PlanetNL53: Island Ratepayers Unable to Use Much LIL Energy

The Numbers Prove It’s Really Nova Scotia’s Project

Island ratepayers may have thought that the Lower Churchill Project (LCP) and the Labrador Island Link (LIL) were primarily built to bring lots of green energy to the Island, that it would close the Holyrood Thermal Generating Station, and just a small fraction of this energy supply would be exported to Nova Scotia. Why would people think that?  Because that’s what their top Government officials and NL Hydro Executives told them over and over again!

Actual evidence from the first year of official deliveries to Emera proves it is the opposite as approximately 80% of LIL energy has gone to Nova Scotia. It’s likely to become even more lopsided in the future if LIL bugs and flaws are ever fixed.  90-95% export of LIL energy to Nova Scotia would be the probable result. What a doozy!

First Year Energy Deliveries Recap

Data from NL Hydro’s Monthly Energy Supply Reports, available on the Public Utilities Board website, reports the total energy brought down from Labrador via the LIL and provides several stats on deliveries via the Maritime Link (ML) to Emera. 

Hydro does not report the exact monthly energy retained on the Island from the LIL but the number may be deduced. An important caveat is that transmission losses are not clearly accounted for and it is possible that the simple calculation used to determine the Island’s share of energy may be significantly overestimated. This is a disturbing prospect, given how little there is. Giving the benefit of the doubt that losses are fully accounted for within the Hydro data, the chart below shows how LIL energy was divided between Emera and Hydro’s Island grid up to October 31, 2022.

Since Hydro started exporting power to Emera 1 year ago, the LIL has delivered 1211 GWh of energy to the Island with 79% of that subsequently exported via the ML, and just 21%, or 252 GWh, retained for Island consumption. Additional data from the same reports was used to develop the chart below comparing the output of Holyrood to the Island share of LIL energy.

As can be seen, in a few winter months the LIL energy does appear that it may have abated some fuel-fired energy at Holyrood. Perhaps $20-30 Million worth at most. That’s small potatoes considering the LIL’s tremendous cost. 

Many locals may think that if more LIL energy had been available, a lot more would get used all year round. That is not the case at all due to two problems.

The Winter Season Problem – Non-Firm LIL Power Can’t Replace Holyrood

The poor reliability of the LIL means that it cannot be counted on to meet Island demand in the winter when total loads exceed the capacity of Island hydro generation. In October, NL Hydro acknowledged this fact for the very first time in updating their major system Reliability Study. Hydro has no alternative but to continue to operate the Holyrood generating units for the foreseeable future, bringing them on gradually with the start of the winter season and shutting them down as winter ends.  

The three Holyrood thermal units, rated at 150-170 MW, can take a week to warm up and after that they operate 24/7.  Thermal steam systems simply can’t work at very low power levels even if there are stretches of time, hours or even days, when loads might not be high enough to need them to operate.  Most winter nights for example, Hydro reduces power from its essentially free hydro generation, because the costly oil-burners at Holyrood can’t be run at less than 70 MW each.  For the majority of time throughout the winter, the Holyrood units operate at their minimum rating leaving zero ability for LIL power to displace it.

Only in the instances when daytime loads cause demand to be higher than Holyrood’s minimum, can LIL power be a useful alternative supply.   Some days the load doesn’t rise much off the minimum supplied by Holyrood while on a high load day a potential demand for 200 MW might develop.  It’s a very small portion of Island demand and it’s required only a small fraction of the time.

Then comes the question of whether the LIL may or may not be available at all.  For example, did a conductor fall off the tower as it did on Friday afternoon in the middle of the Great Northern Peninsula.  

Photo: Facebook (via Ben Gould) December 02, 2022

If it is running but at a lot less than maximum power, as seems to be normal, then there won’t often be much left to meet the Island load after firstly meeting commitments to Emera. 

Hydro is trapped by a set of constraints that severely limit how much LIL power it can use for economic benefit. Last winter, the LIL may have abated 20% of Holyrood’s fuel burn and that may be just about as good as it gets.

The Summer Season Problem – Plenty of Free Island Hydro

To be blunt, the small energy deliveries from the LIL in the summer season are useless and have zero value. The Island has more than enough hydro power already to meet demand in the non-winter months.  There is no good reason to put non-firm LIL power on the grid to displace existing cheap or mostly free Island hydro generation.

