Sample Application for Large Energy Project Funding

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ecoENERGY for Aboriginal and Northern Communities Program

Disclaimer
The information contained in this sample proposal is fictional. The purpose of this document is to serve as an example of the level of detail that should be included in an application.

Project Name:

Community Run of River Hydro Project

Primary Proponent:

Good Lake First Nation

Community:

Good Lake First Nation

Region:

Province or Territory

Project Focus:

Run of river hydroelectric

Key Contact:

Roger Emond

Title/Affiliation:

Economic Development Officer

Contact Coordinates:

1 Good Lake Road, Good Lake First Nation, Province, Postal Code
Phone: 444-555-5555
Fax: 444-555-6666
Email: rogeremond@goodlakefn.ca

Community Head:

Chief Norman Good
Phone: 444-555-7777
Email: chiefgood@goodlakefn.ca

References:

Alfred Newy, VP Market Development
HIGH Hydro
25 Running Water Road
Watervista, Province, Postal Code
Phone: 444-333-2222
Email: alfrednewy@highhydro.ca

Christopher Waters, P.Eng.
Renewable Developments Inc.
1950 Clear Road
Lakeview, Province, Postal Code
Phone: 444-777-8888
Email: watersc@rdevelopments.ca

Jimmy Joe, Energy Officer
INAC Regional Office
Coburville, Province, Postal Code
Phone: 444-321-6549
Email: jimmy.joe@ainc-inac.gc.ca

Clean Energy Engineering & Consulting
April Winters, P. Eng., VP Community Energy
Province, Postal Code
Grisewville, Province, Postal Code
Phone: 444-987-6543
Email: wintersa@cleanenergyfirm.ca

Project Description:

Concise Summary of the Project
Good Lake First Nation is located on the shores of Good Lake, just 2 kilometres south of Good River. Through a detailed feasibility study completed in 2009, the community has determined that a suitable site exists on Good River, within the First Nation traditional territory, to develop a 5 MW run of river hydroelectric project. The community is currently completing an environmental assessment on the site and is looking for funding to complete the detailed design and detailed financial analysis for the proposed hydro development. To plan, finance, develop, and operate the proposed hydro project, the First Nation has recently entered into a joint venture limited partnership agreement with Renewable Developments Inc., called the Good River Hydro Power Joint Venture. The site that has been chosen is expected to provide all of the electricity that the community requires, and excess electricity will be sold to the local power utility. Negotiations with HIGH Hydro for the power purchase agreement have been on-going through the project and are expected to be finalized following completion of the environmental assessment. The project will displace a total of 86,340 tonnes CO2 equivalent over 20 years.

Basis for the Renewable Energy Opportunity
In 2005 the Community completed a Community Energy Baseline, which revealed that the community is using a significant portion of its yearly budget on energy expenses for heating and electricity in community buildings. The study also revealed that the community emits over 1,727 tonnes of CO2eq per year from its electricity use, as a grid connected community. With the results of the Community Energy Baseline, the community completed an extensive planning process to develop a Community Energy Plan that aims to reduce its impacts on the environment and to reduce its expenses. The plan, completed in 2007 provides the community with a clear long-term vision with respect to energy use and opportunities, and will guide the community's energy related actions and decisions over the next 10 years.

To date, the community has implemented many energy related improvements in its community buildings and encourages similar initiatives in residential homes. Also as a result of the Community Energy Plan, the community started looking at additional ways to reduce impacts and costs by investigating local renewable energy opportunities. In 2008, the community completed a pre-feasibility study on various local renewable energy opportunities, and determined that the best option was to investigate hydro development in more detail due to the proximity to, and characteristics of water flows in Good River.

In 2009, the Community engaged Clean Energy Engineering & Consulting to assist in completing a detailed feasibility study on the proposed hydro development. The study confirmed and validated water flows and natural head at three different locations on Good River and recommended one single site for development. The study also assessed grid connection and transmission potential, site access, energy potential and impacts on reducing greenhouse gas emissions and other pollutants. Finally, the study established a preliminary design, and provided a preliminary cost assessment.

Throughout this process, the community has been engaged in discussions with HIGH Hydro, which will purchase the excess electricity from the proposed hydro development that will be sent to the grid. HIGH Hydro is supportive of the proposed development. It is anticipated that a power purchase agreement will be signed following the completion of the environmental assessment, which is currently ongoing.

Name/Affiliation of Partners/Proponents
Good Lake First Nation is the primary proponent and has partnered with Renewable Developments Inc. in a joint venture limited partnership agreement to plan, finance, develop, and operate the proposed hydro project. Renewable Developments Inc. has a proven track record in renewable energy developments, notably six operating run of river projects located throughout Canada. The company also has an unparalleled track record in building strong and sustainable business relationships with First Nations, having partnered with Aboriginal communities in British Columbia and Ontario. The joint venture is known as Good River Hydro Power Joint Venture.

