Senator Richard Neufeld (Chair) in the chair.
[English]
The Chair: Welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. My name is Richard Neufeld. I represent the province of British Columbia in the Senate, and I'm chair of this committee.
I would like to welcome honourable senators, any members of the public with us in the room and viewers all across the country who are watching on television. As a reminder to those watching, these committee hearings are open to the public and also available via webcast on the sen.parl.gc.ca website. You may also find more information on the schedule of witnesses on the website under "Senate Committees."
I would now ask senators around the table to introduce themselves. I will begin by introducing Senator Paul Massicotte from Quebec.
Senator Sibbeston: Nick Sibbeston from the Northwest Territories.
[Translation]
Senator Ringuette: Good afternoon. I am Pierrette Ringuette, senator from New Brunswick.
[English]
Senator Patterson: Dennis Patterson from Nunavut.
Senator Black: Doug Black from Alberta.
Senator Seidman: Judith Seidman from Montreal, Quebec.
The Chair: I would also like to introduce our staff, beginning with the clerk, on my left, Lynn Gordon, and our two Library of Parliament analysts, Sam Banks and Marc LeBlanc, sitting to my right.
On March 4, 2014, the Senate authorized our committee to undertake a study on non-renewable and renewable energy development, including energy storage, distribution, transmission, consumption and other emerging technologies in Canada's three northern territories.
Today I'm pleased to welcome in the first portion of our meeting via video conference from Hay River, Northwest Territories, Mr. Emanuel DaRosa, President and CEO of the Northwest Territories Power Corporation.
Mr. DaRosa, thank you for being with us today. We look forward to your opening statement, after which we will go to questions and answers. Sir, the floor is yours.
Emanuel DaRosa, President and CEO, Northwest Territories Power Corporation: Good afternoon, everyone. I am an electrical engineer by trade. I graduated with a degree from Lakehead University and went on to do a master's degree in business administration from Tulane University in Louisiana. I have been in the power industry for 24 years. I have worked for organizations such as Ontario Hydro, which then became Hydro One, Brookfield Renewable Power and Thunder Bay Hydro, and most recently I've been with the Northwest Territories Power Corporation for four years.
I'll talk about NTPC, the Northwest Territories Power Corporation, in terms of some of the challenges and opportunities. I'll start with its hydro systems.
In the Northwest Territories, 75 per cent of its energy is generated via hydro, and that supplies the majority of the N.W.T.'s population. We have two hydro power transmission grids in the Northwest Territories, one in Yellowknife and the second in the South Slave area. These two grids aren't connected to each other or to the continental grid. Some of the challenges of our hydro systems are cost, as well as reliability.
Energy costs, while they are hydro-powered, are high due to the lack of scale and connectivity to the grid. Without a connection to the rest of the continent, our systems grow organically. So rather than large power plants being connected, built and scheduled on the same basis as the rest of the continent would plan for power systems, ours grow organically in that we add a couple more megawatts of generation as the need dictates.
Without that connection to the rest of the continent, 30 to 50 per cent of the water from our hydro plants is spilled. In the wintertime, when our loads are at maximum, our generating capacity is lower. In the summertime, when our loads are at minimum, we have a surplus of water and we're forced to spill a lot of water.
Reliability is also a challenge for our hydro systems, given that they don't have a connection to the national grid. If we lose or have a problem with one of our generating stations, typically this will trigger an outage for our community.
Some of the opportunities for the hydro systems in the Northwest Territories would obviously be a transmission connection linking our two hydro systems as well as the mines back to the continent, most likely to Saskatchewan. Some of the benefits would be an extended mine life for some of the diamond mines we presently have, as well as a reduction in the 100 million litres of fuel per year that the mines consume. There would be a stabilization of the power grid and improved reliability. We did look at this, but the total cost was $1.2 billion and required a $400 million government subsidy in order to ensure that rates stayed where they are at today. The project ultimately was shelved due to the GNWT's — the Government of the Northwest Territories' — borrowing limitations at this time.
I should probably speak a bit about some of those limitations because they do challenge us in terms of connecting new loads, new mines or self-funding projects, simply because of the GNWT's debt cap. We're part of that debt cap, and it limits some of our ability to borrow even for projects that can self-fund.
In terms of reliability, we are looking at some batteries for Yellowknife. Presently, Yellowknife has an outage rate about four times that of the rest of the country on average. We are looking at batteries. The price tag is in the $10 million range, and that in itself is a challenge for the debt cap. With those batteries, we expect to cut the outages approximately in half for the Yellowknife area.
I'll move on to the thermal side of the N.W.T. So 25 per cent of the energy is generated via either diesel or liquid natural gas to 21 small communities spread out throughout the N.W.T. These systems are isolated, and they are small plants that provide for the electricity needs of each of these communities. There are some challenges for the thermal communities: Certainly, the cost of energy would be an obvious one, and the high cost comes from the isolated locations and the high costs of construction and operations and maintenance, as well as the high cost of fuel. There's certainly a lack of scale.
However, I must say that, generally, reliability is good in the smaller communities and actually better than the national average, given the redundancy that we have built into these small plants.
One of the largest opportunities for the N.W.T. really exists in solar, one of the easiest to capitalize on as well. Solar conditions in the N.W.T. are on par with much of Canada. That's a surprise to many people, but that is, in fact, the case. Challenges for us with implementing solar are some of the high costs. In the N.W.T., the cost of construction is generally 30 to 60 per cent higher than in the South. We're also limited to installing approximately 20 per cent of the community's capacity via solar, given that it's an intermittent source of power and that that intermittent nature can cause us some stability issues. When we install 20 per cent capacity, given that the sun doesn't shine all the time, that translates into about 2.5 per cent of the annual electricity needs coming from solar.
An example where we've had some success is Fort Simpson, which Senator Sibbeston would be very familiar with, where we have installed 10 per cent of that community's capacity in terms of solar. It generates about 1.5 per cent of the community's annual electrical energy. The GNWT did fund this project to ensure that the subsequent rates for this electricity were on par with diesel, and so it did require a subsidy to maintain parity with diesel. We are looking at storage for moving up the capacity from 20 per cent capacity installed all the way up to about 300 per cent, whereby about 30 per cent of the communities' electricity needs could be supplied from the sun.
An example of this is our Colville Lake project, which has been delivered to site. All of the equipment is on site and will be installed and commissioned later this spring and into the summer. In that particular case, we will install 300 per cent of the average community load in terms of solar capacity. There is some significant storage as part of that solution, and, with that, we expect to generate approximately 30 per cent of the communities' annual electricity needs via the sun. This will allow at least the diesel plant, throughout most of the summer, to be shut down and not running.
The GNWT did have to fund a significant portion of the battery costs and a smaller portion of the solar costs to ensure that this project stayed, again, on par with diesel costs.
Some other opportunities for the N.W.T. exist with biomass, biomass being a local fuel. It's starting to show promise. It does still require some government support to ensure the economics keep it on par with existing rates.
We are looking at various locations for wind power where we can integrate wind into our systems. Again, there are a few places that show promise, but for the most part, the N.W.T. sits in the shadow of the Rocky Mountains, if you will, from a wind perspective. We don't have really good wind in many locations.
Liquid natural gas, or LNG as it's commonly known, is an alternative to diesel wherever there is an all-weather road. It's a lower-cost option, and there are some environmental benefits as well.
We have looked at very small hydro for some of these small diesel communities, the challenge being that the very small scale of it is a bit of a challenge economically, and, again, it requires more government subsidies to keep it on par with existing rates.
We're also looking at storage in terms of not only increasing the penetration of the renewables but also improving the efficiency of our diesel and gas engines.
As I mentioned earlier, probably one of our greatest challenges is the requirement for capital. All of these projects require capital, and we are challenged insofar as the territorial government has a borrowing limit that we're a part of. As such, there's a challenge for us as a corporation not only to supply new loads that can improve our economies of scale but also to look at how we can improve our own efficiencies.
That is my opening statement for you, and I'll turn it back over to you, Mr. Chair, for questions.
The Chair: Thank you very much, Mr. DaRosa. We will now go to questions, and I'll begin with the deputy chair, Senator Massicotte.
Senator Massicotte: Thank you very much for being with us. Thank you for your presentation.
