Wednesday, 5 February 2014

PUB TOLD HOLYROOD POWER MAY BE NEEDED FOR DECADES

This Blogger joined with Cabot Martin, David Vardy and Ron Penney, among others, to ask that the Public Utilities Board expand the scope of its investigation into 'Black-Out' 2014.   The PUB held a Pre-Hearing Conference, on Wednesday, February 5, 2014 to allow the Board to hear from the public.  

I want to discuss what other Presenters said to the PUB in a forthcoming Blog Post.  



Today, I am posting the text of my remarks to the Hearing.  Hopefully, they will give you some insight into some of the key issues that, I believe, will affect our power security and supply in the future.  Anyone who believes 'outages' will be resolved with Muskrat Falls should think again.
If you agree, you can have your say, too.  It will take only a minute to send a short message to PUB Chairman Andy Wells at   ito@pub.nl.ca  Tell him the PUB's investigation needs to include those issues, too.
Here is the text of my Presentation:
The root cause of what went wrong at Holyrood, in the early days of January, 2014 and at related power assets, is critically important.   Undoubtedly, it will be the PUB’s top priority. But, any investigation that attempts to assess that issue, in isolation, will not adequately serve the public interest.

Other issues threaten the security of our power supply after commissioning of Muskrat Falls in 2017.  They are substantial issues.  They require a deliberate, objective and transparent evaluation.   

For that reason, I am here today to respectfully ask the PUB to ensure that its investigation is as wide as possible. 

Many people suffered great personal inconvenience; individual citizens and businesses endured financial loss.  Public confidence in our electrical system has been badly shaken. It needs to be fully restored.

I submit, Mr. Chairman, this issue of confidence is not solely bound up in the ‘nuts and bolts’ of Holyrood; it is inextricably tied to decisions already taken by Nalcor relating to commitments of Muskrat Falls power, recall power and current on-Island generation.  

Any serious examination of our power system seems always to lead us back to the question of Holyrood.  The issue is not just about how that facility’s capital repair or replacement ought to be managed.  From the stand point of security of supply, during the post-Muskrat commissioning period, questions abound whether Holyrood ought to be decommissioned as planned.  

Therefore, the PUB’s assessment period must extend well beyond the commissioning date of Muskrat Falls.

Does it make sense, for example, that a significant part of our power generation, after 2017, will rely upon the Labrador Island Link (LIL) located 1100 km. away from the populous and growing area of the Avalon Peninsula? 

We have to truly wonder if the exaggerated promise of Muskrat Falls has caused a paralysis of thinking.   Has it obviated the need to consider a back-up plan to that Project’s inherent weaknesses? Have we forgotten how much power has been committed to Nova Scotia in order to effect Muskrat sanction? 

As ironic as it may seem, Holyrood may well constitute that back-up plan.

Others have noted that, upon commissioning of Muskrat Falls and the planned decommissioning of Holyrood, in 2021-22, there will be a net increase of power to the Island Grid of a mere 120 MW, after taking into account line losses, delivery of the Nova Scotia Block and Nalcor’s 70 MW commitment to Alderon.  In isolation, that issue speaks to the question of the reliability of Nalcor’s demand forecast and its ability to meet demand in excess of that forecast. 

But, other issues come into play, too, raising huge questions of whether our reliance on Muskrat Falls, as the answer to our power security, is warranted. 

I want to highlight three of those issues here:

  1. Water Management Agreement.  The impact of a possible failure by Nalcor to secure the water rights claimed under the Water Management Agreement constitutes a major concern.  Muskrat Falls is estimated to generate 824 MW of power.  Nalcor stated in its 2009 Application to the PUB that without a working Water Management Agreement, the capacity of MF would be limited.  One deduction from the evidence Nalcor presented suggests that, in the absence of the WMA, the facility would be limited to approximately 170 MW of continuous delivery. Nalcor stated:  it would have to “chase the flows” (page 16, Water Management Agreement Application-Pre Filed Evidence by Nalcor Energy).

How is it possible that this critical question can be de-linked from any decision to decommission Holyrood? 

