Monday, 22 February 2016

INCOMPETENCE IN REAL TIME (OR WHY THE PUB SHOULD SAY "NO" TO A RATE HIKE)

A convoy of fuel tanker trucks are seen heading out from the Come By Chance Oil Refinery to the Holyrood Generating Station. The cavalcade persists 24 hours per day; day after day. Their mission: to rescue the electrical grid of the Avalon Peninsula from collapse.

Nalcor has already planted its preferred narrative with the media: historically low reservoir levels have imposed a higher demand on Holyrood for power than ever before.

Yet, there is a larger narrative at play, one that depicts the parade of tankers as proof, as much as metaphor, of failed energy policy, incompetent operators of the province’s electricity assets, and a group who play fast and loose with the truth.

Unfortunately, that is not obvious to the Consumer Advocate; but he will be dealt with in a later post.

Nalcor is seeking approval from the PUB to levy $33.3 million on ratepayers for the cost of thermal (diesel) generated “stand-by” power. This is power supplied by thermal plants other than Holyrood, which are called upon when Holyrood can’t meet demand.


Nalcor states that “the amount of diesel fuel consumed could be material, as high as 215 GWh…” compared with a forecast of 11.3 GWh.


Justification for the claim is described in Part 4 of its PUB Application:

  • ·        Hydro’s Reservoir Storage is at 48% and is the lowest level since 1993…recent inflows into Hydro’s reservoirs are lower than the three driest years on record: 1959, 1960, and 1961.
  • ·       Additional thermal generation required to offset low hydrology for the remainder of 2016; approximately 1,100 GWh.

  •        The Holyrood component of the 1,100 GWh is estimated at 900 GWh bringing the 2016 total production at Holyrood to 2,599 GWh, which is more than 200% of its recent average annual output.

  •      Hydro relies on precipitation to maintain and fill its reservoirs…energy storage has materially declined since September 1, 2015. Currently, reservoir storage is the second lowest level in 24 years…September to December 2015 inflows which were 24% below average and year to date 2016…26% below average.

     Nalcor does not state the actual height of the reservoirs at the beginning of February 2015. 
     And there is much more data missing from its Application. The Company doesn’t talk about the impact of unfettered growth in demand either, which is likely helping drain the reservoirs in advance of the winter season.

Apart from hydrology, Nalcor is also blaming demand growth, and the bundle of bolts, referred to as the Holyrood Thermal Generating Station (TGS), the failure of which has led to the additional requirement for standby power purchases.

But hold on.

Unless the hydrometric data available on the Government of Newfoundland and Labrador’s Web Site, showing Real Time Data is wrong, Nalcor’s hydrology numbers don’t hold up.

The following Real-Time Hydrometric Graph shows precipitation data for the area around the Car Arm Reservoir, a significant source of hydro power. The time parameters cover a period longer than the one for which Nalcor claims low precipitation. The period shown in the Graph is August 2014 to February 2016. Changes in precip are consistent with last year.




Next, let’s look at Granite Lake for the period February 12-19, 2016. Recent precipitation in the area suggests Bay d’Espoir should be a very wet place
.



But the Data Graph that gives additional truth to the other two, is shown below. Again the Graph records precipitation for the region near Granite Lake, a major water shed for the Bay d’Espoir Hydro reservoir. The snapshot period is August, 2014 to the present. The elevations shown on the left of the exhibit indicate a record of consistency of precipitation that is quite striking. 

You would have to ask: what’s the problem? In fact, you can review the hydrological data for a variety of regions from which NL Hydro reservoirs are filled. The data is strikingly consistent over a long time and suggests no major alarms are warranted even now.















Indeed, if all this hydrology stuff is boring you and you need a good laugh, let me take you back just a couple of years when the Vice President of Nalcor was sitting at a Technical Conference of the UARB in Nova Scotia teasing them with 1.2 TwH per year of cheap electricity, in addition to the Nova Scotia Block  get them on-board and sanction the Martime Link. This is what Paul Humphries had to say:

"....based on our over 60 years of hydrology record, we are confident that we will have available on average in excess of 1.2 terawatt hours per year...." He continues: "...in conclusion while the energy is variable it is predictable and we do have 60 years of record that gives us the confidence that it will be available...

Suddenly, Nalcor can barely fill a tea cup!

Nalcor has not made the case, certainly not in this Application, that hydrology is the reason the reservoirs are low.

Of course, the claim is only one of several that undermine the legitimacy of Nalcor’s PUB Application. Load growth is another. 

Growing Customer Load
Nalcor says the increase experienced from 2010-2015, in Island Peak Demand (17%) and on the Avalon (16%) couples with an increase of 21% in Total Annual Energy consumption. 