Sustainable Development Benefits/Outcomes (environment, social, economic)
This proposed hydro development will reduce the community's overall environmental impact by offsetting greenhouse gas emissions that would typically be generated by the community's electricity use from non-renewable sources used to supply the grid. Additional environmental benefits include reduced risk of diesel fuel spills resulting from fuel transfer (truck/barge to storage tank); reduced risk of fuel storage tank leaks; and improved water, soil, and air quality resulting from no fuel spills, no contamination of drinking water and soils, and improved indoor air quality (no vapours from fuel).

It is also expected that the development will result in up to 20 local labour and trades positions over the two-year construction of the site, and will result in at least 1 full-time position during the operation of the site over its minimum 20 year life span. As part of the partnership agreement, the joint venture will employ a minimum of 50% Aboriginal community members from Good Lake First Nation.

Project Impact on GHG and CAC Reductions
The project is expected to offset all of the community's greenhouse gas emissions from electricity use and offset additional greenhouse gas emissions by selling excess electricity to the grid.

• Total greenhouse gas emissions displaced per year based on RETScreen: 4,317 tonnes CO₂ equivalent
• Total greenhouse gas emissions displaced per project life (20 years): 86,340 tonnes CO₂ equivalent

The project is also expected to reduce criteria air contaminants (CAC) that cause smog, acid rain, and other health hazards. CACs include emissions of sulfur oxides (SOx), nitrogen oxides (NOx), particulate matter (PM), carbon monoxide (CO), lead (Pb), and ground-level ozone (O3). CACs are emitted from the combustion of diesel fuel during electricity generation

Project Partnership:

Description of Primary Project Partner/Proponent
Aboriginal or Northern Community/Communities Involved
The primary project proponent is the Good Lake First Nation. There are 605 members living on- reserve and 208 members living off-reserve. The First Nation will be 51% owners of the proposed hydro development and have reached a joint venture limited partnership agreement with Renewable Developments Inc.

Nature of Partnership (alliance, joint venture, new company, etc.) 
Under the terms of the joint venture, known as Good River Hydro Power Joint Venture, Good Lake First Nation will own 51% and Renewable Developments Inc. will own 49%. After expiration of the initial power purchase agreement, Good Lake First Nation will have an option to purchase the additional 49% of the project, which will allow a 100% long-term ownership by the First Nation.

Roles of all Partners in the Project
The joint venture is governed by a Board of Directors made up of Good Lake First Nation and Renewable Developments Inc. representatives. The management committee must vote unanimously on all material matters related to the project including approval of power purchase agreements and project financing agreements.

Explanation of Current Energy Generation & Consumption Patterns:

Profile of Energy System, Inputs/Outputs of the Community, Building, Activity
Good Lake First Nation is connected to the provincial electrical grid and uses trucked fuel oil to meet its heating needs. A Community Energy Baseline completed in 2005 revealed that Good Lake First Nation uses a significant portion of its yearly budget to pay for energy related expenses for heating and electricity in community buildings. The Community Energy Baseline also revealed that the community uses 58% of its electricity demand in residential homes and 42% of its electricity demand for use in other buildings.

Quantitative (Actual or Estimated) Energy Baseline Before Application of Renewable Energy Approach
The community's electrical demand is approximately 7,884 MWh per year, with an anticipated growth rate of 3% per year.

Planned Energy Efficiency/Renewable Energy Approach:

Identification of Specific Generation/Consumption Opportunity to be Targeted
The proposed development is a 5MW run of river hydroelectric project. The proposed site is located 2.5 km from Good Lake First Nation. The site is currently accessible through a bush road that was originally built in the 1980's to support traditional hunting and trapping.

The run of river project configuration will be operated with minimal (i.e. no more than 24 hours) storage capacity. Hydroelectric technology is a proven technology offering reliability and operational flexibility in addition to having a long life. Hydro electrical developments provide additional benefits, including a continuously renewable energy source; no greenhouse gas emissions, criteria air contaminants, or other air pollutants; minimal environmental impact on the local area; and minimal disruption to local wildlife and traditional land use.

Explanation of How Energy Will be Generated/Consumed More Efficiently
Currently electricity that is consumed in the community is generated through the provincial grid with a grid emission factor of 0.219 kg CO2 eq/ kWh. The electricity delivered through the grid is generated from multiple sources. Only a small portion of the province's electricity is currently generated from renewable resources. This project would enable the community to produce all of its electricity from a completely renewable resource and with excess electricity being delivered to the grid to benefit provincially.

Additionally, the community has implemented several measures that have enabled local businesses and residents to consume electricity more efficiently. These include: increasing attic insulation, replacing incandescent light bulbs with compact fluorescent light bulbs, installing low flow showerheads and faucet aerators, and promoting a "Wait till 8" campaign. It is estimated that these initiatives have enabled the community to reduce its overall electricity consumption by 15%.