Just to clarify, I have two or three questions about your presentation. As you said at the very end, you need some capital. Is it that you need an increase of your debt limits, or do you need a subsidy? When you say capital, what does that mean?
Mr. DaRosa: Really we need an increase of the provincial debt limit because the territorial government is willing to invest in power projects that would be of benefit to the people of the Northwest Territories, but the government itself has a debt limit constraint on it at this point in time.
Senator Massicotte: If that were increased, with some of the options you have, you could actually borrow money, and the efficiency of your proposals is such that you could actually repay that debt with interest, at market prices, if the federal government said they allowed your debt limits to go up?
Mr. DaRosa: In some cases we have projects like that that are being held back. There are others that do require government subsidies where the government has looked at them and said, "We are willing to undertake this work because it's in the best interest of our people and in the best interest of the environment." However, the government just doesn't have the debt capacity to do that, to invest for the social benefit of the people in the N.W.T. So the answer is yes and no. In some cases, yes, we could repay it fully. Where we have a new mine come on and request that we provide them service, there are two in particular at this point that we could pay back with interest. There are other cases where the government would like to move off of diesel and into other technologies.
Senator Massicotte: Your reference point, I gather, is your diesel generation. I gather that's a point of reference. That's what you're currently paying, to a very large degree. Am I correct in saying that?
Mr. DaRosa: Yes, for about 25 per cent of the population that is the case, and if we incur any load growth in the Yellowknife area, we will be moving off of hydro and on to diesel.
Senator Massicotte: With all of your power choices, with the exception of LNG, in each case you say you would need some subsidy to make it comparable to your diesel costs. That means that without the subsidy, those other alternatives are going to cost you more than diesel, with the exception of LNG, I gather?
Mr. DaRosa: That is correct. One area where there is also some potential is in the hydro area as well. So, with some load growth, we can invest in new hydro plants to meet that growing need, but, at this point, we're limited in our ability to develop hydro because it's so capital-intensive up front.
Senator Massicotte: Even if the government said, "Here's a loan. Here's the capacity going up. We're going to support you. You go to the marketplace, get a bond and raise the money," it's not feasible enough to justify that and have the repayment of a debt on the hydro side?
Mr. DaRosa: That debt falls under the government's debt cap, and that is a limiting factor at this point in time.
Senator Massicotte: But if that were raised, could your government say, "We would save so much money from this project that we would be able to repay it plus interest and therefore not have an issue relative to solvency or profitability?"
Mr. DaRosa: That is true.
Senator Ringuette: I'm puzzled by the fact that, with regard to your hydro system, you state that a plant must spill 30 to 50 per cent of their water capacity, rather than send any surplus energy into a grid. That's quite a lot of water to be wasted in regard to energy creation.
I read in the last year that Hydro-Québec had developed a special storage capacity for hydro generation. Are you aware of this?
Mr. DaRosa: Yes. Most of our plants are run of the river. We have some limited ability to hold back water, but at some point we have to begin spilling it. In our case, we're not tied to the North American grid. Where we have a system that's solely hydro, such as in Yellowknife or in the South Slave, the load on that particular system is such that in the summertime the loads are at their lowest; in the wintertime at their highest, so we have to build plant capacity to deliver hydro in the winter during the maximum load period.
The water resource is at its greatest in the summer. If we were plugged into the rest of the continent, we could deliver all that surplus energy back into the continental grid, much like other hydro operators, such as Hydro-Québec, do. We don't have that option. Unfortunately, we're forced to spill on our plants anywhere from 30 to 50 per cent of the water resource.
Senator Ringuette: Going back to my question, in regard to the Hydro-Québec storage capability, how does that work and could it work for you?
Mr. DaRosa: Are you suggesting batteries, for instance, for storage, or are you suggesting water reservoirs to store the potential energy?
Senator Ringuette: I think it goes into the battery system that is pretty unique worldwide. They've developed this technology. That's what I read in an article.
Mr. DaRosa: I was just questioning whether you're talking about long-term or short-term storage. Batteries would be appropriate for short-term storage. If you were trying to store the energy from day to night, that would be perfectly applicable and appropriate with batteries. Where you're trying to store a large capacity of water from the summer and carry it all the way into winter, batteries aren't quite as feasible for the storage capacity. It would be very significant, and the costs would be very significant.
Senator Ringuette: Okay. It would resemble the solar system with the batteries taking on the surplus.
Mr. DaRosa: Exactly. Solar would be a perfect example. When nighttime comes, you can store enough energy in your batteries every single day and at night deliver that energy into the system. Here the challenge is to carry all that energy from the entire summer season and store it in such a manner that it can be delivered throughout the winter.
Senator Ringuette: What would be the closest grid that you would be able to connect with eventually?
Mr. DaRosa: It would be Saskatchewan. Uranium City is the closest grid to the Northwest Territories. It is about 100 kilometres from Uranium City to the N.W.T. border, and then another 100 kilometres up to our Taltson plant. An effective grid would require a larger transmission line that would then tie to the Yellowknife system as well, so we're talking in the order of 1,000 kilometres of transmission overall not only to tie our two systems together but also to interconnect to the South.
Senator Ringuette: Have you costed that option?
Mr. DaRosa: Yes; we did. We looked at that option in connection with bringing the single biggest loads in the Northwest Territories, that being the four operating diamond mines that we have. That costed out at $1.2 billion.
Senator Ringuette: It would be a long-term solution, though.
Mr. DaRosa: Yes.
Senator Ringuette: In being connected to that grid, you could sell your surplus during the summertime, and you would have access to energy during the wintertime. That is your requirement mostly.
Mr. DaRosa: Yes, absolutely. It would facilitate all of our existing dams operating much more efficiently, which would lower the cost of operation on our existing dams. It would also facilitate the development of some of our other hydro potential that we have. The Northwest Territories as a whole has an inventory of about 10,000 megawatts of hydro potential. That is enough to power all of Alberta, but unfortunately we have no transmission in the Northwest Territories large enough to carry that kind of power.
Senator Ringuette: Thank you very much.
Senator Patterson: Thanks for the presentation. You mentioned two mines in particular that would help pay off a loan for hydro facilities with interest. Could you spell out those two mines, please, that you were thinking of?
Mr. DaRosa: Well, we have two mines in particular that are looking at beginning operations here in the Northwest Territories. That's NICO mines, which is Fortune Minerals. We also have the Tyhee project. I'm trying to think of the operator there. I apologize. It's not coming to me right now.
Senator Patterson: With regard to the debt cap issue, and I know you're considering a number of projects, including linking the Taltson and Snare grids, as an alternative to the debt cap increase, have you considered whether the federal government might approve a loan guarantee arrangement similar to the Lower Churchill River projects in Newfoundland and Labrador? Would that also be an aid to making such a project financially feasible?
Mr. DaRosa: Certainly that loan guarantee from the federal government would work as well in terms of covering off the debt. A Canadian corporation is looking at the Tyhee project.
Senator Massicotte: Just a supplementary on that. You said that if the federal government guarantee was there, it had to be acceptable. You then said something like to pay off the debt. To make sure the question was clear, if the federal government only provided a guarantee with no assumption of debt service, no assumption of repaying back the debt, are the projects you're talking about feasible enough that they would allow that to occur? In other words, not a subsidy but simply a loan guarantee.
Mr. DaRosa: In some cases, yes. In the case of the large transmission line that would interconnect both grids, tie the mines in and tie to the south, to Saskatchewan, that project, in order to keep the rates at the levels that we have today, requires a $400 million contribution to the $1.2 billion project. The project essentially funds $800 million of its capital cost; it can't fund the last $400 million. That's the shortfall. The GNWT looked at it and looked at some of the social benefits of keeping these mines in operation for longer and thought quite seriously about funding this project simply from a societal point of view — that is, some of the benefits, some of the soft benefits that would come back to it, inclusion of royalty, revenues and taxes.
Senator Massicotte: And the conclusion was what?
Mr. DaRosa: Well, because of their inability to fund this debt, we've got to shelve the project for now until such a time as it has the borrowing capability, as well as it decides to fund the $400 million.
Senator Black: Mr. DaRosa, thanks for your very informative presentation. We're struggling here to try to understand what to do to be helpful, but that makes an assumption that I want to test with you.
Are you of the view that the status quo in N.W.T. on energy provision today is satisfactory?