Hydro Quebec’s challenge to the water rights issue in the Quebec Superior Court will not be heard until 2015; appeals will delay a final Decision possibly for a year or more.

The PUB is asked to address the question: If the WMA is struck down, what will be the Firm capacity of the Muskrat Falls Project? Will Nalcor still have the generating capacity to meet the Island’s demand if Muskrat’s capacity is diminished and in the absence of Holyrood?

  1. Impact of the Energy Access Agreement (EAA).  The analysis completed by Nalcor, and submitted to the PUB, during the Muskrat Falls reference, did not include the 167 MW which must be delivered to Nova Scotia during the peak demand period of a Newfoundland winter. 

Nor did it reflect Nalcor’s commitments under the Energy Access Agreement, specifically the “Variance” clause and the commitments under the “Balancing” Agreement. Nalcor has obligated the Province and committed most of its so-called ‘surplus’ power to Nova Scotia.  The EAA commits, to Emera, a maximum of 1.8 TWh per year (1.2 TWh average) over a 21 year period. Emera has been given the right to take this power during the critical peak demand periods during any given day.

In particular, if sales of additional energy or capacity are also made to Labrador Mining these commitments may conflict with domestic load growth, especially in winter, and require that NL build new high cost generation assets, in addition to Muskrat Falls.

Emera’s initial Application to the UARB states (para 437)

“NSMPL (Emera) confirmed that there were no risks to ratepayers [of NS] from the non-delivery of energy by reason of any legal claim respecting the flow of water, or arising from the reduction of water flow itself on the Churchill River:

“The contractual arrangements between Emera and Nalcor do not allow for non-delivery of energy.  If energy is not delivered, Nalcor is liable to pay compensation damages to Emera.  If the non-delivery is as a result of Government Action, the Government of Newfoundland and Labrador has guaranteed payment by Nalcor the compensation damages.  Risks relating to Muskrat Falls are borne by Nalcor.”

It is not unreasonable to ask: do the contractual obligations contained in the EAA have the same legal basis as those which relate to the Nova Scotia Block?  Do they ‘de facto’ constitute an additional commitment of Firm Power by Nalcor?  Do these commitments, in any way, compromise available capacity to meet domestic load growth?  Will the generating capacity at Holyrood be required if Nalcor’s obligations under the EAA are met?

Finally, on the subject of the EAA, why is there no agreement with Emera to provide for the return of a quantity of power from Nova Scotia to satisfy an emergency situation in this Province if the LIL should fail?
3. The Labrador-Island Link (LIL).  The question of security and reliability in relation to the  risks associated with a long distance transmission line from Muskrat Falls to the Avalon Peninsula has a direct bearing on any planning decision regarding Holyrood.  Nalcor chose a risk level represented by a design criteria of 1:50 year event.
The realities of the adverse maritime climate, the sub-sea crossing under the iceberg-scoured Strait of Belle Isle and the high wind and extreme icing conditions prevalent on high ground in southern Labrador, on top of the Long Range Mountains and across the Isthmus of Avalon cannot be ignored.
The issues raised by Manitoba Hydro International, and noted by the PUB (pages 81-88) in its Decision on the Muskrat Falls reference, also demand further analysis.
For greater specificity, I would draw your attention to the following excerpt from the October 2012 MHI Report (page 47).
MHI notes that CAN/CSA C22.3 suggests a greater reliability of design to 1:150-year or 1:500-year return periods for lines of voltages greater than 230 kV which are deemed of critical importance to the electrical system. It is MHI’s opinion the ± 350 kVdc and 315 kV ac lines proposed for the Lower Churchill Project be classified in a critical importance category due to their operating voltage and role in Nalcor’s long term strategic plan for its transmission system and be designed to a reliability return period greater than 1:50 years.
  1. Many public and business groups have been reminded of the financial costs to people and business, of the power outages specifically, and the environment of uncertainty these outages create.  I am surprised that more of them have not loudly expressed concern over the “…two-week worst case scenario…” (page 85 PUB Decision); the repair period for the LIL raised by MHI.  Perhaps, already, some people think an extended outage can never happen again.  
    Again, considerations of Holyrood are central to the risk associated with the LIL and the harsh winter environment which gives rise to that risk. 
    We need to know if, as currently designed, the LIL represents an acceptable risk, taking all factors into account, and whether the long term maintenance of Holyrood is necessary to ameliorate that risk to an acceptable level.  Does Nalcor have a back-up Plan if the LIL goes down.  The statistical risk is just as applicable in the early years of the operation of the Muskrat Falls system as at some later date.  Is it too late to influence changes to Nalcor’s 1:50 year design period?

