By Lucas Bettle

 

As Canada shifts toward clean energy in an effort to reduce greenhouse gas emissions and combat climate change, remote and northern communities face some of the most pressing challenges. Canada has over 170 predominantly Indigenous communities that rely on diesel as their primary energy source for both heating and electricity (McMaster, 2024). While Canada’s on-grid electricity supply is already 82% sourced from low-emitting sources (Mercer, 2024), off-grid communities continue to rely on costly, carbon-intensive systems that impact economic development, environmental stewardship, and energy independence.

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The High Cost of Diesel Dependence in Indigenous Communities

 

Diesel fuel remains the dominant source of electricity and heating in most remote Indigenous communities. Canada’s 280 total off-grid communities consume 682 million litres of diesel annually, with approximately 75% of those communities being Indigenous (Mercer, 2024). Approximately 70% of off-grid communities rely on diesel, with the remainder using mostly other fossil fuels and hydroelectric systems (Lovekin, 2019). Diesel use is particularly prevalent in northern communities, with Nunavut’s Qulliq Energy Corporation using 55 million litres of diesel each year to power 25 communities (McMaster, 2024).

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This diesel dependence has a variety of negative impacts. Transporting fuel is logistically complex and costly, with many communities relying on bulk shipments during summer or trucking over ice roads (Canada Energy Regulator, 2017). As a result, energy costs in Nunavut can exceed $1.15/kWh, nearly ten times the Canadian average of $0.129/kWh (McMaster, 2024). Remote communities pay six to ten times more for energy even after accounting for $300-$400 million in annual subsidies to offset diesel costs (Couves, 2025).

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These high costs contribute to daily energy insecurity and also exacerbate food insecurity as residents must weigh the costs of heating and eating (McMaster, 2024). Reliance on diesel also creates direct environmental and health impacts, including fuel spills and air pollution. Limited power capacity constrains housing development and local economic activity (Couves, 2025).

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Governance Challenges in Clean Energy Transitions

 

Many clean energy initiatives in Indigenous communities are externally driven and established by non-Indigenous governments, utilities, and organizations (Mercer, 2024). Indigenous governance structures can become sidelined. There is also the risk of “extractive recognition”, where Indigenous rights are only acknowledged for third parties to unlock federal subsidies without regard to actual local benefits (Mercer, 2024).

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In many cases, consultations only take place after project plans have been finalized without meaningful input from Indigenous governments. Projects often generate high-value returns for outside entities while providing only short-term or low-value benefits locally (Mercer, 2024).

Indigenous communities often lack consistent, well-supported energy champions and have limited access to training programs. The lack of local individuals who have been trained in the technical and managerial disciplines required to undertake such projects limits the ability to plan, operate, and maintain renewable energy installations (McMaster, 2024).

Opportunities for Clean Energy in Indigenous Communities

 

Meaningful collaboration with communities themselves is essential to achieve long-term success in energy transitions. An approach that focuses on local leadership, cultural alignment, and existing technical skills leads to better outcomes, with changes made to the Centralized Diesel Proposal following Inuit-led opposition being a prime example of a positive policy shift (Mercer, 2024).

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Alongside facing societal and governance challenges, there is also the matter of choosing appropriate technologies for clean energy in remote and northern communities. Small-scale hydro is one potential option where consistent water flow exists but requires careful site selection to avoid ecological disruption and demonstrates high seasonal variability in northern climates (Krupa, 2025).

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Biomass systems that use sustainably harvested local feedstock can provide both energy and local jobs that leverage existing skills in the communities. However, they rely on long-term fuel supply management to remain viable (Krupa, 2025). Solar power is becoming increasingly viable due to falling solar panel costs and improved battery integration. In northern communities, short winter daylight hours require the use of more significant storage solutions or supplemental generation (Krupa, 2025).

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There are also alternative fuels that can improve performance, safety, and reliability over diesel. Where natural gas is available, lower CO2 emissions and more stable performance can be achieved. However, pipeline access or other transportation adds infrastructure complexity (McFarlan, 2018). Hydrogen is another potential option that can be emissions-free when generated using electricity from renewable sources. It can then be transported and stored similarly to traditional fuels (McFarlan, 2018).

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Methanol and dimethyl ether are two fuel options that can be used in modified diesel engines, reducing the need for new equipment and infrastructure. They release fewer air pollutants and can be refined from biomass for a more sustainable fuel source (McFarlan, 2018).

