Hey there, time traveller!
This article was published 14/10/2015 (2290 days ago), so information in it may no longer be current.
Brian Kelcey writes that Manitoba's hydroelectric resource is greatly overrated and exaggerated (Fixation on Hydro, Sept. 23). Therefore, presumably, he thinks further development could and should be stopped. Perhaps -- but for what reason?
For the past 50 years, Manitoba Hydro has been a leader in northern- and subarctic-climate design and construction and long-distance HVDC transmission. It pioneered the development and use of high-voltage direct current transmission of electricity 45 years ago. It was then one of only three such ventures in the world. That surely is leadership.
Manitoba Hydro has also shown leadership, with its Power Smart program and promotion of geothermal energy, in conservation and efficiency. For practical and environmental benefits, the use of wind and solar (both of which are intermittent, interruptible forms of power) must be backed up by hydro. Coal or nuclear backup units take too long "getting up to steam" and natural gas, while cleaner than coal, still produces a half-tonne of CO2 for every megawatt-hour of electricity. Gas-turbine backup can be justified, but it should be used only for "peak load" and renewables backup.
Kelcey rightly raises the economic issues of resource pricing and utility costs and rates, but he ignores carbon emissions, which is important.
There are those who, in their embrace of the environmental imperative, promote alternatives that, installed prematurely, could very likely cost 50 per cent to 100 per cent more than current rates. That, too, is irresponsible.
Manitoba has fared well with its use of energy resources and controlling its costs. Through its publicly owned utility, the province for 65 years has produced more than 95 per cent of its electrical energy free from fossil coal or gas. That has prevented 25 million tonnes of CO2 going into the atmosphere annually. Over the past 40 years, that equates to as much as one billion tonnes of greenhouse gas avoided. Not bad for a province of one million souls.
The Nelson River, about 75 per cent harnessed, generates about $1.5 billion of revenue or income per year, at current rates. The hydroelectric assets are amortized and paid for, to date, by surprisingly modest rates and charges. That has delivered electricity to Manitobans at rates that are the lowest in the world (except Iceland and possibly Washington/Oregon).
I don't believe Kelcey mentioned rates or CO2 emissions. Yet these, along with construction costs, are the very essence of coherent energy policy.
There have also been benefits from the regulation of Lake Winnipeg these past 38 years which, in turn, enabled the reduction by 60 per cent of the flooding of South Indian Lake. Similarly, it has enlarged greatly the benefits in harnessing water at the Jenpeg, Kettle Rapids, Long Spruce and Limestone dams.
The Limestone site alone has generated about $7 billion in revenue over 20 years. Built during the Pawley administration at a cost of approximately $1.1 million per megawatt, it has been a tremendous asset -- as are all these hydro plants. They are all fuel-cost free and all were built at low-unit cost. Therefore, they are, and remain, protection against inflation for their 100-year (and more) lifespans -- and with no depletion of resources to "leave as a legacy" to the next generations.
Kelcey may be right in suggesting there is such a thing as paying too high a price; constructing at too high a unit cost; being too cavalier in ignoring lower-cost alternatives.
If the price of sales, both domestic and export, keeps pace with wildly escalating construction costs, one could discount fears of massive deficits and bankruptcy. But all signs point to an extended period of export-market saturation, with future low-cost alternatives competing with the ever-rising cost of recent construction facing Hydro. This means debt servicing and amortization will require rising charges and rates to be carried on the back of local customers.
Will Manitobans have to subsidize exports? That may seem unthinkable. But what is the option if construction costs increase from $1 million per megawatt, installed, to $8 million even while the sale price received per megawatt hour in this same period moves from $50 per megawatt hour to only $70 or even $90? Note the cost ratio has moved up 800 per cent -- the price-revenue ratio by less than 80 per cent.
There is a grave danger looming if we ignore these mind-boggling disparities unfolding. These numbers should give us all reason to pause. It's time for a reality check.
We need to wait for prices to catch up with costs. They likely will in the long run, but only if the current market psychology that assumes, incredibly, we are awash in oil and gas starts to change and there is a genuine determination in the UN and its agencies to turn the tap down somewhat on fossil fuels -- starting now, not in 2030.
In the meantime, we can't recklessly start multibillion-dollar projects that have hopeless revenue-expense ratios and hope this will somehow turn out for the best.
Therefore, now is not the time to embark on "$7-million-per-megawatt" projects (i.e. $8 billion for any Limestone-size-equivalent plant).
Nor is it the time to build transmission lines (e.g. Bipole III) that are one and a half times longer than necessary, costing one and a half times more than need be. Spending an extra $1 billion for transmission and an extra $5 billion (or more) on a 1,000-megawatt plant without a similar increase in sale-revenues prospects can only mean one thing: Manitobans will be forced to subsidize the cost of export losses, through grossly higher rates at home. That is an insult to reason.
Manitoba Hydro should wait 10 years or so, until the market and energy policy in North America changes, finally, in favour of renewables such as hydro and wind. One day, we may even bring about an energy policy and grid worthy of Canada's size and scope.
After serving as premier of Manitoba and later as governor general of Canada, Ed Schreyer was guest professor (1993-2001) at several universities in Canada and Europe on global energy alternatives.