 Finally, I want to note the proposed third line connecting the Avalon to available power in Central Newfoundland.
            Nalcor has indicated that 176 MW of non-thermal capacity is available in Central Newfoundland.


Public comment by Nalcor CEO Ed Martin suggested the third line is uneconomic.  The comment seems contradictory to a prior submission to the PUB and suggests its inclusion in Hydro’s Capital Budget was frivolous to begin with.  

The transmission line from Bay d’Espoir to the Western Avalon has a capacity of 319 MWs and according to Nalcor is “terminally constrained and unable to transfer the increased power”.   The construction of a new transmission line, says the Nalcor Submission, “will permit deliveries of 495 MW of hydroelectric generation to the Avalon Peninsula prior to the start of the first oil-fired unit at Holyrood.”

It also stated, on page 37 of its PUB Submission, that the new line will provide for “improved efficiency of the generators at Holyrood...reduced fuel consumption and in turn may reduce the potential for spill at hydroelectric facilities" 

The questions which arise are these: On what basis is the third line no longer needed?  Why was the Project withdrawn from the Capital Budget of Hydro?  Should NLH be ordered to reinstate a request for the PUB’s approval of the line?  Would the upgrade have reduced or eliminated the recent outages?

Mr. Chairman, no overhang of uncertainty ought to characterize these deliberations.  No reasonable question, placed by legitimately concerned citizens, should go unanswered.

The PUB is not being asked to revisit consideration of the financial or technical feasibility of the Muskrat Falls Project.  The public, I submit, is well aware that role was “untimely ripped” from the PUB when the Board failed to give the Government the answer it sought.

The PUB is the only duly constituted and impartial Agency, in this Province, equipped to assess these matters. 

In the absence of an independent inquiry headed by a Supreme Court Judge, under the Public Inquiries Act, only the PUB can safeguard the public interest from being filtered by the Government or Nalcor.   

Questions regarding the security and reliability of our power supply are not isolated to Hydro’s management practices or the condition of the ‘nuts and bolts’ at Holyrood. 

The power ‘black outs’ coupled with decisions by Nalcor have caused significant gaps in how Newfoundlanders once regarded their energy system and the level of confidence with which people regard their energy future now.  These gaps need to be bridged.  

It is time to stop the second guessing, to rid ourselves of the current environment of acrimony, mistrust and secrecy, to give light to the urgency for transparency and public scrutiny. 

We need to have the certainty that no issue, whether related to the pre or post-commissioning of Muskrat Falls will be omitted from this investigation.

We need to be able to rely on the PUB for the protection it is designed to afford. 

Finally, if the PUB, in its wisdom sees fit to expand the scope of its investigation, I would respectfully ask that it re-open the opportunity for interveners to apply and to engage in the more broadly focused Hearings that ensue.

Sincerely,
Desmond Sullivan

________________________________________
References for Filing:

  1. Decision – Nova Scotia Utility and Review Board in the Matter of the Maritime Link Act
  2. Supplemental Decision - Nova Scotia Utility and Review Board in the Matter of the Maritime Link Act
  3. Water Management Agreement Application – Pre-filed Evidence -Appendix D October 27, 2009
  4. Nalcor Correspondence re: availability of non-thermal energy generation October, 2013

6 comments:

  1. Newfoundland and Labrador may need more power. With the closure of the mills, this power is not required in the summer months. It is required in Winter. It is required not because of growth in industry. It is required because we are building bigger homes, with electrical base board heating. Bigger homes use alot more power, on those cold winter days. Heat pumps are also not as effective when the temperatures get below minus 20.

