Case Study: Watay Power Project in Northern Ontario

Northern Ontario welcomes another groundbreaking initiative to reshape the energy landscape and promote socio-economic development within remote First Nations communities. The Watay Power Project is perceived as a visionary endeavour that resulted from the collaboration of 25 First Nations communities. Represented by Wataynikaneyap Power LP and FortisOntario Inc., the collaboration is a testament to the powerful transformation partnership and innovation bring.

Within the First Nations Limited Partnership (FNLP), an intricate equity financing structure was established. This structure involved a $220 million loan obtained from a syndicate representing two Canadian life insurance companies, with legal representation provided by McCarthy Tétrault. Notably, this equity financing was strengthened by a guarantee from the Ontario Ministry of Finance under the Aboriginal Loan Guarantee Program, underscoring the innovative financial mechanisms employed to mitigate risks and attract investment in projects of strategic importance.

Electricity, while a necessity is not readily available for these communities. It is one of the challenges that has plagued First Nations communities in Northern Ontario for decades. Since these communities are isolated from the provincial grid, they rely heavily on diesel-generated power. This option is costly and environmentally unsustainable as well. Through the years, the costs associated with diesel-generated power continue to increase. The cost is not the only concern that calls for a paradigm shift but the environmental problems.

Cedar LNG: One of the largest Indigenous-Infrastruture Projects in Canada. Source: Canadian Energy Centre & Mining.com

Energy Projects with Indigenous Equity in Canada. Source: Fasken

Distribution of Canadian Energy Projects with an Indigenous Equity Component

Distribution of Canadian Energy Projects. Source: Fasken

The Watay Power Project seeks to connect remote First Nations communities to the provincial electrical grid, thereby reducing reliance on diesel-generated power and fostering economic and social development. The project's scope encompasses the construction of approximately 1,800 km of transmission lines, reinforcing the existing grid to Pickle Lake and extending connections to 17 remote communities north of Pickle Lake and Red Lake. Key objectives include:

Enhancing access to reliable and affordable electricity for remote communities.
Reducing greenhouse gas emissions associated with diesel generation to minimise environmental impact.
Catalysing economic growth and social development within Indigenous communities.
Empowering Indigenous communities to assert control over infrastructure and shape their future.

July 2016: The official selection of Wataynikaneyap Power by the Ontario government to undertake the transmission project marks a pivotal moment in the project's trajectory.

March 2017: FortisOntario increases its share in the ownership of the partnership, reaffirming its commitment to the project's success and Indigenous empowerment.

August 2022: Completion and energization of a 230kV transmission line, connecting communities such as North Caribou Lake First Nation to the provincial grid.

October 2022: Successful connection of Kingfisher Lake First Nation to the provincial grid, heralding a new era of energy independence and economic opportunity.

The Watay Power Project promises a multitude of benefits for Indigenous communities and the region at large:

Economic Savings: Transitioning from diesel generation is projected to save over $1 billion in operational costs, redirecting funds towards critical community needs and development initiatives.

Environmental Sustainability: By reducing reliance on diesel, the project contributes to environmental conservation, mitigating greenhouse gas emissions, and preserving natural ecosystems.

Socio-Economic Development: Access to reliable electricity improves healthcare, education, and economic opportunities, empowering communities to thrive and flourish.

Indigenous Empowerment: The project exemplifies Indigenous-led development and control over vital infrastructure, fostering a sense of pride, autonomy, and sovereignty among participating communities.

Continued Diesel Generation Case

The estimated cost for diesel generation for 16 remote communities in 2013 was $43 million, with projections indicating an increase due to factors like load growth and fuel price fluctuations. Over a 40-year period, the present value of avoided costs is estimated at $3.4 billion, primarily driven by fuel expenses and significant operational and maintenance (O&M) costs.

Transmission Connection Case

The estimated capital expenditure for building the 1500km transmission line to connect the remote communities is $1.15 billion (in constant 2015 dollars). Based on PwC's analysis, the net present value of transmission costs, including capital contributions and purchased energy, amounts to $2.3 billion.

The comparison between continued diesel generation and transmission connection demonstrates significant cost disparities. Despite the substantial initial investment required for transmission infrastructure, the long-term savings and benefits outweigh the ongoing expenses associated with diesel generation. Over the analysis period (2021-2060), the transmission option presents a net present value advantage over diesel generation, benefiting Canada, Ontario ratepayers, and the communities involved.

The transition from diesel generation to grid connection mitigates environmental risks associated with diesel spills and significantly reduces emissions. By replacing diesel fuel with cleaner energy sources and eliminating the need for diesel transportation, the project contributes to environmental sustainability and community well-being.

The Watay Power Project provides a sustainable and prosperous future for Northern Ontario's Indigenous communities. Innovation, collaboration and commitment are the foundation of the project that transforms mere infrastructure development into profound social, economic, and environmental transformation.

As the Watay Power Project progresses, it showcases the communities' capacity for sustainable investment and development. This initiative not only addresses critical energy needs but also exemplifies Indigenous-led solutions that prioritise long-term economic growth and environmental stewardship. As stakeholders continue to collaborate and innovate, the project sets a precedent for responsible Indigenous investment.

The Wataynikaneyap Power Project is expected to yield substantial socioeconomic benefits, including:

Lower cost of service
One-time economic impacts from construction
Ongoing economic growth
Increased energy availability and quality
Decreased emissions
Improved health outcomes
Avoided diesel spills
Lower rates in Independent Power Authority Communities
Natural resources development
Other intangible benefits like increased community pride and confidence

These benefits extend beyond monetary valuation and contribute to enhanced quality of life and economic self-determination for Indigenous communities. The project also serves as a model for collaborative infrastructure development, showcasing the potential for greater prosperity and autonomy.

Watay Power Project in Northern Ontario

Background

Partnership Formation

Project Scope and Objectives

Project Milestones

Impact and Benefits

Financial Feasibility

Continued Diesel Generation Case

Transmission Connection Case

Comparison - Transmission vs Continued Diesel Generation

Environmental Considerations

Socioeconomic Benefits

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