LIBERTY REPORT KICKS LAST LEG FROM UNDER MUSKRAT FALLS PROJECT

Likely everyone
remembers #DARKNL. January 2014 – successive days without power
followed by rolling outages – tens of thousands of people huddled in the cold
and the dark.

It didn’t
sit well with anyone – just ask Kathy Dunderdale.

The PUB initiated
an investigation into the root cause of the power failures. The Liberty Group,
a Consultancy, was hired to conduct the inquiry – which had two phases.

The Phase I Report,
released last year, gave exhaustive details of the poor management culture at
NL Hydro, the dreadful state of maintenance on Hydro’s generating assets, and
the need for more generating assets to enhance reliability – which led to a new
generator (sort of) installed at Holyrood.

The Phase II
Report dealt with an “assessment of the adequacy and reliability of the IIS
(Newfoundland island system aka “Isolated Island Service”) to meet customers’ load both up
to and after the interconnection with Muskrat Falls.”  It was released August 19th

Liberty
is quoted frequently in this Post. It is best that this narrative is described in
the Consultant’s own words.


That the
investigation occurred at all was a minor miracle.  It was supported by Newfoundland Power – somewhat
late to the Muskrat game – their weight critical, nevertheless, to convincing the PUB
serious issues needed further study. Several individuals, some connected with
the 2041 Group, including this blogger, made submissions to the PUB to support
the initiative.

Intervenors
were concerned that a prolonged outage associated with failure of the 1100 KM extension cord traversing several climatic
conditions including over the Long Range Mountains – given that the bulk of the
load was located at the far end, on the Avalon Peninsula – would seriously threaten our economy and society.

Liberty noted
that even with the addition of a new generator “more work will be needed …including
two major features that Hydro is not necessarily considering at this time.
Those features are (1) additional power supply and (2) expanded organizational
capabilities.”  

Liberty reminds
us that the outages which occurred in January 2014 “were as much or more due to
organizational issues as they were due to system inadequacies”. The Consultancy
stated that those problems still plague NL Hydro. Having been previously addressed
on this Blog, I will restrict today’s comments to the post-Muskrat phase, except
for one.

Liberty Wants More Supply Now
to Mitigate Outages
Liberty
expresses concern that “(w)hile it had long been contemplated that Muskrat
Falls would preclude the need for more supply until the 2030s…new supply will
be needed before Muskrat Falls is in service, to mitigate near-term supply
issues, and after Muskrat Falls is in service, to mitigate the impact of
extended outages of the Labrador-Island Link (LIL).”

The source
of this concern is what the Consultancy describes as “continuing problems with
Hydro’s existing thermal generating units and the delay in the in-service date
for Muskrat Falls increase the risk of outages until the interconnection.”

Liberty
expects that this additional supply can be obtained “through firm purchases, if
available, over the Maritime Link or additional new generation on the IIS”. In
their own words, the Consultancy believes “…the supply risks are greater than suggested by
Hydro’s assessment and that new generation is likely required prior to the
interconnection.”

Liberty’s concern
is not based upon an increase in demand as the Exhibit (below) confirms.
Readers may remember that Nalcor acknowledged earlier this year that Load
requirements will not hit the forecast level used to justify Muskrat Sanction until 2036.
(Given a recent CBC report about consumers converting to oil that date may even
be optimistic – the public broadcaster may want to inquire about increasing sales
of heat pumps, too).


Liberty
warned, in its 2014 Report, that despite the addition of a new generator at
Holyrood “generation reserves are very low and the risk of outages remains high
for the 2015-17 winter seasons.” This concern is now extended because “full power from Muskrat Falls is forecast as “mid-2020”….in time for
the winter of 2020-21 (which) contrasts to the original plans of the winter of
2017-18.”

The risks of
continuing outages relates not to just the bucket of bolts constituting Hydro’s
existing thermal generation but also due to a “…shift to a 90% probability for
the peak demand forecast from Hydro’s previously used 50%.” Liberty takes a
more conservative approach to the winter peaking problem than does NL Hydro. 

Hydro, as Liberty discussed in a prior Report, uses outages as a demand management
tool – a practice it condemned. (In fact, the only problem Hydro ever had related to “peak” demand due to the unbridled installation of electric baseboard heating in new (primarily residential) construction which “policy” could have resolved. Nalcor essentially used this “false” problem to
justify Muskrat Falls, ignoring the attendant risks.)

