I was lying in my comfy chair listening to evening
news. The forecaster called it the ‘weather
bomb’. This was a term that my old
friend Uncle Gnarley had initially despised, considering it yet another example
of the vulgarization of the King’s English.
But one could not deny the effect it had in describing the events which
he knew was going to unfold in the next 24 hours. The Avalon Peninsula was going to be somewhat
spared. The low pressure system was
moving in from Cape Breton, over the straight and was due to hit the long range
mountains by noon tomorrow. It had come up very quickly, and it was going
to be the first winter storm of the season.
was hypnotic and I quickly started to dot off.
My slumber was quickly interrupted by a knock at the door. Who the hell would be out in this type of
weather, at this time at night? As I
opened the door it was there was the cantankerous old economist Uncle Gnarley
himself. Slapped over his shoulder was
an old canvas kit bag. I motioned for my
friend to come in.
“What brings you up from the shore”
soft in your old age, and I brought you some provisions in the event that this
storm matches the high expectations of Toni-Marie”. He looked at me, the devious smile was
clearly meant as a double entendre.
He reached into the bag, and hauled out a
bottle of Laphroaig “the peat will keep
us warm tonight Nav”.
He sat into the chair next to mine. Despite the eagerness of opening the bottle I
knew the great economist was clearly troubled.
The entire Muskrat debate was starting to take it’s toll on the
warrior. Despite my better judgment, I
lobbed the following question “Uncle Gnarley what do you think of all these
reports on the Muskrat Falls project”?
“Well Nav….
It brings me to a very interesting subject. It seems as if my studies in economics have
come full circle. You see when I first
entered the Economics school I had a passion for the science of
management. At the time there was a
great school of thought which referred to the concept of information
overload. There was even a best seller
book dedicated to the subject.
Information wasn’t power, as much as it could be a red herring”.
his mental fatigue. I thought the old
economist had gone wet, as I failed to understand the significance of his
comment.
“Nav… Government knew their weakness during
the PUB review was that they did not do what should have been done to support
the DG2 decision back in 2010. They had
not properly investigated all the options.
Now, like the prodigal parent on Christmas morning, they have
compensated by producing a litany of documents trying to win the love of the
electorate. In doing so they have become
the advocate of information overload ”.
head of steam, which I knew that one dram of the west island nectar would not
be sufficient to combat.
“Information overload occurs when the
amount of input to a system exceeds its processing capacity. Decision makers
have fairly limited cognitive processing capacity. Consequently, when
information overload occurs, it is likely that a reduction in decision quality
will occur.”1 Uncle Gnarley
then lamented “and there has been no shortage of poor quality decisions being
made by this Government”.
amount of new information is impressive, but it does legitimately seem to
answer most of your previous questions.
Does it not”?
someone who clearly has limited cognitive processing capacity. I can tell from your attentiveness here this
evening, that you are tired of the debate, and that you just want it to be
finished. This is what the government
has wanted. Apathy is an unwanted side
effect of information overload. The
government has scored a double whammy… confusion and public apathy. These are the greatest allies of Dunderdale
and Kennedy”.
“Just as this ‘weather bomb’ will blanket
the island with snow, the Muskrat ‘information bomb’ has blanketed the province
with indifference”.
complete, and they pretty much define that Muskrat is the best option”
With this Uncle Gnarley reached into the
bag and pulled out the silver quaich. I took this a sign that he was ready to
commence a fine session.
reasoned people who still are engaged in this process. A quick review of the documents, and I stress
only a quick review is required to uncover the major omissions in governments
latest set of discussion papers on Muskrat Falls”
“Take for example the wind
report. Manitoba Hydro has produced a
top quality document. It reinforced the
excellent work done by Hatch. An
infantry of high priced engineering consultants who have confirmed the
obvious. Wind is not a realistic option
to replace Holyrood in the isolated option.
As they have been directed by Nalcor they have only examined wind in the
isolated case. There has been no review
of wind with the interconnection to the mainland grid in place. This is despite recommending in their DG2
report that the link to Labrador would allow 400 MW of wind to be integrated
into the island supply mix (Ref. 2).
