How NWT power changes aim to promote community-led clean energy

New policy direction from the NWT government to the territory’s power regulator seeks to promote renewables and community-led energy while mitigating negative impacts to the existing system. 

Eleven directives released earlier this month are set to change the way the Public Utilities Board regulates power in the territory.

Once implemented, the changes would apply to utilities – such as the NWT Power Corporation and Naka Power – as well as non-utility entities that produce renewable electricity.

Substantial changes include increasing the cap on intermittent renewable generation in communities and laying the groundwork for an independent power producer (IPP) policy.

The NWT already has a net metering program, which allows residents to install up to 15 kilowatts of renewables to generate their own power and sell excess electricity to the grid. An IPP policy would target larger, utility-scale projects owned by communities or Indigenous governments.

“This is really great news in general,” said Robert Sexton, director of energy for the NWT’s Department of Infrastructure.

He said the policy direction was a long time coming and prompted by a confluence of factors. The GNWT had been hearing that communities wanted a more formalized IPP policy and more room under the renewables cap, he said, while the regulator and utilities wanted more flexibility in terms of how they set rates and rate classes.

The GNWT has also committed to reaching net-zero emissions by 2050, which will require more renewable energy.

“We knew that there was certainly more space for non-utilities to take part and provide renewable energy and reduce emissions,” said Sexton.

Managing the transition to a lower-carbon energy system comes with challenges, however.

Electricity rates in the NWT are among the highest in the country. Allowing residents to generate their own power by, say, installing rooftop solar can help reduce their power bills, but it can also drive up electricity rates.

When residents generate their own power or sell it back to the grid, utilities lose out on revenue.

A 2021 study commissioned by the GNWT estimated that annual revenue losses from self-generation would amount to between $1.8 million and $2.7 million by 2030 under a 20-percent cap on renewables. That’s a small fraction of the utilities’ total sales, according to Sexton, but it could still pose an issue.

The new directives aim to strike a balance between rate impacts and the benefits of community participation in the electricity system and renewable energy adoption.

“The overarching goal was balance and fairness,” Sexton said. He added that the changes set the stage for reaching net-zero.

More space for renewables

Part of the direction is meant to ensure the territory approaches the coming energy transition with a plan.

To that end, the first of the 11 new directives requires the Public Utilities Board and utilities to undertake integrated power systems planning. The process will involve looking at various supply and demand scenarios between now and 2050, to understand how energy and climate targets can be met and the infrastructure that will be needed to reach these goals.

Other directives aim to widen the path for renewable integration in the NWT’s electricity system.

For instance, the GNWT is increasing the limit on intermittent renewables, such as solar and wind, from 20 to 30 percent of average annual load demand.

Back in 2014, the territorial government set the cap at 20 percent in diesel-powered communities to ensure energy systems remained reliable and affordable. As of 2022, 10 communities had already reached that limit.

A 2021 study commissioned by the GNWT also found that intermittent renewable penetration could be increased to 45 percent without impacting grid stability.

Asked why the territory decided to raise the cap to 30 rather than 45 percent, Sexton said the reason is caution. He described the new limit as “untested territory.”

The new policy directive also clarifies that the 30-percent cap can be exceeded if battery storage is used. Such an approach is being pursued by the community of Paulatuk, which is striving to generate all electricity and heat from renewables.

Another major change is the direction to develop an IPP policy. Although there are some IPPs in the territory that have signed agreements with utilities, these have been one-off agreements.

“Currently, independent power producers are, out of necessity, negotiating power purchase agreements with insufficient public transparency and with too few rules and guidelines to ensure consistent treatment,” the policy directive states. (Power purchase agreements are contracts between an IPP and a utility that lay out how much electricity will be supplied by the producer and the price the utility will pay for it, among other terms.)

Although the specifics of the IPP policy have yet to be determined, the intent is to create more clarity around the rules, requirements and process for becoming an IPP.

That kind of clarity would be helpful, said Chad Bonnetrouge, a member of the Deh Gáh Got’įę First Nation in Fort Providence.

Bonnetrouge works in the sector. A few years ago, he was involved in looking into a potential energy project in Fort Providence that would have required establishing an IPP agreement. At the time, he said, there was limited information on the process.

“We were kind-of shooting in the dark, almost,” he said.

Grace Nakimayak, clean energy coordinator for the Paulatuk Energy Working Group, similarly sees the development of an IPP policy as a positive step. 

“I think it is finally a very proactive start to pave the way on GNWT’s commitment to a net-zero territory and bringing our priorities up to par with the rest of the country,” she said in an email.

Nakimayak added that setting up IPPs in the territory will require major infrastructure investments in northern communities, which can provide important capacity-building and economic opportunities.

