Much to think about on Muskrat Falls

Russell
Russell Wangersky
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Back when the whole 2,800-megawatt Lower Churchill project was being pitched, the government was touting it as “the best and cheapest” source of green energy “in North America.”

That’s probably not the case for the much smaller $6-billion, 824-megawatt Muskrat Falls project.

And if you were to throw South America into the mix, even the entire Lower Churchill project would probably not be the best and cheapest — after all, a Chilean project will produce almost as much power as the whole Lower Churchill venture, with costs similar to just the Muskrat portion.

The HidroAysen project in Chile would build five dams on two rivers and is facing environmental opposition because it will flood sensitive areas in Patagonia.

Interestingly, HidroAysen is pitching its $7-billion, 2,700-megawatt project as a way to actually bring Chile’s electricity prices down — Chile is currently paying the highest electricity prices in South America, at something close to 12 cents per kilowatt hour. Muskrat Falls, meanwhile, would produce power at a price higher than Chile’s current price — Muskrat Falls power would come in at 14.3 cents a kilowatt hour, even without project cost overruns. Both the Chilean government and our government are making one portion of the same argument: that the projects are necessary to maintain security of energy supply. If anything, the Chilean situation is more dire, because electrical consumption is growing more quickly in that country.

But even with a proposal to bring power rates down and provide much-needed power, HidroAysen is far from smooth sailing: last week, 30,000 anti-dam protestors marched on the Chilean presidential palace, where they were met with water cannons. One protester, Paula Banados, told The New York Times “The government is saying we will be left without energy, but it’s a lie … They are just trying to scare us. But we won’t be scared away, because we know we’re right.” Sixty per cent of Chileans oppose the project. While the Dunderdale government is almost certainly polling the residents of this province on Muskrat Falls, they haven’t been in a big rush to release the numbers here.

There’s also a view that the Chilean government is seeking new, cheaper power primarily to support mining ventures; that the government deliberately isn’t looking at such options as improving energy efficiency and is ignoring the country’s capacity for wind, solar or geothermal power. Sound familiar?

Take this view from Roberto Roman, an associate professor of mechanical engineering at the University of Chile, quoted in The New York Times: “Compared to Brazil or Argentina, Chile is doing very little to incentivize renewables … in five to 10 years, solar options will be cheaper than HidroAysen.”

If solar power really were to become cheaper than the HidroAysen project, look out Muskrat Falls.

And cheaper is interesting from another point of view.

Danielle Powers, an energy consultant from Massachusetts, told the Saint John, N.B. Telegraph-Journal last week that selling power to New England wasn’t as lucrative an option as some Atlantic Canadians might think. Right now, the region consumes 31,000 megawatts, and can produce 35,000 megawatts on its own.

Emissions regulations could make power from Muskrat Falls more attractive, but … “When you look at (natural gas) prices right now, I don’t know how the case is made financially to bring the resources in … In the near term, unless I’m missing something, I don’t see it working.”

And ignoring making homes and businesses more energy efficient is another issue.

What’s more, last week Hydro-Québec was trumpeting the huge success of its Energy Savers’ Circle program. The utility says that, since 2003, major customers have carried out some 855 energy efficiency projects, saving 1.5 TWh, “equal to the annual consumption of more than 90,000 households.” While the provincial government and Nalcor have talked about how much energy demand will grow in this province, there hasn’t been a clear effort to slow that growth through better use of power.

There are those who argue that increased prices will make consumers necessarily more efficient on their own — but if consumers cut back when prices rise and we’re in the midst of paying for a new hydropower infrastructure — built with borrowed money that we have to debt-service — well, can you say “perfect power-price storm?”

None of this is to say that Muskrat Falls isn’t the most attractive option for the province’s future power needs — meet with Nalcor boss Ed Martin and you’ll quickly realize that he is absolutely convinced the project is the best option.

But reviewing that conviction is another issue: the province’s Public Utilities Board has been tasked to look at aspects of the project, and the government has promised an independent review, saying it will show Muskrat Falls is the lowest-cost option.

Both seem more like stopgap sops to sooth public opinion than real efforts to establish the project’s viability.

And don’t get me started on Premier Kathy Dunderdale, who told the House of Assembly that the province had two independent audits of the project — and when one of those audits turned out to be merely a project review of the construction process, maintained the difference was “sematics.” Project reviews are good and necessary and keep things on track: they’re not audits.

Put it this way: you will always get a perfect project review of a plan to flush $6 billion down the toilet if 1) the circumference of your sewer pipe is big enough, 2) the toilet is big enough to handle the money you’re putting in each time, 3) someone will lend you the money, and 4) the handle on the toilet is pushed down regularly enough to clear the bowl.

An independent audit, however, might tell you if it’s a stupid way to waste your money.

One says you can do it, the other says whether you should or not.

With a massive power error already in our past, we have to be extremely careful that the business plan is carefully and independently tested. Until we’re sure, $6 billion in borrowed money is a lot of eggs to put in one basket. Or bowl.

Russell Wangersky is the editorial page editor of The Telegram. He can be reached by email at rwanger@thetelegram.com.

Organizations: New York Times, University of Chile, N.B. Telegraph-Journal Hydro-Québec Public Utilities Board The Telegram

Geographic location: Muskrat Falls, Chile, South America North America Brazil Argentina Massachusetts Saint John New England

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  • John Smith
    June 27, 2011 - 09:21

    Once again Mr. Wangersky muddys the water with talk of South America and Solar power. Solar Power? Ha ha ha, we just had 23 days of RDF. Give me a break. The Muskrat Falls portion of the lower Churchill is the best and only answer to our growing energy needs. Anyone who can't see that, and esily see that, is either stupid, a Liberal, or both.

  • Unfortunate Son
    June 25, 2011 - 10:43

    Independant audits are suspect too. There is competition in this field of auditing, so if the results are not what the requestor (Gov't) wants to hear, maybe the next time the requestor (Gov't) needs an audit of some sort, it might take it's business somewhere else.

  • DON
    June 25, 2011 - 10:24

    Once again Russell Wangersky has clearly defined the facts about the Muskrat Falls hydro-electric project. Regrettably, Wangersky is a voice crying in the wilderness. Nobody will listen. When you know the facts, expose the truth and nobody will listen and nobody cares, that is a most frustrating and maddening feeling. Never mind, as the old saying goes, you can lead a horse to water but you can't make him drink or as the Bible has it, they have eyes and see not, they have ears and hear not. Give the people of Newfoundland what they want. Let them act in haste and repent at their leisure. You get the idea. The Government of Newfoundland is committed to this doomed money wasting project and it will go forward despite the fact that it will be grossly over budget, behind completion schedule and will increase the debt of Newfoundland by another $9 Billion to a grand total of $19 Billion. The project will not realize any profit for Newfoundland for 30 years, if ever. The PC Government wants another term in office and the Muskrat Falls project is their meal ticket to another majority Government despite the cost and the increase in the debt of the Province. Who cares? Get elected now, worry about the cost later.