A tale of two projects

Published on May 13, 2014

An interesting electronic document made the rounds on Monday from Hydro-Québec — it was the utility’s annual environmental performance report, a document that looks at everything the company has done, from demand management (finding ways to help customers reduce electrical consumption) to construction of new hydroelectric operations.

As with most things Hydro-Québec does, the publication is glossy, filled with colour pictures, and is more than a little, shall we say, self-promotional.

But two things stuck out and both had to do with new hydroelectric facilities and with numbers, as well.

The first was details about the company’s just-finished Eastmain-1-A/Sarcelle/Rupert project. That facility cost $4.7 billion, has an installed capacity of 918 megawatts, and will bring new power into the Quebec grid at a cost of 4.3 cents per kilowatt hour — including transmission costs. Oh, and for that facility, the report boasts, “The cost of construction totalled $4.7 billion, less than the $5 billion originally budgeted.” Interesting, given that Nalcor Energy has said it is finding “cost pressures” on this province’s Muskrat Falls project, and is no longer talking about just what the current budget numbers are.

The second was details about a different hydroelectric facility — Hydro-Québec’s Romaine development is preparing to bring its first generating station online, Romaine No. 2. The Romaine system involves four generating stations and is forecast to cost $6.5 billion with an installed capacity of 1,550 megawatts. The operation is scheduled to bring its power into the Quebec grid at 6.3 cents per kilowatt hour, once again, “including transmission costs.”

Both the projects make for an interesting comparison to Muskrat Falls.

Muskrat Falls is both smaller and more expensive than either Eastmain or Romaine, and the power it’s set to produce will cost, at a minimum, seven cents per kilowatt hour, with the final cost including transmission (because we have to build an entire transmission system to bring the power from Labrador to the Avalon) at a minimum of 21 cents per kilowatt hour, provided there are no cost overruns.

So why does that matter?

Well, perhaps another part of the Hydro-Québec report would help shine a light there.

“Electricity sales outside Quebec remain an important source of the company’s profitability. Quebec hydropower is an attractive energy option for the New England states, as it can contribute to achieving their (greenhouse gas) reduction objectives. Hydro-Québec is continuing talks regarding possible participation in transmission line projects between Quebec and New England, among other markets. These connections would allow for increased exports to those markets,” the report says.

Ah, New England. You might remember that as one of the places we’re planning to sell Muskrat Falls power.

Where we’re planning to sell more expensive power, that is — and more expensive power that we also have less to sell of than our competition seems to have. They have a track record on electrical sales. Right now, we do not have anything close. They have proven compliance with American open access tariff requirements; we have provincial legislation closing the door to that kind of open access.

Why is it that anyone is expecting this to end well?