The PUB is expected to accept the information on its face since no other context is provided. 

Yet, the data represents a problem characterized by power demand that has been allowed to run rampant, as thermal generating assets are permitted to deteriorate. The following Chart 2 is reproduced from page 6 of Nalcor's filing.


The Graph is unmistakable evidence of the consistency of year-over-year increases both in energy consumption and in peak demand.

In 2002, the Tobin Government extracted a deal from Vale to build a nickel smelter in the Argentia area. The power commitment based upon hydromet was for 94 MWs.. The province certainly needed the jobs but they came at a high cost, and not just to Vale. NL Hydro did not have surplus power capacity to sensibly make that offer. 

The Vale deal was reconfirmed by the Williams' government in 2008. By then Abitibi in Stephenville was permanently shuttered and in 2009 Grand Falls Abitibi followed suit. Secure power for Vale was available but only if Nalcor built the third transmission line from Central Newfoundland to the Avalon to open the "choke" created by the current two line system and to all those megawatt hours of power being spilled in the very same reservoirs Nalcor tells us are running dry. But Nalcor withdrew, not once but twice, an Application submitted to the PUB for approval to build the 3rd transmission line; the second time to free up the schedule for Hearings on Muskrat Falls. No additional Application was filed.

Back in 2011, a Nalcor Submission to the PUB contained this claim:

By 2015, electricity demand on the island is expected to reach the same level as 2004 when we hit an historical peak in electricity use, and it will continue to grow from residential, commercial and industrial electricity usage.

Almost all extra load growth on the island from today, including the addition of Vale Inco’s large industrial load at Long Harbour commencing late in 2011, will cause Holyrood output to once again increase. The Long Harbour hydromet plant at full load in 2016 will require the burning of an additional 1.1 million barrels of heavy fuel oil at the Holyrood thermal plant every year under normal hydroelectric production conditions.

Nalcor can’t claim it did not foresee an increased reliance on thermal assets. But the Vale decision was useful because it helped bolster the claim Muskrat Falls was necessary. Nalcor then proceeded to make an impending supply problem even worse.

Chart 2 (above) constitutes a perfect overlay for an Exhibit that shows the growth of residential construction, in recent years. During that time, as now, electric baseboard heaters were the primary heating source in over 90% of new homes.

Are you sensing, as I am, why Hydro’s reservoirs might be experiencing low water levels?

_______________________________________________________________

Related to this post:

UNCLE GNARLEY: TROUBLED WATERS: NALCOR SPILLS $MILLIONS
______________________________________________________________________

Yet, Nalcor took not a single measure to restrict demand growth, even as it knew the problem was threatening the very stability of the electrical grid, especially on the Northeast Avalon.

In the face of an energy policy, best described as incompetent, not just the former Tory Government, but Dwight Ball and Siobhan Coady, can be heard to decry Holyrood’s “aging assets” as justification for continuing the Muskrat Falls project. This "aging assets" narrative also permeates Nalcor rate hike Application.

Barely a week goes by, on this blog without people, like Professional Engineer Winston Adams, expressing frustration that Nalcor refuses to slow the average load or peak load growth associated with new home construction. 

Nalcor could have asked the government to require the installation of devices such as heat pumps (which reduce demand by over 60%) in new homes,  and by differentiating electricity rates for peak and off-peak usage (an option discussed in a Paper by Memorial Economist Dr. Jim Feehan), and by providing incentives for homeowners to install a plethora of energy saving options, in all homes and buildings, as many countries and virtually every other province have done.

In addition, it is tough to look at the demand graph and feel anything but derision for the policymakers whose myopic focus on Muskrat Falls inspired them to forget that the province’s thermal generating assets would be needed for many more years.

Unplanned Generational Capability
The following excerpts from Nalcor’s Submission to the PUB are instructive:
  • “…Hydro is experiencing reduced energy generation at the Holyrood TGS in recent months due to reheater tube failures in Unit 2 requiring repairs and a likelihood of similar problems occurring in Unit 1…” (Item 4 of the Application.
  • “There is a major capital project for Unit 3 in 2016 including a rewind of the Unit 3 rotor and the generator overhaul. This is in addition to normal planned maintenance outages for the Holyrood units.” (P. 7 of Report)
  • “…as the Holyrood TGS reaches the end of life, Hydro’s ability to operate all units at maximum capacity outside maintenance periods is limited, based on planned and unplanned required maintenance and upgrades. This is most recently evidenced by 2016 Unit 2 unavailability.” (P.7 of Report).
  • “In January 2016, Unit 2 of the Holyrood TGS experienced a number of boiler tube failures….there remains a number of tubes with wall thicknesses below optimal levels in both Units 1 and 2… Hydro does not consider it appropriate to operate Units 1 and 2 at their maximum capacities….” (P.8 Report)
In short, Units 1, 2, and 3 at Holyrood have limited operating capacity and are unreliable.
Little wonder the Liberty Group, a Consultancy reviewing Hydro’s generating assets for the PUB, reported:

“Hydro has planned its system to the same overall standard for many decades. This standard provides for lower reliability than what Liberty has observed in other regions of North America”. It noted that Hydro’s plan is based upon “roughly twice” the frequency of supply related outages than found elsewhere.”