From 2024: Paulatuk’s long road to 100-percent renewable energy

Aside from establishing an IPP policy, the new policy direction specifies that all self-generators will have to be part of a regulated program.

Until now, non-utility entities have been allowed to produce their own power behind the meter – think solar panels installed on a commercial or community building that generate power for use in the building.

Because these systems affect power rates and grid stability, they will now have to be part of either the net metering or IPP program.

Meanwhile, the net metering program will be expanded to include commercial and government users. Previously, the program was limited to residential participants.

Mitigating costs

Another focus of the policy direction is increasing electricity use and utility sales while controlling rate impacts.

The GNWT has asked the PUB to review how renewable generation is compensated.

Under the net metering program, customers are credited the full retail variable energy rate when they sell excess electricity to the local grid. In hydro zones, however, installing solar or wind does not contribute to significant emissions reductions according to the GNWT, while in thermal communities, renewable integration means diesel generators and distribution systems have reduced efficiency. For these reasons, the GNWT says renewable power producers are likely being overcompensated.

In addition, electric vehicle chargers will now be included as part of regulated utility operations, creating a new revenue stream for utilities.

Several strategies will also be explored to make use of excess hydropower in the North and South Slave systems, including developing new electric heating rate options and establishing rules under which utilities can capitalize certain grid upgrades linked to electrification.  

These changes allow the regulator to focus on a wider set of priorities than it has in the past, according to Gordon Van Tighem, the Public Utilities Board’s chairman.

Until now, he said, the focus has been on a “cost of service evaluation,” which is restrictive. He described the approach as essentially “you tell us how much it costs, and we’ll tell you if you can charge that or not.”  

“What we’re being asked here is to do a deeper dive into what services exist, what services are needed, what alternatives are available, and how do they fit with what we have now,” he said.

“How do we blend it all together and come forward with something that makes sense, remains affordable and doesn’t impact the reliability?”

Van Tighem added that the policy directive is something the PUB has wanted to see for a while.

“Things have come up that need to evolve,” he said.

Wins and losses

The PUB still has to hash out the specifics of how these policy directives will be implemented and translated into regulations. For now, it’s unclear exactly what they will mean for the operations of utilities and other electricity producers.

“It’s really difficult to assess what these directives to the PUB will mean in practice until the PUB responds and provides at least some of its initial thinking,” said Doug Prendergast, a spokesperson for the NWT Power Corporation.

While the policy direction doesn’t contain any surprises, he said it covers a lot of issues.

“There’s a lot of meat in those directives,” he said, adding that NTPC is pleased to see steps toward more clarity on key areas of energy policy.

Naka Power echoed this statement. The utility “appreciates the clarity and structure” the directives offer, vice president of northern development and Indigenous relations Jay Massie wrote in an emailed statement.

“The new directives from the GNWT are a significant step toward building a more modern, secure, and low-carbon electricity system,” Massie stated.

Not everyone agrees the directives are the right course of action.

Richard Nerysoo, energy champion with Dinjii Zhuh Solutions in Fort McPherson, said he was saddened to read the policy direction.

“I think it’s very limiting. It’s not very visionary,” he said.

Nerysoo would like to see a system where communities have more opportunities to build significant energy projects as well as own energy assets in communities – not only those related to generation but also to distribution.

Under the new policy direction, community-owned and Indigenous-owned projects are still at the discretion of utilities, Nerysoo said.

The direction “continues to protect the structure and the system that’s in place,” he said.

“There’s got to be a point in time when the NWT stops defending and supporting the power corporation, because you’re never going to get a different vision.”

Emily He, manager of the Pembina Institute’s renewables in remote communities program, said she has mixed feelings about the announcement.

“There are a decent amount of wins in the policy,” she said, pointing to the increase in the renewables cap, direction to create an IPP policy, and billing mechanisms for electric heating and vehicles.

There are also aspects of the policy that are less positive, He said – for instance, the reference to renewable producers being overcompensated.

She said she understands why the GNWT would come to that conclusion but, if they were to expand the scope of their calculation to include the millions of dollars spent on subsidizing diesel energy costs, the numbers may shake out differently.

He looks forward to more details on the regulations as they take shape.

For now, the policy direction is in the regulator’s hands.

Van Tighem said the board is going through the directives and formulating clarifying questions. The Public Utilities Board will have further discussions with the GNWT and may propose its own recommendations, he said. 

Asked when he expects the changes will come into effect, Van Tighem said optimistically late this year. The regulator is currently working on a general rate application, to which the new policy directives do not apply.

“Once that’s out of the way, then we can dig in deeper on what this is,” he said.