WIND AND THE ODOUR OF SCANDAL

Government’s handling of World Energy GH2’s wind power project on the Port au Port Peninsula contains the elements of a scandal – all of the Government’s making. This is a public policy catastrophe that Premier Andrew Furey must wear. Let’s take a look at what GNL’s flimsy – almost non-existent – approval process lacks, and identify the kind of information that ought to precede any wind power interconnection with the Island grid.

World Energy GH2 filed a wind/hydrogen development plan on June 21. The Application was accepted by the Minister of Environment and Climate Change under the Environmental Review process, though the Company possesses no right or title to the land on which the wind farm is to be built.

Absent, too, are any limitations or requirements placed on the size of the World Energy project, no consideration having been given to the implications for the Island grid of a 1000 MW wind generation connection. The World Energy and possibly other projects proceed as many questions – technical and financial – remain unanswered especially for the public, which is at risk of incurring substantial costs to accommodate private wind power producers.   

I would also note that World Energy proposes two additional wind power projects amounting to another 2000 MW. John Risley, a Director of the Company is on record stating that If “all three sites must be developed to create the economies of scale required”. There is a larger narrative at play which, so far, remains unexplained; this Post exposes the issues created by only Phase 1 of the World Energy proposal.

Nevertheless, without right or title to the Port au Port site (Phase 1), and the current legislative regime barring private energy development, it is doubtful that the Department of Environment and Climate Change possessed the legal authority to accept the World Energy GH2 Application in the first place.

Last week, some sanity prevailed following Brendan Paddick’s resignation as a senior advisor to the Premier on energy matters. The amateurs in the Premier’s Office figured out they were creating a legal and financial quagmire for GNL, not the least of their problems a disposition of favoritism towards World Energy GH2. At stake were the financial and legal implications of entering into undefined and arbitrary commercial arrangements, including a “backstop” agreement with the Company.

The Premier did the only thing he could in sending two other amateurs – Andrew Parsons and Bernard Davis – to announce a “half-baked” bid process; “half-baked” because neither they nor their officials, including NL Hydro, had thought through the mountain of issues containing public interest implications. All were responding to a timeline that was essentially bogus, as the two Ministers’ new timelines confirm.

It is worth noting that GNL’s decision to require nomination and competitive bidding processes, while late and ill-prepared is, conceptually, the right one. Two existing competitive models offer a basic guide. One is used by C-NLOPB to administer the “sale” of rights for offshore oil and gas exploration. Another is called “The Public Tender Act”.  They are mechanisms that create a level playing field for everyone, including friends of the Premier.

But the process isn’t as simple as it seems and no process was ready to entertain the World Energy Application. The policy field around the offshore nominations/bid processes is based demands commitments to exploration expenditures and bid deposits, the latter forfeited if the expenditures are not made. It is tied into a system of licenses that convey “rights” to the successful bidder, including, essentially, perpetual ownership if a field is deemed to contain a “Significant Discovery”, if oil/gas is found in commercial quantities. There are other obligations – and costs – pertaining to marine safety and issues with an offshore focus. This is to say that the C-NLOPB model, as a concept, is relevant but the C-NLOPB has no expertise in matters that pertain to wind power and electrical grids.

GNL ought to have been spending time and resources, less on a model, than the conditions and limitations on which any award of a wind site should be based. Again, GNL was entertaining the World Energy proposal when it had given no thought to the implications of large industrial-sized wind power projects on the provincial electrical grid, to developer costs and obligations, to protecting rate payers who pay the high cost of this infrastructure, or even to the issue of royalties or other ways the Province might benefit from its wind resource.  

The Province has set October 1st for the Nomination process to end and for the bidding process to be completed by the first Quarter of 2023. Andrew Parsons describes the process as “haste vs. caution”, considering Nova Scotia’s interest in wind energy. Nova Scotia need not worry!

Minister Andrew Parsons

NL has wasted enormously valuable time. Some technical issues requiring clarity are straightforward, others are complex; all are existential and need to be understood before any nomination/bid process for wind power development is launched. Wind doesn’t blow all the time; wind power must be supported by “firm” sources in order to be relied upon by industrial users. Those “firm” sources – hydro, oil fired turbines – represent high capital construction and operating costs.

The World Energy project was going through the Environmental Review process eventhough it is unaware, for example, how much wind power the existing Island system can support, and if NL Hydro will need to impose transmission constraints on specific projects, whether in Port au Port or some other potential site. We know that there are transmission constraints on the Avalon Peninsula.

The next issue is fundamental, too: What reliability risk is posed by one or more wind power interconnections? Will the provincial grid be exposed to a larger number of outages due to the demands of one or more wind farms? Seems like something that the public ought to know.

In this context, a keen Government, preoccupied solely with the public interest, would have alerted the Public Utilities Board (PUB) weeks ago that a System Study is underway and a System Review request, in relation to wind power integration, is on its way to the Board.

The Study would naturally include a description of the interconnection upgrades required, as well as their cost, and an examination of the risk to ratepayers. It would include an enumeration of the transmission upgrades required to accommodate wind power, whether in relation to the export of power to Nova Scotia, or delivery elsewhere on the island for new industrial consumers (i.e., a high-risk hydrogen electrolysis operation).

Was the cost of those upgrades to constitute a “freebie” for World Energy GH2, or to be decided by politicians – after project approval?

There are still other issues, especially the question of the maximum wind power capacity that can be supported by the island grid. This is necessary so that the province isn’t unwittingly forced to build new and expensive generating capacity later to support obligations made under political duress. Depending on the answer, the large project proposed by World Energy GH2 may be the only that can be supported. Shouldn’t that information be known to the public and to other wind power producers in advance, rather than after World Energy received a leg up?

One engineer, aghast at NL Hydro’s failure to state publicly that an extensive system analysis is already complete, wonders if it is possible that NL Hydro performed such a Study and chose not to present it for public scrutiny? The question manifests the seriousness of what NL Hydro has failed to bring to the public’s attention in relation to the World Energy GH2 proposal.

Perhaps, a reporter will ask the question and let us know.

On a different level, too, the public is now mindful of GE’s inability to produce working software with which to effectively operate the Labrador Island Link (LIL).

Even if this problem is eventually fixed, NL Hydro Consultants (Haldar and Assoc.) warn of the potential for frequent extended outages due to ice loading on several parts of the line during the winter season. Legal liabilities associated with entering into “balancing” agreements, or other power commitments, need to be identified.

Don’t forget, this Province is not out of the woods, yet, in relation to NL Hydro’s obligations under the “Nova Scotia Block” of Muskrat Falls power. Just ask Emera.

In part, because NL Hydro can’t be trusted, but also because it is the legitimate oversight role of the Public Utilities Board (PUB), a Reference is an absolute requirement. It is the only way that the public can be assured that they will not unwittingly subsidize a private investment. (Yes, the Consumer Advocate should be on top of the issue, but that’s another story.)

Is the Government ready to receive nominations/bids for wind power development? Ask yourself, if NL Hydro has released any of the information requisite to receipt of a wind development proposal?

With so many unknowns, the public ought to ask Premier Furey this question: having none of this information ready, on what basis did you intend that GNL should proceed with the grant of Crown Lands and the connection of the World Energy GH2 project to the grid?

None of the system upgrades having been either studied, defined, or costed, was it GNL’s intention to give World Energy GH2 free rein?

The project is still scheduled to be released from the Environmental Review on August 5th.   

This is the dysfunctional, conflicted, murky kind of government found in the Third World. It may be commonplace in Haiti but the Premier should be reminded that, over here, it still has the odor of scandal.

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.

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