Holyrood has been downgraded less by age than by incompetence. As  if this was not already proven, I invite the reader to see Nalcor's own estimate (Table 7 below) of the difference in cost per KWh of thermal energy produced at Holyrood vs.that produced by other stand-by sources. 

Yes, a quick glance will confirm Holyrood thermal is roughly half the cost of other thermal alternatives. 

Now ask yourself, if you were heading a privately owned Utility, would you have chosen to be blind to the downgrade of the Holyrood assets and risk paying twice the cost of producing power?

Next consider Table 4 (below) indicating the amount of time Nalcor has reserved to get the Holyrood assets fully operational. 

I suggest not a single private sector entity would fail to cut this time in half or better, rather than pay twice the cost of electricity from another source. Likely, they would work 24 hours/day to get the more cost effective Units back into service.

Nalcor is managing our Holyrood assets as one might in countries like Haiti, the Dominican Republic or some other third world, or failed, state. Unfortunately, Nalcor has the option of running to the PUB; it can ignore entrepreneurship and professional management.

Whether or not the public understands the implications of what Nalcor refers to as “de-rated” assets, they need to be concerned that Holyrood will have to serve Island power needs until 2020, at the earliest; far longer if Muskrat runs out of money, the Water Management legal challenge is lost, or the project is delayed even longer. Then there is also the likelihood that the PUB orders Holyrood maintained as back-up.

Four more years is a long time to expect performance from seriously neglected assets. Yet, Ed Martin and even the new Liberal Government have the temerity to justify Muskrat as if neglect is all we should expect.

Could someone tell me how you attract industry to a province struggling to keep the lights on; one that offers, at best, a future based on double the electricity costs available elsewhere?

But to the point, Nalcor wants the public to pay for what is essentially a failed energy policy and failed management. The PUB should not reward incompetence even if the ratepayer is forced to suck up the cost of the diesel fuel some other way.

There is one final point, one inspired by a 2010 Nalcor Exhibit contained in an "Information Sheet" on the Holyrood TGS.  

You will appreciate those paragons of energy forecasting as your senses go numb in the face of the frightening reality these same people write the scripts for Premier Ball, his Resources and Finance Ministers, just as they did for the Tories.

The Exhibit shows Nalcor’s long term projection for oil prices. The obvious implication is that, while Ed Martin and V-P of NL Hydro Rob Henderson could not see the demand increase occurring on the electrical grid daily, taking no action, they felt emboldened, nevertheless, to predict the price of oil to exceed $100/barrel well into the future. The truth is Nalcor is neither good at planning or forecasting.

The current state of Nalcor, evidenced by the state of Holyrood TGS, in energy policy, as in the management and construction of the Muskrat Falls project, is truly a national disgrace.

For all those reasons the PUB should refuse NL Hydro’s Application. 

And, as you continue to see the parade of tanker trucks heading to Holyrood, Stephenville, and other locations which offer thermal "standby" generation, you will know you are seeing  incompetence exercised in real time.
_________________________________________________________________

Editor's Note: I want to acknowledge an occasional contributor to this Blog who uses the nom de plume Agent 13, for his review of the province's hydrology data. 

15 comments:

  1. Just this morning on VOCM there were reports of Nalcor releasing water at GRanite Canal. Not sure if this is between resevoirs, or through the final dam. Seems like with the weather we have had this winter, we would be chock o block with water.

    ReplyDelete
  2. Based on the information you have provided I can see that the Cat Arm Reservoir is at the same level it was in mid April 2015. The water level is 2m lower from this same time last year.The levels are not consistent at all as you claim.

    Also, Granite Lake is between Victoria Lake and Meelpaeg reservoir. The control structures on either side will allow Hydro to move the water down stream and control the level in Granite Lake. If you look at the level in Victoria Lake it is down 4m from this same time last year.

    Finally, Newfoundland Power and Corner Brook P&P have also stated in Hydro's application that their water inflows are down as well indicating that the loss is province wide.

    ReplyDelete
  3. Reference Nalcor's Chart 2 (Island Load Growth):

    Nalcor has "conveniently" selected year 2010 as its starting point from which to draw its Island Peak demand line (green line) and only in this way was it able to show a demand increase of 16%.

