I would like to agree with the support for the Muskrat Falls project voiced in last Saturday's paper by David Short, although I must disagree with several points in his analysis.
He refers to the rate of return on capital as being unsuitable as a metric for publicly owned projects.
I would point out that the project requires the use of several billions of dollars from world capital markets and the borrowers require this return on their investment.
The project would be unable to raise money in the bond market if it were not financially viable over the 30- year life of the loans.
The business case in favour of the development is rock-solid and the non-trivial objections are nothing but political discontent. Provincial Liberals are seething that the PCs will execute a successful hydro project in Labrador. The legacies of Williams and Smallwood will be as different as the accomplishments (and non-accomplishments) of the men themselves.
It is clear that the project has passed the scrutiny of the Federal Department of Finance and that it is being accepted in the bond markets of the world. This is in addition to acceptance by Nalcor, the provincial Department of Finance and the voters in the last election. I am not sure that I place too much faith in the comments of our Public Utilities Board, which is dominated by a well-known climate-change denier who has been known for interesting behaviour in the past. One shudders at the prospect of the forthcoming racket over the electricity fiasco of the past few weeks.
I am certain that mistakes were made in the management of the existing infrastructure but I am also certain that some of these mistakes were made in the interest of not throwing good money after bad.
Investments in the Holyrood facility must be minimized, as they can not be amortized over more than the remaining productive life of the assets (about four years). An upgrade or repair in Holyrood would cost each electricity customer more than one-hundreddollars a year over the remaining four years of life. Ask the Canadian Navy about the costs to repair a submersible
version of Holyrood.
I don't quite swallow that two single- point failures in the transmission network were the inevitable results of industry best-practices planning. In the near future, the Muskrat Falls project will connect the island grid to the mainland and essentially eliminate the contingency of an island-wide blackout. This is a game-changer in terms of engineering reliability of supply for island consumers.
The link to Nova Scotia could be reversed to bring market-price power to the island if technical problems ever shut down the Muskrat and Churchill Falls sources.
A major cost of the Muskrat Falls project is the classical substitution of capital cost (rock, concrete and transmission wire) for operational cost (fossil fuels). This locks in most of the cost to the consumer for a generation. This certainty should be used by consumers to plan their energy use for the next 30 years or more.
Heat pumps and insulation are available to every one of us and should be made available to those on fixed incomes when the provincial economy'( a.k.a. the price of Brent crude) improves.
The project lays the foundation for our future role as an energy powerhouse for the mainland. We will need additional HVDC links to bring the five-fold greater production of the Upper Churchill and the more than two-fold greater Gull Island power to the wholesale market.
Our electricity future is limitless when you factor in the wind energy potential off the coast of Labrador as illustrated by the Environment Canada Wind Energy Atlas.