The Canadian rock band Barenaked Ladies made plenty of bucks penning a song with a catchy beat and the closing line: “If I had a million dollars … I’d be rich.”
Clean energy projects do not make individual members of First Nations, Métis or Inuit rich – and the same would apply to indigenous communities throughout the world – but they do carry the potential to be a virtuous wealth-creating circle for the community. Hydro, wind, biomass and solar projects are essentially capital infrastructure projects. Ventures are front-end loaded in terms of investment and effort, but also yield energy production and income for generations. The best practice that is emerging is an Aboriginal Clean Energy Capital Circle.
The cycle begins with the pursuit of a renewable energy opportunity, generally with qualified partners. Outputs of a project’s initial business assessment, or pre-feasibility, can include strengthening of aboriginal business planning know-how and improved community decision-making processes. This is only possible with the placement of early stage risk financing by the community, often with assistance from governments and private or utility partners.
The feasibility phase of a project yields further outcomes for the community, including land development experience and project financing capacity.
As a project moves into the construction planning stage, equity investment and debt financing comes into play. This funds the installation of clean energy generating capacity, and has the potential to spin off aboriginal enterprises and employment as well as new community infrastructure (e.g., roads, bridges, accommodation facilities, workshops, equipment yards).
Project earnings and dividend streams from aboriginal clean energy facilities are where the big numbers lie. For medium- to large-scale projects, lifecycle dividends can be in the tens of millions of dollars, or even higher. What then?
Skeptics may think that the situation is ripe for corruption and the misuse of funds. That view is uninformed and simply incorrect. Aboriginal communities are increasingly taking the long view. Indigenous equity in renewable energy projects is more and more often being held in clean energy trusts. These are community owned but independently operated entities. Through democratic, transparent and accountable processes, community members determine the “designated purposes” for the application of clean energy project earnings. More popular designated purposes include youth education, skills training, economic investment in new aboriginal businesses, cultural activities, local health and social services, and community infrastructure.
The experience of the Pic River First Nation located on the shores of Lake Superior, east of Thunder Bay, Ontario, is telling. Over the course of the past two decades, the community has become a partner in several hydroelectric and, more recently, wind power projects developed on the band’s traditional territory. Pic River’s clean energy assets generate income of $1 million a year (and growing rapidly). These annual funds have helped finance a women’s crisis centre, a youth centre, a recreation centre, and cable television and high-speed Internet services for community members. A 60-unit housing project is now under construction.
The James Bay Cree Nation adopted a very similar approach, using a financial settlement related to large hydro developments in northern Quebec as an economic development investment fund. Other communities are following the lead of these pioneering aboriginal communities. The Nelson House Cree Nation (Manitoba), the Hupacasath First Nation (B.C.) and the Dokis First Nation (Ontario) are among several indigenous communities that are establishing clean energy trust mechanisms to build a foundation of sustainable prosperity for future generations.
The governance of aboriginal clean energy trusts needs to be rigorous, complying with Canadian trust law. Trustees, appointed by aboriginal communities, have a fiduciary responsibility to ensure funds are well managed, invested wisely and applied only to designated purposes. Often, aboriginal communities retain a qualified corporate trustee company to assist with regulatory requirements, and an investment manager to optimize returns on capital.
The approach borrows from community and charitable foundations and private corporations that use commercial revenue and endowments for broader social impact purposes. Only in this case, aboriginal equity ownership in renewable energy projects is what provides the funds to kickstart what becomes a long-running generator of sustainable wealth.