Accelerating an Indigenous-led Clean Energy Future
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Join Susan McGeachie and Chris Henderson, Executive Director at Indigenous Clean Energy and President at Lumos Energy, in the second installment of this two-part series to mark Canada's second National Day for Truth and Reconciliation. In this episode, our experts discuss renewable energy needs across Canada and opportunities to increase Indigenous participation in developments.
In this episode:
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How Canada is building resilience in renewable energy generation capabilities
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Successful projects in development that help Canada achieve both climate and reconciliation ambitions
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How to advance equity opportunities with more renewable energy development projects
Sustainability Leaders podcast is live on all major channels including Apple, Google and Spotify
Chris Henderson:
Indigenous ownership or co-ownership or defined financial agreements with clean energy projects across Canada represents almost 20% of Canada's electricity generating infrastructure. Indigenous communities are the second largest asset holders of clean energy projects, so indigenous communities by the hundreds are really deeply committed to clean energy and they have acquired a lot of knowhow.
Michael Torrance:
Welcome to Sustainability Leaders. I'm Michael Torrance, Chief Sustainability Officer with BMO Financial Group. On this show, we will talk with leading sustainability practitioners from the corporate, investor, academic, and NGO communities to explore how this rapidly evolving field of sustainability is impacting global investment, business practices and our world.
Speaker 3:
The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates or subsidiaries.
Susan McGeachie:
Welcome to another episode of Sustainability Leaders. I'm Susan McGeachie, head of the BMO Climate Institute. Today we're talking about the level of renewable energy required across Canada to achieve our climate goals and the opportunity to increase indigenous participation in this development.
Susan McGeachie:
I am joined by Chris Henderson, executive director of Indigenous Clean Energy Social Enterprise, and president of Lumos Energy. Indigenous Clean Energy is a Pan Canadian not for profit platform that promotes indigenous inclusion in Canada's energy futures economy. Welcome Chris.
Chris Henderson:
Good to be here, Susan.
Susan McGeachie:
Let's start with some background on Indigenous Clean Energy from your initial vision to your objectives over the next five to 10 years.
Chris Henderson:
Thanks for asking, Susan. I mean, Indigenous Clean Energy was an outgrowth on my work with Lumos Energy for the last 20 years where I was acting as an advisor to First Nations, Metis and Inuit communities as they sought to develop and become partners in renewable energy projects.
Chris Henderson:
Around 2015, I realized that what we really needed to do was to build indigenous capacity to be partners and take projects together forward with their partners.
Chris Henderson:
Therefore, we first started an indigenous training program called 2020 Catalyst, which is now in its sixth cohort. From that we realized that indigenous communities and organizations and people wanted a place that was their home, and we founded Indigenous Clean Energy in 2018 and it's grown since then. Now, we have a suite of 10 to 12 programs covering all spheres of clean energy, renewables, energy efficiency, advanced energy, green energy infrastructure.
Chris Henderson:
It really is that hub for Canada and our way forward is to really get even greater indigenous participation throughout the clean energy spectrum, both in terms of economic development and climate action.
Susan McGeachie:
Thanks, Chris. I mean, just from observing, there are many successful projects through this platform, which do help Canada achieve both our climate and reconciliation ambitions. Can you share some examples of these projects, just even one or two, and how you were able to move them forward?
Chris Henderson:
Yeah, I'd be absolutely pleased to. If you look, for example, at the region of Gaspé in Quebec where there's very strong winds. The Mikmaq community, there's three of them in Gaspé, decided to say, look, we'd like to build a large renewable energy development, a wind energy development.
Chris Henderson:
They negotiated with the Quebec government and they negotiated with a partner who happens to be Innergex, which is a publicly traded energy development company, and together they developed a 150 megawatt wind farm that they collectively own between Innergex and the three Mikmaq communities. That's a very significant project. It's a project of $700 million and it's been operating now for four years.
Chris Henderson:
An example of a completely different kind of project would be in the community of Kiashke Zaaging Anishinaabek, or Gull Bay First Nation in Northern Ontario, about a two hour drive north of Thunder Bay. Its geographic location means that the community is reliant on diesel power for its power and therefore they want to diversify away from that.
Chris Henderson:
Over the last four years, Gull Bay First Nation has developed a solar array, which is now displacing around 40% of the diesel they would consume normally, and they own that project 100%. These two projects, Mashkawiziiwin Wind Farm in Gaspé, and the Giizis Solar Project in Gull Bay First Nation are just illustrated projects of hundreds, in fact, even thousands of renewable energy projects that indigenous communities now own, a hundred percent or with partners.