    We built Muskrat Falls to meet the growing Energy need (on an annual basis). Nalcor have always talked about how much energy (GWhr) that will be sold to NLH as part of the Power Purchase Agreement. Initially it is 40% of the energy, increasing to 100% of the energy from Muskrat Falls over time.

    What Nalcor have NEVER provided is how much of the 824 MW capacity are we entitled to in Winter?

    Because we dont need Muskrat Falls power in summer.

    If Holyrood closes we will need Muskrat Falls power in the months of October to March. During the peak periods we will need most of that 824 MW for short periods of time.

    When Nalcor convinced us that Muskrat Falls was the lowest cost option they specifically excluded the Maritime Link from the review. They excluded the 167 MW which must be delivered to Emera on those very same cold winter days.

    In the lowest cost assessment done by Nalcor was that delivery to Emera ignored?

    How does the PPA deliver the energy to NLH over the full year?

    Does the terms of the PPA reflect the lowest cost analysis submitted by Nalcor to the PUB?

    If the PPA differs from what was submitted to the PUB, and publically told to the people of the province well then it is a very serious matter. The management of Nalcor would have potetnially undertook a 7.7 Billion dollar deception of the people of Newfoundland and Labrador.

    The scope of the PUB investigation should be extended to include these questions.

    ReplyDelete
    Replies
    1. To Anonymous:: Page 59 of the PUB report states that Nalcor will sell 100% of MF power to NL Hydro (ratepayers) not 40%, they predict that we will need 40% but will pay for 100%.
      Gerry Goodman

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    2. 1. temperatues on the Avalon almost never go below minus 20C
      2. at minus 20C airsource minisplits use about half the energy as baseboard heaters. ground source use about 1/3 the energy
      3 either of these is much cheaper than MF energy
      4 new houses , Net zero use about 250.00 per year for heating. R2000 with heat pump use much less energy than smaller older houses

      Delete
  2. We will pay for 100%. We will get 40%. This is referring to the total energy produced.

    However Capacity is what we need at any particular period of time. It is what we can use of the 824 MW rating. Again we are paying for 100% of the MF Plant. However we are only gettign 80% of the rating as 167 MW are going to Emera. So we only have 580 MW available to us at Soldier Pond.

    What does the PPA say? How does this compare to Nalcor's analysis in the lowest cost charade?

    We will not have an energy issue when Muskrat comes online. We will potentially still have a capacity/reliability issue.

    ReplyDelete
    Replies
    1. 824 MW is the max capacity of MF. But average capacity is only about 560 MW due to water availability, and with transmission losses accounted for , avg capacity is only about 500 Mw without any allowance for Nova Scotia. Given committments to NS we have little left

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  3. BOARD OF COMMISIONERS OF PUBLIC UTILITIES

    REPORT TO GOVERNMENT Dated 30 MARCH 2012

    7.2.4.1 Power Purchase Agreement and Cost of Service



    In general Nalcor has used a cost of service (COS) approach to determine the CPW of incremental capital and operating costs incurred in the development of each option. Nalcor has, however, used a Power Purchase Agreement (PPA) approach in relation to the costs for the Muskrat Falls generating facility in the Interconnected Option. The PPA distributes the costs of the Muskrat Falls generating facility over a 50-year period, the anticipated life of the asset, in a per-unit charge for energy sold to Hydro by Nalcor. This rate is expected to be uniform throughout the future period, adjusted only for escalation.



    In using the PPA approach Nalcor assumed that Hydro would sign a take-or-pay contract with Nalcor for the forecast energy purchases from the Muskrat Falls generating facility. To calculate the PPA prices it was assumed that all of the firm output generated by Muskrat Falls would be sold, that the internal rate of return would be 11.0%, and that equity financing would be 100%. Since Hydro purchases are expected to be 40% of Muskrat Falls’ firm energy in 2017, the use of this arrangement is forecast to allow Hydro an internal rate of return of 8.4%. Nalcor explained that the take-or-pay contract would mean that, regardless of the amount of energy that Hydro needs, it would still have to pay the contracted revenue.

    ReplyDelete