Thursday in this space, we wrote about the provincial government’s plans to keep electrical rates down once Muskrat Falls comes on stream. In that editorial, we looked at the whole range of planned mitigation measures.
But one of ways the province plans to raise money still makes us scratch our heads.
The province maintains it can make $35.5 million a year from “adding value” to the surplus energy that the province will have once Muskrat Falls comes on stream.
(Our power, by the way, is set to cost more than 22 cents per kilowatt hour, without remediation, once Muskrat Falls comes on line.)
The plan? To auction a firm supply of energy to new customers.
The province maintains it can make $35.5 million a year from “adding value” to the surplus energy that the province will have once Muskrat Falls comes on stream.
Here’s what the government plan says: “A key prospect is the data centre sector that has been growing significantly in Labrador … ‘Data Centre’ typically refers to an energy intensive customer with computer servers or other computer equipment to store or process computer data such as Google, Apple and Amazon, and ‘block-chain’ data processing associated with cryptocurrencies such as Bitcoin.”
Now, leave aside the fact that the government of China just announced that it was reviewing whether it was going to continue to allow Bitcoin mining, adding the process to a list of industries to be made illegal because they were “unsafe, wasted resources or polluted the environment.”
Let’s look at the hard numbers instead.
Right now, there are data centres in Labrador, but primarily because the region has incredibly low power rates. There is, in fact, so much demand for the cheap power that Newfoundland and Labrador can’t approve all of the operations that want to use the power.
But once the available cheap power (from the Upper Churchill) is used — and any new power’s coming from Muskrat Falls — how does the power rate stay competitive? Even before transmission, Muskrat Falls power costs seven cents per kilowatt hour to produce.
How do we make money selling power for less than that?
After all, our nearest neighbour, Quebec, has quite the data centre deal on the go right now.
As of April 1, 2019, Hydro-Québec is offering power to new data centre customers at rates as low as 3.98 cents a kilowatt hour — and that’s with all transmission and distribution costs included.
They also offer design help: “Our experts will walk you through the entire process, from the draft-design phase to integration to getting your data center up and running.”
“As you know, the lower you keep these numbers, the more hard-earned revenue stays in your business. It’s a no brainer,” Hydro-Québec says.
And the lower numbers your competitor charges in, say, Montreal, the lower you have to go to match or beat them in Labrador or on the island.
So where exactly is the mitigation money supposed to be coming from in sales to data centres?
