A hydropower expansion project that would replace four diesel generators in the Yukon with renewable hydroelectricity is rising in cost – and a $60-million funding gap could put it behind schedule.

The Atlin Hydro Expansion Project in northern B.C. is now projected to cost $315 million, according to Energy, Mines and Resources Minister John Streicker – and more funding is needed to get it started.

The project is owned and operated by Tlingit Homeland Energy Ltd. Partnership (THELP), a company owned by Taku River Tlingit First Nations (TRTFN).

The Yukon government has committed $50 million over five years to help expand the hydro infrastructure there so the territory can draw cheaper, renewable power to its grid. 

On Wednesday, the official Opposition criticized the government for a project that’s over-budget before work has even begun.

“It’s starting to raise questions about the viability of this project,” Yukon Party Leader Currie Dixon told reporters after question period Wednesday.

“What we know is that the project is late. It’s over-budget, and it’s under-funded.” 

But just how over-budget or under-funded it is is a different story depending on who you talk to.

The earliest budget estimate for the project was published in Yukon Energy’s 10-Year Renewable Electricity Plan in 2020: a total project cost of $120.7 million – a long way from the current $315-million projection.

The Atlin hydropower expansion is a key component of Yukon Energy’s 10-year plan to generate an average of 97 per cent renewable energy by 2030.

Streicker told reporters Wednesday the original budget was $250 million when his government committed $50 million this year.

The Star reported last February that project costs were anticipated to be $206 million.

Further muddying the waters, THELP told the Star in an email Thursday the estimated costs at the start of 2022 were $230 million.

They also said the latest assessment puts costs at $310 million – not $315 million, as Streicker told the legislature.

Whatever the costs, initial or current, the goal is to expand the existing hydropower infrastructure in Atlin and build a transmission line to Jakes Corner, 90 km south of Whitehorse, supplying Yukon Energy with hydroelectricity purchased from THELP.

It will also replace four diesel generators with renewable energy.

The expansion is expected to increase the size of Yukon’s electrical system by eight per cent and generate 31 gigawatt hours each winter. That’s roughly equal to the amount of electricity 2,500 Yukon homes use annually, according to Yukon Energy. 

The reasons for the rise in costs, THELP said in the email, is “a combination of COVID-related supply chain issues, inflation, commodity price volatility, the price of oil (both for the cost of fuel both for construction and transportation, and as a raw material for the penstock), and the poor Canadian dollar exchange rate.”

Currently, funding from the territory, B.C. ($20 million), Canadian Infrastructure Bank loans taken out by First Nations ($80 million) and the federal government ($100 million) and grants acquired by THELP add up to $255 million. TRTFN is also investing equity in the project.

So just how much more funding is required to cover the new costs and get work underway?

During Wednesday’s question period, Yukon Party MLA Stacey Hassard said $133 million is still needed, and asked Streiker where that money will come from.

Streicker said the funding gap is actually $60 million, a number backed up by THELP and more in line with the current funding committed by all partners.

Asked where his party got the $133-million figure, Dixon only told reporters his party couldn’t be sure of the actual gap since the project cost seems to be a moving target.

Streicker said the government partners are now re-evaluating their funding commitments and THELP is searching for additional funding to meet the new projected costs.

The start date is contingent on that funding, and Streicker said project completion is now expected for October 2025 – a year behind schedule.

Since inflation – which has been on a stratospheric rise this year – accounts for so much of the cost increase, and the timeline depends on securing more funds, Streicker said all partners are working to close the funding gap as quickly as possible and purchase materials before costs change.

While Streicker said he remains optimistic, Dixon told reporters his party is becoming increasingly disillusioned.

He said the YP supported the project as it was outlined in Yukon Energy’s 10-Year plan, but now questions whether it’s still viable as costs continue to rise.

“The more we learn about this project, the more we see these budgets increasing, the more we see these timelines being blown up, the more concerned we get,” he said.

“They’re indicating it’s financially viable without knowing where the financing would come from.”

Dixon said the government has no backup plan and is worried how much additional money it will spend on a project that hasn’t even started.

He suggested the government consider constructing a liquified natural gas (LNG) facility in the Yukon to replace diesel generators, as his party campaigned in 2018, if the hydro expansion is no longer viable.

But Streicker told reporters LNG is “the wrong way to go.”

Additionally, Dixon noted, the purchasing agreement between Yukon Energy and THELP, which would allow the territory to buy energy from the project and would help repay project loans from the Canadian Infrastructure Bank, still hasn’t been approved.

The agreement, signed last February, outlines Yukon Energy’s intention to buy renewable energy and capacity from the Atlin Hydro Expansion Project for 40 years at prices less than or equal to the cost Yukon Energy would otherwise pay for electricity generated using liquefied natural gas and diesel.

The Yukon Utilities Board is still reviewing that agreement for potential benefits, costs, risks and customer impacts that influence whether the Electricity Purchase Agreement should proceed as proposed by Yukon Energy.

Streicker told reporters his government is still confident in the project and remains committed to its completion.

“We know that the territory is growing. And we know that the demands in the territory are going to shift,” he said.

“We’re moving heat over to electricity, we’re moving transportation over to electricity, mining is active. All of this requires electricity.”

Streicker said hydroelectricity from Atlin would cost 13.5 cents per kilowatt hour, compared to 19 cents per kilowatt hour for power from the diesel generators the project is replacing.

The rising cost of diesel means that cost is even higher right now, Streicker said. He also said it will provide firm energy for the winter.

“I still believe this is an incredibly important project for the Yukon.”