Hydro is blinkered by history

Hey there, time traveller!
This article was published 10/4/2014 (1225 days ago), so information in it may no longer be current.

Testimony before the Public Utilities Board this week of an independent expert that tested the economics of Manitoba Hydro's preferred development plan -- big, expensive dams and a pricey new transmission line to the United States -- reveals the value of a little perspective. In this case, it is the ability to step back, scrape away vested interests and start with a view unencumbered by a historical view that regards hydroelectric development as the best way to meet Manitoba's energy needs.

When La Capra Associates, with the help of other independent experts hired by the PUB, ran their own economic tests of Hydro's plan, it found numerous flaws. It told the PUB that the benefits of building the Keeyask dam, a transmission line into the northern States and then Conawapa were marginal compared to supplying power through natural gas plants alone.

Rather than being $1.7 billion to the better with the preferred plan, La Capra found Manitoba Hydro could see as little as $45 million saved over an all-gas plan. And that recalculation "takes virtually all of the advantage over all-gas off the table." The benefits of the preferred plan are sustained only when counting money flowing into provincial coffers from fees for water rental, debt guarantees and capital taxes from Hydro over 78 years.

And, La Capra says, with the case for Conawapa unproven -- Hydro does not know when the mega-generating station will be needed domestically -- the case for building a new U.S. transmission line is undermined.

La Capra's report tested Manitoba Hydro's analysis, including its forecasts for prices it might get for export sales of surplus energy (especially the power it sells from dams that are constructed well in advance of domestic power needs), the price of alternative energy, which hydroelectricity competes with in the export market and the construction costs of the dams. All of that is compared to not building dams and going with other forms of energy, such as gas, wind and solar, to meet Manitoba's needs.

Manitoba Hydro is overestimating the cost of the alternatives, especially in the case of wind, because it has not considered how new technology has made that power cheaper to produce, as witnessed in North Dakota.

Further, proving the preferred plan's economic benefits requires a timeline of 78 years, because even after 50 years, the all-gas alternative has bigger financial benefits.

La Capra stresses that no one, including Manitoba Hydro, can predict where alternative technologies and energy prices will be so many decades into the future.

Under considerable pressure, including from the PUB, Hydro has looked seriously at substituting a combined-cycle gas plant for Conawapa in its plan.

As well, it is also proposing to ramp up electricity conservation efforts, which will change all its numbers again, including when dams will be needed for domestic use.

Hydro disputes La Capra's analysis and insists it must build dams because wind is unpredictable, gas plants are cheaper but have a shorter life and no one knows if conservation efforts will work.

But the gulf between its position and that of an outside expert shows Manitoba ratepayers are not well served in energy strategy by a Crown firm that was created specifically to develop and supply hydroelectric power. Manitoba Hydro cannot be blamed for defending its interests, but Manitobans can expect more of their provincial government.

What is needed, as has been proposed by former NDP energy minister Tim Sale, is an independent energy authority that keeps abreast of the global developments and plots Manitoba's resources and its energy needs against technological advances and environmental and market forces. Such a body would serve as a natural, continuous counterbalance to a hydroelectric agency that, when tested, has been found wanting in perspective.

WHAT LA CAPRA FOUND

A summary of La Capra Associates Inc. findings can be found at wfp.to/comment