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Government Frameworks Driving Clean Energy Projects

 

Both the Government of Canada and provincial and territorial governments have implemented a variety of programs to support energy transition in remote and northern Indigenous communities. The Canada Indigenous Loan Guarantee Corporation was implemented in 2024. It will provide up to $5 billion in loan guarantees for Indigenous groups to acquire capital for major energy projects (Government of Canada, 2024).

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The Clean Energy for Rural and Remote Communities (CERRC) program provides federal funding for community-scale renewable energy, with both grants and low-interest loans to cover up to 90% of project capital costs (Government of Canada, 2025).

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The Indigenous Off-Diesel Initiative (IODI) provides funding for training, industry mentorship, and project proposal development. The first cohort ran from 2019 to 2023, supporting 14 projects with up to $9 million in funding (Government of Canada, 2023). The second cohort ran from 2022 to 2025, providing up to $1 million in funding for 10 projects (Government of Canada, 2025).

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The Indigenous Leadership Fund will provide up to $180 million to support climate action by Indigenous groups by 2029, with over $40 million recently committed to 13 renewable energy and energy efficiency projects (Government of Canada, 2025).

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Landmark Projects Leading the Clean Energy Transition

 

Many major clean energy projects have been initiated in Indigenous communities in recent years. One of the largest such examples is a 200 MW solar farm planned through a partnership between the Montana First Nation in Alberta and Indigena Capital, finalized in 2024. The project will be built on reserve land and will also supply clean energy to the provincial grid (Mercer, 2024).

First Kaska Utilities LP began on a 2.85 MW solar farm with battery storage in 2024 in Yukon, which will be the largest Indigenous-led solar project in Canadian northern communities. It is expected to displace over 1 million litres of diesel use annually and has been funded through the CERRC program (Government of Canada, 2025).

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In 2023, the Ulkatcho First Nation announced a major off-grid solar project supported by the IODI, projected to cut diesel use by 64% in the community, approximately 1.1 million litres (Government of Canada, 2025). In 2019, the Vuntut Gwitchin First Nation commissioned the largest northern solar array at the time, cutting diesel use by 190,000 litres annually (Couves, 2025).

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Enabling a Sustainable Energy Future for Indigenous Communities

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Continued development of clean energy transitions in Indigenous communities in Canada is critical to achieve energy independence, reduce environmental impacts, and improve community well-being. While diesel dependence persists due to structural, logistical, and governance barriers, successful projects have shown that the right approach can offer a path forward.

Government programs currently provide substantial financial support, but can fail to address alignment with Indigenous governance systems and ensure that projects provide a true long-term benefit to communities. While there are still challenges to overcome, progress is being made at a faster pace than ever before.

 

References

1. Canada Energy Regulator. (2017). Market Snapshot: Explaining the high cost of power in northern Canada. Retrieved from Canada Energy Regulator.

2. Couves, L. (2025). Diesel dependency: the hidden cost of living in remote communities. Pembina Institute.

3. Government of Canada. (2023). Indigenous Off-Diesel Initiative – Cohort 1. Retrieved from Government of Canada.

4. Government of Canada. (2024). Canada Indigenous Loan Guarantee Corporation. Retrieved from Government of Canada.

5. Government of Canada. (2025). Government of Canada Invests in Landmark Solar Project in Anahim Lake. Retrieved from Government of Canada.

6. Government of Canada. (2025). Indigenous Off-Diesel Initiative – Cohort 2. Retrieved from Government of Canada.

7. Government of Canada. (2025). The federal government invests in Indigenous-led solar initiative in Watson Lake. Retrieved from Government of Canada.

8. Government of Canada. (2025). The Government of Canada is supporting 13 Indigenous-led clean energy projects through the Low Carbon Economy Fund’s Indigenous Leadership Fund. Retrieved from Government of Canada.

9. Krupa, J. (2025). Financing clean technologies within Canada’s Indigenous communities: Perspectives on sustainable energy transition from practitioners and academics. Energy.

10. Lovekin, D. (2019). Diesel, renewables, and the future of Canada’s remote communities. Pembina Institue.

11. McFarlan, A. (2018). Techno-economic assessment of pathways for electricity generation in northern remote communities in Canada using methanol and dimethyl ether to replace diesel. Renewable and Sustainable Energy Reviews.

12. McMaster, R. (2024). Assessing local capacity for community appropriate sustainable energy transitions in northern and remote Indigenous communities. Renewable and Sustainable Energy Reviews.

13. Mercer, N. (2024). Is ‘eliminating’ remote diesel-generation just? Inuit energy, power, and resistance in off-grid communities of NunatuKavut. Energy Research & Social Science.