We don't want a half-century of regret

Russell
Russell Wangersky
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Fifty years is a long time. That's about the length of time that we're signing ourselves up for a Muskrat Falls power contract. It is, of course, the most difficult kind oflong-term contract to sign: in order to decide the right way, we have to accurately assess not just one kind of futures contract over a huge term, but many.

We have to accurately forecast the price of oil, to ensure that we make the best choice of material for supplying electricity.

We have to forecast electrical prices and natural gas prices, to ensure that the electricity we're generating not only has a market here, but a market outside the province (something that no one seems to be claiming exists right now at a price below what the power costs per kilowatt hour).

How many and how much?

We have to be able to accurately forecast both the size of our population over the next 50 years, and the demand that population will have for electricity and whether that demand might change, falling markedly as prices increase (even at the current forecast increase, not including cost-overruns, from some nine cents a kilowatt hour not that long ago to 16.4 cents per kilowatt hour).

The numbers being used now for the kind of growth in power consumption necessary to support the need for Muskrat Falls will mean a significant growth in demand that simply hasn't been seen here in the last decade.

We have to accurately predict 50 years of changing weather conditions and we have to properly engineer hundreds of miles of highvoltage lines that will run on a single line of towers across this province to meet those conditions, which seem to be changing fairly rapidly.

In the short term, we have to be able to calculate the supply of available labour and materials for a massive engineering and construction initiative because, as availability decreases, costs increase.

We have to be able to calculate the cost of steel and copper for a massive transmission line, and once again, the labour to build that line.

The margins look broad: when comparing Muskrat Falls to the existing costs of a cleaner and eventually replaced Holyrood generating station (and fuel for that facility) the difference in favour of Muskrat Falls is about $2 billion.

Not everybody wants that equation to be any more complex than that, and than simple politics; the government is pretty blunt in trying to argue that households will see increases like $15 a month. Opponents look at more dire scenarios.

But however proponents and opponents want to describe it, this is not a simple equation; we're not looking at one plus one equals two.

Many things simply aren't on the table. Nalcor and the provincial government disposed of options like controlling electrical demand until power is available from the Upper Churchill in 2041. Likewise, using a decade-old study on natural gas (one so old that it forecast that oil prices would be at US$18 a barrel through 2025 that looks like a joke now and it isn't even a 50-year forecast), the provincial government has tossed out using natural gas as an option, without ever studying it properly.

No-go zone

The province abruptly argues that it's "not economically feasible" to bring natural gas ashore, despite the fact that gas is being brought ashore in a cost-effective way in much more challenging conditions in other parts of the world.

Fifty years is a long time from a technology point of view as well. This week, Hydro-Québec signed a joint venture deal with a Norwegian firm that expects to be producing some 25 megawatts of power a year by 2015 using something known as osmotic power using salt and fresh water and a membrane system to produce pressure and turn turbines. The economics of power generation may not be changing much inside this province, but everywhere else they certainly are.

Wouldn't it be a sick joke if we had a power line to ship power into the mainland grid and it actually turned out to be cheaper to bring power the other way?

The more information, the better.

The real problem is that everyone has made up their minds, dug in their heels and stopped listening.

There are a ton of variables why are we treating this like everything is already set in stone?

Fifty years is a long time to be paying prices that could be amongst the highest in the country. We owe our children more than that.

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

Organizations: Hydro-Québec, The Telegram

Geographic location: Muskrat Falls

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Recent comments

  • Peter
    April 02, 2012 - 18:14

    There are other alternatives. All new subdivisions should be laid out such that all homes have a southern exposure. Change the building code to double wall construction so that they approach solar passive standards. Replace baseboard heating with heat pumps, possibly with well sharing for adjacent homes. Thick walls and no Northern facing windows would drastically reduce heat loss. Heat pumps would reduce the electrical load another 75%. Once this was done, just decommission Holyrood for good. The only longer term solution to energy needs is to not use it. Newfoundland however does have extremely valuable resources that will be a cash cow once oil gets unaffordable. If we create a link to the mainland, we will be just exporting raw materials -- like shipping raw fish to china or logs. If we develop the power without the link and mill cement, smelt metals or other high energy processes -- we will create jobs here and export the energy as finished goods. We should do what is best for the local population and which keeps wealth here. Using natural gas from our offshore would cost much more than conservation, probably much less than Labrador power but be temporary. Better home design and heating systems on the other hand, are permanent solutions. BTY I have evacuated solar tubes in the back yard and they are useless when the sun doesn't come out for days. Same for solar cells. Reducing winter heat loss is the only solution.

