Muskrat is the best option: economist

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James McLeod
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Wade Locke gives public presentation on project

Economist Wade Locke gives a presentation on the Muskrat Falls project at the INCO Innovation Centre Tuesday evening. He says with the information available right now the Muskrat Falls project is a good one for the province. — Photo by Keith Gosse/The Telegram

Wade Locke, the province’s most recognizable economist, set out to answer a simple question: “Is it worth it?”

Tuesday evening, Locke re-soundingly declared that yes, Muskrat Falls is the best option to meet Newfoundland’s energy needs as the least-cost option.

The public lecture at Memorial University drew a massive crowd; the lecture hall was filled to capacity, and an overflow room set up with a live video of the presentation was also filled.

Provincial MHAs, federal politicians and former premier Roger Grimes all showed up to hear what Locke had to say. The lecture was delayed because organizers were expecting Lt.-Gov. John Crosbie to attend.

Once Locke started speaking, he laid out in technical detail essentially the same argument Nalcor, the project proponent, has been making for more than a year.

Yes, Locke concluded, it’s “reasonable” to believe the province will need the power. Yes, Locke concluded, Muskrat Falls is the cheapest source of that power.

“On the balance of probabilities, it seems reasonable to me to assume that Muskrat Falls is the best option for the province,” Locke said.

Locke has previously declined to comment on the Muskrat Falls project because he has done work for Nalcor, and felt his opinion was compromised.

He said he believed Muskrat was “a good project,” but a report by former Public Utilities Board (PUB) chairman David Vardy released a report which “raised a number of serious questions” in his mind.

“Just to help my own self understand whether or not I had made the right decision about whether this is a good project or a bad project, I went back and had a look at David’s paper,” Locke said. “What you’ll see here tonight is the outcome of that reflection.”

Addressing the critics who have questioned his bias based on his work with Nalcor, Locke said emphatically he values his integrity and reputation more than anything, and his only reason for doing the research was for public information.

Over the course of the lecture, Locke spoke forcefully — shouting at times — as he walked the audience through charts and graphs detailing cost-comparisons, commodity price forecasts and other technical specifics.

He went into extra detail on the option of using natural gas — the option championed by Vardy — but concluded it wasn’t viable either.

Locke’s presentation will likely become a powerful vindication for the government, who has been championing the project. However, he did offer one major point of criticism.

Natural Resources Minister Jerome Kennedy has limited the time the  PUB has to examine the project. Locke said that is a mistake.

Not extending the public review for the PUB, in my mind, is a problem,” Locke said. “It creates a suspicion that’s unneeded. If they need three more months, give them three more months and let them do it.”

At that point in the lecture, the audience broke into spontaneous applause.

Following his one-hour lecture, Locke took questions from the audience for roughly another hour.

He was questioned about the potential to use wind power and other alternatives to Muskrat Falls, as well as the possibility of using energy conservation to decrease demand.

Locke was forced to decline comment on some questions, saying he isn’t an expert in the engineering. On the conservation questions, he said the kind of reductions in power-usage required would pose an undue hardship on the people of the province.

Speaking to The Telegram after his lecture, Locke said he was surprised by the sheer number of people who showed up; one organizer estimated at least 500 people were in attendance.

“It was impressive,” he said. “It’s certainly more than I have in class.”

Locke’s full presentation will be made publicly available on The Harris Centre’s website, at www.mun.ca/harriscentre/.

jmcleod@thetelegram.com Twitter: TelegramJames

Organizations: Public Utilities Board, The Harris Centre

Geographic location: Newfoundland

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Recent comments

  • Maurice E. Adams
    January 18, 2012 - 16:02

    AND FRED, the was no "analysis" in Dr. Locke's 're-presentation' of Nalcor's own flawed assumptions, forecasts and options.

  • Maurice E. Adams
    January 18, 2012 - 15:39

    SORRY FRED, that was not a use of calculator error, it was, as you can see from a close read of my posting, that it was a 'typing' error. In both instances where I typed "0.01%", it should have been "0.1%" (the 0.1% was typed correctly in one instance). However, the 7.6 GWh figure and the substance of the posting is clear and remains unaffected. Thank you for pointing out the typo.

  • Maurice Rogers
    January 18, 2012 - 14:53

    Looks like Locke did a great job in answering some of the questions. There are options to MF and people will have to decide if they want the higher cost options. It's obvious some people will stick to their party allegiances and will oppose this project no matter what the facts say. It's beyond being ridiculous, watching these regular posters cherry pick statistics and twist the data to try and support their position. They are not interested in facts, or being informed, they are opposed at no matter the costs.

