In 2030 electricity will be greener, but rates will still be expensive
Posted October 18, 2024
Nova Scotians have good reason to be confused about who and what are affecting their electrical bills.
The starting point is the Muskrat Falls project in Labrador. As documented in this space, it has been a financial disaster for Newfoundland and Labrador and a disappointment for Nova Scotia.
In 2014 the CBC reported: “The $7.7-billion Muskrat Falls hydroelectric project is on track as planned to start generating power in 2017 with full production the next year, the CEO of Nova Scotia utility company Emera said Monday.”
“Chris Huskilson said the Maritime Link project, which is part of the overall Muskrat Falls development and will include a 170-kilometre subsea cable that links Cape Breton with southwestern Newfoundland, is also on time and he’s confident electricity will begin flowing to Nova Scotia in three years.”
His confidence was ill-deserved. The cost ballooned to $13.4 billion. The Maritime Link project was completed in 2017, but the first Nova Scotia Block of electricity did not flow through it until 2021. Final commissioning did not occur until 2023.
During that prolonged delay ratepayers were obliged to pay interest on Nova Scotia Power’s (NSPI) $1.7 billion cost of the link plus maintenance costs of $18 million per year.
The Utility and Review Board (UARB), NSPI’S regulator, began a holdback from NSPI of $2 million a month, later increased to $4 million, as a partial contribution to pay customers for the problem.
A bigger problem was the need to import electricity from other jurisdictions to make up for the Muskrat shortfall. This has accumulated a $500 million debt, on which of course interest also needs to be paid.
This is the matter that was addressed by federal Energy and Natural Resources Minister Jonathan Wilkinson, who announced “a $500-million bailout for Nova Scotia’s privately owned electric utility,” saying the money will be used to prevent a big spike in electricity rates.
To call it a bailout is a gross overstatement. What they are doing is offering, for a yearly fee of 0.5%, a 28-year government guarantee of the debt, which will lower the rate lender’s demand and protect NSPI’s investment grade. Useful but not earth-shaking.
He characterized it as protecting ratepayers from a one-time 19% rate increase. That would not happen in any event; instead the UARB could spread the payments over many years.
Instead of paying 19% once, ratepayers will pay an increase of 2.4%, about $63 million a year for the next 28 years. Ottawa had provided a similar “bailout” to Newfoundland and Labrador for $5.2 billion.
In a news release at the conclusion of the fall legislative session, Premier Houston said: “While in the legislature we repeated calls to end the federal carbon tax – the federal government’s tax costs Nova Scotians nearly $400 million per year.”
That is an understatement.
Nova Scotia Power does not pay the federal carbon tax on the fossil fuels it uses to generate electricity. Large emitters had a choice to either pay the federal carbon tax on fuels they use to power their businesses, or to participate in the Nova Scotia Output-Based Pricing System.
The System uses a carbon price set by the federal government, which motivates regulated facilities to reduce their emissions while also being competitive in a global market. In other words it is a carbon tax adjusted up or down depending on how well or badly NSPI reduces emissions from its fossil fuels.
How much additional burden this is adding to your electricity bill is not knowable at this time. The amount for 2023 is supposed to be revealed by December 1st.
Provincial legislation requires Nova Scotia Power to have a minimum of 80% of electricity be from renewable sources, and federal legislation requires elimination of all coal generation, by 2030.
Meeting these goals will require massive capital investment, the cost of which will largely be born by ratepayers. The cost of the once mooted Atlantic Loop was found to be uneconomic.
Coal plants, some of which can already use fuel oil, will be retired or converted to work with natural gas, and eventually hydrogen. Many more solar and wind installations are needed. Industrial-size batteries will be needed to store energy from those sources; the federal government has contributed to the cost of these.
The availability of wind and solar energy is variable and unpredictable. More connections with New Brunswick are needed to access reliable balancing power.
Our experiences with large electricity projects in the past decade have been unhappy. If there is hope for the present plan, it is that it is made up of many smaller pieces most of which are using proven technology.
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