  • Maurice E. Adams
    April 01, 2012 - 15:21

    Just starting to get a bit of a handle on the convoluted financial knot that Nalcor has conjured up so they (and Kenney) can say that rates will only go $15 or so dollars a month. ++++++ It seems that by using this 'take or pay' contract approach, in the first 12 years the provincial government coffers, in effect, may have to subsidize the average householder's bill to the tune of about $85 per month, every month, in order to artificially, politically, keep your rates down (the 'worm'). +++++ But surely you must know that whether that $85 per month is on your light bill, or paid for by the taxes you are giving the government, IT HAS TO BE PAID in order for Nalcor to show revenue levels sufficient to make the high debt servicing payments. +++++ I hope to be able to expand and explain this further as I understand it better myself..... Also, keep in mind that during those first 12 years that 'subsidy' totals about $2.8 BILLION ----- all of which will have to be made up in later years by increasing rates on our children and grandchildren (Nalcor has confirmed that they are not 'FOREGOING' their 'return on equity' (by shifting it off on future generations), they are merely "DEFERRING" it's recovery.

  • Messrs. Smith and Paynes attitude is what has put our province in the economy-less, jobless state down through the ages
    April 01, 2012 - 14:17

    John Smith and Samuel Payne, whether you realize it or not, it is your type of attitude that has gotten the province of Newfoundland and Labrador into the economic mess that it finds itself into today. Our province has a wonderful strategic location and lots of natural resources, but we have not been able to build an economy here with jobs and infrastructure because we have given our natural resources away for others to build economies or we have allowed very careless contracts to be drawn up on a natural resources, where we were not the primary beneficiary of the resource. What both of you are saying is don't listen to the voices of reason of those pointing out the risks Mr. and Mrs. Politicians, go ahead RAM the Muskrat Falls Project through, we will worry about the back breaking costs when we arrive at the other end. That kind of mentality Messrs. Smith and Payne is what brought us to our knees every since we have lived in this beautiful and abundantly rich place called Newfoundland and Labrador. Please, let us not go down that road again, until we are sure of what we are doing. I am not saying don't go ahead with this project down the road but we have to make damn well sure that we have a need for the energy, that we are not getting shafted on the construction costs and that the project will be earning revenue that will be able to offset the monthly mortgage.

  • Maurice E. Adams
    April 01, 2012 - 14:01

    Sheldon, the photo you are referring to may be when I ended up for a short time at the wrong event in the same hotel. I was there to attend another event --- a Rotary Club luncheon where the speaker's topic was Muskrat Falls. +++++ Nevertheless, Jim Bennett seems to be doing a very good job as fisheries critic and I commend him for trying to make sure that our most important renewable resource is utilized first and foremost for the benefit of THOSE WHO ARE ADJACENT TO IT.++++ I think PC Jim Morgan may have been in the same photo, if it is the one I am thinking of.

  • Sheldon Walsh
    April 01, 2012 - 12:17

    Samuel Payne, I never said you had to believe anyone. I didn't say Maurice and Cyril are right, just that they at least aren't frightened to use their real names and stand behind their opinions. They could be strictly commenting for partisan purposes but they are using their real names. Maurice E. Adams from paradise was pictured in this very paper a few months ago standing next to Jim Bennett at some Liberal event, and Cyril Rogers has stated previously who he is and where he lives in this province, so unless they're stealing somebody's identity you can easily prove these people are real. They could be big Liberals but who cares. The point is they're not unidentified. Who the hell are "John Smith" and "William Daniels"? One's a civil servant with an agenda who has commented on 90 per cent of articles in the local media regarding muskrat falls in the past number of years and the other is a known liberal troll. When people see the same anonymous nimrods commenting day after day after day, is there any wonder why the average person has become jaded with politics? If you're pro muskrat then listen to Jerome Kennedy, at least we know who he is.

  • What is more authentic than facts that are cut and pasted from Nalcor's own site
    April 01, 2012 - 10:41

    There is nothing more authentic than information that is cut and pasted from Nalcor 's own site, so then why are you, John Smith and Samuel Payne arguing with the facts that Maurice Adams presents before you here on this site. I am sure if the facts that Maurice is presenting were wrong Nalcor would be the first to bring it to the attention of The Telegram that falsehoods are being presented. So please guys give up fighting the facts!

