Investment needed to meet climate goals

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This article was published 15/11/2023 (1039 days ago), so information in it may no longer be current.

It has become increasingly clear that if governments want to fully harness Manitoba Hydro’s potential to fight climate change, they must invest directly into the publicly owned utility.

A good example of that occurred last week when the federal and provincial governments announced $475.6 million of capital funding for two Manitoba Hydro projects that will not only boost transmission capacity, but also help reduce greenhouse gas emissions.

The two levels of government are investing $314 million into the Pointe Du Bois hydroelectric power station on the Winnipeg River, northeast of Winnipeg. Hydro is planning to replace eight generating units, which are nearing their end of life, at the 110-year old plant.

The upgrade will add 52 megawatts of electricity output to the grid and extend the station’s life to at least 2055. The project includes a new transmission line connecting Pointe Du Bois to a substation in the Whiteshell.

A separate project announced last week will see a new transmission line run from the Dorsey converter station northwest of Winnipeg to a planned station west of Portage la Prairie. The $161-million project will help meet growing hydroelectric demand in the region and reduce Hydro’s reliance on the natural-gas fired Brandon Generating Station.

Demand for hydroelectric power in Manitoba is growing rapidly. The need for more hydroelectric power is expected to accelerate as Manitoba’s population and industrial sector grow and as households and businesses shift from carbon-based energy to clean, renewable power.

That poses a challenge for Hydro, since its energy and capacity resources are limited. The Crown corporation is already anticipating that it will not renew some of its export contracts so it can use more of its surplus power for domestic use in the near future. However, it will need to do more than that to meet future demand.

Hydro’s fiscal capacity is also limited. It has taken on historically high levels of debt to finance megaprojects, such as the recently completed Keeyask Generating Station. There are limits to how much more the Crown corporation can borrow to finance future capital projects.

Which is why governments will have to consider increasing their investments in Hydro if they want to advance their policy goals of reducing greenhouse gas emissions.

Some capital projects, like the Pointe Du Bois upgrade, would not have been possible without direct investments from government, according to Hydro’s chief executive officer Jay Grewal.

“Without the federal dollars, the business case would not have worked,” she said last week.

Manitoba Hydro is now looking to third-party funding to support capital projects and has incorporated it into its long-term capital spending plans.

According to Hydro’s 2023-24 Enterprise Plan, the corporation plans to expand third-party funding, including from federal and provincial governments, to minimize debt exposure.

“As Manitoba Hydro works to address debt levels and prepare its balance sheet for the evolving energy landscape, efforts will be made to minimize borrowing costs, keep rates low for customers and invest in our system for the future,” the report says.

Demand for hydroelectricity in Manitoba will be driven in large part by government policy, including the desire to move towards a net-zero emissions economy. The speed at which governments plan to make that transition will have a significant impact on the demand for hydroelectric power.

It will be necessary, therefore, for governments to make substantial investments in capital projects that expand Hydro’s transmission output. The kind of partnerships Manitobans saw last week between the two levels of government and Hydro will be a key part of moving towards a low-carbon or no-carbon economy.