Reference to Where The Approach Has Been Used Successfully Before
Hydroelectric developments (and specifically run of river hydro developments) have been successfully developed in many nearby communities. Within 500 kilometres of Good Lake First Nation, there are 2 operational run of river hydro facilities. A 2 MW run of river hydro development has been installed on Little Columbus River by Bear First Nation, and a 6 MW run of river hydro development has been installed on Swift River in a partnership between the Elk First Nation and the Municipality of Swift Lake.

Summary of Energy Efficiency & Renewable Technologies to be Used

Explanation of Specific Technologies/Process/Practices to be Applied
A summary of the project and its associated structures is as follows:

• A weir and head pond;
• An intake channel;
• A buried steel penstock (underground tunnel);
• A power house with two 2.5 MW turbines and a power generation unit;
• Construction of a 115 kV transmission line to connect to the existing HIGH hydro distribution line;
• A switchyard to transform power to the HIGH Hydro grid; and
• A trail race channel to return water back to the source.

It is expected that the environmental assessment will be completed within two months, at which point the power purchase agreement with HIGH Hydro will be formalized. The completion of the EA will also enable us to obtain the necessary permits to begin construction.

The final design and cost assessment for which we are requesting funding will take six months to complete.

Estimate of Greenhouse Gas Reductions Achieved Directly Through the Project:

Energy & GHG Reduction Calculations
The GHG emissions reductions estimates have been determined using the following assumption and calculations in RETScreen.

Project Details:

Generation capacity: 5 MW
Capacity Factor: 45%
Energy generated annually: 19,710 MWhr

Baseline GHG Emissions:

Provincial grid emission factor: 0.219 tonnes CO2e / MWh
Baseline GHG Emissions: 4,317 tonnes CO2e / year

Project GHG Emissions:

Project Emission Factor: 0 tonnes CO2e / MWh
Project GHG Emissions: 0 tonnes CO2e / year.

Net GHG Emissions Reductions Estimates:

Total GHG emissions displaced per year: 4,317 tonnes CO2 equivalent

Total GHG emissions displaced over project life (20 years): 86,340 tonnes CO2 equivalent
(It should be noted that a typical hydroelectric project has a typical life of 40 to 50 years, thus resulting in even greater project GHG emissions reductions.)

Project Risks and Mitigation Measures
The extensive community planning and support for this project has been key in moving the project forward. Every effort is being taken to minimize and mitigate any residual risks, which include the following:

Project Risks

Project Execution Risk

• Inability to agree on a final power purchase agreement with the electricity purchaser, HIGH Hydro;
• Inability to secure financing for project construction.

Operational Risks

• Climate change impacts resulting in unexpected low seasonal flow in the Good River
• Failure to maintain reliable operation of the project (due to inappropriate maintenance, labour shortage, dam failure, etc.)
• Financial problems faced by the FN or corporation leading to insolvency or closure of project

Risks that May Jeopardize Realization of Environmental and Other Benefits

• A significant decrease in the grid emissions factor.
• A power purchase agreement negotiated at a lower rate than expected
• An increase in project costs that would decrease the anticipated financial returns to the owners during the debt repayment period;
• Community members not having the necessary skills/ education to be hired to work on the construction of the project.

Mitigation Measures

Project Execution Risk

• HIGH Hydro has been engaged since project conception and signed a memorandum of understanding (MOU) with the First Nation early in the process. They are supportive of the proposed run of river project on Good River. Once the environmental assessment is completed, it is expected that a power purchase agreement will be formalized between HIGH Hydro and Good River Hydro Power Joint Venture.
• The community does not anticipate any issues in raising the capital to cover our portion of the equity required for financing. Additionally, our partner, Renewable Developments Inc. has an excellent credit rating and has successfully implemented several hydro projects in Ontario and BC.

Operational Risks

• The flow in Good River was monitored over 24 months. Water flows were found to be consistent and predictable over this time period, with normal seasonal fluctuations. The minimal flow was also determined to be more than sufficient to generate 5MW of electricity. Any decrease in water flow is expected to be minimal as the river is part of a large watershed with many tributaries. Good River is a Class I stream and discharges into Little Good Lake, which subsequently discharges into Big Good Lake.
• Operation of the hydro facility will be managed by the Good River Hydro Power Joint Venture. Our partner, Renewable Developments Inc., has a proven track record for the implementation and long-term operation of hydro facilities in numerous communities, including First Nation communities. A formal operations and maintenance plan will be developed and implemented once financing is secured for the project. A local employment strategy will also ensure local opportunities and qualified and availability of qualified workers.
• Good Lake First Nation has worked hard to develop this project which will benefit the community in many ways and has made this project a priority. Our financial matters and records are in order and managed with great care and detail. We have also secured a reputable partner in a joint venture to carry out the project for which we have conducted our utmost due diligence.

