By Keith Halliday -- Power generation: The North’s next entrepreneurial frontier

Looking for a business opportunity? Try making power

After decades of stability, with state-owned utilities generating our electricity from diesel generators and dams built by the feds, the power industry in the territories is facing massive change. It has already begun, and will only accelerate.

From a businessperson’s point of view, the great thing about power generation is that it hedges your bets: It can provide profits whether demand comes from industry, population growth or an expanded civil service, or even if it comes from sources that haven’t been thought of yet.

It’s a bit like the big lesson of the Klondike Gold Rush: The best way to get rich was to mine the miners, not the creeks. Shopkeepers, dance hall magnates (and their dancers) and even a poet named Robert Service made more money than most miners.

It is clear that the North will need a lot more electricity. Demand will grow from new mines and (maybe) pipeline compressor stations, and from a growing population that continues to live in bigger houses and buy more televisions and hot tubs.

But there’s another, possibly bigger, demand driver at work. That’s pressure to shift our mix of energy from fossil fuels to renewable sources such as hydro and wind. If the peak oil theorists are right, we are soon to run out of cheap oil. And if the Obama administration imposes serious climate change policies (dragging Canada along too), then any kind of “cap and trade” system will raise the cost of burning fossil fuels.

Take the Yukon, for example. According to Whitehorse’s Vector Research, 80 per cent of the Yukon’s energy come from fossil fuels in 2005. Just 20 per cent came from renewables, mostly hydro. Norway, on the other hand, gets more than 50 per cent of its energy from renewables.

If Yukoners want to reduce the $100-million they spend per year on fossil fuels, or reduce carbon dioxide emissions, they will need to invest millions of dollars in new generation capacity. The story in the NWT is similar, while Nunavut is almost totally dependent on fossil fuel power today.

Politicians in all three territories have called for more renewable power, but the cost would be enormous. The Jaynes Inlet dam near Iqaluit, for example, could cost around $200-million. The Mayo B project in the Yukon is priced at over $150-million. And that’s for just five or six megawatts, which would increase the Yukon grid’s renewable capacity by between five and 10 per cent depending on how you measure it.

Achieving Norwegian-style levels of renewable power across the North would take hundreds of millions of dollars more.

This is where the private sector and entrepreneurial First Nations come in, given that territorial governments face deficits and the power companies have limited finances.

Governments are preparing for private sector involvement. The Yukon is working on an independent power producer policy, while the new corporate structure of NWT Hydro allows for various kinds of partnerships.

There’s already one interesting example in Atlin, B.C., just south of Whitehorse. Last September, the Taku River Tlingit celebrated the opening of a 2.1-megawatt, run-of-river hydro facility at Surprise Lake. The First Nation’s partners included EBA of Whitehorse for geotechnical work and about 20 other Northern businesses. Project funding included the First Nation itself and debt from Canada Life Insurance. The First Nation was also able to attract equity from EcoTrust Capital and contributions from federal programs due to the renewable nature of the project.

We can expect more projects like this of various sizes across the North. They can be challenging technically and there are significant risks of cost over-runs. But they can be highly lucrative for proponents, contractors and investors. The Taku River Tlingit, for example, have locked in a 25-year deal to sell power to BC Hydro.

This business is not for the faint of heart, however. Power deals can be politically explosive, as Yukon Premier Dennis Fentie discovered earlier this year when his secret talks about merging Yukon Energy with privately owned Atco Group leaked out. And no one would describe the regulatory process for getting even a relatively benign run-of-river power project approved in the North as “easy.”

But given our apparently insatiable need for power, it’s a safe bet that we will see more deals like the one in Atlin. And savvy businesses and First Nations stand to make a tidy profit out of them.