Scott Thomson, president of Manitoba Hydro, denigrates Graham Lane's conceptual assessment of gas-fired generation as a 'back of the envelope' calculation in his Dec. 16 column Gas-fired plant can't meet power needs.
Thomson places his faith on the 5,000 pages of what he describes as "evidence and analysis" that supports Hydro's development plan. I have reviewed that document and conclude it is a stretch to refer to it as "evidence." Much is not evidence, but projections based on assumptions.
Take, for example, the load forecast for Manitoba. The plan is based on a Hydro assumption that energy consumption will increase annually by 1.5 per cent during the next 20 years and beyond. To achieve that growth, load will have to increase by 413 GWh every year, but for the past 10 years annual growth has been only 266 GWh. The assumed growth for the next 20 years is 55 per cent higher than it has been historically.
The same assumption is made about the peak capacity requirement. It turns out, however, that it will be an energy requirement, not a peak capacity requirement, which will determine when we need new power resources. The focus should be on energy requirement.
The primary drivers of Hydro's rosy growth forecasts are assumptions about population growth and per capita use of electricity. It is assumed population will grow at 1.1 per cent annually and per capita use by 0.4 per cent. Together, it is assumed these two factors will produce a 1.5 per cent annual growth in energy consumption (before modest savings that might be achieved with new Power Smart programs).
Let's examine the assumption about population growth. While there has been a surge in population growth in recent years, there is no guarantee it will continue. Manitoba's long-term average annual population increase is less than 0.6 per cent, well below the figure assumed by Hydro. Recent growth has been maintained at an artificially high level by a government that seeks to offset emigration from Manitoba to other provinces and provide human resources for its deficit-fuelled government-funded economy.
Not unrelated is the NDP's effort to exploit the federal-provincial tax transfer program, which benefits Manitoba handsomely from population growth. An economy supported by 'deficit dollars' and 'Confederation cash' is not sustainable. Neither is a 'managed' population growth nor a development plan relying on that growth.
What about the other component of Hydro's load growth assumption, the 0.4 per cent annual increase in per capita use? This dwarfs the 0.1 per cent reduction in energy consumption that Hydro intends to achieve with new Power Smart efforts. A plan counting on increase in per capita use bucks the trend. A Dec. 30 Associated Press article titled U.S. home electricity use declines for third straight year has the following to say about per capita use of electrical power:
"Because of more energy-efficient housing, appliances and gadgets, power usage is on track to decline in 2013 for the third year in a row, to its lowest point since 2001, even though our lives are more electrified".
Why has Hydro added 0.4 per cent to a load growth estimate already exaggerated?
Hydro's 5,000-page document acknowledges the softness of some of the other assumptions that underpin its plan. Included among those assumptions are the estimates used for the capital cost of Keeyask, Conawapa and associated transmission, the price of natural gas, the timing of a drought, carbon policy, and the discount rate used in comparing alternative plans. To deal with uncertainty, the plan incorporates probability studies. Unfortunately, the ranges of uncertainty considered are very narrow and new assumptions made during the analysis make the original assumptions obsolete.
Returning to the load forecast, Hydro's methodology for justifying its development plan does consider the impact of deviation from the assumed load forecast, but not in a realistic range. The lowest annual growth considered for load was about 1.2 per cent. Even at this level of growth, the viability of the plan is questionable. The question that needs to be asked is: if a load forecast had been used that was in line with a more typical 0.6 per cent annual growth in population, and if it did not include the unsupportable increase in per capita consumption, how viable would the plan be? Five thousand pages later, this question is unanswered!
A system built on exaggerated projections of load will find itself without revenue to pay for its costs. Even though the government would like us to believe that the Americans will help us out, the buck stops with ratepayers. Projected rate increases over the next 20 years at twice the rate of inflation using excessively rosy projections of load forecast will be found to be inadequate.
Keeyask will be built many years before it is required and a decision will have to be made soon whether to build Conawapa at all. There is a strong case for delaying Bipole III and considering a much cheaper and less risky combined cycle gas plant.
Sometimes a conceptual assessment "on the back of an envelope" is better than volumes of paper, particularly if that paper is little more than a house of cards.
Garland Laliberte is dean emeritus of the faculty of engineering, University of Manitoba, and vice-president of the Bipole III Coalition.