Risks that May Jeopardize Realization of Environmental and Other Benefits

• If the province were to shut down one of its coal fired power plants, the grid emission factor would decrease. While this would not impact the project itself, the stated reductions in emissions may be reduced because they are based on the grid emission factor. The community would nevertheless be operating on a hydro system with 0 emissions, and thus the emissions reductions would still be considered significant. It should also be noted that this risk is beyond the control of the community/ partner/ project.
• The rate at which the power purchase agreement is negotiated may impact anticipated financial returns; however it is unlikely because the project is subject to a Standard Offer program. If anything, it is expected that the negotiated price will be higher based on the First Nation involvement in this project.
• The detailed financial analysis and assessment of financing options will ensure that the most up-to-date costs are being considered. A contingency fund will be set up to address any unexpected costs, etc.
• In anticipation of the jobs to be created throughout this project, Good Lake First Nation has been diligent in providing training to a number of community members through apprenticeships with existing skilled workers and local companies in the community. The First Nation has also integrated related skills development into the local high school program.

Project Budget

Overall Budget for Proposed Project
The overall budget for construction of the project is estimated at $15 million. The budget for completing the detailed design and detailed financial analysis for the project is $210,000. This work will be completed by March 31, 2011.

Identification of Use of Potential INAC Clean Energy Initiative, Large Energy Projects Contribution
Good Lake First Nation is requesting a contribution of $105,000 from INAC's Clean Energy Initiative Large Energy Project Contribution. These funds will be used to engage Clean Energy Engineering and Consulting to complete the detailed design of the run of river hydro development and to provide a detailed breakdown of the costs required to construct, operate, and maintain the hydro site. INAC's supporting funds will also be counted towards the First Nation equity contribution for the project. Funds to support the activities described below include:

• INAC - Clean Energy Initiative: $105,000 - applied
• INAC - Community Economic Opportunities Program: $24,000 - pending final approval
• Good Lake First Nation: $21,000 - confirmed
• Province: $42,000 - confirmed

Assumptions of Budget Estimates
Budget Breakdown
Budget Rationale

The tasks that are required to complete detailed design and financial analysis are as follows:

• Validate project parameters and data - August 2010 ($5,000): Review and confirm general project data collected through the pre-feasibility and feasibility studies, including water flows, site location and access, etc.
• Conduct detailed site survey and produce site map - September 2010 ($20,000): Conduct site survey to map site elevations, distances, and characteristics, essential for hydro site detailed design.
• Validate, or adjust, preliminary design as required - October 2010 ($5,000): Review and adjust as necessary draft preliminary design. Provide recommended approach and rationale for design elements.
• Design site, including weir, intake channel, penstock, powerhouse, trail race, and connection to existing transmission - October, November, December 2010 ($150,000): Produce detailed design drawings of all components of the hydro development integrating site survey and project data and parameters.
• Identify material, labour, equipment, and long-term operating and maintenance requirements and provide cost breakdown - January 2011 ($20,000): Provide a detailed cost breakdown and rationale for all components of the hydro development.
• Identify financing requirements and options, payback, and recommended option - February 2011 ($10,000): Assess and provide a recommended option for financing.

The tasks identified here are planned to be completed by the end of February 2011. See attached Budget Table 1 in Appendix A.

Documentation of Other Project Benefits:

Explanation of Other Benefits (Social, Economic, Community) 
As discussed, it is expected that this project will result in up to 20 local labour and trades positions over the two-year construction of the site, and in at least one full-time position during the operation of the site over its minimum 20 year life span. As part of the partnership agreement, the joint venture will employ a minimum of 50% Aboriginal community members from Good Lake First Nation.

The Good River Hydro Power Joint Venture is expected to sign a power purchase agreement with HIGH Hydro following the completion of the environmental assessment. The contract is expected to generate $1,419,120 annually or approximately $28.4 million revenue over a 20 year period based on a Standard Offer Program of 12¢ per kWh.

The community has been aware and supportive of the project from the beginning. Although the community will not benefit through a direct decrease in electricity rates, the income that will be generated from this project will be reinvested into the community for infrastructure and program needs.

Submitter Comments:

Further Comment, Information, and Input from the Submitter that may enhance the proposal.
As part of the community's overall Energy Plan and vision for energy sustainability, Good Lake First Nation is also pursuing a project to retrofit the existing school with a geothermal system that will provide heating and cooling energy for the building. For this, we are planning on submitting an application to the ecoENERGY for Aboriginal and Northern Communities program - Request for Contribution to Energy Efficiency and Renewable Energy Technologies for Infrastructure Projects.

*Note: All submissions will be kept confidential