Mr. DaRosa: Firstly, the status quo in terms of rates is not. Residents have been leaving the Northwest Territories due to the high cost of living.
The government has looked specifically at energy costs, and electricity being a key one because it's heavily involved in the delivery of electricity; so the government of the Northwest Territories is looking very closely at how it can lower the cost to its residents of electricity and other energy needs.
Senator Black: The answer is the status quo is not acceptable to you today?
Mr. DaRosa: Today, residents pay as much as 10 times the cost of electricity of other jurisdictions in Southern Canada; so on that basis, I would say that's not a sustainable point of view. As such, the government subsidizes some of those costs down to lower levels that people can afford.
Senator Black: If that is the case — and I accept if you say that that is the case — what specifically would you suggest be done do rectify the problem?
Mr. DaRosa: I would start first off with some debt relief from the GNWT so that we could undertake the initial projects that are self-funding so that those can proceed; then we can also look at some of the projects where some minimal amount of government support could be helpful. That's a starting point.
The ultimate vision or solution, in my mind, is a transmission grid, but that's going to take an effort of the GNWT, the federal government and the people of the Northwest Territories, and really the people of Canada supporting a project of that magnitude.
I think the benefits are not only for the North; there are benefits here to all of Canada in terms of environment, as well as developing the North. A lot of people from the South travel to the North and work here. Really, that is a solution that benefits all Canadians, in my mind.
Senator Black: That transmission facility, the contribution that you're thinking about, that would be larger than the one you're suggesting from northern Saskatchewan over the 200 kilometres into the territories; is that right? Your solution would be bigger than that.
Mr. DaRosa: Yes, the 200 kilometres only ties into one system to the south, the smaller South Slave system. That certainly could be a starting point. That could be phase one, but really, Yellowknife and the North Slave is where the much larger load is. It's in the order of 10 times the size of the South Slave. Really it's important, not only to tie that first system in, but then also to link it up with the northern system bringing Yellowknife into the fold.
Senator Black: Give us an order of magnitude of the cost of that.
Mr. DaRosa: To just tie the South Slave in first is probably in the order of $200 million. But there is another $750 million or $800 million to tie the North Slave with the South Slave together with enough capacity that it becomes useful. From there, we're looking at another $200 million to tie in those mines. The mines themselves are perfectly willing to fund the interconnection all the way to Yellowknife; the mines aren't looking for the capital cost to connect themselves. They have indicated there's willingness on their part to build back towards Yellowknife, but certainly not to build all the way down to Saskatchewan.
Senator Black: Adding that and the $1.2 billion tying into Saskatchewan, that brings us to about $2.5 billion; is that correct?
Mr. DaRosa: No. The $1.2 billion is all in; that is the entire cost of the project.
Senator Black: That would tie in the Northwest Territories to the grid?
Mr. DaRosa: Absolutely.
Senator Black: This is very instructive. A little bit south of you is the oil sands, which has a tremendous demand for energy and many issues surrounding that. With your hydro resources, is there some kind of partnership that could be developed with the oil sands producers to assist you in developing the energy from the North to provide the oil sands?
Mr. DaRosa: Certainly. As I mentioned, we have the capacity to supply the entire oil sands with hydro power should they so choose. That would require not only the $1.2 billion for the transmission but also a significantly higher amount of capital to build the hydro facilities to harness or collect some of that power.
The challenge has been that Alberta is a deregulated marketplace, so we have some private transmission companies in it, which is a very different regulatory regime from the Northwest Territories. We have approached Alberta. It's going to be, I will say, a little bit more difficult to work out some sort of arrangement with Alberta as compared to Saskatchewan. Saskatchewan is a system that parallels ours in the N.W.T., where they have government responsible for electricity. They have a Crown corporation; we have a Crown corporation. They have a minister responsible for their Crown corporation; we have one.
Discussions with Saskatchewan have moved along much more readily than the ones with Alberta. They are also much more closely linked. There is only 200 kilometres in total to construct to tie into Saskatchewan. Alberta is about 350 kilometres to the closest interconnection point.
Senator Black: That's very helpful.
Senator Sibbeston: I'm probably going to sound like an old man when you hear me. I was a young boy back in the 1950s when NCPC, Northern Canada Power Commission, came to Fort Simpson and generally into the North, and they set up power plants and began providing electricity to the community. After that, for years, and until this time, they've always spewed smoke and heat up the chimney.
I know my aunt and uncles were living two houses down from them, and their houses and the kitchen would rumble; the dishes would shake. They lived in that situation for years and years. I've always wondered why the heat could not be used to heat the community. I know it is not an impossible thing, because we're going to be hearing later from witnesses from Fort Providence who have done that. They have small generators, and they've used the heat that the generators produce to heat their buildings and provide hot water and heat. It shows it can be done.
At the moment, you're going after sun and wind. Why couldn't the power corporation be involved in something like that, where it could be integrated into a community where all the excess heat that goes up in the air could be used to provide heat for the community? I know you're relatively new to the North, but have you thought of that? Is that something that the power corporation could do instead of grasping at far-out wind and solar power, which to me are not very practical at the moment? They're not efficient. But the idea of using the heat from these stacks seems more practical. Have you thought about that?
Mr. DaRosa: Yes, thank you, senator. We have, in fact; waste heat recovery is a big part of our program. We look for opportunities in every community to recover some of the waste heat. So, generally speaking, our diesel engines take the energy from the diesel fuel, and 40 per cent of that energy is converted into electricity. The remaining 60 per cent, as you point out, is lost in terms of heat.
About a third of that is out the stack; another third of it is out through the water jacket, the radiators; and the last approximately third is just lost, radiated inside of the generating rooms, so the rooms need to be ventilated to be cooled. The challenge is the economics of collecting all of that heat. In fact, we have, in some locations, done that, but it has taken subsidies from government.
In Inuvik, for instance, we do. A good portion of that heat is collected from the generation facilities, and it heats the water treatment plant; the water has to be heated so that it can be distributed throughout the community because it's quite cold when it's taken in the wintertime. We preheat the treatment plant there. In Fort McPherson, we do heat one of the schools and a few of the office buildings in that community as well.
The challenge is that without a subsidy, the cost of heating is relatively low compared to the infrastructure required. Fort Simpson, the community that you're quite familiar with, is where we have a power plant in very close proximity to some of the buildings nearby. We have talked to the community about it. One of the challenges for that infrastructure is that there is erosion of the riverbank nearby, so the life of the existing plant may not warrant a lot of investment in infrastructure. We are looking at a new location a little way down the highway.
So there are some challenges with what you're suggesting we do look at. Where there's an opportunity, we do go to the government and say, "Look, with some funding, we can make this work for providing heat to the community at a reasonable price that is 60 per cent or 70 or 80 per cent of what it would cost them to heat with fuel oil." But some support is required to undertake that.
Senator Sibbeston: Mr. DaRosa, what is on the horizon? I know that the territorial government has dealt with a power system plan, and I'm sure your corporation has also made plans. One of the bigger plans was to connect the hydro systems in the South and in the North, but it seems that that's not going to go ahead because of cost. Then there's talk in little communities like Whatì, where we went. The committee went to Whatì to visit the community where they have a possibility of a run-of-the-river hydro plant in the future. These are possibilities for the future.
What are your immediate few years' plans? Is there anything substantial that could really improve? Is it you that is mostly responsible, or do you feel that the GNWT is mostly responsible? How do you see things?
Mr. DaRosa: First, I'll answer that question. It's jointly undertaken. We do a lot of the legwork. We come up with a lot of the ideas, and then we pass them off to the GNWT to undertake studies and run pilot projects, simply because the way the electricity system is set up here, all of those costs the government doesn't want to put against the ratepayer. So we come up with a lot of the ideas, and we work jointly with the GNWT. They fund the projects, and, in many cases, they will actually carry out some of the pilot projects to test the viability of new things that could be tried elsewhere.