Susan McGeachie:
That's amazing, and I'm just wondering where are you still seeing gaps and what needs to happen to fill those gaps?
Chris Henderson:
What I note, first of all is to share a metric that's really important. Indigenous ownership or co-ownership or defined financial agreements with clean energy projects across Canada represents almost 20% of Canada's electricity generating infrastructure. Indigenous communities are the second largest asset holders of clean energy projects, second only to Crown and private utilities.
Chris Henderson:
Indigenous communities by the hundreds in terms of communities and thousands in terms of projects are really deeply committed to clean energy and they have acquired a lot of knowhow. But going ahead, it's more than renewable energy. We actually use a compass and we speak of renewable energy being the North Star, but then the South Star is energy efficiency and conservation of indigenous homes and facilities, and the East and West Stars are advanced energy systems and green energy infrastructure.
Chris Henderson:
The biggest single gap that we believe exists today, because there will still be many more renewable energy projects and they will continue to move forward. But the biggest single gap is the absolute deplorable state of poor energy use and inefficiency and cost in indigenous homes and facilities across the country.
Chris Henderson:
We have identified that there's a need for about $6 billion worth of infrastructure, and this has to be married together with building indigenous capacity and training and governance at the community level and the right policies that allow you to go forward. We think that indigenous energy efficiency housing is the biggest single clean energy opportunity ahead, and then also the biggest single economic and climate change opportunity.
Susan McGeachie:
That's a great reminder, Chris, that energy efficiency is the first step in the decarbonization hierarchy. I wonder if you could talk about, I understand that some nations can more easily access capital than others. How can we advance equity opportunities with more renewable energy developments or other decarbonization or climate solution projects to these other nations?
Chris Henderson:
Susan, let me answer that question in two parts. In the first part, with regards to renewable energy generation, we say the solution is a triangle, three points of a triangle. One point of the triangle is capital, but the other two equally important points are government policy and regulations, particularly at the provincial and territory level, and indigenous capacity.
Chris Henderson:
Our role with Indigenous Clean Energy is to help build indigenous capacity. You can get capital though if you get the right kind of policy and regulations, and so therefore certain jurisdictions have done a great job, places like Yukon and BC. Some jurisdictions like Northwest Territories or Nunavut are a bit behind, and Saskatchewan is behind as well. We need to change that.
Chris Henderson:
But if you get those three pieces, what does that mean in terms of capital? In typical terms, you have a series of components that are put together to make a renewable energy project happen. You need land, you would need permitting, you need authority to use the land, you need technology, you need capital infrastructure, and you need all those packages that makes the project happen.
Chris Henderson:
When you finance the project, you typically look at long term lending, which comprises anywhere from 80% to 90% of the total capital required for that project and the remainder being equity from the partners, indigenous communities and their partners. For that long term financing of 80% to 90% of the project, lenders like insurance companies and pension funds, institutional lenders really look to see what's the integrity of the project.
Chris Henderson:
They're not concerned about whether in the indigenous community owns the land because all land is indigenous land in this country, but it may not be technically owned by indigenous communities. They're more concerned about the veracity of the project. Do you have access to the land? Do you have infrastructure for the land? Do you have all permits including environmental permits? Do you have regulatory authorities? Do you have an offtake agreement for someone to buy that renewable energy, and is it economic overall?
Chris Henderson:
If you have those components, you can acquire the long term capital. Because indigenous committees are partnered, typically with a development company or a utility or an engineering partner or a finance partner, it's that combination of partnerships that's a backstop for that long term financing.
Chris Henderson:
Now, I mentioned there's a second part to that answer. Energy efficiency is a completely different situation because then you are dealing with indigenous lands, typically reserve lands of First Nations. That is a problem that in terms of getting financing, because lenders who might say, well, we'll lend you $40,000 or $50,000 or more to fully retrofit your house and make it energy efficient, a deep retrofit.
Chris Henderson:
They're saying, well, we're uncomfortable lending to you because there's risk associated with that, and that risk is that if we have to recover that capital, the ownership of the land happens to be owned by the band, for example, not the individual. How do we deal with that?
Chris Henderson:
This is where new financial solutions and creativity is needed, and in fact, what we hope to partner with, with a range of organizations who would welcome BMO's involvement later this coming winter, is a design process to say, okay, since we've had a lot of success with renewable energy with indigenous partners in the development sector, the utility sector and financial partners, how do we mirror that success for energy efficient housing and facilities. Because that has a great benefit in terms of cost reduction, greenhouse gas reduction, huge economic development opportunity, and frankly, major other corollary benefits like improved health and social status.
