The estimated cost for building the first piece of the Lower Churchill hydro project — including the construction of the dam at Muskrat Falls near Happy Valley-Goose Bay, the link to Newfoundland and the new transmission line across Labrador and the island — is $1.2 billion higher than it was in November 2010.
The cost has gone up from an estimated
$5 billion to $6.2 billion ($6.2 billion and $7.4 billion respectively if you include the link to Nova Scotia) and there are many reasons why.
The updated cost forecasts include changes in the design of the project resulting in a need for more materials like concrete and steel, a tightening in the labour market for engineers and other skilled workers and an expected need for more resources at the planned construction camps.
Representatives from both Nalcor Energy and the provincial government walked through some of the points during an information session for reporters and a subsequent news conference at the Sheraton Hotel in St. John’s on Tuesday.
Changes in the expected project needs are a direct result of Nalcor Energy and SNC-Lavalin advancing the engineering and design work on the project.
Only about five per cent of that work had been completed when the first cost estimate was made, whereas the latest numbers come with about 50 per cent of engineering and design completed.
The work has led to changes being made to the transmission line plans, for example. The line will now be made stronger and more resistant to failures in severe storms.
“On the Labrador-island link, the steel towers that you will visually see, we have designed those to a much more robust and reliable design, primarily (derived from) further analysis we did on wind and ice loading,” said Ed Martin, Nalcor Energy president and CEO, while speaking with reporters. “So by robust I mean thicker steel, broader bases, stronger towers.”
Reliability aside, the change means more steel will be needed to build the towers for the line and more work hours will have to be clocked to get the line installed.
Line changes alone have added about
$571 million to the overall cost of the project.
Similarly, changes have been made to the plans for the dam at Muskrat Falls. Nalcor actually rotated the core of the dam by 30 degrees to take advantage of the most efficient use of the flowing water. Alterations in how the dam will be built are collectively expected to add about $261 million to the project cost.
Citizens, politicians await debate in House of Assembly
In terms of labour, having other large projects like the Hebron gravity base structure competing for workers has led to cost increases. Nalcor Energy and its main subcontractor have already had to offer higher pay and relocation costs for available engineers.
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And more is expected to be needed to cover site services like transportation, drug and alcohol testing and vehicle maintenance. Added site service costs are expected to run about $121 million.
Changes to plans for the switchyards have added about $126 million to the overall cost, and changes to plans for power converter stations are adding $192 million.
Many detailed numbers were offered on the project costs, but it was not stated exactly what the change in estimated construction cost will mean for ratepayers. That said, a bill calculator has been made available online (www.powerinourhands.ca) to help predict costs.
Meanwhile, the estimate for how much the overall construction of the project is not expected to make jumps to the same degree in the future.
“Nalcor has been working on refining the design and the engineering of the project to ensure a high degree of cost certainty,” said Premier Kathy Dunderdale at the afternoon news conference.
“The structured process identified by Nalcor gathered critical information up front, which minimizes the level of risk and uncertainty associated with large-scale resource developments and allows us to have a well-informed, more accurate cost estimate in place,” said Natural Resources Minister Jerome Kennedy.
Holyrood resident Jack Swinimer, who took the time to make a presentation to the Public Utilities Board during its review of the project, said he is not concerned with the new, higher bill expected for the Muskrat Falls development.
“The costs have gone up, but that was to be expected. It’s within limits and all the talk about going up to $10-12 billion dollars that you heard from certain skeptics, that’s not there. That’s not going to happen,” Swinimer, a firm supporter of the project, said.
“I don’t think these are the final figures, but now you have an idea of where it’s going to come in,” said City of St. John’s Coun. Tom Hann, who also spoke with The Telegram following the news conference.
“Now it’s time to take it to the House (of Assembly) and debate it and get the details out there so people understand what the project is. If it comes in with the numbers they put on the table — the loan guarantee and everything else — I think it’s a good thing for Newfoundland.”