  • Maurice E. Adams
    January 18, 2012 - 13:17

    Here's another fact that is not hard to grasp. ++++++ Dr. Locke's presentation pointed out that we used 7,600 GWh of energy last year. Nalcor's Final Submission also says that over the last 20 years our average rate of growth has been 0.01% annually. ++++++ That works out to 7.6 GWh per year that we need to meet our 20 average growth rate of 0.1%. ++++++ In a 6 month period in 2011 alone, NL Hydro spilled the water equivalent of 694 GWh of energy over its existing island hydro sites, and furthermore, Nalcor's PUB documents says that they expect to have to keep spilling our EXISTING EXCESS energy capacity year over year until Vale's Long Harbour plant comes on line to use our excess capacity. ++++++ Or to put it another way, that one year, 694 GWh of wasted, excess energy is enough to meet our 0.01% yearly demand increase (7.6 GWh/year) for more than NINETY ONE (91) years. ++++ Not 1 year, not 10, years, not 50 years ---- but 91 years. +++++ Also, NL Power, with only 1% of its customers participating in its energy conservation plan, in the first three quarters of 2011 saved 8 GWh of energy. That alone, also exceed our 20 year average growth rate. +++++ NO RISK, NO COST, NO BAFFLEGAB, ----- no university degree needed.

    • Fred Penner
      January 18, 2012 - 14:26

      In the interests of the province, you should either go over to Nalcor and show the engineers how to use a calculator or go down to MUN and show Dr Locke the errors in his analysis. No bafflegab!

  • Cyril Rogers
    January 18, 2012 - 12:42

    Being away, I was unable to attend Dr. Locke's presentation last night but I have gone through his slide presentation and found it to be full of assumptions that are just that....assumptions. To begin with, Dr. Locke is dreaming if he believes the actual cost of power coming out of MF will be around 7.5 per Kw. The government has already acknowledged that it was cost around 14.9 cents to produce, so where could he come up with such a figure. SECONDLY, the actual market price will be 20 cents or more, at a minimum, when one factors in the transmission costs, maintenance costs, profits, and so forth. THIRDLY, the assumption that it will come in on time and on budget does not measure up to the reality of these mega-projects. The actual price could easily be double the current projected production price. FOURTHLY, he dismissed all alternatives as being too costly or impractical but relied on the shoddy analysis done by NALCOR, I would assume. We all know they were taken to task by the Environmental Review Panel for failing to provide any real analysis of other options. FIFTHLY, this project can produce almost 900 MW's of power but, as of now, we would need only about 100 MW in the dead of winter for two or three months even if Holyrood were completely offline. Nova Scotia will take its FREE 100 MW, via its transmission line, and that's it for now. What happens to the rest of it and how much more costly will the entire project be if we can't use or can't sell the excess power? The actual production and project costs would then be astronomical. SIXTHLY, the recent assertions by government about needing power to run these new mines in Labrador is a red herring. We already have 300 MW of recall power, from the Upper Churchill, that is being sold on the open market. It would be decades before there is sufficient mine production to use all of that. FINALLY, Dr. Locke uses NALCOR stats to assert that we will need close to a 50 % increase in power on the island by 2041. That assumption is wrong, if based on power usage in the past 20 years. In effect, when you start from a false premise, you may end up with a conclusion you want but has no basis in reality. I am surprised and disappointed that Dr. Locke paints a false picture based on outdated data and unreliable assumptions. There are many reasons to hold off, and many alternatives that will solve the problem of more power needs, if we ever get to that point.

