Authors: Chad Eggerman, David M. Overall, Caolan Lemke
The severe disruption caused by the COVID-19 pandemic has forced governments across the country to rapidly expand funding programs and contemplate a massive increase in infrastructure spending in the post-pandemic world.
This may provide unexpected opportunities for Indigenous communities seeking to promote the rise of renewable energy.
Canada is no stranger to renewable energy, and for decades many provinces have turned to their vast waterways to construct hydroelectric megaprojects. More recently, there has been growing adoption of smaller, community-based projects utilizing solar, wind, biomass and run-of-river technology. Many Indigenous communities which are isolated and face barriers accessing the conventional power grid can greatly benefit from such projects. In addition to improving energy security, these projects provide economic opportunities and a framework for local capacity development and knowledge transfer.
Typically, an Indigenous renewable energy project starts by seeking funding from the Federal Government. In Western Canada the Federal Government has prioritized certain “shovel-ready” Indigenous renewable energy projects through Western Economic Diversification Canada or the $305 million Indigenous Community Support Fund. What qualifies as “shovel-ready” will vary between projects, but they must all be structured as entities capable of receiving funding to be used only for completion of the project, such as a corporation or limited partnership.
While it is beyond the scope of this article to describe all the myriad funding streams that are available, key programs and capacity development organizations include the following:
- In British Columbia, the provincial government’s CleanBC program funds the Indigenous Clean Energy Initiative together with the Federal Government’s Strategic Partnership Initiative. This funding is administered by the New Relationship Trust, an independent non-profit organization that assists B.C. Indigenous communities in financing community-based projects. To date, more than $2.5 million has been contributed towards hydroelectric, wind, solar, marine, biomass and geothermal projects. In August 2019 the New Relationship Trust and the Federal and provincial governments pledged an additional $9.5 million to support this initiative.
- In Alberta and Saskatchewan, the First Nations Power Authority and the First Nations Finance Authority can assist Indigenous communities in scoping projects, financing and advancing renewable energy initiatives as independent power producers.
- In Manitoba there are a number of funding programs available to Indigenous communities through Manitoba Hydro, such as the Community Geothermal Program. Indigenous social enterprises, such as Aki Energy, can assist in accessing and deploying this funding. To date Aki Energy has installed geothermal technologies worth over $3 million in two Manitoba First Nations. The Manitoba Government Energy Opportunities Office can also assist Indigenous companies seeking to participate in Manitoba Hydro tenders.
Implications of COVID-19 and the Post-Pandemic World
The COVID-19 pandemic has caused an unprecedented wave of job losses, forcing all levels of government to contemplate massive increases in post-pandemic infrastructure spending as a way of reviving the economy and encouraging the growth of new businesses. While the details of such spending remains to be seen, we anticipate that governments will build upon established funding programs and provide even more opportunities for Indigenous communities to pursue renewable energy projects.
Beyond federal and provincial funding opportunities, Indigenous groups that have projects in an advanced stage of development may also be in a position to attract private equity financing. While the COVID-19 pandemic has restricted the ability of private equity to invest in these projects, it is expected that the risk profile of private equity providers will change as the pandemic subsides. Indigenous renewable energy projects may be viewed as preferred investments – particularly those that have power purchase agreements (PPA) secured with a public utility such as BC Hydro, SaskPower or Manitoba Hydro, or one of the various private utilities in Alberta. Projects with a PPA or a clear pathway to a PPA backed by a provincial government will be in a desirable position because they carry a lower level of risk, making them an attractive target for newly-mobile capital seeking opportunities for deployment. In other words, a project which has only taken steps to establish a corporation or LP may be the least “shovel-ready”, whereas a renewable energy project that has secured a PPA will be the most “shovel-ready”.
The typical model for advancing Indigenous renewable energy projects is to partner with a developer who takes equity in the project and in exchange finances and develops the project. While we don’t see this financing model changing significantly in the future, with other sources of capital available to Indigenous groups it is becoming less necessary for them to give up this equity in their project. Indeed, in the wake of COVID-19 developers may come to view Indigenous groups more akin to competitors than “partners” because both parties could be acting as independent power producers, competing for the same PPAs. This is particularly true if government funding is increased and there is a reduced need for developer involvement. However, prudent developers with an eye to the future will want to take this opportunity to strengthen their relationship with Indigenous independent power producers rather than weaken them in order to position themselves to be successful in future procurement processes.
We expect that the post-COVID-19 world will also usher in other opportunities for Indigenous ownership of power production, through unique entities such as Rural Electrification Associations (REAs) in Alberta, wave power generation off the coast of British Columbia or biomass generation in the boreal forest of Northern Saskatchewan and Manitoba. However, we will save discussion of these unique Indigenous power projects for a future article.
While we have made all reasonable efforts to provide up-to-date information in this article, specific program or organization information may have changed without our knowledge. Therefore, it is recommended that readers contact each program as required to confirm the details therein. If you are an Indigenous group or a developer and require advice on financing your Indigenous renewable energy project, please feel free to contact us directly.