  • Maurice E. Adams
    April 01, 2012 - 10:16

    MHI said that Nalcor underestimated about half (a portion) of our needs and overestimated our TOTAL needs (the part that the viability of Muskrat Falls depends on). Nalcor overestimated our total demand on average 1.74% annually. That is 74% higher than the permissible industry standard of + or - 1% annually and works out to more than 90% too high over the 50 year period. ++++++ That means that not only is the viability of Muskrat Falls dependent on a forecast that is almost double what it should be, but the consumer rates that nalcor forecasts is also based on these erroneous forecasts. +++++ If ACTUAL DEMAND IS LOWER, rates MUST BE HIGHER in order for Muskrat to be viable and for nalcor to meet its debt servicing costs. +++++ Add to that, that Nalcor uses an excessively TOO LOW escalating inflation factor of 2% annually. +++++ ACTUAL inflation on average over the last 50 years has been more than double the 2% used by Nalcor. +++++ What that means is that Nalcor's forecast rates for our children and grandchildren will actually be about 4 times what they tell us, and in any event will be (even without the inflation 'hook') about 10 times what they should be if they were not backloading costs to our children and grand children. So-called low rates early on is the "worm" (and these are 'estimated' rates only), with low demand, higher inflation, higher project costs, higher debt serving costs and the shift of most of these back to our children and grandchildren will make this project a travesty that we, ourselves, will be imposing them ------- AND WE DON'T EVEN NEED THE POWER.

  • Maurice E. Adams
    April 01, 2012 - 10:13

    MHI said that Nalcor underestimated about half (a portion) of our needs and overestimated our TOTAL needs (the part that the viability of Muskrat Falls depends on). Nalcor overestimated our total demand on average 1.74% annually. That is 74% higher than the permissible industry standard of + or - 1% annually and works out to more than 90% too high over the 50 year period. ++++++ That means that not only is the viability of Muskrat Falls dependent on a forecast that is almost double what it should be, but the consumer rates that nalcor forecasts is also based on these erroneous forecasts. +++++ If ACTUAL DEMAND IS LOWER, rates MUST BE HIGHER in order for Muskrat to be viable and for nalcor to meet its debt servicing costs. +++++ Add to that, that Nalcor uses an excessively TOO LOW escalating inflation factor of 2% annually. +++++ ACTUAL inflation on average over the last 50 years has been more than double the 2% used by Nalcor. +++++ What that means is that Nalcor's forecast rates for our children and grandchildren will actually be about 4 times what they tell us, and in any event will be (even without the inflation 'hook') about 10 times what they should be if they were not backloading costs to our children and grand children. So-called low rates early on is the "worm" (and these are 'estimated' rates only), with low demand, higher inflation, higher project costs, higher debt serving costs and the shift of most of these back to our children and grandchildren will make this project a travesty that we, ourselves, will be imposing them ------- AND WE DON'T EVEN NEED THE POWER.

  • John Smith
    April 01, 2012 - 08:52

    maurice, if you are just going to make stuff up, then what's the point? All i can say is people should go to the PUB site, look up the Muskrat review, look up Nalcor exhibits, and scroll through untill you find #103. The information is there for all to see. It clearly shows an increased demand every year. As well, MHI and Navigant both stated that Nalcor underestimated our future needs. So continue to manufacture data to suit your needs...you are only making your comments weaker, and weaker. If that was even possible. Oh, and how do we know Maurice and Cyril are using their real names? They sound more like grade 9 students to me.

  • Maurice E. Adams
    April 01, 2012 - 07:57

    JOHN, here is the actual 'cut and paste' from Nalcor's Exhibit 103. These are the "ACTUAL" "Peak Demand" and "Energy" used for the years 2001 through to 2010:++++++QUOTE: "Island Peak Demand (MW) 1,435 /1,592 /1,595 /1,598 /1,595 /1,517 /1,540 /1,520 /1,601 /1,478 +++++++ Weather Adjusted Total Island Load (GWh) 8,060 /8,224 /8,446 /8,637 /8,496 /8,088 /8,082 /8,103 /7,500 /7,608 UNQUOTE ++++ As you can see, 'peak demand is up only 43 MW over 10 years from 1,435 in 2001 to 1,478 in 2101 (and actually gone down over the last 9 years about 120 MW) +++++++++ Similar with load/energy, DOWN more then 1 terawatt since 2004 (from 8,637 to 7,608 in 2010). ++++ Perhaps you are looking at Nalcor's FORECASTS, instead of REALITY., but in fact John, I don't think you even looked at Exhibit 10s because the numbers you quote don't seem to be there, not even in Nalcor's forecasts.

  • John Smith
    March 31, 2012 - 20:26

    Maurice i just looked at exhibit 103 on the pub site. It clearly shows that load increases every year...from 7000 gwh in 2001 to 9200 in 2020. So what exactly are you talking about?

