Price of Power
Posted January 4, 2012
Notwithstanding Canada’s rejection of the Kyoto targets, Nova Scotia, like many jurisdictions, has established goals for reduction of greenhouse gases (GHG).
The goal of reducing annual GHG by 5 megatonnes by 2020 will have to be largely achieved in electricity generation. Most of Nova Scotia’s electricity is presently generated by burning coal. Replacing it with a renewable source such as wind, tidal, or hydro creates a 100% reduction in GHG for that amount of power. But there is another option. New natural gas fired plants reduce the GHG from coal by about 60%. So replacing ten units of electricity from coal with gas has the same GHG benefit as replacing six units of coal generated electricity with a renewable source.
Emera has proposed a power line to bring hydroelectricity to Nova Scotia all the way from Muskrat Falls in Labrador, and to provide through transmission to New England. It is likely that the Utilities and Review Board will be asked to consider this request in 2012. Here are some factors that might be worthy of consideration:
- Emera has stated that the hydro project will be considered if the price is competitive with wind projects. But that price might be close to double the price of newly built gas-fired production.
- Gas generation can be built in increments which, together with wind, replace coal plants reach the end of their useful life, and have been fully paid for. By contrast the power line will bring on a very large amount of power at once and will require coal plants to be shut down prematurely. The cost of writing off these assets will be an additional charge to power customers.
- Replacing all of our coal plants (once they have been fully paid for) with gas and wind power will in due course far surpass the greenhouse gas reduction target. As well the slower timetable allows for the possibility of a viable and cost competitive tidal technology and the associated jobs to be developed. We will be much better off with renewable energy from local tidal power than distant hydro, to which we have a 35 year commitment.
- Higher power costs are not only a burden on residential customers. They also threaten jobs, particularly in the forestry and manufacturing sectors.
- Building and running gas-fired plants or tidal installations will create far more sustainable employment for Nova Scotians than laying a power line for a plant in Labrador.
- Some might argue that the price of hydro power will not go up while the price of gas might. But it is generally acknowledged that new gas discoveries and extraction technologies have added a hundred year supply to proven reserves. The prevalence and diversity of these new sources and the absence of barriers to competition mean that prices are likely to persist at close to the cost of production.
- If gas prices were to nevertheless rise the royalties to the Government of Nova Scotia from Sable and Deep Panuke, as well as new discoveries, would also grow. These royalties would provide more money for health care, education, tax reductions, or other public purposes. Allowing well regulated exploration and recovery of natural gas in the province can create well-paying jobs in rural Nova Scotia. The gas would provide energy security and be close to the existing pipelines for gas .
Given those factors one might expect the Emera proposal to have difficulty. But in fact there is substantial risk that it will be approved, and it will be the fault neither of Emera nor of the Utility and Review Board.
In addition to the entirely reasonable requirement for reduction in GHG the province has a requirement that 25% of electricity come from renewable sources by 2015 and 40% by 2020. As part of its process the UARB will look at alternatives, including transmission from Quebec, which might be more cost effective.
But any alternative, even one that reduces GHG by the same amount, creates more jobs, and saves power customers money, cannot be considered because it will not meet the entirely arbitrary and environmentally unnecessary goal for energy from renewable sources.
Government policy should require reductions in greenhouse gas emissions from electricity generation. Within that constraint we should choose whichever options minimize power costs and maximize employment. The 40% renewable energy requirement is a recipe for high cost power, lower living standards, and job losses.
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