In terms of your other question about what plans we have, we have plans pretty much throughout the Northwest Territories for opportunities that we may have to improve things. In the North, one of the biggest potentials in the Beaufort Delta is wind potential for Inuvik. There's a place called Storm Hills that is touted to have world-class winds. We have been monitoring it for about a year. We are looking at another year of monitoring before we will know the actual wind conditions and be able to determine what the economics of wind for Inuvik would be. When we look at your community of Fort Simpson, right now, we're examining two options for replacing the existing diesel plant in a new location, largely due to the erosion of the river bank of the Mackenzie right alongside that plant. We're looking at biomass, as well as LNG. We're working with the town government to point us to location: "Where would you like us to locate this plant?" We're trying to work with the community and some of the Aboriginal groups on the potential for collecting biomass. It will take a significant amount of time and effort to negotiate land or woodcutting rights, but we've started some of those discussions. If we can get the economics of biomass to where they are at or better than diesel, even if that is with a government subsidy, that could be the next plan for that community.
When you look at Yellowknife, we're looking at an expansion of our Bluefish, simply because that is where the most cost-effective hydro for Yellowknife is. Beyond Bluefish, it would be Whatì, specifically a place called La Martre Falls that you mentioned. Rather than just a community base, there's a potential of about 13 megawatts. Not only could it supply that community with lower-cost hydro power, but it could also feed into that Yellowknife grid.
We have plans throughout the entire territory for things that could help to improve reliability. Also, ultimately, we're always looking to lower costs. Simply, as I said, we recognize that the existing costs aren't sustainable, and we're looking at every avenue possible to lower costs for our customers.
Senator Seidman: Most of my questions have been answered, but one of them is perhaps a continuation of Senator Sibbeston's regarding the priorities and projects that the Northwest Territories Power Corporation is planning. You did come out with a vision at the end of 2013, and I guess my question concerns whether the plans and priorities that you just started to elucidate for us are the crux of that vision.
Mr. DaRosa: Yes. In fact, we have a power system plan, as the senator mentioned previously about Churchill Falls. The power system plan that we developed in 2013 contained many initiatives, including some of the ones that I have mentioned, like the wind in Inuvik and some of the further development of the hydro system throughout. As well, the big project in that plan was the transmission grid. We do have plans, and we do have a power system plan that has been developed, basically outlining all of that. Other than the transmission grid, which has been parked for now, those plans continue to evolve, and so we've further refined and developed some of the projects that we had in that 2013 document. The list of projects really continues to grow as we find more opportunities in the N.W.T., and, really, we want to pursue the ones that are the best opportunities first.
Senator Seidman: I guess one of the most important things that we've heard from witnesses talking about the whole issue of energy development in the North and its use and its supply is the importance of sustainable and efficient and local. I think that if I look for three words, those were maybe the three words we've heard the most often — sustainable, efficient and local. How do you think about that in terms of approaching the very great challenges that there are in the North?
Mr. DaRosa: I think that categorizes very well the requirement for power systems and electricity delivery in the future. Ultimately, sustainability from an environmental and a cost point of view is absolutely required. I'll move to local first. In terms of local, it has become more important to me as I have learned more about the Northwest Territories, and that has really come through from the people. The people really communicated the requirement for more local, whether that be biomass, simply because we are harvesting a local fuel as opposed to purchasing diesel that comes from foreign countries or other parts of our own country. People see a real benefit in local participation, so that's certainly important.
When your costs are high, you have to be efficient. There's no question that we strive to be as efficient as we can. I think that's a great characterization of what's required on a go-forward basis.
Senator Seidman: Thinking about that, I am thinking about biomass. You have talked about that to some extent. I know that the Government of the Northwest Territories released a strategy for biomass and is sort of at the end, perhaps, of the phase-in of that strategy. Could you tell us where we're at with the biomass development piece?
Mr. DaRosa: We're undertaking some feasibility studies right now, and we're looking at LNG versus biomass for the community of Fort Simpson. That's probably where we're furthest ahead. We're looking at both cases. At the end of the day, the solution that provides the greatest value to the community overall will be the one that we will go with.
Today biomass is higher priced than LNG from all indications. LNG does come in at a lower cost, but there are social benefits. If the government were to partially fund a portion of the capital, if the GNWT decided to do that because that's in the best interests of its regular departments to develop a local industry in terms of harvesting wood, that may change. That is a decision that will lie with the Government of the Northwest Territories somewhere down the road. Today I would say that the economics between the two would have LNG as the lower-cost option, but that's only today. We've also looked at biomass for Yellowknife. We've got an older backup plant that needs to be replaced. We held a stakeholder session with many groups from the area that are supplied from that power grid including Yellowknife, the Dene Yellowknife, Dene First Nations and the Arctic Energy Alliance. We invited various stakeholder groups in, and we looked at about 13 different options. Biomass ended up in the top four. It wasn't necessarily the number one option. A particular hydro project ended up as number one, but biomass will also be evaluated in terms of Yellowknife. That is, is it an option for Yellowknife on a go-forward basis?
If I had to summarize biomass, in my mind, biomass, much like geothermal, is best suited when you have a requirement for heat, and electricity is a by-product, not the other way around. If you start with the electrical generation, the economics of it are challenging. However, where you have a requirement for heat and you're building a facility for heat, you can take some of that heat and turn it into electricity. That's where I think there's greater potential for biomass. I talked about diesel turning 40 per cent of the energy into electricity. With a biomass plant, that will be down to 15 to 20 per cent. For every unit of energy you're collecting in terms of electricity, you're losing five units of heat. That's why I suggest that biomass and geothermal are better solutions when you have a heat requirement, and an ancillary benefit becomes electricity production.
Senator Seidman: That's helpful. Thank you very much.
The Chair: That's the end of our questions.
Senator Patterson: Is there a protocol set up by the power corporation to buy electricity produced by consumers?
Mr. DaRosa: Yes. In fact, we've recently developed the net-metering program so that consumers can produce electricity on their rooftops with solar, wind or other renewable resources, and we will purchase back any surplus up to a limit. A limit is set simply because regulators, like those in other parts of the country, look at how much benefit one customer derives for themselves at the cost of others. There is an opportunity for people to self-generate in the N.W.T. and for some of that surplus power to be pushed back into the grid, and we credit the customers for that power.
The Chair: I want to go back to that last question. It's just an in-and-out cost to the producer. That is, if they produce X amount of electricity, they just put it in the grid. They don't really get any money. They just reduce their own cost. Is that correct? How does that work?
Mr. DaRosa: That is correct. If a consumer puts a system in their home or on their home and it produces solar energy in excess of, say, 200 kilowatts during the summer, all summer long, that goes into their bank and is banked for that customer. Then through the winter, when the sun isn't producing power through the system, they're able to pull those credits back out and utilize those credits at that point. We do have a reset point. March 31 we basically reset them back to zero, if they haven't utilized all of their credits.
The Chair: You talked about the solar panels that were installed in Fort Simpson. It needed a subsidy from the government, if I heard you right, to keep it at the same cost as diesel generation. Is that diesel generation after it's subsidized by the Government of the Northwest Territories? What percentage of the capital cost was needed as a grant to make that feasible?
Mr. DaRosa: Yes, that is the full cost. If you look at the marginal cost, when you're looking at a diesel plant, like Fort Simpson for instance, it will produce power at about 60 cents a kilowatt hour, and 35 cents of that is largely diesel fuel. When we look at what's required to lower our cost, we need something that's 35 cents a kilowatt hour or less because the plant doesn't go away. It still remains there and has to be recovered through rates. It's the marginal cost that we compare against, as opposed to the full-in cost of 60 cents. I'm taking the government subsidy completely out of the equation simply because we were trying to do an apples-to-apples comparison here without any government subsidies.
In terms of the percentage, that project was undertaken about three years ago, and solar has come down considerably. At that point in time, we needed about a 50 per cent contribution from the government to keep it on par with 35 cents a kilowatt hour. Today it would be lower, probably in the order of 20 per cent subsidy to keep it on par with diesel, given the dropping costs of solar.
The Chair: In two years, the cost for solar has dropped 30 per cent; is that what you're telling me?
Mr. DaRosa: It has, yes. In Fort Simpson, we installed solar at a cost of $10,000 a kilowatt. In Colville Lake, this summer we're installing at about $7,000. It has been about a 30 per cent drop in solar for us in the Northwest Territories over the past three years.
The Chair: We appreciate very much the time you took to talk to us. I think you gave us some good information. Thank you again for being here.
For the second portion of our meeting today it's my pleasure to welcome Jeff Philipp, President and CEO of SSi Micro Ltd.
