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/ ©2017 NAVIGANT CONSULTING LTD. ALL RIGHTS RESERVED1 Confidential and Proprietary

Renewables in Remote Communities 2017 Conference

October 25, 2017

ACCELERATING THE DEPLOYMENT OF RENEWABLES IN THE ARCTIC

/ ©2017 NAVIGANT CONSULTING LTD. ALL RIGHTS RESERVED2

AGENDA

Introduction

Principles and Proposed Framework

Why this Structure?

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INTRODUCTION

NAVIGANT AT A GLANCE


PRINCIPLES AND PROPOSED FRAMEWORK

OVERVIEW

P R I N C I P L E S & F R A M E W O R K» Renewable energy development should not increase costs to the incumbent utility,

territorial government, or customers» Renewable energy development should be financed using a mix of private and public

capital to leverage limited public funds» Navigant recommends a framework that includes a long-term PPA at the

incumbent utility’s avoided cost, and an entity to provide coordinated access to federal funds in the form of grants and loans

T H E I S S U E» Nunavut is 100% reliant on diesel fuel for electricity» Diesel contributes to climate change, subject to global supply and price volatility, and

contributes to local air quality concerns» Need to accelerate the deployment of renewables in the Arctic

T H E B A R R I E R S & C H A L L E N G E S» Customers, communities, government, and government-owned utilities in the

territories have limited access to equity capital» Relatively small scale of individual projects limits access to third-party debt and

equity capital» Subsidised electricity rates, for most customers, negatively impacts the economics of

self-generation or behind-the-meter generation



STRAWMAN FRAMEWORK



THREE CORE ELEMENTS

PAYMENTS BASED ON AVOIDED COSTS

FEDERAL ENTITY TO PROVIDE GRANTS AND LOANS

LONG TERM POWER PURCHASE AGREEMENT

ü Federal grants, loan guarantees, and direct loans should be made available to renewable projects that displace diesel

ü They are a mechanism to improve short term economics of renewable energy and to value non-energy impacts

ü Over time, federal funds entity could expand beyond renewable power to energy efficiency and heating fuels

ü Payments for renewable power should not exceed the utility’s avoided cost, which includes the cost of diesel fuel and over time the avoided capital cost associated with refurbishment or replacement of existing diesel generators

ü Non-energy impacts should be reflected in government subsidies, not the price paid by the utility

ü Renewable projects should receive a long-term power purchase agreements to guarantee price levels and provide a mechanism to securitise future revenue

ü PPAs could be offered through a competitive procurement or as a standard offer

ü Contracts could include requirement for Indigenous involvement

AVOIDED COSTS1 FEDERAL FUNDS ENTITY3LONG TERM PPA2


Government of Nunavut

Federal GovernmentFederal Funds Entity

Community Developers

LoanGrant/Subsidy

Equity

QEC

Subsidies

QEC Customers

Transfer Payment

PPA RateProject Company

2

3

Long-term PPA

Federal Funds Entity


FRAMEWORK

Bill Payments

Budget Allocation

1Avoided Costs


Government of Nunavut

Federal GovernmentFederal Funds Entity

Community Developers

LoanGrant/Subsidy

Equity

QEC

Subsidies

QEC Customers

Transfer Payment

PPA RateProject Company

21

3

Avoided Costs

Long-term PPA

Federal Funds Entity


FRAMEWORK

Bill Payments

Budget Allocation


WHY THIS STRUCTURE?

Foster Indigenous community involvement and/or ownership

Does not increase costs to territorial government, utility or customers

Applicable to large and small scale projects

Competitive procurements to drive cost efficiencies

Accelerate renewables deployment

Provides access to private debt and equity capital to leverage

public funds

accelerating the deployment of … · 1 / ©2017 navigant consulting ltd. all rights...

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