Ed Martin recently ("Former CEO of Nalcor touts power flow to Soldier’s Pond," The Telegram June 29) defended Muskrat Falls with the claim that the project was always about the long term benefits, not the short term. How does this claim stand up to close scrutiny?
Nalcor built its case for the project over 50 years. Figure 23 of Nalcor’s Nov. 10, 2011 submission to the PUB shows continuously increasing demand for power over a period of 40 years at which time the full 4,900 GWh would be used and other power would be required. Nalcor needed a 50-year time horizon in order to finance the project. With the project scheduled for full power in 2021 the 50-year horizon will extend to 2070.
In so doing, Nalcor downplayed the role of Churchill Falls power as a long-term solution to the energy needs of the province. All 30,000 GWh of Churchill power will become available in 2041, in just 23 years from now and will be available over the period 2041 to 2070 and beyond. Having satisfied local demand through Muskrat Falls how will we benefit from the availability of the cheapest power in the world from Churchill Falls after 2041?
The Maritime Link is built only large enough (rated at 500 MW) for surplus Muskrat Falls power and cannot handle the massive power flow from Churchill Falls. We would have to build new transmission lines and additional sub-sea cables to transmit power from Gull Island or from the Upper Churchill by way of the Anglo-Saxon route.
When full power comes on stream in 2021 there will be an increase in the annual cost of our electric system of $800 million, after accounting for fuel savings, bringing the total electrical system cost on the Island to $1.5 billion. The financing of the project is unusual in that the cost of servicing the province’s equity investment in generation assets is deferred, increasing future costs dramatically.
Over Nalcor’s 50-year planning period these annual costs will total $78.6 billion of which $56 billion will appear in customers’ billings from 2041 to 2070. The average annual cost from 2021 to 2041 will be $1.1 billion; from 2042 to 2070 it will rise to $1.9 billion.
Because of the back end loading of the $4-billion equity invested by the province the $800 million in the first year of full power will rise to $2.6 billion by 2069, of which $1.8 billion will be return on equity (ROE). This means that in 2042 ratepayers on the Island will continue to be burdened with the cost of Muskrat Falls power. There will be no sudden drop in power rates when the Churchill Falls contract with Quebec expires in 2041.
Nalcor forecasted energy load rising from a base of 8,000 GWH in 2012, the year Muskrat Falls was sanctioned and that load would grow by 2017 to 9,000 GWH, and by 2030 to 10,000 GWH.
2011 CEO Stan Marshall’s update of June 2017 showed that the 2017 energy load would barely reach 7,000 GWH and that by 2030 energy load would rise only to 7,200 GWH, a remarkable reduction in the amount projected. Nalcor estimates rates of 22.9 cents per KWh in 2021 rising further, to 32.5 cents, by 2040. With such high rates it is highly questionable whether these demand projections will be reached.
The fatal mistake made by Nalcor was to ignore the reality of the Churchill Falls contract and the availability in 2041 of more than enough power for our needs. The burden of Muskrat Falls will be so great that it will keep our power rates high, when they should be falling. Churchill Falls should have been the centrepiece of our long term energy plan. By ignoring it Ed Martin and his colleagues placed our energy heritage at great risk. How can he possibly claim that Muskrat Falls will provide long-term benefits?
David Vardy
St. John’s