RUSSELL WANGERSKY: Muskrat: the gift that keeps on taking

You’d think, just right now, that the last thing that Nalcor Energy and Newfoundland and Labrador Hydro would be thinking about is a new hydroelectric project.

Think again.

Early last month, on Aug. 7 to be precise, Newfoundland and Labrador Hydro awarded a contract to launch a hydrology and feasibility study for an expansion at the Bay d’Espoir hydroelectric station. The plan is to build an eighth generating unit at the station, to increase the facility’s full output from 604 megawatts to 758 megawatts. There’s already a completed engineering study for the project, done by SNC-Lavalin three years ago.

The project is still very much on the drawing board, is forecast to cost $393.7 million and would take four years to complete.

It is, sad to say, not new power.

The project wouldn’t actually supply more energy overall — it doesn’t change the reservoir size at Bay d’Espoir, so the stored energy in the system would be the same. It would simply allow Hydro to draw down the reservoir more quickly and produce an additional short-term 154 megawatts at the generating station, and would also presumably give Hydro more flexibility in how and when it used the water in the existing reservoir system. A key rationale for the project involves its role in providing backup should the Labrador Island Link go down.

But here’s a question: how do you look at the costs for a project like that? Because, if Newfoundland and Labrador Hydro would need the project to provide energy during peak periods when Muskrat Falls power isn’t available, doesn’t that mean that the $393.7 million needed to build the new generating unit should actually be considered as part of the cost of having a dependable power system anchored by Muskrat Falls?

And if it is, shouldn’t that $393.7 million be rolled into the overarching Muskrat Falls cost of, at the moment, somewhere in the ballpark of $13.1 billion?

This is all early days: Hydro would have to decide to go ahead with the project, and then it would then have to go through the province’s public utilities board process to see if the project met the key demands of delivering safe, reliable, least-cost power to its customers. The question, always, is how much it will cost to maintain an acceptable level of reliability.

What Hydro and the PUB are doing is only prudent; the time to examine reliability and cost is not when you’re sitting around in the dark after a major equipment or transmission system failure. But whatever the cost of that reliability is, it will flow directly through to your power bill.

The big problem is that we were sold a bill of goods that Muskrat Falls was, in itself, actually guarantee of lowest-cost, reliable power.

We were always going to pay an additional cost for that promised reliability — a cost that’s since effectively doubled — and now, it turns out reliability will mean more costs on new projects in addition to the Muskrat financial millstone.

Oh, and in case you think all good jokes need a punchline, here’s one for you: even if it is built, the $393.7 million Unit 8 won’t be able to supply enough power on its own to cover off for a Labrador Island Link failure.

Newfoundland and Labrador Hydro is also considering purchasing up to four light-oil combustion turbines to also support the island’s electrical grid, at a cost of $169 million apiece. (Simple math? Four times $169 million equals $664 million, plus $393.7 million for Unit 8 equals about $1.06 billion.)

Remember the good old days, when we were told that, in addition to everything else, Muskrat Falls and the Maritime Link’s connection to the North American grid would give us failsafe energy security?

Afraid not.

Meanwhile, the people who brought us the project are long gone from the picture.

Russell Wangersky’s column appears in SaltWire newspapers and websites across Atlantic Canada.