What Do We Need

Posted June 27, 2012

The current proposal to develop the Muskrat Falls hydro project and the associated transmission line to Nova Scotia began to take form about five years ago. If implemented, the cost is said by Emera to be $1.2 billion which will have to be paid for by residential and commercial ratepayers in Nova Scotia over the following 35 years.

It is important to ask whether we need that power, and if so, when.

The 2009 Integrated Resource Plan by Nova Scotia Power (NSPI) provides projections of provincially based electricity generation and an expectation of future demand.

The power generation resources available in 2009 will soon be increased by additional wind-based facilities. Our eight coal-based plants, which currently provide about 52% of provincially generated power, will have to close down after 45 years of service because of Federal environmental regulations. This means two of them will have to close by 2020 and a further four by 2030. Correspondingly, greenhouse gas and other emissions from these plants can be expected to reduce by 25% by 2020 and 75% by 2030. Emission reductions will be even greater if it is the coal-fired plants that are idled when there is excess capacity.

But demand for power is also decreasing. Well managed conservation efforts have created a credible track record of success in various jurisdictions. Because of these efforts, usage is forecast by NSPI to reduce each year by 1.5%. As well, the loss of Bowater and (at least) one of the New Page mills is forecast to cause a further 12% drop in demand from 2012 forward.

The chart below tracks the relative movement of supply and demand for the next 20 years. Power sources are not identical. Wind is not as reliable as fuel based sources. Coal is easy to store but gas is not. Hydro can be affected by too much dry weather. Nevertheless the basic conclusion should be sound.

Comparison of Demand to Supply

As it turns out, demand is falling faster than supply.  If the forecast assumptions turn out to be correct, the amount of excess capacity will be greater for the next 20  years than it was in 2008. In other words, even with the closing of three quarters of our coal-fired plants over the next 20 years, there is adequate power generation with existing resources. Were the province to buy into the Muskrat Falls project, ratepayers would have to pay $1.2 billion for entirely unneeded capacity.

It is of course possible that reality will differ from projections. If demand begins to approach supply, there are several possible alternatives to Muskrat Falls:

1. Additional wind power projects

2. Perhaps by that time a viable and cost-competitive tidal technology will be available

3. New gas-fired plants which, at today’s prices, would produce electricity at a fraction of the cost of Muskrat Falls power.

4. Imports from Hydro Quebec which, because of competition from low cost gas-fired power, has recently provided very competitive rates to other jurisdictions

5. Imports from New Brunswick once the Point Lepreau plant comes back on stream. The pricing will likewise be constrained by the gas-fired alternative.

Clearly the first three alternatives would provide far more jobs for Nova Scotians than the Muskrat Falls project.

When and if the need for more capacity arises, the alternatives need to be assessed by a body independent of either NSPI or Emera. Allowing them to do the assessment would be like asking the General Motors dealer to assess their trucks against those of  Ford, Chrysler, and Toyota, before it decides which ones the province should buy. Now is a good time to establish the framework for such an independent body.

In summary, reasonable projections of future demand and supply indicate that there is no need of additional generating capacity now or for some considerable time into the future. The proposed Muskrat Falls expenditure of $1.2 billion on behalf of ratepayers is entirely unnecessary at this time. Should a need arise in the future each of the possible responses to that need should receive fair consideration.

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  • I have heard a lot of foolish talk about the need to raise our rates because the users who were covering fixed costs have evaporated. If this were a regular business which had lost its biggest customers, and not a monopoly, a sales force would be sent out on the road to drum up new business. Since there is no new business here, NSPI needs to go to New England and sell their excess capacity into that market.

    As for Muskrat Falls power, nobody is talking about what the rate will be for ordinary consumers. If Muskrat Falls comes in at something like 20 cents per kWh, I suggest the following exercise: Take a sheet of graph paper, make the vertical axis the price per kWh and make the horizontal axis the years between now and when Muskrat Falls comes on line. Draw a line from the current user price and that price and that should be a pretty good forecast of what future rate increases we can expect. Looks like it will be something like 30% in the next few years.

    The chairman of Emera should go on bended knees to Hydro Quebec and get suitable rates from them. Then NSPI should build a transmission line from Nova Scotia to Quebec. That solves the problem of future supply and we can retire all the coal fired plants as their number is up.

    Right now, Emera is salivating about spending the $1.2-billion on Muskrat Falls because they are guaranteed a 9% return on that investment. This foolish setup is like the old cost plus 10% contracts which were let out during World War II. I know for a fact that in Greenwood, a trench was dug next to hangers that were built and millions of dollars worth of supplies were dumped there to increase the costs and increase profits. That’s the game which NSPI is playing right now. With a guaranteed rate of return on equity, the only imperative NSPI wants to obey is to increase costs so they can increase their profits.

    Jon Coates – Halifax

    Jon Coates | October 3, 2012

  • We NEED to recognize that N.S. is at a crossroads; not unlike when in the evolution of power when it provided for earlier industrial expansion of steel, pulp, etc. Just as hydro and steam, on site, yielded to electricity’s distribution grid, bigness (unsustainably, non competitive) factors have crept into our base. We WILL have to INVEST if progress is in our culture. Whether we NEED to be topping up Boston’s future power requirements as a long term investment, or to invest elsewhere as the power-road forks onto its next evolution, is perhaps the question. I can understand Emera’s need to grow (export, business as usual), but trust that they don’t miss the next fork in the monopoly road.

    gordon a.... | June 28, 2012

  • Bill, agreed 100%.

    Ben | June 27, 2012

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