Looming need for new energy sources: Hydro CEO

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This article was published 30/01/2024 (620 days ago), so information in it may no longer be current.

Demand is growing so fast, Manitoba Hydro may need to have new power generation on line by the end of the decade, its chief executive officer says.

“When we built Keeyask (generating station), we didn’t think we’d need that new power until 2045. We may need it by 2029 or 2030,” Jay Grewal said in a Tuesday morning speech in Winnipeg to the Manitoba Chambers of Commerce.

Grewal told the audience — in so many words — there’s likely going to be a lot more wind farms in Manitoba in the near future.

Hydro currently generates about 2.5 per cent of its total output from wind and another 0.1 per cent from natural gas powered generation. The rest is from emission-free hydroelectricity.

Grewal said models have shown electricity demand in Manitoba could double or triple in the next 20 years. However, the Crown utility does not plan to build more hydro generating stations.

“That’s because we are so highly leveraged,” she said, noting 33 cents of every dollar its customers spend on Manitoba Hydro services goes to pay the interest on that debt.

“Which is why our strategy will be to go to market for new sources of generation,” she said. “We will issue requests for proposals for independent power producers and for power purchase agreements.”

In a frank, information-packed speech, Grewal sketched out the unique challenges — and opportunities — the provincial utility faces in its efforts to meet the federal government regulation of getting to net zero in electricity production by 2035.

Grewal’s address to the chamber also touched on the impact drought-like winter weather has had on the amount of power Hydro has been able to recently produce.

“This year’s drought has left us with a $160 million-plus negative net income at this time… and our cash flow has shrunk by $900 million.”

She said the risk of drought is one of the toughest to plan for. Dry conditions in 2021 left Hydro $160 million in the red; last year’s excessive moisture brought a $600-million profit.

Those dynamics become even more fraught due to the Crown corporation’s massive debt load, which makes up 40 per cent of the provincial government’s total.

The disruption in Hydro operations is being driven by efforts to decarbonize global society to fight climate change. It is causing a sustained increase in demand for clean electricity as the world shifts, for instance, from cars running on internal combustion engines to electric vehicles that need to be regularly charged.

While the CEO was open about the heavy debt load the corporation carries — calling Manitoba Hydro one of the most leveraged utilities in Canada — she was also keen to frame the situation as an opportunity.

“Every utility is facing the impact of that policy (to reach net zero by 2035),” she said. “We will be spending to build clean generation. Other provinces and utilities will have to spend to replace carbon-based generation and then build new (net-zero power generation).

“We are in an enviable position.”

The challenge now is to double or triple — in less than 15 years — the generating capacity that has taken 100 years to construct.

Grewal was not able to give a timeframe for this process to begin, but noted it could take years before new-source power will be able to start humming through Hydro’s lines.

Although purchase agreements will mean the utility will not have to invest billions in capital expenditure to build new generating stations, it will have to spend on new power lines to bring that energy onto the grid (in addition to the actual cost of purchasing the power).

“What we do know for certain is that with all these investments, electricity costs will go up,” she said, without offering a timeframe.

However, Grewal noted any increased fees will be added on to what are now the second-lowest electricity rates in the country.

The Public Utilities Board has agreed to one per cent hydro rate increases for the next couple of years.

In the meantime, Hydro will double down on efforts to enhance efficiencies, Grewal said. That will include new technology programs, such as the introduction of smart meters to manage peak usage, which could push back the clock on when new generation sources are required.

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The CEO said the Crown corporation is also looking to build back its workforce, which is now about 1,000 people fewer than it was seven years ago. She acknowledged because of that, only about 70 per cent of maintenance work on existing infrastructure is being done.

It has been estimated Manitoba Hydro will have to invest about $27 billion to obtain the new generation required to meet the expected increased demand. That does not include maintenance work on existing assets.

Those workforce issues may be more challenging than in the past because of new skills and experience that will be needed to manage potentially thousands of megawatts of wind power generation and the accelerated timeframe for the demand for those workers.

It has prompted Manitoba Hydro to undertake its first ever strategic work plan.

martin.cash@freepress.mb.ca