  • Sheldon Walsh
    March 31, 2012 - 20:22

    See, regardless of how I feel, and regardless of how others feel, the only opinions in this comments section that you can pay any attention to are Maurice's and Cyril's since they're the only ones with the guts to use their real names. Anything else said on here by the usual creatures hiding their true agendas behind their screen names is just noise and should be tuned out. If you really want to make a legitimate point be it pro or con about this project then do yourself and the rest of us a favour and stand behind your opinions.

    • Samuel Payne
      April 01, 2012 - 09:34

      How would you know if Maurice or Cyril are using their real names? They can have false email addresses too! I think there are a few people who have their own agenda. Let us decide who we believe.

  • Maurice E. Adams
    March 31, 2012 - 18:01

    Anyone wanting a pdf of my MFBochure which addresess primarily the question "Do we need the power?" feel free to email me at adamsmauricee@aim.com

  • William Daniels
    March 31, 2012 - 17:09

    If this deal is allowed to go through we will have repeated history with another financial disaster to rival the Upper Churchill. It can’t be allowed to happen.

  • Maurice E. Adams
    March 31, 2012 - 15:37

    Who do you think you are fooling John? ++++ Everyone knows that Emera is putting the line across the Cabot Strait at an estimated cost of $1.2 billion. There is NO REVENUE in that for NL. +++++ By the time we own it, it is not an ASSET, it is a LIABILITY (almost ready for replacement at our expense, perhaps by then for 30 0r 40 Billion dollars). +++++++As to the ACTUAL island demand, look up Nalcor's own Exhibit 103 on the PUB website. And as for the 1.74% ANNUAL ERROR in Nalcor's demand forecasts (91% over 50 years), look up Manitoba Hydro's recent report. +++++ They also point out that the long forecast period QUOTE: "magnifies risk". ++++ I would love to know where we could sell 37 cent energy for 5 cents and make a profit and by doing so avoid default on our mulit-billion dollar, multi-decade loan/debt --- so that Danny's mining giants can get free energy at our cost.

  • John Smith
    March 31, 2012 - 14:27

    Oh, and Maurice I just checked the price for power in Mass. it is 14.71 US per KWH, and in maine it is 12.98 cents a KWH USD. Not 5 cents

  • John Smith
    March 31, 2012 - 14:21

    Maurice...I swore I would never read your rants, but I do need a laugh every now and then. As I mentioned before, can you show any evidence, any sites, any cites, anything to back up your nonsensical, ludicrous claims? I have asked you again and again to show me where your data comes from...yet not once have you complied. I guess your idea is to just spew as much horse$hit as you can, and hope some of it sticks. I deal in facts, and truth. Emera is paying nearly 2 billion dollars...do you consider 2 billion dollars to be free? Not only that, but we will get to use the line for free, for as long as we want. To sell the excess power we will not be able to use. We have full call back on all that parcel of power. We will end up owning the line outright by the time we get the UC back in our control. We will see somewhere between 200 and 400 million from the sale of power on the spot market. Or we could just tell Emera we won't use their free line, and just let the power spill into the bay. A money grab for rate payers. In 1998, I was paying 60% less for power than I am today...what to talk about a money grab! In the next 20 years we will see the price of oil skyrocket. Why do you think Niagra power, BC Hydro, Manitoba Hydro, Quebec Hydro are all building hydro dams right now??? It's OK for them...but not OK for us? We should all pull the covers up over our heads, turn off the lights and wait till some magical genie develops power for us?? Your arguments are weak Maurice, you have no factual data to back up any of your fantastical claims. I would just love to know what your agenda really is? Do you want us to regress as a province? Do you want us to continue to see our bills triple and triple again along with the price of oil? Time to stick to reality Maurice...you should try it once in a while...

  • Maurice E. Adams
    March 31, 2012 - 13:06

    $400 million a year from Emera ???? So JOHN you would have us believe that we will be selling energy to Emera for 45 cents/KWh when Quebec and the NE states rate for electricity is now 5 cents/KWh. +++++ First all -- THERE ARE 'NO' REVENUES from Emera, as they get Muskrat Falls energy for free for 35 years for putting the cable across the Gulf. +++++ As to the island having an "energy deficit" by 2017 --- even Nalcor has recently moved their 'energy deficit' forecast back now to 2023 --- and that is using their own much too high forecast model (MHI reported that Nalcor annual total island forecast error would be more than 91% TOO HIGH over their 57 year forecast period, and that this long forecast period "magnifies the forecast error". ++++ In truth, we would not even breach our capacity BUFFER (which is "more then 200 MW") until 2041 (when we would still be more than 200 MW BELOW our "existing installed NET capacity of 1,958 MW), and we would not need more energy til sometime well past 2041. ++++++ WE DO NOT NEED MORE POWER. It is a money grab from ratepayers.