The rare opportunity when LIL energy could be beneficial in the summer is if Island hydro reservoirs are very low, however, as climate change appears to be bringing more wet weather to the Island, that situation is likely to become very rare. This year, the Monthly Energy Supply reports indicate Island reservoirs were so full as to be in danger of requiring intentional spill as not to breach dykes.  Putting any LIL energy into a grid that doesn’t have critically low reservoirs during the summer season (or the winter) doesn’t save the utility a cent and it does nothing to improve reliability. It has zero economic value.

Given how high the reservoirs have been in the past year, and that Hydro is simultaneously failing to meet its contractual commitments to Emera, it’s difficult to understand why any energy was brought into the Island grid during summer 2022. Besides meeting contractual revenue-free energy deliveries, Hydro might have been able to sell Emera surplus energy.  If the estimated 50 GWh or so of Island energy delivered in the summer period had been sold as surplus energy for $50/MWh, Hydro would have collected $2.5 Million. Something is better than nothing.

If the LIL Can Ever Work Better, Emera Will Get More

On the whole it’s hard to see any opportunity for the Island to take more than the 252 GWh from the LIL than it did in the past year. If summer deliveries were eliminated, as they properly ought to have been, the total economically useful amount should have been no more than 200 GWh.

If the LIL should dramatically improve in performance, Emera would demand contractual deliveries of 2500-3000 GWh annually just as its shrewd contracts demand while the Island might be constrained to using just 200-300 GWh.  That’s about a 90:10 split.  If Hydro has no use for other surplus power from Muskrat Falls within Labrador, they may end up exporting even more to Emera, resulting in a 95:5 split.

Could Have Had a Small Wind Farm Do The Same Thing

This province is spoiled by its relative abundance of firm hydro power that is reliably ramped up at any time to meet the level of utility load.  Non-firm power on the Island is scarce and relatively new.  The main example, before the LIL, is the two 27 MW wind farms that started service in 2009 at St. Lawrence and Fermeuse. Together they typically produce almost 200 GWh annually. Hydro pays about $14 Million per year to the wind farm operators for that energy or just over 7 c/KWh.

A similar scale wind buildout in 2017 (matching the original planned power delivery date for the LIL) might cost about $10 Million per year, as the cost of wind power contracts has declined significantly in the last decade. 

It’s plausible that this extra wind capacity would have been much more predictable, reliable, and useful than the LIL and just as effective at abating some Holyrood fuel cost.  A small wind farm surely wouldn’t put the Island grid at risk of blackout in the event of a fault or nuisance trip as the LIL does – the high power levels transmitted to Nova Scotia are the root cause of that risk.

The actual cost of service for the LIL and its co-assets comprising the LCP, stands to be in the ballpark of $1 Billion per year.  To date, Hydro and Government have delayed the reconciliation of costs and evoked an elaborate scheme of rate mitigation that moves the costs around in time but does not eliminate them.  Don’t be fooled.  When the smoke and mirrors are removed, Island ratepayers stand exposed to paying the inconceivably high rate of $4-5 per KWh for the amount of LCP electricity it might use.  That’s 100 times higher than a simple wind project that would have accomplished the same technical result.

Nova Scotia ratepayers are on average set to pay about 8 cents per KWh for the lion’s share of project power delivery.  That cost may decrease a little if the export deliveries exceed their original quota or it could rise by a few cents if the LIL continues to struggle in getting them all the energy they are contractually entitled to.  It’s not a super-cheap project for Nova Scotia ratepayers but it’s not bad.  It’s astronomically better than it is for Island ratepayers who must pay 50-60 times more.

By Every Measure But One, This Is Nova Scotia’s Project

However hard done by Nova Scotian interests may feel about the Lower Churchill debacle, it is clearly they who are the principal beneficiaries.  They have, through shrewd negotiation with a weak and deluded counterpart, managed to obtain the rights to most of the energy at just a tiny fraction of its cost.  They smartly left the riskiest parts of the project in the hands of NL Hydro who is paying dearly for its desire to complete a project at any price.

Today, NL Hydro finds itself committed to vainly attempting to fix the project’s flaws.  For who?  It is clear to see it is not for NL ratepayers and the Island system which has no meaningful use for it. 

The substance of Hydro’s mission is to satisfy the contracts with Emera to get large amounts of power flowing into Nova Scotia for the betterment of that province and its ratepayers.  The Island could easily live without it and in fact, other than for the onerous Emera contracts, NL ratepayers would be best off if it was abandoned and left to rust.

This is Nova Scotia’s power project in every sense but one: local Island ratepayers have been duped into gifting it to them.

Sources and References

Board of Commissioners of Public Utilities – NL Hydro Monthly Energy Supply Reports NLH – Reliability and Resource Adequacy Study – 2022 Update -2022-10-03.PDF


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