Outages Cannot be Avoided says
Liberty
Post-Muskrat
Falls, Liberty is concerned that the “isolated island system” or IIS is “relatively
small…approximately 1,700 megawatts”, with the majority of its load centered on
the Avalon Peninsula. It states that the size of Muskrat Falls (824 megawatts) …”is
large for the size of the IIS” which “presents challenges from a reliability
perspective given the consequences of the instantaneous loss of the LIL”
(Labrador Island Link) – precisely the concerns over which the small group of
intervenors sought the PUB’s ear – over Nalcor’s objections.

Liberty
points out that “outages cannot be completely avoided”.

Indeed, you
may find the Consultant’s next comments disturbing. Liberty states:

“Reliability analyses completed by
Hydro for the LIL indicate a probability of a full LIL outage every three years
with an average duration of twenty-nine hours.” Hydro believes …customer
outages will be limited to a few hours…” (but) “Liberty believes…that there
will be more LIL …outages than estimated by Hydro”. (emphasis added)

Simply put,
if there is not sufficient backup, there will be additional customer impact,
including rotating outages. The capacity will have to come from “…new
combustion turbines or firm, dependable capacity from Nova Scotia via the
Maritime Link”, says the Consultancy.
Liberty
recommends that Hydro secure the necessary capacity commitments to mitigate the
consequences of an extended LIL bipole (full system) outage. Says Liberty:

“Extended LIL outages are possible,
including failure of the overhead line (OHL). Although Hydro’s stated objective
is to complete repairs for the overhead lines within two weeks, it is difficult to have confidence that two weeks
is the maximum limit for an OHL-related outage, recognizing the magnitude of
the challenge of repairing significant OHL damage in potentially extreme
weather and in harsh terrain.” (emphasis added)

Maritime Link: a 300 MW Generator?
Liberty
states that “Hydro’s reliability analyses assume the Maritime Link is
equivalent to a 300 MW generator with high availability for the IIS.” They note that “(t)he Maritime Link is thus a critical feature for the operation and
reliability” of the province’s electrical grid post-Muskrat commissioning.

Liberty wants
“…additional studies (to) be completed not only with the (Maritime) Link in
service, but also with it out of service”. They acknowledge some of the questions
critics of Muskrat have raised from the beginning – in particular, that “(o)n a
bipole trip (a complete Labrador Island Link failure), Nova Scotia will have to
replace the power it loses from Muskrat Falls and provide additional capacity
for the IIS.”

Nalcor has
never produced an agreement with Emera (which would likely require the approval
of Nova Scotia’s UARB) how the ML will be “a source of dependable generation…”
even after Nova Scotia’s coal fired generators are shut down. It need to do just that. This is hardly a minor loose end.

Liberty was
charged with investigating issues of power reliability and security. In this
Study it was not concerned with the cost of those installations.

Yet, Liberty has serious concerns about Nalcor’s outage claims. Its doubts that a bipole
failure on the LIL can be repaired within two weeks. It claims that additional thermal
generating capacity is necessary and that another deal with Emera must be
entertained. 



Taken together, Liberty has kicked the last leg, if any remains, out
from under the idea Muskrat was a viable option – even as a secure supply – without refurbishing Holyrood, the very asset, Nalcor argued, it was designed to replace.

None of the “back-up” arrangements proposed by Liberty come for free.

As construction
costs mount and consideration is finally given to the costs of insuring against
a winter outage extending from twenty-nine hours to in excess of two weeks, we
await another of Stan Marshall’s Ed Martin style revisions.  

I wonder how many Liberty Reports it would take to convince Danny Williams Muskrat was a dog from the get-go? But, then, it was always all about Danny. Wasn’t it?.

Des Sullivan
Des Sullivan
St. John's, Newfoundland and Labrador, Canada Uncle Gnarley is hosted by Des Sullivan, of St. John's. He is a businessman engaged over three decades in real estate management and development companies and in retail. He is currently a Director of Dorset Investments Limited and Donovan Holdings Limited. During his early career he served as Executive Assistant to Premier's Frank D. Moores (1975-1979) and Brian Peckford (1979-1985). He also served as a Part-Time Board Member on the Canada-Newfoundland Labrador Offshore Petroleum Board (C-NLOPB). Uncle Gnarley appears on the masthead representing serious and unambiguous positions on NL politics and public policy. Uncle Gnarley is a fiscal conservative possessing distinctly liberal values and a non-partisan persusasion. Those values and opinions underlie this writer's views on NL's politics, economy and society. Uncle Gnarley publishes Monday mornings and more often when events warrant.

