Muskrat Falls as ‘crown jewel’ — hilarious

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It is clear that Nalcor, plus the two previous and present adminstrations, have a seriously flawed appreciation respecting inevitable implications arising from current modes of developing “stranded” hydroelectric sites in Labrador (e.g. Muskrat Falls).

The basic problem stems from false expectations that such energy outputs show market characteristics as do durable commodities, whereas, in fact, their realities will more largely resemble catalysts. Catalysts demand different handling than commodities.

At Muskrat, this basic error became compounded by a mismatch of a relatively modest-sized (though horrendously expensive) site plant with long, uniquely problematic transmission requirements.

Despite all this, at the NOIA conference Muskrat Falls was touted hilariously as the “crown jewel” of Newfoundland and Labrador’s future economy: and Nalcor’s annual report, in the like vein, fantasizes on “multi-generational prosperity.”

Just to be clear. Oil typifies a durable commodity, valuable at production, during transmission and saleable even long after.

Electricity, however, in keeping with its largely catalytic nature, engenders little or no “market” value at its remote generation site, nor during its necessarily costly transmission; then, if profitable distribution is not immediately guaranteed, its non-storable nature results in dissipation of all potential value.

Hence, the unique market vulnerability of “stranded” hydropower, especially for those export sales which Muskrat Falls proponents extol so lavishly, supremely ignoring self-evident limiting factors — remunerative contracts not nailed down in a wider energy market that is ever-changing and highly competitive!

Though Nalcor/government are both blatantly loath to admit it, Muskrat Falls viability relies solely on the captive Newfoundland and Labrador domestic market (industrial clients enjoy “special deals”) which Muskrat Falls will serve only marginally (if at all) — a victim exposed to unprecedented near-future risks.

Far from being the “crown jewel” of NL’s future economy, the Lower Churchill projects as now presented are loaded dice and Newfoundlanders and Labradorians the obvious dupes.

A rethink is urgent.

Dr. J.F. Collins

St. John’s

Geographic location: Newfoundland and Labrador

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Recent comments

  • George Barrett
    July 09, 2014 - 17:50

    I agree totally with Dr . J. F Collins comments.

  • Tony Rockel
    July 09, 2014 - 13:31

    Actually, Muskrat IS like a crown jewel: it costs a fortune, makes one or two people very rich off taxpayers' money, and has no practical use.

    • George Barrett
      July 09, 2014 - 18:03

      Great comparison Tony.

  • Jack Smith
    July 08, 2014 - 21:34

    What nonsense. Can we give the Muskrat Falls deal few days off? There are so many illogical statements and arguments in this letter that I can not understand how it got published.

    • Tony Rockel
      July 09, 2014 - 10:42

      Well, John, I see you've changed your name to Jack. How imaginative!

  • Brad
    July 08, 2014 - 20:35

    "Just to be clear. Oil typifies a durable commodity, valuable at production, during transmission and saleable even long after." Oil is saleable exactly one time. A very temporary durability. How long do you think the headwaters of the Churchill River will last? Do you think the reservoir has no value? Do you think it will get cheaper to develop this resource in the future? Do you like the idea of Holyrood Thermal Generating burning bunker C oil to heat the houses of the Avalon Peninsula for the indefinite future. Do you think the cost of burning oil to generate electricity may increase exponentially in a resource constrained world? Do you think the new hydroelectric plant will last less than a generation? Do you think once the capital costs are incurred, the plant is running and producing energy, that it might be a resource for countless future Newfoundlanders and Labradorians? Do you think there is value in securing a stable and recursive major source of electrical generation for the security and stability of this province? I think you need to think more about what you think.

  • Cyril Rogers
    July 08, 2014 - 10:24

    Thank you again, Dr. Collins, for exposing the lie that is Muskrat Falls and, by extension, NALCOR. That the words "crown jewel" could ever be uttered in the context of Muskrat Falls is so out-of-whack with reality that we are dealing with the farcical. How that money pit can be considered a prize is beyond comprehension…. and speak volumes about the incompetence or corruption associated with entities such as NALCOR. As commenter, Samuel J, points out…the so-called expert, Wade Locke, has been silent as the wind in an empty forest for the past while. Where is your analysis and voice now, Mr. Locke? If your own original numbers were accurate, we are already beyond the point where the cost of the Muskrat is tilted in favour of the alternatives…and the project is nowhere close to completion yet. It may not bankrupt the economy, Samuel, as oil revenues will continue to sustain us to some degree, but it will severely strain the ability of future governments to manage the affairs of the province with any degree of comfort. This PC administration is like the drunken lottery winner who blows it all on his drinking buddies and lives in a fog….a fog they have created by refusing to open their eyes to alternatives, demand realities, and population loss…. within a decade. We are looking at electrical prices that will be nearly double from 2011 to 2018….and it is at all certain that this rapid escalation will stop even then. So much for "least cost" option!!!

    • Jackson
      July 08, 2014 - 12:18

      To be fair, it was never Locke's "own original numbers". I remember that presentation and it was clear that his whole analysis was based on the numbers Nalcor provided.

  • Samuel J.
    July 08, 2014 - 08:36

    Haven't heard much from Wade Locke since revelations of the expected cost over-runs. In his strained justification of Muskrat, Locke had to ignore just about everything he ever learned about economics. Calls into question the competence and independence of MUN's economics department. To be fair, another member of that department - Professor Jim Feehan - has previously stated his skepticism of government's case for this development. At best, this project becomes a major burden to ratepayers in the province with an expected doubling of residential rates in less than a decade. At worst, it badly comprises this province's fiscal integrity and hence its creditworthiness. Indeed were it not for our ability to cross-subsidize Muskrat with oil and gas royalties, we could once again be facing the prospect of bankruptcy.