Questions linger around Muskrat

James
James McLeod
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Wade Locke — File photo

A day after he emphatically endorsed the Muskrat Falls project, Wade Locke said his calculations were “probably not” a fair comparison of the options.

In an interview with The Telegram, Locke confirmed his figures only included the costs associated with building the hydro dam in Labrador and generating electricity. The numbers do not include the price of transmission from the Churchill River in Labrador to the island portion of the province.

Locke was comparing the Muskrat Falls project to an isolated island alternative, and he found Muskrat Falls is $2.2 billion cheaper than the second-best option.

But that cost difference doesn’t include the cost of transmitting power to the island.

When asked by The Telegram, “If that doesn’t include transmission, is that a fair comparison?”

Locke answered, “Probably not. You’d want to include transmission as well.”

The issue was raised during Tuesday night’s presentation by fellow economics professor James Feehan.

During the Q&A session, Feehan challenged Locke, saying the calculations were based on an assumption that it will cost around $75 per megawatt/hour to generate the electricity. Feehan said that doesn't factor in the cost to transmit that electricity from Labrador to the island. Factoring in those costs, he said the true cost is close to double — $143 per megawatt hour.

Feehan declined to do an interview with The Telegram on the issues he raised.

Locke said he believes Muskrat Falls represents the least-cost alternative for electricity the island will need by around 2017.

However, more than anything he said he was just trying to contribute to a more informed debate.

“The best thing for us to do as a society is to get information, and discuss that information in a rational, clear, respectful way,” he said. “Whether or not you think mine is credible or not, that’s fine. I’m just trying to contribute to the debate.”

The presentation definitely sparked a response from opposition political parties.

Liberal Yvonne Jones said Locke’s presentation hasn’t done anything to change her opposition to the Muskrat Falls deal.

She said she thinks the hydroelectric development should be used for the benefit of Labrador, and the mining projects there that need power.

“Any deal that we’re going to do for Muskrat Falls should be looking at where the immediate demands for the province are, and that’s with industrial customers in Labrador,” she said. “There’s nothing in this deal that talks about leaving power in Labrador. There’s nothing that talks about power purchase agreements for Labrador industry.”

NDP Leader Lorraine Michael said she’s open to being convinced that going ahead with the project is a good idea. Nothing Locke said moved her, though.

She said she’s hoping to see independent, in-depth examination of alternatives to Muskrat Falls before the project gets sanctioned.

“If there was an in-depth analysis that was done on an alternative like the wind power — an in-depth analysis — then I’d like to see it,” she said. “My understanding is that no in-depth analysis has been presented.”

jmcleod@thetelegram.com Twitter: TelegramJames

Geographic location: Muskrat, Labrador, Churchill River

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Recent comments

  • Customer
    January 19, 2012 - 12:17

    Any person in sales understands the art of big and small. The price you try to experss to the customers has got to be small, Dr. Locke's 7.5 cents. Think mortgage or car payment. What you promise as the benefit to customer has got to be big, the $2.2 billion benfit, think RRSP salesman. Problem is if interest rates economy changes etc. the big # $2.2 billion which is measured over a very long long time, and the 7.5 cents doesn't include all the costs. I am sorry Dr. Locke in fairness I see a sales pitch here.

  • Cyril Rogers
    January 19, 2012 - 11:44

    Dr. Locke has discredited his own presentation by stating that he did not factor in the cost of the transmission line and presumably the actual cost of transmitting the power. There are assumptions by NALCOR based on "estimates" of the price of oil escalating over time and therefore they used these numbers in order to justify this project. To base your projections on a volatile commodity like oil, or to assume there will be no other cheaper alternatives in future, is a real stretch....... but we are expected to pay for this expensive project in its entirety. If people would only sit back and rethink this project, I strongly suspect they would come to a conclusion far different than the propaganda machine from government is cranking out. There are numerous small wind projects and alternatives like peat that we can put into play, as well as an aggressive conservation campaign, to offset the relatively minor increases needed on the Island of Newfoundland. As for the power going to Nova Scotia, that will simply be a giveaway on our part, notwithstanding the supposedly free transmission line coming back to us 35 years out........ it will be like getting an old car that needs expensvie repairs before it will be driveable.

    • Yessir
      January 19, 2012 - 13:53

      And we look forward to your presentation on the costs of alternatives (without using any assumptions) at the Harris Centre. Yeah, didn't think so.

  • Jerome
    January 19, 2012 - 10:21

    I've heard, and read, people talking about the Upper Churchill in the same breadth as Muskrat Falls. The "Joey Giveaway" didn't cost the taxpayers of this province one cent. In fact we get a few measly dollars every year from the sale of Upper Churchill power. What Muskrat Falls does is add, at least, five billion dollars to our debt. I agree with MBC that we have two renowned economists who differ on this proposal. That's what makes it even more important that the PUB be given all the time it needs to access this project.

    • Maybe
      January 19, 2012 - 11:00

      To an accountant, the Upper Churchill has cost us nothing. To an economist it has cost us the revenues we could have earned if the deal was negotiated better. In other words, we are giving away something of value for next to nothing. Muskrat Falls will add to the debt but it would be a debt backed, to some degree, by transferable assets - the hydro plant, transmission lines, etc. In comparison most of our government debt is not supported by any assets (e.g the pension liability) or assets that cannot be transferred (e.g. roads).

