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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
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AGENDA
Introduction
Principles and Proposed Framework
Why this Structure?
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INTRODUCTION
NAVIGANT AT A GLANCE
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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
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PRINCIPLES AND PROPOSED FRAMEWORK
STRAWMAN FRAMEWORK
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PRINCIPLES AND PROPOSED 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
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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
PRINCIPLES AND PROPOSED FRAMEWORK
FRAMEWORK
Bill Payments
Budget Allocation
1Avoided Costs
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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
PRINCIPLES AND PROPOSED FRAMEWORK
FRAMEWORK
Bill Payments
Budget Allocation
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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
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BEN GRUNFELDManaging [email protected]
AMANDA ACKERMANManaging [email protected]
navigant.com
CONTACT