This engineering infantry are well trained, and have flawlessly executed
their orders. But the General has told
them to direct their fire to the wrong target”.
of my own. “Well Uncle Gnarley I believe
the first independent review of the project by the Joint Review panel
recommended that Nalcor consider building the link to Labrador now, but instead
of building Muskrat Falls, use wind and thermal to supplement the RECALL power
which is presently available from the Upper Churchill”
“Well Nav, there are
infrequent times which your mental prowess impresses me… this is one of those
times. You have raised a very valid
point. I would like to see what this
option costs, especially we know that in 2041 we will have vast sources of
power available to put across on that link.”
is another government paper which discounts this possibility. It indicates that the power may not in fact
be available in 2041”
With that Uncle Gnarley
continued over to woodstove in the corner.
“I think it best we get this going, just in the case the power goes out
tonight”. With that Uncle Gnarley
started to build a fire.
“Nav… if you want any
evidence that the Government has not maintained objectivity in reviewing the
lowest cost options just review the document which reviews the availability of
power in 2041. It reeks of desperation,
and is not worth the glossy paper which was needlessly wasted in its
production. As is entrenched in their
2007 Energy Plan, it is clear that the province will have access to power from
Upper Churchill in 2041. I would expect
that we would have to pay market rates for it, just as will Hydro Quebec. But we will get 65% of the money back in our
pockets. The higher we pay for Upper
Churchill power, the higher Hydro Quebec will pay for Upper Churchill
power. The more the “market rate” is the
more money we make. It is the cost which
is important, and the cost is about 2 $/MWh which has been previously acknowledged
by Nalcor themselves [Ref. 3].
thought that the splits might instantaneously combust from the fire emanating from
Uncle Gnarley’s eyes. He was clearly
tormented by this 2041 paper. I made a
mental note to go back a re-read the paper with an open mind.
“You see Nav we must get
back to first principals. Do we need the
power? Well I agree that for the next 10
years there will be growth on the island.
But Nalcor has assumed that in 50 years we will need 50% more power on
the island, even if there is no growth in the population. It is the greatest example of the ‘Garbage-In-Garbage-Out’
axiom. Their estimates may be
acceptable. But the fact that they have
not explained the risk to people of the province if the demand does not grow as
expected, then this is not acceptable.
Ed Martin has failed in his obligation to the people of the province. He should clearly define what the risk to the
rate payer is if the demand grows 0.2% per year as opposed to the 0.8% used by
Nalcor”.
had my learned friend “Well, Uncle Gnarley, surely the price of oil is much
riskier than the growth in the islands electrical demands”
“Nav… with the predictions
that the US may be a net exporter of oil by 2035 this assumption is very much
in doubt. But it must also be remember
that Muskrat Falls can be built in the future, should energy prices increase in
the US to where Muskrat Falls makes sense.
The link being built (and mostly paid for) would make this a much more
palatable exercise…. And one I would support”
next question. Is it the least cost
option? The rate calculator provided by
Nalcor on the website clearly shows that it makes very little difference to our
rates, at least in the short term. We should not only consider what is the least
cost option. We should ask what is the
least risk option!”
I think anyone with an open
mind would agree that Muskrat Falls can only be considered the highest risk
alternative. From the risk associated
with cost growth, to the demand risk there could be a potential perfect storm
for rate payers in the province. Where
is the Government handout which explains what our rates may be if things do not
go as planned?
and lack of demand there are other risks as well. If inflation is not 2% per year then we are
snookered, left holding a massive debt in the face of declining revenue. Where has government explained the risk of
Emera, or ConEdison or other generators asking permission to sell power into
Newfoundland using the Open Access Transmission over the Maritime Link, or
Labrador link. They may come in with
cheap electricity generated from Shale Gas, and try to sell it to the
industrial customers on the island.
You see Nav, there is
substantial risks associated with the Muskrat Falls project.
lack of public discussion about how being connected to the North American grid
may have on the electrical market in Newfoundland. There is also no discussion why rate payers
in Newfoundland will not pay more for our rates, than our brothers in
Labrador. Their rates will be kept low
based on the RECALL power. Where has
this been discussed?
You see Nav there has not
been discussion, there has only been talking points. There is a clear difference. Without Nalcor appearing before the House of
Assembly where will these questions be answered for the public record”?
Gnarely was clearly mentally drained. He
appeared out the window. The snow had
started, and the reality of his situation had finally set in. The silhouette of Gnarley was pressed against
the wall, the fire was quietly starting to form into glowing embers, and
provided yet again a generous backlight.