Thank you for being here today, Mr. Philipp. We appreciate your time and look forward to your presentation. We'll then go to some questions and answers. The floor is yours, sir.
Jeff Philipp, President and CEO, SSi Micro Ltd.: Thank you, Mr. Chairman and senators, I appreciate your taking the time to hear from me. It's a great topic, so I'm happy to be here.
I'm the founder and CEO of the SSi group of companies.
I'd like to thank the chair and the senators for inviting me today for the opportunity to contribute on this important discussion about energy solutions for Canada's North.
Before I begin with the rest of my opening remarks, maybe I will quickly preface this by saying this will be significantly different than the discussion you just heard from the CEO of the Northwest Territories Power Corporation, and further I should say that the NTPC is actually not the power corporation in my home community, which I'm going to be making reference to.
So we have two companies that distribute power: Northland Utilities as well as the Northwest Territories Power Corporation. In my home community, it's Northland Utilities that has the contract and has had for some time. Does it really make a difference? Power is power and it's at the same rate, but I want to make that distinction because this is not aimed at anything that the power corporation may or may not be doing in Fort Providence.
Lastly, I'm not here to tell you just the history of the family business and power off-grid, but also a vision for our home community, which I hope is a model for every other community in the North. As Mr. Sibbeston indicated, things like capturing heat are critically important. I think you may find this interesting from that perspective.
The primary business of the SSi Group is satellite broadband communications in remote and underserved areas. The company is headquartered in Yellowknife with our network operations centre and teleport based in Kanata, just outside of Ottawa.
We have established a communication network of infrastructure across 56 communities in the Arctic, as well as several countries around the world. So we work in Africa and Indonesia, as well as the South Pacific, or have worked.
But our roots are something quite different. SSi stands for Snowshoe Inn. It's the family business in Fort Providence. It's been operating for 50 years. And if you look at slides 2 and 3, slide 2 will give you a geographic reference of where Fort Providence is, just as the Great Slave Lake funnels out in the Mackenzie River where the Deh Cho Bridge was recently built, that's the location of my home community, Fort Providence.
Slide 3 zooms in and identifies Fort Providence on the map and shows it in relation to Yellowknife. We are about 320 kilometres west of Yellowknife.
The family business began in the Northwest Territories 50 years ago. It was started by my parents in 1965 as a coffee shop and a craft store, and over the years it grew to become a 35-room motel, a restaurant, a bar, a gift shop, a convenience store, commercial rental facility, residential space, bulk fuel and industrial garage, heavy equipment, trucking service, marine operations and power plant.
Slide 4 is an aerial shot of the community. It's a community of about 800 people. Slide 5 will give you an overview of our complex. The main Snowshoe Inn facility sits on about 15 acres of land, which is title land which my folks bought back in the 1950s; and as you see there, it is one of the properties in Fort Providence, and it is the property I'm going to be referring to in the rest of this.
Slide 5 shows you the complex and the individual buildings and areas of infrastructure. My wife, Stefanie, and I took over the business 25 years ago, and we have expanded the business to what it is today.
Fort Providence is a hamlet of approximately 800 people on the Mackenzie River, 320 kilometres southwest of Yellowknife. The population is mostly Dene and Metis.
Its reality today is similar to that of many small communities in the North. It is challenged with a lack of economic development and local jobs. There is a critical shortage of affordable housing, and fewer young people are finishing school, and those that do are leaving the community due to lack of opportunity.
Businesses have closed due to very high operating costs, the most critical being the cost of power, followed closely by heat, which is easily four times higher than in the South. I was happy to hear the CEO say it was 10 times higher, and in many cases it is.
And yet even with these challenges, Snowshoe Inn continues to operate and grow as a sustainable business. How is this possible? The answer is actually not that complicated. For the past 42 years, we have been off-grid producing our own energy. We provide heat and power for 100,000 square feet of commercial and residential space at a fraction of the cost that other businesses pay to the utility, which I remind you is Northland, not the NTPC. I don't want to make any enemies today.
The original cogeneration system, which is combined heat and power, was built by my father, Sieg Philipp, in 1973. He was a diesel engine mechanic and hard-working entrepreneur who immigrated to Canada after the Second World War. My father understood the value of self-sufficiency and innovation. His design was simple and very effective. I have provided you some information on the system, including photographs and diagrams in the form of an eight-page article published back in 2001 by CMHC entitled "Snowshoe Inn, Co-Generation Model."
The original system used two redundant diesel generators and captured the waste heat in both the cooling water and the exhaust gases. This captured heat was stored in a large insulated water tank, from where it is circulated to all of the different buildings. The buildings are connected via an underground four-foot-wide utilidor or tunnel, which is really a fancy name for a culvert poured in concrete in the ground. Through that tunnel, all of the water, hot and cold, is distributed, as well as power and communications. In each building, the concrete slab, the circulated air and the domestic hot water are heated by the heat that we capture from our cogeneration system. During the coldest months of the year, additional heat is required, and we have a waste oil burner that burns all of the waste oil from our equipment, our generators, our heavy equipment, and that waste oil burner would produce an additional 900,000 BTUs of heat, further improving our self-sufficiency.
Not only did this system provide heat and power to Snowshoe's existing buildings, but it enabled us to build and operate Northern Canada's only greenhouse. For a number of years, we provided fresh produce, tomatoes, lettuce, carrots, cucumbers, radishes. We had a hydroponics room with a banana plant, and we produced that for our own restaurants, as well as for sale in the community.
Eighteen months ago, we undertook a major upgrade to the original cogeneration system. I should say my father passed away about eight years ago, so I undertook a major upgrade to this cogeneration system. We replaced the old diesel generators with a larger, much more efficient 150-kilowatt, 600-volt system; so we upgraded both the size and the voltage. We installed a third unit as backup. Both of the main generators were modified using exhaust gas heat exchangers, as well as charge air coolers, which take the heat out of the turbo-charged air, as well as removing the radiators and pulling the heat out of the water jacket and the oil coolers. Out of the 60 per cent that Mr. DaRosa alluded to, we capture probably 50 per cent of that energy.
All of these were directly integrated onto the engine. These upgraded units are now truly state of the art and performing extremely well, with at least 60 per cent gain in heat capture due to the massive improvement in efficiency. This is reflected in a reduced need for alternate heat from the waste oil burner. In fact, due to improved heat capture, we were able to replace the 900,000 BTU waste oil burner with a modern, more efficient 400,000 BTU unit with no impact to our overall heating in the middle of winter. We have reduced our oil burn by upwards of 25,000 litres a year of waste oil that we used to supplement our heat.
Our amortized cost for power on the old system worked out to approximately 24 cents a kilowatt hour. It's the capital cost plus all of the operating costs of that facility. While too early to tell, the new system is expected to be equivalent or better, while providing a 25 per cent increase in electrical capacity; three times the redundancy, or triple redundancy now I should say; a lot easier operator use, detailed data recording and the ability for me to monitor that system from anywhere on the planet.
In southern terms, 24 cents per kilowatt hour may sound like a lot. But in the North, where commercial power in the grid in Fort Providence is today 57 cents, it's a game changer.
With an average annual electric load of 100 kilowatts, we save approximately $290,000 a year just on the electricity, and we benefit from 800,000 BTUs of free heat. In practical terms, what this means is that we can employ 25 full-time people in the community and still make plans to grow the business.
Our new system is quite impressive, so much so that it's garnered international attention. I've included in the handout materials an article that was done recently on Snowshoe Inn and published in Worldwide Independent Power.
The point of all this is to show that an efficient heat and cogeneration system is clearly workable and sustainable. Our company is recognized as a leader in northern innovation, and we continue to grow despite economic and social challenges. We are also the largest private employer in my home community, Fort Providence, and we provide much- needed local services, and we have done so for 50 years.
But we need to do more. We need to expand our efforts if we want to benefit the entire community. I have been thinking about this seriously for the last decade. I am passionate about helping the community find ways to generate a recurring revenue and sustainable revenue that can be used for local business development, job creation, better housing and improved access to post-secondary education. Currently 72 per cent of high school students in Fort Providence drop out before they complete. The ones that do complete do not stay in the community because there is no housing for them, except for low-income housing that they would be stuck in forever.