NALCOR (Masquerading as ‘Hydro’)LIVES IN AN UPSIDE DOWN WORLD

If a Big Mac costs McDonalds $10 to produce and it is sold for $1.50, McDonalds will go out of business. They would not declare a profit!

REMEMBERING BILL MARSHALL

Bill left public life shortly after the signing of the Atlantic Accord and became a member of the Court of Appeal until his retirement in 2003. During his time on the court he was involved in a number of successful appeals which overturned wrongful convictions, for which he was recognized by Innocence Canada. Bill had a special place in his heart for the underdog.

Churchill Falls Explainer (Coles Notes version)

If CFLCo is required to maximize its profit, then CFLCo should sell its electricity to the highest bidder(s) on the most advantageous terms available.

8 COMMENTS

  1. Good summary of the Liberty Report and the consequences: substantial more costs on top of Marshall`s 11.4 billion price tag. Critical conclusion is that MF will NOT eliminate the the need of reliable thermal generation on the Avalon, likely at Holyrood, as power imports of 300MW of power from Nova Scotia is a pipe dream.
    And that demand reduction on our isolated grid, prior to MF sanction, was an option that was ignored, but is still an option. As to the on-going rate of heatpump installations (in addition to oil heat conversions), Nfld Power`s own surveys show 5000 installed over the last few years, and these are the numbers for mini-splits alone. Ducted and ground source ones are also being installed. All these are seeing considerable uptake. In Nova Scotia, 20,000 minisplit systems were installed in the year 2011 alone. We will see a more rapid uptake here with projected double the electricity rates.

    • Des, was this latest Nalcor forecast posted on the PUB site, as to some question, can you advise the source.
      Also, the green line forecast seems to not include power sales loss resulting from the uptake of heatpumps and wood. Before MF sanction Nfld power surveys showed that there was a large shift in all electric houses going to wood heat, off the Avalon. And wood heat is cheaper than electricity, even wood pellets is 30 percent cheaper than current electricity cost on a BTU basis. So for electricity at 10 cents compares to pellets at 7 cents. With electricity at 15.4 cents, pellets is 10.8 cents.
      And for heating with heatpumps, they use only 40 percnt of the electricity as baseboard heaters. So at 10 cents for baseboard heaters, electric heatpumps produces the same heat at a rate of 4 cents. At 15.4 cents for baseboard heaters, heatpumps would use an equavilent of 6.2 cents. How can they use a forecast and ignore this.There own survey shows the uptake, and their own consultant ,ICF, showed minisplits as the single most important source for energy savings potential. To ignore this is the same as pre-Muskrat where they ignored technology and said technology for housing energy saving was reaching saturation.
      So let them make a real forecast including both these factors, and also one showing what will happen at 20 cent per kwh rate.
      My above posting mentioned Nova Scotia: their rates are higher , but also NS gave incentives for heatpumps, and so the conversions there were and still are very high. We are just starting on conversions here, and have only about 3 percent of houses converted. So imagine the impact that is to come. Up to now they prefer to ignore this impact, as if this will not happen.
      Winston Adams

  2. The gag "Well Ollie its a fine mess you have gotten us into" comes to mind about the Nalcor crew. The problem is this is not a slapstick comedy!

    The culture at Nalcor/Hydro has not changed. The secrecy that empowers the incompetence has to end. Why on earth at this point in the MF disaster is the rate/taxpayer, who is on the hook for the outrageous costs and dismal service, still kept in the dark?

    The Premier and Stan Marshall have to answer the many questions raised in this post. Too bad the media are functionally dead in NL and have been reduced to parroting the spin from the culprits of this disaster.

    On the fiftieth anniversary of Star Trek, "Live Long and Prosper" Des.

    • Add to the list of questions; Jim Gordon's letter, questioning the competency of the earth dam engineering. Was any acknowledgement or reply given to this qualified Engineer's concern regarding the stability of earth dams on marine clays?