  • Tom
    January 19, 2012 - 10:07

    What is meant by "cost to transmit the power"? Is this about power lost in transmission, or is it the capital cost to build the transmission lines (and service the debt incurred to pay these costs)? If it is capital costs then surely it already accounted for in the $6.2 billion. If not, then Dr. Locke's analysis is deeply flawed.

  • K. A. Watt
    January 19, 2012 - 09:56

    Mr. Locke has been wrong before. In reference to Hibernia pundits who had it all wrong back in the early nineties, this is what the Sir Robert Bond Papers had to say about Professor Locke's contribution to that debate: "None, though, could match the pessimism, negativity and sheer crap about Hibernia coming from none other than Wade Locke". Engineers are required to put their stamp on drawings and engineering calculations. If the bridge collapses due to faulty design, they can kiss their licence good-bye. Unfortunately no such warranty comes with the muddle musings of economists for hire.

    • Too Funny
      January 19, 2012 - 10:52

      That's funny, you think the Bond Papers is some sort of unbiased journalism. Don't you know that the Bond Papers is a blog written by a Liberal hack. No one is surprised to hear Hollett attack anyone that is not supporting the Liberal party position.

  • Karen ONeill
    January 19, 2012 - 09:06

    Nalcor's total cost analysis, with everything included, favours Muskrat Falls by $2.2B over the isolated island alternative. This includes generation AND transmission cost for Muskrat Falls. It is not just generation costs as is stated in the Telegram article.

  • Don II
    January 19, 2012 - 08:58

    What is the good of an economic analysis that leaves out the most pertinent information?The cat is out of the bag! The Muskrat Falls project is going to be a bigger mistake than the Upper Churchill project was under SMALLWOOD. This revelation explains why the Government of Newfoundland is in such a rush to ram this money loser through. Who stands to gain from this project? Follow the money and contract trail media folks and you will soon find out why the politicians and bureaucrats are in such a hurry to get this project past the PUB and into production. The massive debt that this project will create will cripple Newfoundland and Labrador. Premier Dunderdale is going to do what Prime Minister Richard Squires did in the late 1920's and that is put Newfoundland in bankruptcy! Stop this crackpot project before it is too late to back out.

  • Geoff Meeker
    Geoff Meeker
    January 19, 2012 - 08:45

    This is astounding. The costs of transmission are going to be massive (and quite probably the project component with the highest cost overruns). How on earth did he leave that out? It calls into question the numerous other assumptions that he made in his presentation.

  • Maurice E. Adams
    January 19, 2012 - 08:10

    It is my understanding that the $2.2 billion dollar difference between the Muskrat Falls and the Isolated Island options (which is Nalcor's unreasonable and unfairly derived number) and which Dr. Locke is accepting and quoting, that number do indeed does include the transmission costs. ++++++ But that raises an even bigger question. ---- If Dr. Locke doesn't understand that the $2.2 billion includes the transmission costs (which is purely an economic matter that he should surely understand), what does that say about how well Dr. Locke really understands this project? ++++++++ How can he rationally conclude that Muskrat Falls is the best option?

    • What
      January 19, 2012 - 09:52

      Talk about shooting yourself in the foot. If you think that Dr. Locke, with decades of training and work experience in natural resource and cost benefit analysis doesn't understand it then what makes you think, with your no years of training or experience, understand it. Get a grip on your limitations.

  • john Smith
    January 19, 2012 - 08:09

    No matter what development we come up with it will need transmission lines. This does not change the bottom line, it is still cheaper even with the cost of trasmission.

  • MBC
    January 19, 2012 - 07:29

    Make no wonder why taxpayers do not trust wade locke and nalcor. We have 2 economist from MUN who cannot agree on the costs for this projects!!!!

  • Karoline
    January 19, 2012 - 07:08

    The article is not correct. The 2.2 billion advantage that Muskrat has over the next best alternative does include transmission. Everyone has access to that data and information. It is in the Nalcor submissions. Please verfiy with Dr. Locke. No misinformation please.

    • James G. Learning
      January 19, 2012 - 12:30

      My pet phrase for the Muskrat Falls Project is stupid. My qualifers are killing rivers, poisoning water with methylmercury, and can't compete with quebec hydro. Stupid is my opinion, methymercury poisoning and can't compete with Quebec hydro are facts. Stupid Project!!!!

    • James G. Learning
      January 19, 2012 - 12:33

      My pet phrase for the Muskrat Falls Project is stupid. My qualifers are killing rivers, poisoning water with methylmercury, and can't compete with quebec hydro. Stupid is my opinion, methymercury poisoning and can't compete with Quebec hydro are facts. Stupid Project!!!!

  • Paul
    January 19, 2012 - 07:07

    when the lines are drawn by political stripe...you can not believe those on either side...the Government and the opposition voices cancel each other out. then you must look to the informed but impartial voices...Locke and Feehan? I was prepared to believe Locke but if he hasn't considered the cost of bringing the power to the Island then he has done us a dis-service by merely muddying the waters...what was the point of his presentation the other night then?!! the analysis he presented was based on an unrealistic situation...it must consider the cost of bringing the power to the island, not just the cost of generating it...thats like budgeting the cost of building a house but not including the cost to buy and develop the land..

  • Charles
    January 19, 2012 - 06:48

    Mr Locke,I have a question for you...concerning the use of power.Here my question, You are putting up a building , let say 21000 square feet,I'm putting up a home of 3500 square ft, Which of the two, would use the most energy,