My goal today is to expand on Snowshoe's success by involving the community and the leadership on a number of levels. Today I would like to share with you some of the plans that I believe could be a model for other communities and that I'm actively working on in my community.
In order to support long-term economic and social development, the community must have sustainable and recurring revenue. In order to enable this, we will be expanding our heat and production capacity to accommodate future growth by installing a new biomass system that uses woodchips, locally harvested, as the primary fuel source. We have been conducting due diligence for quite some time, and I should point this out: Nowhere in here does it say, but, 35 years ago, we built our very first gasification system in Fort Providence. We built a gasification system using locally harvested wood 35 years ago. That experience was invaluable, but, frankly, it wasn't reliable enough at the time.
So, currently, we're doing due diligence on new gasification systems that can produce 500 kilowatts of electricity and 1,000 kilowatts of heat, which is roughly 4 million BTU of heat.
Snowshoe intends to engage local Aboriginal partners to ensure that the infrastructure is majority owned or even 100 per cent Aboriginally owned, ideally through a not-for-profit community foundation. The foundation will benefit by selling energy to the local grid, and Snowshoe will benefit from having access to inexpensive heat and power for another 50 years.
Operations and maintenance of this system will be the responsibility of Snowshoe Inn, and feedstock would be supplied locally, creating jobs in the community in a wholly owned harvesting business. It's anticipated that the Aboriginal partner would facilitate the input of training dollars or other resources to this new venture, through accessing some of the existing government programs that are available. In return, their equity ownership would reflect that contribution.
So to be clear, I see this as an Aboriginal-owned operation in a small community, to generate revenue for the community.
In parallel, we intend to build a new 10,000 square foot commercial building in the community. This facility will add additional space needed to accommodate new jobs moving into the community as a result of devolution of powers to the territorial government last year. Heat and power for the new facility would be supplied by the new biomass plant, which will assist in the long-term sustainability of the project.
Building on the expected success of the first venture, expansion of power and heat production, in partnership with the community, would be a logical next step. Snowshoe envisions a state-of-the-art energy centre, comprising a second biomass plant and solar photovoltaics or solar panels, as well as evacuated tube solar collectors, which would release solar thermal heat on the roof of this energy centre, accompanying the underground thermal storage. If you've looked at any of the systems like the Okotoks or the Drake Landing Solar Community in Okotoks, they have a phenomenal system for thermal storage, which allows you to store that heat that you can't capture and save all summer for use in winter, and we would implement a system like that.
In addition, hydrogen generators could be used to use the off-peak electricity to produce the hydrogen, which would be stored for on-peak demand use, where we would be peak shaving, as well as using it for additional heat. We have done a lot of research into this as well.
Alternate energy systems like solar are still very much at that break-even stage. They are getting better, but they are at the point where — and I would agree with Senator Sibbeston — they are reaching. I believe we have better ways to improve our efficiencies and economics in the communities.
Add to this vision a more extensive underground utilidor infrastructure to supply this heat to the community buildings, such as the school, the arena, the pool, the health centre and the seniors home, and it becomes easy to imagine Fort Providence on the path to recovery and prosperity. It should be noted that we're the bulk fuel supplier in the community. So a loss of fuels sales by moving those buildings onto an alternative form of heat is a loss of revenue to my company, but, frankly, it's one that I willingly accept because it would also move those communities into a more sustainable position. I'm here not only as the fuel supplier with something to lose but also as a member of the community with something to gain, and I think the whole community does.
Our existing diesel plants will serve as a reliable redundant backup system in the event that the biomass facility requires repair. Ultimately, the community's dependence on diesel-generated power would be reduced considerably, and the profits produced by the energy centre would contribute significantly to the annual revenues that could accrue to our Aboriginal partners.
Affordable energy opens the door for lucrative economic development. Fort Providence is strategically located in the centre of the Dehcho and the South Slave. It could be and should be the ideal hub for meetings and conferences, serving participants from Yellowknife, Hay River, Fort Simpson, Enterprise, Fort Resolution and Nahanni Butte, which are all within a couple of hours of Fort Providence. The Snowshoe Inn is well positioned to help make this happen by expanding the hotel and by building a multi-purpose conference facility situated on the banks of the Mackenzie River. This would double the number of guest rooms from 35 to 70 and make Fort Providence a viable alternative for smaller conferences to Yellowknife. Should we have more heat than we require, we could also install an indoor, year-round pool as a unique attraction. Without free heat, this would be impossible, and it seems almost as farfetched as building a greenhouse. But we've done it, and, really, it's a matter of the cost of energy. If you have lots of excess heat, a swimming pool is simply a capital cost that becomes part of your building construction, and it does become a significant draw because they don't exist in these communities today.
Affordable energy could also mean a new greenhouse, bigger and better than the one Snowshoe had once built, and operated by local people. It would mean healthy and affordable produce in a community where fresh fruits and vegetables are rare and expensive, realizing and recognizing that we haul our fruit and produce — we are on the road system so we are fortunate — a thousand kilometres in winter, heated, and we cool it a thousand kilometres in summer to make sure that it doesn't wilt.
A long-time dream of the community educators has been to build a small trades training centre, where local youth and others can learn practical skills that are needed in these Northern communities. Affordable energy can also help make this a reality.
In conclusion, I believe that Fort Providence can be the community in the North that others look to as a model for modern revitalization. It can be a well-respected example of progressive community partnership that truly works. With the right partners — local, federal, territorial — I believe we can achieve all of this, without waiting for any outside source to solve it for us. Thank you. Those are my opening remarks.
The Chair: Thank you very much, Mr. Philipp. We will now go to questions. Senator Massicotte?
Senator Massicotte: Thank you, Mr. Philipp, for being with us. Much appreciated. You bring a very important perspective. I'm stunned, though, and I'm looking for an explanation. Your own costs using your old generators were about 24 cents. You now expect, with new generators, total new replacement costs to be down to, say, 18 cents. I thought you said a 25 per cent saving of your —
Mr. Philipp: No, a 25 per cent increase in the amount of power. We went from 110 kilowatts to a 150-kilowatt power plant, and we increased our thermal capacity significantly. I don't know what the reduction is. I don't expect a significant reduction from the 24 cents per kilowatt hour. You're getting pretty tight there.
Senator Massicotte: Okay, let's say 24 cents, but you also make a comment that the average in the area is 57 cents.
Mr. Philipp: Correct.
Senator Massicotte: We heard previously that it could be as high as 70 cents if you include the subsidies. Why such a difference? Why aren't others doing the same thing as you do and reducing their 70 cents to 24 cents?
Mr. Philipp: There are a couple of reasons. It was interesting; Mr. DaRosa said that the diesel offset price, which is really the term for it within the regulatory act, is 35 cents. They factor their cost of producing power at 35 cents for the diesel. Our cost of producing power, all in, is 24 cents, and part of that reason is that if you look at the typical community — Fort Providence, my community, is typical — it's 800 people, small. In our case, we're on the road system. But we have a multitude of diesel power plants. Our average load is 350 kilowatts in the community. The power corporation — in many of these communities — runs a 500-kilowatt power plant because you need that extra little bit, and when we get up to peak at 700 kilowatts, they run two 500s, which means you have a megawatt of power sitting there. You are 30 per cent inefficient to begin with. When you take a litre of fuel and take the 40 per cent that is translated, as he says, into electricity — and I think it's lower than that, more like 35 per cent — if you're already 20 per cent inefficient because you have an engine running that's 1 megawatt or two engines and you're only at 700 kilowatt, you're 25 per cent inefficient on that, let's say, 40 per cent already. Then, through distribution across the grid, you've lost another X per cent of that. It's high, 30 per cent. So their cost of producing power is very high. Our cost is quite a bit lower because we use smaller power plants, which are more energy-efficient. They burn less fuel, meaning we can stage them. Rather than one 500-kilowatt plant, we would run a 250 and a 150 and a 100, and the fuel burn would be lower.
Senator Massicotte: Their 35 cents, from my understanding, is what he called his marginal costs.
Mr. Philipp: Yes, the fuel cost.
Senator Massicotte: Any amortization or payback of the capital costs. Your 24 cents includes all-in costs with new generators; is that accurate?
Mr. Philipp: That's accurate. Let me put that in perspective. The 150-kilowatt, 600-volt diesel power plant is a $35,000 unit. It's trivial. We save $290,000 a year on the cost of our electricity. I could replace that power plant every other month.