“Nav. Not to mention the risk of the power line
coming down from Labrador. Another gem
which was buried in the MHI report was that Nalcor did not include in their
pricing the design of the transmission system to the design condition
recommended by MHI for remote alpine area.
This was clearly in contradiction to MHI’s recommendation from their DG2
work. There is a chance that the transmission
line could be out of service for up to a month, while a repair was being
implemented”.
returned to the National. The leading
story was about the great winter storm on Cape Breton island, which was causing
widespread damage and power failures.
Uncle Gnarley looked at
me. “There is quite a storm brewing….
Nalcor are telling us that Muskrat Falls will make our power supply more
secure. MHI are stating are transmission
line will not be designed to industry standard”
I looked out the Window and
then lamented “Maybe Tony Marie will be wrong. Like the V2 rocket this weather
bomb may go off course”.
took out the great piece of birch, and stoked the fire. “Nav… you may want to keep this relic a few
more years yet”.
JM
References
Wind Recommendation
stating 2$
(Editor’s Note: JM is the anonymous author of a 175 page Submission to the Public Utilities Board (PUB) entitled: Muskrat Falls – The Benefits of a Phased Development. He has written several subsequent Reports, related to the Muskrat Falls Hydro Project, including Labrador Mining – A Reason to Rethink and Upper Churchill – The Unexplored Alternative).
The RISK to our fiscal situation is the thing that scares me the most. The government and NALCOR are glossing over so many unanswered questions and their assumptions are a fairy tale. Unlike Uncle Gnarley and JM, I am not at all convinced that we will EVER need a power line from Labrador.
To be clear, I do believe that the Holyrood plant needs serious upgrading, in order to reduce its carbon footprint and the pollutants that it emits. That can be achieved for about $600 million dollars, according to NL Hydro's own estimates. This is effectively only 2 years' interest payments on the Muskrat Falls debt.
As well, I believe wind power can substantially reduce the power we need from Holyrood and effectively replace it much of the time, thereby further reducing the amount of oil consumed and the emissions that result from it. What they are not telling us is that Holyrood, or a similar system will always be needed as a backup so…thermal power will NOT disappear.
Wind power is more expensive than hydro, to be sure, but, as a supplementary source, it can be integrated effectively and cheaply with only moderate price spikes. Also, it may be that we can develop additional small hydro sources to increase power output.
As Winston Adams points out frequently, installation of more efficient electrical units can, and will, significantly reduce consumption and could obviate the need for any additional sources of power.
I see the solution as being a series of incremental increases, using various sources. However, possibly reducing power consumption through more efficient types of heating, might eliminate the need for more sources, given the lack of population growth or more likely, a declining population, in the next 20 years. That fact alone is sobering and should be a major red flag for government.
Sadly, the myopia attached to St. John's and environs is skewing the outlook of the government, its bureaucrats, and the business elite. We are heading for dangerous waters and there is no preparation or planning!
In the governments haste to show the wind was no solution they analysized the silly idea of adding 1200 MW of wind on the island, 600 on the west coast and 600 on the east and a expensive separate transmission line to bring power from the west coast to the east. If that wasn't silly enough they added a battery backup for this at some 4 billion extra. A grade 4 student could probably reason this was not economic.
But what appears to be overlooked is the other info on wind in that report. We currently have 54 MW of wind, about 3.5 percent of our peak demand. Nine months ago MHI agreed with Nalcor that 80 was likely our maximum wind for technical reasons. Now they say it is ok up to 10 percent of our maximum system demand , and up to 15 percent if some additional controls are used. This permits wind up to 3 to 4 times our present level. At 15 percent this is 177 MW in addition to our present 54 MW. 177 Mw of wind costs about 425 million. As these operate at about 43 percent capacity, this is 77 MW average offset against holyrood oil, saving about 50 million per year in oil. It also offsets the full average load of Vale Inco which is 75 MW, and thus cuts the load forecast.
For all that , the wind limit is still only about one third of the efficiency savings possible, and which is much cheaper cost than the wind. But this wind is an important supplement to efficiency,along with the 77 MW of island hydro allowing the ratcheting back to zero use of Holyrood in 7 or 8 years instead of 12 years with efficiency alone. This part of the MHI report is a important key finding to require a reassessment of the isolated option, but which must also including efficiency. Winston Adams
There's definately a great deal to learn about this subject.
I love all the points you have made.
Keep on writing, great job!