  • redrantingtory
    January 18, 2012 - 12:00

    Paddy Daly was right! No matter who says anything about this project and no matter how right they are there are always going to be people who are against this no matter what. You are not going to convince the naysayers and political opportunist that this is a good deal. I ask the same question as Daly, why would any true Newfoundlander , Labradorian put their reputation on the line and support this project if it were not in the best interest of Newfoundland and Labrador, especially after Churchill Falls? I suggest that these people are knowledgeable well meaning people that are trying to do what is best for Newfoundland and Labrador. Remember Hibernia? How many politicians and how many armchair experts said it was a bad deal and would cause us to go bankrupt? They came out of the woodwork then suggesting that we here in Newfoundland are going to ruin ourselves and go bankrupt. How are we ever to get ahead and stay a have province if we don't develope industry and jobs? This project, along with the others will keep the money coming in to our coffers. Other areas of the world are developing mega projects so why can't we do the same? With regard to other sources of power like wind, there are problems like how to store power for when there is no wind? You must carry a back up system for this, Such as a power plant. Plus the cost of maintenance on Wind Turbines is high. Natural gas requires the finding of it and then the cost of a pipeline or other ways of transporting it. So in the end Wade Locke did the number crunch and we need this power to develope. I believe him. Why would the man put his reputation on the line? But no matter what I say or anyone else who supports this, we are all in cahoots on this and the naysayers and conspiracy theorist won't ever agree it's a good idea and plan.

  • Calvin
    January 18, 2012 - 11:34

    Lets put the price of oil aside. It is a NON-RENEWABLE RESOURCE!!!! Someone said it will take 50 years for the price of oil to double not 25 years. There will be very little oil (if any) left in 50 years folks, but the water will continue to flow. This project should, and will, go ahead.

  • Why Debate in The House
    January 18, 2012 - 11:17

    In order for a debate to happen, there must be 2 different views. All 3 of NL's political partys support the project so the point of having a debate seems irrelevent to our politicians for just that reason. Talk about out of touch with the electorate!!!! Replace them all!!

  • Maurice E. Adams
    January 18, 2012 - 10:42

    Dr. Locke made a reference to a Globe and Mail article which he quoted as saying that because of the shale gas revolution, instead of the price of oil going up 5 times as much, it will only go up twice as much. ++++++ What Dr. Locke failed to say (and I wonder why), was that the actually said was that instead of oil going up 5 times of much in 50 years, the availability of shale gas means that it will now take 50 years for oil prices to even double (not alone go up 5 times). +++++ Now that puts the Globe and Mail article in its proper context. Taking 50 years for oil prices to double totally demolishes Nalcor's and Dr. Locke's slide which shows oil doubling in 25 years. ++++++ Taking 50 years for oil prices to double also totally demolishes any 'apparent' least-cost advantage that Nalcor's numbers give to Muskrat Falls (70% of the apparent cost advantage of the Muskrat Falls option comes from Nalcor's and Dr. Locke's no longer valid oil price forecast). +++++++ Shale gas has already reduced electricity rates in the U.S. by 50%. +++++++ What will that do for the viability of exporting high cost, heavily subsidized Muskrat Falls power to the U.S. or even Ontario and the Maritimes?

    • Calling a spade
      January 18, 2012 - 11:33

      Even when someone credible says that the project looks like the best option you still refuse to accept it. Lets just cut to the point, no matter what anyone says, you're going to be against this project. It's become your obsession. You throw out number with absolutely no understanding of statistics or economics.

  • Jessica
    January 18, 2012 - 09:49

    It is hilarious how people are taking bits and pieces of Dr. Locke's words and twisting and using them to construe other messages. i.e. Mr. Locke never said that we should double electricity costs, for exactly the same reasons specified by John Collins... that although it is possible it will hurt people.

  • They're blind and deaf by choice
    January 18, 2012 - 08:51

    Looks like a lot of comments here by people not interested in hearing facts.

  • Robert
    January 18, 2012 - 08:44

    John Smith - January 18, 2012 at 08:58:46 If you examine the following links: http://dcnonl.com/article/20060119800 http://www.canada.com/topics/finance/story.html?id=26f87c10-3d69-4c0b-9bc0-967b3434c505 http://www.releases.gov.nl.ca/releases/2006/nr/0126n10.htm You will see that there was a viable Wind Alternative that was turned down by the government.

    • Fred Penner
      January 18, 2012 - 10:41

      You are quite correct in that a wind farm was proposed for Labrador....not the island. The Labrador power system is synchronized to Churchill Falls and Hydro Quebec and can support a very large wind generation facility....probably 10-20TW. I think this will eventually be built but building it now would be putting the cart before the horse.

  • Paul
    January 18, 2012 - 08:29

    Reading these comments is quite interesting. With no exceptions, any idea that is generated in Newfoundland for the benefit of Newfoundlanders finds naysayers who feel that others will make money from the pockets of the average joe. If this does not go ahead, and oil prices continue the way they are, electricity prices will be MUCH higher that electricity from Muskrat. AND that price will be stable for years!

