Friday, March 2, 2012

NACOR'S (IN)CONSISTENT MESSAGE


In a previous post, I discussed the very thorough presentation that Liberal Energy Critic Yvonne Jones made to the Public Utilities board on the Muskrat Falls development.

In her presentation, she identified the potential large industrial customers in Labrador and how the Muskrat Falls project does not include any allowances for this demand growth in either generation or transmission. 

She is right, and this is a valid criticism.


Gilbert Bennett, VP at NALCOR, has responded to this on the NALCOR leadership blog 
To quote directly from the blog “Under the 1969 Power Contract, there’s still more than one terawatt hour (TWh) of energy available through recall power from Churchill Falls to meet the industrial needs in Labrador, and 40 per cent of the production from Muskrat Falls (2 TWhs) will be available to support development in 2017. Another 12 TWh of energy will be available by developing Gull Island. Once there’s an interconnection to the island, Labrador has access to more than 2 TWh from small hydro and wind, as well as markets outside the province to support industrial development.

The premise of the Muskrat Falls deal is that 40% of the energy will be immediately required in Newfoundland to replace holyrood, 20% is for the EMERA maritime link commitment, and there is 40% left for export.  So Mr. Bennet is correct that there is 1 TWHr available from RECALL, and an additional 40% left for Labrador requirements in 2017.  But how will this change over time?

I have been reviewing the public written submissions on the Public Utilities Board Website.  There are 27 different written submissionswhich have been posted 

There are several of the presentations which appear to address this issue, at least partially.  However there is one presentation which does provide some valid commentary regarding the future demand projects, and how this may impact the commentary provided within Mr. Bennett’s blog post

This is a 180 page presentation, so you may need to download it first.  Go to page 113 of this presentation where the EMERA deal has been reviewed.  The entire submission from NALCOR, and the economic model validating Muskrat as the lowest cost option is based on the ever growing demand in Newfoundland underwriting the entire project.  Whether you believe it or not, NALCOR are suggesting that by 2052, the island will be using 100% of the energy from Muskrat.  The PPA is based on this projection. 
However, as the author of this presentation is suggesting that with the EMERA commitment of 1 TWhr there is a potential deficiency in Newfoundland in around 2035.  So this is immediately is a potential contradiction in what is being suggested in the leadership blog.

What is even more confusing is that in the Rev. 1 version of the presentation on the PUB, the author has commented that within NALCOR’s calculations they have assumed that the 1 TWhr of electricity from the Upper Churchill RECALL power is put into the island grid (Page 142).  The presentation then goes on to ask some very relevant questions, including whether the NL ratepayer will pay for all the MF power, and that EMERA will effectively be getting the free Recall Power from the Upper Churchill.  According to this presentation there is no real alternative for Labrador’s needs.  I am sure Yvonne Jones will be questioning this when the house finally opens!  

However, going back to Mr. Bennett’s post, it is unclear how any of the Muskrat falls power can be redirected to Labrador considering both the Island and EMERA commitments projected into the future. 

 He mentions the potential for Gull Island, Wind, or Labrador Small Hydro to be able to fill the void. However, small hydro and wind have been previously discounted by NALCOR within their PUB submission.

This is where valid questions need to be asked.  If Gull Island is the likely candidate for to fill this additional requirement how do we pay for it, considering the debt load that MF itself will provide?  Remembering that Gull Island is much larger than Muskrat, what do we do with all the excess power not then used by Labrador.  The link to Newfoundland, and then to Nova Scotia, is not sized to take this additional power.  So we will be left with substantial amounts of energy, about the size of Muskrat Falls output that we need to either approach Quebec, or build additional transmission to Newfoundland.  This sounds very similar to Muskrat where Nalcor will be building expensive generation which will be exported at rates less than what it is sold domestically.  

Within the 170+ page presentation to the PUB the anonymous author has suggest that NALCOR build the link to Newfoundland, but delay the construction of the Muskrat Falls dam.  The immediate access to RECALL power will meet the short term requirements for the island.  This would allow 5+ years to confirm the power requirements in Labrador, and to review all other options including Gull Island and Natural Gas. 

If only 50% of the mining prospects of Labrador happen then the Gull Island may make better sense than Muskrat.   

The more public discussion that is happening, the more I realize that the current PUB terms of reference is not centered on reality.   

We need to slow down the freight train, and determine which is the best way to switch the rails. 

1 comment:

Anonymous said...

No replies so far? Hmm. No slagging from the usual crowd