CASE STUDY: Watay Power Project in Northern Ontario
Watay Power Project in Northern Ontario
Northern Ontario welcomes another groundbreaking initiative to reshape the energy landscape and promote socio-economic development within remote First Nations communities. The Watay Power Project is perceived as a visionary endeavour that resulted from the collaboration of 25 First Nations communities. Represented by Wataynikaneyap Power LP and FortisOntario Inc., the collaboration is a testament to the powerful transformation partnership and innovation bring.
Within the First Nations Limited Partnership (FNLP), an intricate equity financing structure was established. This structure involved a $220 million loan obtained from a syndicate representing two Canadian life insurance companies, with legal representation provided by McCarthy Tétrault. Notably, this equity financing was strengthened by a guarantee from the Ontario Ministry of Finance under the Aboriginal Loan Guarantee Program, underscoring the innovative financial mechanisms employed to mitigate risks and attract investment in projects of strategic importance.
Background
Electricity, while a necessity, is not readily available for these communities. It is one of the challenges that has plagued First Nations communities in Northern Ontario for decades. Since these communities are isolated from the provincial grid, they rely heavily on diesel-generated power. This option is costly and environmentally unsustainable as well. Through the years, the costs associated with diesel-generated power continue to increase. The cost is not the only concern that calls for a paradigm shift, but the environmental problems.
Partnership Formation
Watay Power Project stemmed from a shared vision of empowerment and sustainability. Twenty-five First Nations communities, united under the banner of Wataynikaneyap Power LP, forged a strategic alliance with FortisOntario Inc., a leading utility provider known for its commitment to community engagement and innovation. This partnership, marked by shared ownership and control, exemplifies a bold step towards Indigenous-led development and sovereignty.
Project Scope and Objectives
The Watay Power Project seeks to connect remote First Nations communities to the provincial electrical grid, thereby reducing reliance on diesel-generated power and fostering economic and social development. The project's scope encompasses the construction of approximately 1,800 km of transmission lines, reinforcing the existing grid to Pickle Lake and extending connections to 17 remote communities north of Pickle Lake and Red Lake. Key objectives include:
- Enhancing access to reliable and affordable electricity for remote communities.
- Reducing greenhouse gas emissions associated with diesel generation to minimise environmental impact.
- Catalysing economic growth and social development within Indigenous communities.
- Empowering Indigenous communities to assert control over infrastructure and shape their future.
Project Milestones
The journey of the Watay Power Project is punctuated by significant milestones that underscore its progress and impact:
March 2017: FortisOntario increases its share in the ownership of the partnership, reaffirming its commitment to the project's success and Indigenous empowerment.
August 2022: Completion and energisation of a 230kV transmission line, connecting communities such as North Caribou Lake First Nation to the provincial grid.
October 2022: Successful connection of Kingfisher Lake First Nation to the provincial grid, heralding a new era of energy independence and economic opportunity.
Impact and Benefits
The Watay Power Project promises a multitude of benefits for Indigenous communities and the region at large:
Economic Savings: Transitioning from diesel generation is projected to save over $1 billion in operational costs, redirecting funds towards critical community needs and development initiatives.
Environmental Sustainability: By reducing reliance on diesel, the project contributes to environmental conservation, mitigating greenhouse gas emissions, and preserving natural ecosystems.
Socio-Economic Development: Access to reliable electricity improves healthcare, education, and economic opportunities, empowering communities to thrive and flourish.
Indigenous Empowerment: The project exemplifies Indigenous-led development and control over vital infrastructure, fostering a sense of pride, autonomy, and sovereignty among participating communities.
Financial Feasibility
PricewaterhouseCoopers (“PwC”) conducted an assessment of the financial feasibility of connecting 16 of Wataynikaneyap's member communities to the Ontario grid, with an additional community subsequently joining the project. This initiative forms part of the Wataynikaneyap Power project, a First Nations-led endeavour aimed at providing sustainable energy solutions.
Continued Diesel Generation Case
The estimated cost for diesel generation for 16 remote communities in 2013 was $43 million, with projections indicating an increase due to factors like load growth and fuel price fluctuations. Over a 40-year period, the present value of avoided costs is estimated at $3.4 billion, primarily driven by fuel expenses and significant operational and maintenance (O&M) costs.
Transmission Connection Case
The estimated capital expenditure for building the 1500km transmission line to connect the remote communities is $1.15 billion (in constant 2015 dollars). Based on PwC's analysis, the net present value of transmission costs, including capital contributions and purchased energy, amounts to $2.3 billion.
Benefits of Indigenous Infrastructure Ownership for Canada
Indigenous ownership of infrastructure offers numerous benefits for Canada:
1. Economic Growth: Indigenous-led infrastructure projects stimulate economic growth, create employment opportunities, and generate revenue streams for Indigenous communities, contributing to overall economic prosperity.2. Social Development: Access to quality infrastructure services enhances the health, education, and well-being of Indigenous communities, fostering social development and cohesion.
3. Environmental Stewardship: Indigenous ownership often prioritises sustainable resource management and environmental stewardship, aligning with Canada's commitments to climate action and conservation.
4. Legal Certainty: Indigenous ownership arrangements provide greater legal clarity and stability, reducing conflicts and litigation risks associated with land and resource development.
5. Reconciliation and Empowerment: By recognising Indigenous rights and self-determination in infrastructure development, Canada advances the process of reconciliation and empowers Indigenous communities to shape their own futures.
Comparison - Transmission vs Continued Diesel Generation
The comparison between continued diesel generation and transmission connection demonstrates significant cost disparities. Despite the substantial initial investment required for transmission infrastructure, the long-term savings and benefits outweigh the ongoing expenses associated with diesel generation. Over the analysis period (2021-2060), the transmission option presents a net present value advantage over diesel generation, benefiting Canada, Ontario ratepayers, and the communities involved.
Environmental Considerations
The transition from diesel generation to grid connection mitigates environmental risks associated with diesel spills and significantly reduces emissions. By replacing diesel fuel with cleaner energy sources and eliminating the need for diesel transportation, the project contributes to environmental sustainability and community well-being.
The Watay Power Project provides a sustainable and prosperous future for Northern Ontario's Indigenous communities. Innovation, collaboration and commitment are the foundation of the project that transforms mere infrastructure development into profound social, economic, and environmental transformation.
As the Watay Power Project progresses, it showcases the communities' capacity for sustainable investment and development. This initiative not only addresses critical energy needs but also exemplifies Indigenous-led solutions that prioritise long-term economic growth and environmental stewardship. As stakeholders continue to collaborate and innovate, the project sets a precedent for responsible Indigenous investment.
Socioeconomic Benefits
The Wataynikaneyap Power Project is expected to yield substantial socioeconomic benefits, including:
- Lower cost of service
- One-time economic impacts from construction
- Ongoing economic growth
- Increased energy availability and quality
- Decreased emissions
- Improved health outcomes
- Avoided diesel spills
- Lower rates in Independent Power Authority Communities
- Natural resources development
- Other intangible benefits, like increased community pride and confidence
These benefits extend beyond monetary valuation and contribute to enhanced quality of life and economic self-determination for Indigenous communities. The project also serves as a model for collaborative infrastructure development, showcasing the potential for greater prosperity and autonomy.
