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Northern Canada Needs a Diesel Diet

Much of the Canadian Arctic is still powered by old, diesel-fired power plants. In Nunavut, the reliance on diesel is total, and in the Northwest Territories it’s a drain on government funds. In both places, a post-carbon economy is for now a distant fantasy.

Written byChris Windeyer Published on Dec. 28, 2015 Read time Approx. 5 minutes
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DAWSON CITY, YUKON – While governments and indigenous leaders in Canada’s Nunavut and the Northwest Territories have been vocal about the need to protect their parts of the Arctic from the impacts of climate change, these two territories still rely overwhelmingly on fossil fuels for most of their energy needs.

Northerners use about twice as much energy as the national average, due to the long, cold and dark winters they endure. The fuel must be shipped over long distances, and also emit greenhouse gases and cause local pollution. But there has been little progress developing renewable energy sources that would cut these communities’ reliance on diesel. Of the 80 communities in Canada’s territories, 53 are powered primarily by diesel fuel.

Nunavut’s power plants serve 37,000 people scattered over an area the size of Western Europe. Thanks to terrain, a lack of infrastructure and sheer distances, there is no electrical grid to speak of. The infrastructure in the Northwest Territories (NWT) is a little more developed, having benefited from hydro systems built to supply mines with electricity in the mid-20th century. But the territory’s two hydro grids are not connected to each other or the south, and they bypass many smaller communities entirely.

As a result, diesel fuel is used to generate virtually all of Nunavut’s electricity and 20 percent of electrical generation in NWT, mostly in smaller off-grid communities far from the territory’s two separate hydroelectric grids. Yukon, with a longer history of mining and development, generates nearly all of its power from hydro, with only five communities fully reliant on off-grid diesel. The rest of the territory uses diesel and natural gas only for backup supply.

Nunavut’s situation is particularly grim. Each of the territory’s 25 far-flung communities huddles around its own diesel-fired power plant. Some of those facilities are now well beyond their original design life, although the Nunavut government, aided by Ottawa, has been upgrading some of the oldest plants. Still, most of Nunavut’s power plants date back to the 1960s and 70s, and elements of some plants, as in Qikiqtarjuaq and Iqaluit, trace their lineage as far back as the 1930s and 40s.

“There has been virtually no penetration of renewable energy technologies [in Nunavut],” noted a 2015 report from the Canadian senate’s energy committee. “The territory relies entirely on diesel power plants which are old and in need of immediate upgrading and/or replacement. The [Nunavut government] pays roughly 80 percent of all energy costs in the territory, much of this through direct and indirect energy subsidies.” In 2014, Qulliq Energy Corporation (QEC), Nunavut’s publicly owned utility, spent Cdn$51 million (US$46 million) on “fuel and lubricants,” predominantly diesel.

The territory continues to tinker with renewables: Nunavut Arctic College is expanding a small but successful solar panel system and the territory has immense hydroelectric potential. Yet the upfront capital costs of building hydroelectric dams in a territory with minimal infrastructure has proven to be prohibitive.

QEC got deep into planning a hydro project that would eventually produce between 16 and 25 megawatts for Iqaluit, Nunavut’s capital, a city with a population of 7,250. But with capital costs estimated at anywhere from Cdn$250 million to Cdn$450 million, the territory’s finance minister Keith Peterson said in May that the project had been mothballed. Meanwhile, studies into hydro projects in Nunavut’s Kivalliq region, on the west side of Hudson Bay, have never gone beyond the drawing board.

The best hope for reducing Nunavut’s complete reliance on diesel appears to be a transmission line between Kivalliq and Manitoba. The Nunavut and Manitoba governments in November renewed a memorandum of understanding on a Cdn$904-million transmission line that would deliver hydroelectric power from Manitoba and save the territorial government Cdn$40 million per year in diesel costs. Savings to the region’s mining industry could hit Cdn$100 million per year, and electricity prices could drop significantly – by 80 percent in some communities.

The situation in the Northwest Territories is less desperate, where 75 percent of the electricity mix was hydro in 2013. But diesel remains a major drain on the territory’s finances. The Northwest Territories Power Corporation (NTPC) generates around 67 gigawatt-hours of diesel power every year, at a cost of Cdn$20 million, says Andrew Stewart, with NT Energy, NTPC’s sister corporation.

But those figures can swing wildly: low water levels in the Snare Hydro System that serves Yellowknife forced NTPC to burn an additional 29 million liters of diesel at the city’s Jackfish Lake generating station in 2015. Over the past two years the NWT government has spent nearly Cdn$50 million just to head off the rate increases the extra diesel use would have cost ratepayers.

The previous NWT government made tentative steps toward renewables as a means of cutting those costs, installing solar power capacity in Fort Smith and tiny Colville Lake. The government has also done the math on the cost of connecting to the southern grid, but at Cdn$1.2 billion, it’s more than the territorial government can afford.

Frustration with the cost of living is a perennial issue in NWT politics, particularly in Yellowknife where housing costs are high and so are electricity prices. A residential user pays around 24 cents per kilowatt hour, nearly double the rate in Edmonton. Residential rates in diesel-only communities are around 30 cents, but are heavily subsidized. “The biggest cost driver is our reliance on diesel … it’s a crushing burden,” the territory’s now-former finance minister Michael Miltenberger said last year.

For both Nunavut and the NWT, the problem has always been one of money. Both territories have small economies and both must operate under debt caps imposed by the federal government, which limit their ability to borrow for capital projects. And both are reliant on transfers from Ottawa for the vast majority of their revenue.

The current decline in oil prices takes some of the immediate pressure off northern governments, but low oil prices are never a permanent given. The current system is not sustainable, either economically or environmentally.

A report from the Senate of Canada released in June sounds a note of decidedly muted optimism about the North’s energy future: the region contains many potential sources of renewable power, but without a massive infusion of capital they won’t be developed.

“It is true that for most territorial communities, diesel is what warms the living rooms and keeps the lights on, and it is also true that diesel will likely continue to play an important role in powering the territory’s future,” the report stated.

The new federal Liberal government has promised to ramp up infrastructure spending and accelerate the transition to a “green economy.” Expect the Nunavut and NWT governments to be near the front of the line looking for cash to fund an energy transition that is long overdue.

Top image: The territory of Nunavut, Canada relies entirely on imported fossil fuels for its energy needs. The territory’s capital Iqaluit has two diesel plants. (Wikimedia Commons/Saffron Blaze)

This version corrects an earlier version of the story in which it was reported that just one community in Yukon relied on diesel fuel to generate electricity. In fact, five small communities do.