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The Art of Landing a Power Development Deal in Saskatchewan

Energy Efficiency Q & A: Leah Nelson Guay, First Nations Power Authority of Saskatchewan

LNG  FNPA 2014

One of the first things communities bring up to Leah Nelson Guay is “what can you do for our costs of energy?”

With 75 bands in the province of Saskatchewan, First Nations saw an opportunity to alleviate some of the frustrations their communities had when it came to investing in power development projects. Leah Nelson Guay supported First Nations leadership by creating the concept for the ground-breaking First Nations Power Authority of Saskatchewan (FNPA) in 2011. It’s a not-for-profit that facilitates power development projects for First Nations of Saskatchewan with crown utility SaskPower through a 10-year agreement.

Q Where did the idea for creating the FNPA come from?

 A It was driven out of a need in the marketplace. A lot of First Nations are interested in becoming involved in the power development sector. Projects cost hundreds of thousands of dollars and it can be very risky. In Saskatchewan there were so many communities investing money and hitting a wall with their project. They were developing projects that didn’t align with SaskPower’s needs. There was an understanding that Saskatchewan had a need for more power generation. A lot of people where coming in from outside of Saskatchewan, without a sense of what the development pathways were for SaskPower. They had a different take based on their legitimate experience outside of Saskatchewan, in other jurisdictions. There was a disconnect with Saskatchewan, SaskPower, First Nations and the crown. There was frustration with industry and First Nations – it was a perfect storm and there became a need for a third party to come in and inform the First Nations about the process, what the opportunities were and how to make the investment. It’s a multi-year process that can cost $300,000-500,000 in earlier stages and $750,000–$3 million in later stages that would get it closer to a financeable project. It’s all specific to each generation type, such as biomass or electric, and the same for timelines. The fastest track would be a natural gas project and best case for that would be three and a half years, more likely five.

Q What were you doing prior to forming FNPA?

A I was part of a development team on the Meadow Lake biomass project which has been successful in an agreement with SaskPower that hopefully will be starting soon. Meadow Lake Tribal Council owns a sawmill called Norsask, and they’re taking the waste out of the sawmill and using it as fuel into a power plant. It’s clean energy.

Q What makes FNPA unique?

A We are the only one in Canada and the only one in North America according to our research and we couldn’t find any models internationally. There are some industry associations that are similar, but not with the same social mandate to engage First Nations. Industry associations are about developing industry-specific policy, but our mandate is broader — we’re looking to bring real project opportunities to industry led by First Nations.

What makes us unique is that we have a 10 year master agreement with SaskPower until 2022. That agreement allows us to have proactive disclosure of SaskPower’s generation supply needs. In simplest terms, we know what their power needs are for all generation types. If a wind developer came to SaskPower they would be told about what SaskPower’s wind generation plans are. We’re updated quarterly. So we are one of the most current entities for what all of SaskPower’s needs are.

With SaskPower being a crown-based corporation there are no independent power producers in Saskatchewan. So we’re aligned with the independent marketplace outside of Saskatchewan.

Q What are the current business opportunity trends in the power sector?

 A The price on renewables is dropping significantly, and the cost to delivering energy to consumers is increasing. A real opportunity for us is at the customer level, to install their own power generation, so rooftop solar is a place to start for us. The price is becoming so competitive it is a real opportunity at the residential and business level.

Q What projects are you working on now?

Solar Demo FNPA (3)

FNPA’s solar demonstration in Swift Current with FHQ Developments and Lockheed Martin Canada.

A We’ve just completed a solar demonstration in Swift Current, the partners are FHQ Developments, they represent 11 bands across southern Saskatchewan, and Lockheed Martin Canada is the other partner on it — they’re becoming more involved in power generation with off-grid applications. That took a year and half, the demonstration is a smaller system and is connected to Home Inn & Suites. When the project came in we were looking for an opportunity to deliver in a cold and windy environment. So it was a substantial opportunity. We ran into some technical complications, we learned a lot and Lockheed Martin learned a lot. We provided the project management on the installation and raised the funding.

Q How do sustainability and energy efficiency factor into First Nations’ projects?

 A Renewable energy aligns really well with First Nations stakeholders, with traditional beliefs and approach of doing business. The other piece that’s a big driver is the cost of energy in remote areas. They’re using electricity to heat their homes. That, combined with poor housing stock, means many are paying about $1,000 a month in costs. In Hatchet Lake, Dene First Nation and Fond du Lac Dene First Nation, each school pays $200,000 a year for their heating, not counting their propane bill which is $17,000 a month, if that kind of situation was happening in an urban area there’d be rioting in the streets. When we sit down with a new community one of the first things they bring up is “what can you do for our costs of energy”. That’s a big driver – energy efficiency and demand side management are big drivers. We’re looking at communities and facilities, we haven’t done industrial yet, but it’s in our line of sight.

Q What are the keys to a successful business relationship?

 A Having the industry expertise is a critical success factor for us, second to that is having a genuine appreciation of why it’s important for Saskatchewan to involve First Nations in these projects. There’s enormous value in this, to our industry partners and various levels of government, and working within the energy sector there’s real value in working with First Nations.

Q When do you know a business relationship will not be successful?

A We try to get there as soon as possible. We’re really frank with our industry folks, you really need to understand the value of working with First Nations. So first, is the relationship there and positive? Is the First Nation happy with the relationship? We support the First Nation in the process so they have good information and can make the best investment decision for their business portfolio and their community. We want to alert a community about investing in a project that doesn’t have legs, particularly when there are other projects that have a greater chance of success. Sometimes when we sit down and discuss the development process a community may decide not to go forward and direct their time and money on a less risky project.

Q What’s unique about your master agreement with SaskPower?

A It’s a relationship-based agreement. We’re working together in a collaborative, transparent way. Early feedback on our projects is critical. We need to know if it is of genuine interest to SaskPower. There are schedules to our master agreement called First Nations Opportunity Agreements that allow us to start working on something right away, instead of taking many months and sometimes years to negotiate a detailed contract. From a utility perspective, future  energy supply must continually be looked at – lots of things can change in 10 years so having the ability to move quickly is important. As a result of our umbrella agreement we have three projects under development currently.

Q Who are the power developers you work with?

A Power developers find us, if you want to do business in Saskatchewan – we don’t have to do a lot of trolling. Companies that come to us understand the need for First Nations. They appreciate the landscape we’re operating in.

Q What government policies beneficial for supporting energy efficiency?

A For our communities that are experiencing these exorbitant energy costs, it has to do with the definition of a remote community. In Canada the definition is there’s no grid connection. It doesn’t take into account reliability or cost. Every community in Saskatchewan is connected to the transmission system except one. However, we have outages that are sometimes as high as 30 per cent so there’s a compelling business case to do more onsite generation.  Now, we just don’t qualify for many funding programs because technically we’re grid-connected. From a policy perspective it’s common to see those issues in Eastern Europe or Africa, but governments need to realize that many communities in Canada face the same challenges.
Posted February 26, 2015

McDonald Interior Colour 2014

Elizabeth McDonald is president of CEEA