It's not the power plant. It's the building. It's the staffing. It's the trucks that run back and forth. Their overheads are high. Their direct operating cost, if they're saying fuel is 35 cents, I believe that because they're running big power plants that are running very inefficiently, and they don't capture — forget the waste.
Senator Massicotte: So having said that, you are effectively our miracle man. Let's say we made you chief executive officer of all the North. What would you do?
Mr. Philipp: It's not a simple problem. I don't begrudge them anything. I'm not sitting here suggesting —
Senator Massicotte: We'll increase your debt limit, but no subsidy. What would you do?
Mr. Philipp: I can tell you that, actually. I think that's a great challenge. I would take you up on that.
I believe that there's not just one solution. In hydro, I think they're right. I don't know their numbers or the business case, but I do know it would be pointless to connect Fort Smith-Taltson to Saskatchewan without connecting to Snare because the bulk of the load is Yellowknife, and that's where we need the redundancy, and the bulk of the capacity comes from Snare.
For hydro, you would have to look at that business case and determine. Connecting to Saskatchewan probably makes sense. To clarify, I think the point that Mr. DaRosa made about Fort McMurray is that we don't have enough capacity to supply Fort McMurray, so there's no point in running the line down. I think that question came up. We'd have to add capacity.
He did not say that this would be viable. He said that with a $400 million subsidy, we could make this the same price as what we're paying today.
Long-term, looking 50 years out, I think it's probably a good idea, but I haven't looked at the numbers. I would say that's what you do in hydro. To his point, that's 75 per cent of the population, but that forgets 30 of the 33 communities in the Northwest Territories, or 23. I don't know what the right numbers are, but diesel power plants exist in the bulk of these communities. We can cover 75 per cent of the population by doing the three largest communities and tying them into hydro, but we do not solve the challenge for the businesses in the small communities that are shutting down and leaving and the social problems.
In those communities it's a different challenge. I was happy to hear from one of the senators that "local" was a word that was coming up, because we've been very much local my whole life in Fort Providence, and I believe that ownership of critical infrastructure in the North should have more local ownership. The critical infrastructure, telecom and power, should have more local, and I'll call that Northern, Aboriginal and Inuit investment and ownership.
If that happened, if the communities were empowered to participate and own more of that infrastructure — and this is not a simple challenge, don't get me wrong. I grew up in Fort Providence up until 12 years ago. I lived in this community my whole life. There are challenges to have the Metis and the Dene and the local governments work together. This is not a simple problem.
In those communities that have biomass, there's no question biomass is a better solution, and I don't believe that it requires a big government grant. In fact, we will put in a 500-kilowatt biomass plant this year if we can make the math work, and so far, from what the sales people tell me, the math works.
Now, I'm skeptical, but I believe biomass in areas where we have forestry — and in this last 12 months, we signed forest management agreements between the bands and the Dehcho, so my home community has signed forestry management agreements with the feds as well as in a couple of other areas. They have the right to harvest and sell that wood now, which is a big deal.
Senator Massicotte: Why is it not getting done?
Mr. Philipp: It only happened three months ago. They have not gotten a legal agreement with the feds.
We don't have a million dollars' worth of harvesting equipment. We don't have a biomass plant. We don't have anything yet to do this, and it takes leadership and direction.
In the communities where there's biomass, the power corporation should be looking at these opportunities, because it does create a lot of local work that is immediate work that they could use harvesting wood, but it will require a pilot project to validate this.
This is what I propose to do in Fort Providence, with or without government involvement, because, frankly, I believe if it's a better energy solution and the math adds up, I'm going to put it in. It makes sense for me, and I would say that's a good model for other communities. Those are the two.
To answer your question, I think hydro is a different problem in the large markets than what we do in the small. In the small, we have to build a better mousetrap, and that's not just putting in more 500-kilowatt diesel power plants.
We've had joint ventures with the power corp. I knew the previous CEO very well. I know the people within the energy sector well. The challenge is that the GNWT debt limit is part of it, because they are a Crown corporation, but it's also the fact that it's not going to happen overnight, but we have to start soon.
How do we educate the people who are the diesel engine mechanics running the power plants in the communities today that improving the efficiency is going to require some change? That's really part of it, educating the local workforce, starting with the power corporation, seeing this need, providing the education and support to the communities and engaging the communities in power conservation.
There's one thing we don't do in the North right now. We don't advise the consumers about their power.
I'll give you an analogy. I'm in telecom. If I said to my Internet customer, "I won't tell you what your Internet usage is until the last day of the month, and then I'm going to give you the bill for it," they'd go nuts because the cost of usage in the North is 10 times higher than the cost of usage in the South. People hold back on using power because they can't afford the bill.
If we make people more aware, so a social program such as — let me rephrase that. Automated meter reading, the ability to connect to the meter and provide the consumer with real-time data as to what their consumption is and what their bill for the month will be based on this consumption. I have been doing this in my house for four years now. My kids are 13 and 17. I said to them, "Go and turn all the lights off and come back and look at this webpage. When you see the price go down, you'll know what the impact is this week, this month and this year on our energy costs just by turning the lights off in the bedroom." We can't do that.
It would also provide huge insight into the power corporation saying, "Where is all the power being used? Is it being used in the health centre and all the old buildings which don't have any upgraded insulation, which could use a capital improvement to reduce our power bill?"
I think social awareness is one piece, to have consumers use less. That's a big piece of reducing our demand. Making the engines more efficient is a big piece of it, and capturing that 60 per cent of the energy that we blow out the stack is a big piece of it.
Thirty-five years ago we offered this to the community of Fort Providence. We offered to heat the local pool, which was right next to our motel, on the adjacent property. Just two pipes out the back, into the pool, heat it year round. The challenge at the time was what happens if the power goes out? Then the pool is going to be cold. This was a local municipal challenge, not a federal or a territorial one. We said, "Well, if the power goes out, we have a much bigger problem than the pool." At that point, 100,000 square feet freezes up and all the pipes in the culverts freeze up. This is the problem.
We never did do it. We have now spent $4 million on a new pool in our community. I think it was $4 million. That was four years ago. It's operated a total of six months because of mould and mildew. It wasn't properly designed. The worst part is it only operates for a month and a half in the summer. They pay me $40,000 for the fuel to heat it for a month and a half in the summer, and it's shut down for 10 and a half months because they can't afford to heat it, and it's four feet deep. It's a knee pool, and it's $4 million, I think. It is a ridiculous investment in this community. It's the kind of thing that really puzzles me.
How do we make it better? If I was the president of the power corporation, it's not an easy job, but it is going to have to be looking at alternatives.
He mentioned the batteries, and I'm glad to hear they're doing that, and I'm happy to hear they have a $10 million funding problem, because that's an investment I would like to make. Charging those batteries all day long off grid, off water, they're spilling out over the dam and providing that when the power goes out in Yellowknife as an online grid- level battery backup. That's something that we could do easily, and $10 million is not a significant amount of money.
There are lots of things that can be done, and I welcome the opportunity to work with the new president of the power corporation to see if there are ways we could improve, starting in Fort Providence, but then expanding.
To your point, Senator Sibbeston, capturing the heat is a no-brainer. I can show you the equipment. I can show you the manufacturer. You're talking about an investment of under $60,000, and you would capture so much heat that the pool in Fort Simpson would never need fuel again.
This is not a difficult concept. I think the numbers they've looked at in the past were some time ago, kind of like solar. I don't think they've looked at it recently, and I have.
Senator Sibbeston: When I was a young MLA, I went to Fort Providence in the 1970s to see your dad build and begin his operation of providing his own electricity, and at the time there was a gasification process using local wood and so forth. I've always admired your father and now you for what you have done.
This is why I raise the point: Why don't they do this in the North? In part, it's because of business. Private family businesses and people can do it much more efficiently than government. I think that's the first answer. You can do it better because you care. Obviously, your father had the knowledge, the experience and the common sense to set up such a system.
Like I said, all my life I've seen power, big black smoke coming out of a diesel generator in Simpson. You think of the heat that's lost and the cost. I always think, government is smart, White people are smart; they have engineers. Government is smart. Why can't they do something about that? That has always occurred to me. I think there are other local people who wondered that.