Chris Henderson:
We feel that there's very different financing issues. We think the renewable energy financing issue has largely been solved because we've had, as is mentioned, over thousands of projects, and then laterally there is a major problem that we need new design tools of financing for energy efficient housing and homes.
Susan McGeachie:
That's a great idea, Chris. At BMO, we're working with government and other partners for a retrofit financing product for commercial real estate, and it's something we can definitely talk to you about leveraging for residential, especially in indigenous communities.
Chris Henderson:
Yeah, I'm delighted to hear that, Susan. What I would note is that we think this design process is a blended financing model, which may involve some grant financing from government. It may involve some climate financing, recognizing there's value to reducing greenhouse gases and selling the renewal energy credits, for example, and that may involve some commercial financing that is a long-term asset. That's very, very helpful.
Susan McGeachie:
Agreed, and it would be great to talk to you about that. Maybe just before we wrap up, I wanted to talk about the value chain in terms of, I mean maybe it's going back to renewable energy. Maybe there's something we can talk about too in terms of heat pumps and electrification opportunities.
Susan McGeachie:
How is Canada building resilience in our renewable energy generation capabilities and everything that we need to decarbonize? For example, the manufacturing of inputs throughout the value chain, from the metals to the finished products. Are we actively developing the manufacturing sectors that we need to advance climate solutions, or will we be relying on imports from other countries?
Chris Henderson:
That's a great question and that's a concern. Because of supply chain gaps, and in fact, the growth and demand for renewable energy and other forms of cleaning energy, supply chain supply is becoming an issue. Therefore, whether you're dealing with storage batteries or you're dealing with wind turbines or transformers, they're all becoming a gap, and our Canadian manufacturing capacity is very weak.
Chris Henderson:
I would say there's two strategies that we need to think of as a country and with indigenous communities as partners. One is to look at growing our internal manufacturing capacity in certain key areas. I would note in terms of rare minerals and batteries that is an area that we believe as great potential.
Chris Henderson:
Then laterally, I think we really need to look at more combined procurement. Why does every utility have to buy their own transformers, have their own procurement mechanism? Why can't we do them at scale? Why does every wind energy project have to look at their separate procurement? Can we do that together?
Chris Henderson:
Volume gives you power in a market. I think there's a combined solution here of two strategies. One is to make sure that we target building domestic manufacturing capacities in key areas of growth where we have inherent competitive advantage, for example, with rare minerals, and then laterally looking at more creative approaches to procurement so we can buy volume at scale.
Chris Henderson:
Your keep-ups example is a great illustration. We know for example, there is a need for between 10,000 to 40,000 heat pumps in indigenous homes every year, but does that have to be bought in the tens or the hundreds by every separate indigenous committee? Or can it be combined together to buy that with one volume purchase with one supplier, with the inherent advantages of having price scale advantages when you buy in volume and also supply advantages when you buy in volume.
Chris Henderson:
We need creative procurement, and we also have to look at a targeted manufacturing capacity.
Susan McGeachie:
Chris Henderson, thank you for sharing these insightful ideas with us today, and thank you to our listeners for tuning in.
Chris Henderson:
It's been a pleasure, Susan. Thanks for reaching out.
Michael Torrance:
Thanks for listening to Sustainability Leaders. This podcast is presented by BMO Financial Group. To access all the resources we discussed in today's episode, and to see our other podcasts, visit us at bmo.com/sustainabilityleaders.
Michael Torrance:
You can listen and subscribe free to our show on Apple Podcasts or your favorite podcast provider, and we'll greatly appreciate a rating and review and any feedback that you might have.
Michael Torrance:
Our show and resources are produced with support from BMO's marketing team and Puddle Creative. Until next time, I'm Michael Torrance. Have a great week.
Speaker 3:
The views expressed here are those of the participants and not those of Bank of Montreal, its affiliates or subsidiaries. This is not intended to serve as a complete analysis of every material fact regarding any company, industry, strategy or security.
Speaker 3:
This presentation may contain forward-looking statements. Investors are cautioned not to place undue reliance on such statements as actual results could vary. This presentation is for general information purposes only and does not constitute investment, legal or tax advice and is not intended as an endorsement of any specific investment product or service. Individual investors should consult with an investment, tax and/or legal professional about their personal situation. Past performance is not indicative of future results.
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