The Dunderdale government wants the Muskrat Falls debate to be focused on the two questions that constituted the terms of reference for the PUB review. Those two questions are: do we need the energy and, if so, is the Muskrat Falls development the least-cost alternative. It makes sense for them to attempt to keep the debate restricted to these two issues since all other peripheral reasons that have been offered up as part of a supportive rationale have been far from convincing. One such peripheral reason suggests that we should develop Muskrat Falls to enable us to “finally get around Quebec.”
There are no power purchase agreements in place with any customers outside our province and should they arise, it is clear that we would sell Muskrat Falls energy for about one-fifth of what it will cost us to produce and deliver it. Emera will get energy at no cost to them for 35 years and sell it to Nova Scotians at rates that will allow Emera and its shareholders to recover all of their investment in the project and reap a very handsome profit. The same company currently sells energy for us from the Upper Churchill at less of a profit than when Hydro-Québec used to sell it for us. As well, there is no existing capacity on the transmission lines in Atlantic Canada to allow us to get our Muskrat Falls energy into the same markets that Hydro-Québec is supplying. We physically can’t “get around Quebec” and compete with them with Muskrat Falls energy and, even more sadly, even if we could in the future, we would have to sell our Muskrat Falls energy at about one-fifth of what it costs us to produce it. Hardly a convincing rationale for developing any project.
A second such peripheral reason suggests that Muskrat Falls energy is needed for pending mining developments in Labrador. Nothing could be further from the truth. At the recent Provincial Mining Investor Forum, it became abundantly clear that this is not so.
The presenter for Adriana Resources indicated that “talks have already been launched with Hydro-Québec for energy” for their project in Labrador West. While it wasn’t stated in The Telegram article covering the event, the reason they are approaching Hydro-Québec is plain to see — energy from Hydro-Québec is a much
lower-cost alternative. If that reasoning is good enough for our government, it is equally good for any mining company trying to minimize costs and maximize profits. The lower-cost energy is from the Upper Churchill rather than the much more costly Muskrat Falls energy.
The only mining company that has made any mention of wanting Muskrat Falls energy is the one that just happens to have former premier Danny Williams as an adviser. Mr. Williams publicly stated rationale had nothing to do with lower costs. He simply stated, “I just can’t stand the notion of buying energy from Quebec.”
The only way any mining enterprise will want energy from Muskrat Falls is on a competitive, low-cost basis. That can only happen if we sell it to them for less than the cost of producing it. Again, hardly a convincing rationale for developing any project.
Since these arguments provide no rationale to proceed with the Muskrat Falls development, the government wants us to focus on whether we need the energy on the island and, if so, is Muskrat Falls the least-cost option to obtain that energy. To date, Nalcor and the Dunderdale government have failed to convince either of the two public project reviews of their case.
Neither the joint federal-provincial environmental panel nor the PUB concluded that the project was needed or that it was the least-cost option.
One thing is absolutely certain: the island of Newfoundland does not need over 800 megawatts of new energy, now or in the forseeable future.
While such a circumstance may be desireable or nice to have, it is absolutely not a necessity. That seems to be a distinction that Nalcor and the Dunderdale government don’t understand or don’t want to consider. Any shortfall, if it actually exists, can be met through a combination of small hydro developments on the island, wind power and conservation measures.
The same flawed logic is used when discussing whether we need to close Holyrood and use “cleaner” energy from Muskrat Falls. While it would be desirable to have the “cleaner” energy, it is not a necessity. Cleaner and less-costly alternatives are available for Holyrood by converting to natural gas or building a newer, gas-run facility.
In relation to the matter of “lowest or least-cost energy” it is more than possible that the board of directors of Newfoundland and Labrador Hydro may be in violation of the provincial legislation that established them and gives them their mandate. According to the legislation, the NLH board is mandated to only approve of projects and purchase energy that will be of the lowest cost to their customers. That makes sense, especially since we, as taxpayers and ratepayers, actually own the company. Since the inception of NLH, “least-cost options” have always been ranked on a scale of cost per kilowatt or megawatt delivered to the provincial grid and therefore available to be sold to customers.
Using such a scale today, energy from Muskrat Falls would come in last place as the most expensive energy per unit. Small hydro costs would be less than half of Muskrat Falls energy per unit, wind power would be about one half the cost, and even a refurbished Holyrood generating station would deliver energy to the grid at a significantly lower unit cost than Muskrat Falls.
So the premier and the minister of Natural Resources are left to muse that “we’ll freeze in the dark” if we don’t do the Muskrat Falls project and ”our energy costs are going to increase in any event.” The first circumstance can only happen if Nalcor and the Dunderdale government have been totally derelict in their duties. Conservation measures alone will ensure that it doesn’t. As for inevitable rising costs predicted by Nalcor and the government, only time will tell. But if we proceed with Muskrat Falls there will be guaranteed increases every year for the entire 55 years needed to pay off the project.
I have yet to see any sound financial or other rationale to support this development. We, as customers on the island, will pay the full cost through rate increases and taxes for the next 55 years.
Meanwhile, Emera and its shareholders will reap large profits and any mainland customers or mining enterprises in Labrador that end up accessing Muskrat Falls energy will actually get it for less than the cost of producing it. In other words, we, as the owners of the project, will give mainland users and mining companies a subsidy which will be part of our light bills. Just doesn’t sound or feel right to me.
Roger Grimes is a former premier of Newfoundland and Labrador.