I write with respect to Ian McMaster’s Sept. 4 letter to the editor (“The cost of doing nothing”) in which he attempts to compare Muskrat Falls costs with fuel costs for the Holyrood thermal generating station operations.
While his efforts are commendable, his demonstrations can be deceptive.
McMaster wrongfully assumes that Holyrood operates on average at 67 per cent of its maximum capacity. Given that Holyrood is often reported as using 18,000 barrels of fuel a day when operating at capacity, he uses fewer than that (12,000 barrels — 67 per cent) a day for 365 days a year to arrive at his average yearly fuel cost operations.
The facts however tell the real, and quite different, story.
Nalcor’s May 24, 2011 email states that over the 11-year period “From 2000 to 2010 (Holyrood) electricity production has ranged from a low of 740 (gigawatt hours) in 2006 to a high of 2,385 GWh in 2002. The annual capacity utilization of Holyrood has therefore ranged from a low of 18% to a high of 58% during this period.”
At an actual 18 per cent utilization rate (the lowest utilization of an 11-year annual fuel usage period), 18% (3,240 barrels) of the maximum 18,000 barrels of oil utilization a day is more than three time less than McMaster’s assumed fuel utilization of 12,000 barrels a day.
At an actual 58 per cent utilization rate, (the highest utilization of an 11-year annual fuel usage period), 58 per cent (10,440 barrels) of the maximum 18,000 barrels of oil utilization a day is 14 per cent less than McMaster’s assumed fuel utilization of 12,000 barrels a day.
And at an actual 11-year average 29 per cent utilization rate (the average utilization of an 11-year annual fuel usage period), 29 per cent (5,220 barrels) of the maximum 18,000 barrels of oil utilization a day is 57 per cent less than McMaster’s assumed fuel utilization of 12,000 barrels a day.
Based on erroneous fuel utilization assumptions, McMaster states that the “... cost of oil used by the Holyrood plant is about $270 million annually. The latter figure assumes the cost of oil is $61.40 per barrel and the plant is operating 67 per cent of the time.”
Based in part on this flawed analysis, he says that “If the cost of oil increases to $70 per barrel, the annual cost of oil to feed the Holyrood plant increases to $308 million” — more than three times as much as the actual cost in 2010 — a time when oil cost $74 per barrel and the annual cost to feed Holyrood was less than $101 million (and the 11-year annual average was $92 million).
Furthermore, over the 10-year period from 2006 to 2015, Holyrood, on average, provided only 13 per cent annually of the island’s total energy needs. So even if oil cost doubled, rates would only be needed to increase by about 1.5 cents per kilowatt hour to cover that increased cost — not even in the same ballpark as Muskrat Falls (see also http://www.vision2041.com/holyrood.html ).
About 2,500 years ago, Plato wrote, “Arguments which base their demonstrations on mere probability are deceptive, and if we are not on our guard against them they deceive us greatly.” (“The Phaedo”).
If requested via email, a copy of Nalcor’s email and 11-year Holyrood oil expense summary can be posted on website www.vision2041.com.
Maurice E. Adams