  • McLovin
    January 18, 2012 - 07:29

    So let me get this straight, Dr. Locke was able to complete a full review but the PUB cannot? Was Dr. Locke given access to information that the PUB has been requesting and haven't been able to obtain?

  • John Smith
    January 18, 2012 - 07:23

    It was a very good presentation. Dr. Locke broke it down so that even the Liberals could understand the deal. The questions afterword were a waste of time, nonsensical ravings about importing natural gas from new york, and generating wind with ballons from under the sea...LOL Anyway, even the liberals like Danny Dumaresque seemed dumbfounded by the talk. Danny's suggestion that wind farms are the answer, was at best...farsical. The only part I disagreed with was when Dr. Locke suggested the gov. give the pub the second three month extension. I hope the government sticks to thier guns. If not this waste of time will go on forever. I trust Navigant, and MHI more than I would ever trust the politically motivated pub. This is a great project, it will provide stable rates for the next 50 years, connect us to the mainland and allow us to grow our economy. Let's get on with it!

    • Townie
      January 18, 2012 - 08:18

      Let's get this straight, your cheering for an $8-10 Billion expenditure by the Province. WOW! Let's give everybody a couple of million, we're a have province.

    • Fred Penner
      January 18, 2012 - 08:46

      The lack of understanding in the public regarding the limitations of wind generation for an isolated power system was made very clear during the question and answer session. The power system, in it's current topology, cannot absorb more than approximately 130MW of wind without stabilty problems.

    • Get a clue
      January 18, 2012 - 08:55

      I guess the townie didn't bother to hear the presentation.

  • John Collins
    January 18, 2012 - 07:22

    Yes, whatever you say Mr. Locke. It may be alright for your electricity rates to double, it won't make a dent in your bank account. However, for us ordinary moderate income families, it will be a battle of heat versus food. And don't give me the crap about oil rates doubling also, because everyone knows that there WILL be another recession because of the Greedy oil companies continued bullying and exaggerting demands for oil. Funny thing is there were always devastating storms, floods, wars, rumors of wars and even opec membembers who passed away, they are after all mortal as the rest of us. So why is it that only in the last 12 years that it affects the cost of a barrel of oil so drastically as it does? It's ridiculous!! It's because economists like you are'nt doing enough to pressure the Governments to stand up to the oil companies and say enough is enough. You are no doubt being paid off to keep your trap closed also!! Continued inflation left alone , letting oil companies contiue to raise the price of oil, obviously causes everything else to raise in price. It's as basic econmics 101 you can get. Why not prove me wrong and get all your other economist buddies on board to stop the oil companies from ruling the world we live in!!!!

    • Get a Clue
      January 18, 2012 - 08:53

      Are you for real?

  • Gerry McManus
    January 18, 2012 - 07:07

    In the interest of transparency I state the following: if you go to the Registry of Companies and Deeds you will find Dr. Locke has a registerred consulting business. If the Telegram made an access to information request to government as to how much business this company has recieved from government since 2003 it could provide transparency. I do not intend to besmerch the sincereity of Dr. Locke's views, but if a financial relationship exists, then it should be acknowledged. I also believe the same should apply to economist Jim Feehan as well in the interest of fairness.

    • Eli
      January 18, 2012 - 08:36

      Locke is bought, packaged and sold to the NL government. Just another mouthpiece like Skinner.

    • Rob Thomas
      January 18, 2012 - 10:45

      Eli my boy, you do know that you can be sued for those comments, don't you. Don't fool yourself by thinking that you're anonymous either, too many people have posted comments on newspaper websites, thinking they were anonymous, only to be dragged into court.

    • Eli
      January 18, 2012 - 11:30

      Oh my, sounds like I should go underground real fast.

    • joan
      January 18, 2012 - 11:38

      i agree with eli,,so sue me The trouble with you rob is your gutless

  • lonenewfwolf
    January 18, 2012 - 07:06

    EMERA / SNC-Lavalin are here taking our money for nothing, and we're going to lose control over our grind and water if we let them in without a fight. What assumptions was he using that could cause us the most trouble? The plan is bankruptcy for our company so they can move the most profitable assets to private hands. Gwynn Morgan, Paul Sobey, Brian Mulroney are all names that come up when you dig into these deals and companies. I've heard enough from the numbers guys, lets here from some real politicians who care about people. Lets talk with a few of them from Iceland and Norway about what we should do with our tremendous resources and the best way to move forward with development.