Senator Massicotte: Maybe they're not as smart as you think they are.
Senator Sibbeston: No, I think so. They've got people like Mr. Philipp here who exist in the world. I get the impression that because it's government, they don't care. Government is what it is. The power corporation is interested in producing power. Other aspects of government do other things. There's not an integration.
We're wealthy; we're a very well-off government and we're very rich, so we don't put any effort and energy into doing something.
Also, the Native people who live in the communities just came off the land. In our part of the North and in Dennis's part, the Inuit people have just come off living in igloos and living off the land, so they're not in a position to depend on the government to do things for them. I think that's why.
Wouldn't it be nice if somebody began to care, somebody began to want to do something about this? You talk about the technology. It's there, very cheaply, and seems like it can be had.
Would you just say something on that point, that technology is there to provide power and heat to communities, but the government and the power corporation just don't use it because they don't care?
Mr. Philipp: It's a combination of things, senator. I grew up in Fort Providence. I went to the local high school until Grade 7, where it ended, and then I went away to high school on Vancouver Island. I was fortunate that my parents saw the benefit of sending me away to school because, to your point, these communities are just a couple of generations off the land, from hunters and trappers and fishers and gatherers, and in my lifetime in that community — I was born in 1967 in that community — I have seen it improve, improve, improve, and start to decline. The decline is because now we're not just one or two generations out of the bush. We've now got families that were raised in the community or a couple of generations of families, and they're sending their kids away because there is not the local capability in the community to employ them or provide them with an income long-term, or even housing.
What's happening is that the people in my peer group and even younger, 30 to 50, who have kids, when you ask the senior administrative officer or the mayor, a lot of people in the community, where their kids go to school, they've gone away, much like I did. The difference is that after high school I wasn't really interested in university, in pursuing an education in school. I came back to work in the home community. I worked in our family business my whole life. My trade is actually in being a diesel engine mechanic and a pilot.
The reason I bring that up is that I think the ingenuity exists, the people have the capability; I'm one of those kids from the community. The only difference is that I spent four or five years away, from Grade 8 to 12, in high school somewhere else, which opened my eyes up to the possibilities of what you could do, that there weren't these limits. I came back to Providence, and a big part of the reason that this happened in Fort Providence is because of my interest and passion for technology. It doesn't matter whether we're talking about the telecom business that we run or talking about energy, I have a passion for it. We do find a way to implement and innovate, but I would say that this is not exclusive to me. This is something that people in the communities can do and have been doing.
What we need to do is enable them, and, Senator Sibbeston, I think one of the challenges is training and education. In my lifetime, our company has spent a lot of time on training, such as in the telecom field — we have 55 remote locations; we have agents in these remote communities; we have towers, cellular, satellite, Internet, video conferencing; we run all of the Government of Nunavut's wide area network. Training is critical. We couldn't do this in 25 communities across Nunavut without training local people how to support the infrastructure. That needs to happen more so in power as well, but it's not a simple challenge. It's going to take some time.
The Chair: Thank you. It has been very interesting. Senator Sibbeston, maybe what you have to do is go back to your home community and start doing those things like getting elected as a mayor and start doing those things. I say that jokingly.
Senator Patterson: I would like to thank Mr. Philipp and commend him for what has been done. What you have done speaks for itself. Would you have any comments about whether the Northwest Territories should accommodate individuals in communities who might want to connect and sell surplus electrical generation into the grid? Have you ever thought of that, and are you hooked into the grid at all?
Mr. Philipp: We're not at all connected to the grid. I looked at connecting to the grid a couple of years ago before doing this last big upgrade to our power infrastructure. I went to the power corporation to see whether we could strike a deal that would be cost-effective to save me investing a quarter of a million dollars in new equipment. As it turned out, there was no deal to be had. The commercial rate is 58 cents a kilowatt hour. The savings are $290,000 a year, so we stayed off the grid and didn't bother to connect.
That said, do I believe individuals should be connecting to the grid and selling power back? Frankly, it would not be worth the power corporation's time to entertain even the 50 individuals that thought they might have the wherewithal and capacity and financial ability and technical ability to integrate a bunch of solar panels to sell a few kilowatts back to the grid. It would take more manpower within the power corporation to manage that process than would ever be viable.
I believe in larger-scale projects like what I'm proposing in Fort Providence, where we produce privately for ourselves initially 500 kilowatts using biomass, and we sell the 350 excess back to the grid, absolutely, because they've already said they'll pay 35 cents a kilowatt hour for it, and we're looking at biomass power rates that are significantly lower than the 24 cents I'm currently seeing. As long as we can get the feedstock at a reasonable price in the community, working with the local Aboriginal community, we will invest in biomass. Frankly, I will hold the power corporation to their offer of paying 35 cents of the diesel offset price because I believe there's about 11 to 15 cents a kilowatt hour to be made there, which is not insignificant.
Senator Patterson: Your dad started biomass so many years ago, and I recall that visionary experiment myself from my days in the North. You've maximized diesel and now you're going to biomass.
Mr. Philipp: The problem with the biomass plant we built 35 years ago was that it was not reliable enough. There was no way to store the gas coming off the biomass plant, which meant that if there was any mechanical problem with the biomass plant, the gas quit working, the engine quit running and the electricity stopped. It's not like you have a tank of gas or that we even tried storing the gas, but it's such a high volume that you really can't do that effectively.
Biomass at the time required too much oversight. You couldn't leave it for two weeks, go away and hope it was going to keep running. There were a number of things that we pioneered as changes to make it more reliable but, frankly, it still wasn't as reliable as what we were doing with diesels 35 years ago.
Today it's being used extensively in Europe. There are a lot of biomass plants out there. In fact, in about a month I'll be down in California looking at this exact one. It's a floating bed, 500-kilowatt biomass plant, and, if it is what they say, if it has the economics they say, we will buy one because it makes sense. We don't need any subsidy for it. It's the kind of thing that I believe the community should own, but, frankly, Snowshoe would buy it because the diesels can sit there and we will run biomass. By my calculation, if we were running a 500-kilowatt biomass plant, it would put $350,000 a year into the local community just in harvesting wood. That's two and a half truckloads of wood a day, every day. That is not a bad little job for a community of 800 people where we have 100 unemployed. It's something.
Senator Seidman: Thank you for a truly remarkable lesson in many respects. I must say, having listened in other studies that this committee has done to a lot of discussion about the enormous cost of fresh fruit and vegetables, for example, in the North, that to hear you have discovered a way to grow them in an efficient way is quite remarkable. We're all aware of how important that can be in the North.
Have you used other Nordic countries as a model? Obviously, your father was a real innovator. It's clear to us as we've heard and discussed it at committee that there are Nordic models. Of course, they have to deal with a similar situation in the northern parts of their countries. I think of Finland, for example, which I believe is among the leading countries in the use of biomass for energy production. In being so innovative and creative, did you use another country or countries as a model?
Mr. Philipp: It's even simpler. We used Google. A lot of research is done online. I have not looked at a lot of other countries' studies of what they have done. Finland has done a lot in biomass. Many of the bigger plants come from Europe. Most of the bigger biomass, whether they're for producing energy through steam turbines or for producing a syngas, which is combustible, produces a gas that can be run in a convertible diesel engine or steam to turn a turbine. There are lots of examples of very large, one megawatt and above biomass-type facilities where they're just augmenting their power with biomass. It gets much more complicated when you get into the smaller 500-kilowatt and other sizes. We wouldn't want one one-megawatt biomass plant for Fort Providence because our load is 350 kilowatts in the middle of the night. We don't want to feed that much wood into the thing as it would be inefficient. We need smaller biomass plants running in parallel for redundancy.
Our community, as an average community in the North, is about 350 kilowatts to 700 kilowatts off peak to peak. Really, that's not a bad model for a 500-kilowatt biomass plant and a couple of diesels. When you get bigger, you put in a second biomass plant and you keep your diesels. That is my goal. We have three diesels now, but we only run one at a time. We would use a biomass plant and keep our diesels as backup. If we could sell our power to the grid, we would use all the heat from that, which is a benefit for us. There are lots of models out there. I'm not really basing this on anything other than our experience in Fort Providence and finding new technology that suits us.
The Chair: Thank you very much, Mr. Philipp. It was very interesting, and we appreciate your time.
(The committee adjourned.)