  • John Smith
    March 31, 2012 - 12:23

    Russell, there are a couple of things you didn't mention. First of all, our rates for electricity have increased by 60% since 1998. Secondly, our rates are forcast to triple if we stay on an isolated island system. Third, the muskrat falls hydro development is a means to supply power to the Province of NL...first and foremost, not Emera, not the US, not anyone else. The whole Emera side of the deal is just a way of us getting good value for the excess power, untill we need it here. We are not taking a risk on the Island NS link, someone else is putting up the nearly two billion for that. Lastly, Nalcor, Navigant, and MHI all agree that we will be at a energy deficit by 2017, and we will be nearing a crisis situation by 2020. So we can sit around and dream about reverse osmosis, and gas, and mirrors on the moon...or we can develop this project, provide our people with the most stable, low polluting, electricity in North America, as well as provide us with push/pull capability through our lines both in the gulf and across the straits, get rid of the cancer causing smoke belching generator in Holyrood, provide our coffers with between 200, and 400 million a year through sales to Emera. Time to get away from being dependant on other countries in the middle east for our power, and start investing in our own power...clean, green hydro power from our own province.

  • Maurice E. Adams
    March 31, 2012 - 11:23

    It began with "we have an urgent need for more power ON THE ISLAND", "AND", that we could export 20% to Emera and make money. ++++ However, the fact is that Muskrat Falls energy costs 37 cents/KWh to bring to the Avalon (and more to bring to Nova Scotia). ++++ SO how do we make money when Quebec is selling energy for less than 5 cents? +++++ As to our need for immediate power? ++++++ Minister Kennedy now says that west Labrador's mining giants (some of whom now have Danny as 'senior adviser' and now also have him as a member of their Board of Directors) will need 40%, that leaves 40% of Muskrat's 'firm' energy capacity for the island (1,800 GWh) ---- less than 2/3rd's of what Holyrood 'firm' capacity already is. +++++++ How then can it be said that the island NEEDS MORE energy, when Emera gets 20%, Labrador's mining giants get 40%, and the remaining 40% will leave the island with 1/3rd LESS firm energy than Holyrood now is capable of? ??????.++++++ Something does not make sense. ++++++ In 2001 the island's peak demand was 1,435 MW. +++++ 10 years later in 2010 it was 1,478 MW. +++++ At that rate (even with Vale) we would not even breach the island's 1,683 MW "buffer" line until 2041 (our EXISTING INSTALLED 'NET' CAPACITY IS 1,958 MW) +++++++ SO, ARE WE (ISLAND HOME/ HOUSEHOLDERS, --- everyday citizens ---- being pushed and cajoled into this Muskrat Falls project for the real purpose of supplying the 1% (the mining giants of west Labrador) virtually free power ----- free power THAT WE, OUR CHILDREN AND GRAND CHILDREN MUST PAY DEARLY FOR ---- FOR DECADES TO COME? +++++ Clearly, the facts show, as Wangersky has alluded to, ---- WEW DON'T NEED THE POWER. +++++ Even Manitoba Hydro International concluded that Nalcor's demand "total island" forecasts was 1.74% TOO HIGH --- ANNUALLY. That is ALMOST 100% TOO HIGH over the 57% year forecast period. Also, keep in mind that if demand is substantially LOWER, rates will/must be substantially HIGHER ---- in order for Nalcor to avoid default on its/OUR multi-billion dollar debt.

  • Cyril Rogers
    March 31, 2012 - 09:26

    Now that Dr. Bruneau has laid out another viable and cheaper alternative, I am wondering if there is somebody with expertise out there who could provide us with some unbiased information regarding wind as another tier in the energy ladder. It is clear that Muskrat Falls is NOT the cheapest and NOT THE LEAST cost option, except when compared to a hypothetical projection based on future oil prices. That they have excluded all other options is, in my opinion, a gross derilection of their duties and responsibilities to the people of the province. We are not going into this project as informed investors and, on that basis, the government is failing us at every turn. If they were an investment firm, we could sue them for breach of trust for having failed to properly disclose all pertinent details. Russell, I disagree with you that everyone has made up their minds.....most of us want to have ALL the cards laid on the table but have been restricted to playing with a very small deck. The government HAS made up its mind and that is a drangerous situation because they have already stacked the deck!

  • Townie
    March 31, 2012 - 09:21

    As a comparsion fifty years is about the length of time current workers have to wait from their birth to the completion of the Lower Churchill Contract