YUKON

Federal dollars sought to close funding gap for Atlin hydro expansion


Fri, February 24, 2023 

The Atlin Hydro Expansion Project would increase the power output of existing infrastructure from 2.1 megawatts to 10 megawatts. It would provide Yukon Energy with clean power and reduce the territory's reliance on diesel generation. (Philippe Morin/CBC - image credit)

Multiple players behind the Atlin Hydro Expansion Project are looking to the federal government's spring budget to close a growing funding gap that Yukon's energy minister says endangers the entire plan.

The project's proponent is Tlingit Homeland Energy Limited Partnership. The project would increase the generation capacity of existing infrastructure and include transmission lines upgrades.

The hydro expansion would be complemented by a 40-year power purchase agreement, where the additional electricity would be sold to Yukon Energy. This would supply the utility with clean power during winters and reduce the territory's reliance on diesel generators rented from Alberta.

Last fall, financing for the project faced scrutiny in the Yukon legislature as critics pointed to its escalating cost and significant funding shortfall. The Yukon government has committed a $50-million grant. It is one of multiple funding partners, which among them include the B.C. and federal governments.

At the time, Tlingit Homeland Energy said the project had risen in price due to factors including inflation, supply chain problems and a weak Canadian dollar. It said the funding gap would need to be closed by January to preserve the target for commercial operation in 2025.

The latest estimate for the project is $330 million, according to Lee Francoeur, the president and CEO of the Taku Group of Companies.

Francoeur further revealed that the funding shortfall is at $106 million, which includes a $30-million contingency for increased borrowing costs due to rising interest rates.

"We were a victim of circumstance and we are just trying to do our best to keep the project on the rails," Francoeur said.

While the gap hasn't been closed, Francoeur said there is a "small window" to avoid pushing timelines further back.

"And I wish that we would have an all-of-government approach so that everyone as quickly as possible can get this project moving forward, because it's not going to get cheaper. Everyone in the world right now is trying to move towards green energy, and that is causing a spike in these prices," he said.

Claudiane Samson/Radio-Canada

Yukon Energy, Mines and Resources Minister John Streicker said none of the money committed has been spent yet. He said at this stage, partners are trying to "line up" funding before work on the hydro project can begin in earnest.

Streicker said getting all the needed funds at once is a challenge. Tlingit Homeland Energy secured $80 million for the project from the Canada Infrastructure Bank by borrowing against the sale of electricity. Streicker said the bank has agreed to lend "at a very low level of interest."

"Interest rates have been changing. Suppose that we don't get the money this spring to close the gap. It's possible that that gap could change on us. And so that could put the whole project at risk, not just the timing of the project," he said.

Streicker said the Yukon government has been helping. He said he traveled to Ottawa with Francoeur last fall to pitch the project to the federal government, which has already pledged $32.2 million.

Streicker said he believes the federal government recognizes the merits of the project, since the hydro project is First Nations-led and would expand existing infrastructure. However, Streicker was unsure if Ottawa would come through with the money.

"I think they agree with it in principle, but … they have to make hard decisions around their budgets," Streicker said.

The shortfall is too big for the Yukon to cover alone, Streicker said. But if the federal government were to get "80 per cent there, or 90 per cent there," Streicker said he would explore whether covering the rest would be possible.

That would rouse critics like Yukon Party energy critic Scott Kent. His party has been raising questions about the project's viability and its timeline. Kent pointed out that in 2019, the project's estimate was at $120.7 million.

As the territory's electricity demands are expected to increase in years ahead, Kent said the government needs a solid plan to meet it.

Chris WIndeyer/CBC

"The government needs to come up with some viable alternatives amidst those growing concerns around the energy plan," Kent said.

"Atlin is one of those projects in [Yukon Energy's] 10-year renewable plan. Moon Lake [pumped storage project] is another one and it hasn't even gotten off the ground from the design phase. So it could be years and years away."

If the funding gap isn't closed, Streicker said the government would look to other options. He said there's a suite of measures to keep Yukoners powered, like policies allowing them to connect renewable technologies to the grid, a grid-scale battery in Whitehorse and renewable projects in the communities.

He also pointed to the Moon Lake pumped storage project, which is scheduled to come online near the end of the decade, and talks about connecting to the main B.C. grid.

"So we're always in these conversations about how we're going to work to build up reliable, affordable, clean energy over time," he said. "So Atlin is an important project, but it's not the only project."