A stage gate approach

The Saamis Solar project began in 2023 in response to customer interest, along with ever-changing and uncertain times in the energy industry locally, provincially, federally, and globally.

A “stage gate” (sometimes called a phase gate) is a project management technique that breaks up large projects into a series of stages with gates (or decision points) between them. At each of these points, work is reviewed to decide whether the project can move to the next stage. Another term sometime used for a stage gate is “off-ramp” which more clearly implies the ability to pause, modify, or abandon a project if evaluation signals it does not make economic or financial sense to proceed.

The Project Management Institute sets out a more formal definition here:

“A review at the end of a phase in which a decision is made to continue to the next phase, to continue with modification, or to end a project or program.”

Stage gate methodology is built to prevent – or minimize – risk.

It allows organizations to determine viability of strategies and initiatives or uncover new ones along the way with an emphasis on information-based decision making. A project typically begins with a big-picture overview and then dials down to more minute details after each gate. Each stage is used to collect more information or reach certain goals. At the end of each stage, the process is reviewed and decision makers determine whether or not the project can continue to the next phase.

Saamis Solar stage gates

The Saamis Solar project is occurring in essentially three phases, with a stage gate represented by stars on the image below. Each star represents a decision where Council may decide to proceed or end the project (or consider other alternatives), in the form of approving or denying budget dollars to move on.

Approve purchase of the project
Approve further due diligence
Final investment decision (FID) to build or not

This project involves decisions not only at the local level, but also by provincial regulatory bodies who oversee the energy landscape across the province. Those additional steps are reflected in the project timeline on this page.

Where are we now?

On April 7, Council approved a request for $675,000 to proceed with detailed analysis and due diligence. Now that the City owns the project, we can drill down to more finite details using today’s understanding of pricing, lead times, supply chain, contract estimates, engineering, technology advancements, and more.

Following this stage, it is possible that the project team would NOT recommend proceeding with the project. The City is taking a prudent and hard look at the numbers that will inform a responsible decision at the end.

The timeline

It is important to note that the City incurs carrying costs along the way, which is why the Saamis Solar project continues to move forward at a pace appropriate to minimize risk to our community. We acknowledge the pace may be uncomfortable for some, particularly with both a federal and municipal election this year, but the energy industry must be mindful of the long-term view for long-life assets like this.

An analogy

Analogies are conceptually helpful by comparing something complex with a similar concept that is more familiar. Here, we’ll consider the Saamis Solar project as if it were a decision to build a home. While all elements of the analogy are not necessarily directly reflective of each other, this example is meant to help loosely compare the stage gate approach of both.

First, you would look at your family’s financial position to determine if building a home is feasible and at what scale (square footage, land costs, etc.).

If it seems viable to begin the process, you will need a plot of land to build on. Purchasing the land is a sunk cost that will incur carrying costs along the way (interest on loans, property taxes, maintenance, etc.), but you now own an asset, similar to how the City now owns the Saamis Solar project.

Now it is time to engage a homebuilder, perhaps an engineer or architect, and start evaluating square footage and the types of materials and finishes you want that will impact the final construction cost of your home. At this stage, you are incurring costs, while you also contemplate the future operating costs associated with the home you decide to build – things like mortgage, interest, insurance, taxes, ongoing maintenance, utilities, etc. This is all similar to what will incur in Phase Two of the Saamis Solar project – determining the size of the project, price and type of equipment, the cost operating the distribution system connected to the solar generation plant, regulatory implications, etc. while incurring carrying costs associated with owning the project.

Now, you have a home design and an understanding of the price, and what future costs may entail, it’s time to decide whether to apply for a mortgage and move forward, or to abandon the project and contemplate selling the land. This would be akin to the final investment decision for Saamis Solar. It is the final go/no-go decision.

Conclusion

All of this is to say that the Saamis Solar project is not a foregone conclusion. There are still many factors and a remaining investment decision (or stage gate) that will determine the final outcome. Continue to stay tuned to this page for the most recent information.