    2010 "just happened" to be the lowest "starting point" year from which to draw the island peak line. If Nalcor had gone just 1 year further back (to year 2009) that 16% increase would be reduced to 6% --- 2009 island peak was 1,601 MW. In fact for most pre-2010 years going back to 2002 island peak was closer to 1,600 MW than 1,500 MW.

    Misleading? You be the judge.
    Maurice Adams

    ReplyDelete
  4. RE Chart 2 (Total Annual Energy)

    Again, looking at Total Island Energy (which was used to justify Muskrat), instead of just NL Hydro's "Island Energy", 2015 shows a 1% DECREASE from our peak in 2004. Even if you want to look at only the last 6 years, the increase is 12.5 % --- not 21 %.

    I wonder if Nalcor ever heard the phrase "The truth, the whole truth, and nothing but the truth"? Infographic at http://www.vision2041.com/

    Maurice Adams, Paradise

    ReplyDelete
  5. This is part of the VOCM news story today on spilling water from Granite Canal: "NL Hydro says residents living near the Granite Canal in Central Newfoundland will have to beware of the potential for a controlled water release from the canal some time this week. Full story at this URL: http://www.vocm.com/newsarticle.asp?mn=2&id=60695&latest=1

    Hydro says it's a localized event due to a recent increase in rainfall and snowmelt this week. During a release water levels could rise as well as speed up. They say the releases could happen with little notice.

    The canal is part of the Bay d'Espoir system."

    Meanwhile, the Holyrood Generating Station is still cranking out power because there is no third line available to the Avalon; the current two line TL acts as a "choke" permitting water to be wasted.

    ReplyDelete
  6. FACT: From 2014 to 2015 there was a 33% DECREASE in the cost of oil burned at Holyrood.

    FACT: From 2014 to 2015 there was a 40% DECREASE in the cost of oil per GWh of energy produced at Holyrood. Maurice Adams, Paradise

    ReplyDelete
  7. You are playing fast and loose with the hydrometric data (or you don't know how to interpret it properly) as Kurt Sullivan shows. http://kurtbsullivan.blogspot.ca/2016/02/low-reservoir-levels-really.html

    ReplyDelete
    Replies
    1. Well said. Reservoir planning on the island is a multi year and multiresevoir exercise. The theory is to burn as little fuel as possible but ensure as little spill of water as possible. Spill is natural as you would never be able to afford a reservoir big enough to capture all water. They are optimized at time of construction with best data available at the time. Holyrood is supposed to be able to generate nearly 3 GWH pef year. It never has. That is great! Less the better BUT IT might need to when water is low. Or come from combustion turbines. What Hydro is proposing is perfectly fine. The rate stabilization plan prevents gaming this. Carry on and let them do what they know how to do. Water management is complex and aided by sofisticated tools that can not be related by a couple of graphs and ability to use a spreadsheet.

      Delete
    2. That should have said 'nearly 3000 GWH per year'.

      Delete
  8. And the cost per KWh for Holyrood has been trending down (down 42% since 2012, from 19 to 11 cents/Kwh) --- about 1/3rd the cost of Muskrat power. Maurice Adams, Paradise

    ReplyDelete
  9. I notice Maurice`s blog `vision 2041` has an excellent color chart showing an actual small decline in total energy used per year since 2003 to the present and a substancial decline of power produced by Holyrood from 30 percent to about 13 percent now.
    So we are spending 10 billion to offset this 13 percent! And this decline in Holyrood is without any substantial customer efficiency measures such as heatpumps. It seems straight forward that efficiency measures,high new house efficieny standards, more wind generation and more island hydro generation would have easily allowed essentially zero use of holyrood, except for emergency use. Much lower cost and would have prevented high power bills we will see with MF. As Nfld Power is now forecasting much lower growth in energy use and peak demand going forward, it reinforces the Isolated Island option as the least cost option. And there is on-going conversions to heatpumps, wood, and oil and propane with present low costs for these alternatives (such that Nfld Power is concerned about increased conversions with high cost MF power rate hikes....see their application now with the PUB). Little or no growth going forward results in less need for Holyrood as present trends are showing, and confirms the stupidity of MF.

    ReplyDelete
    Replies
    1. Mr Adams seems to be working under the assumption that the island system is energy constrained as opposed to capacity constrained. Prior to the closure of the paper mills forecasts were showing that the island would be energy constrained first. That changed when the mills closed. Nalcor's own documents discuss this, see Muskrat Falls exhibit 16.

      Govt has selected Muskrat Falls to replace the Holyrood capacity and add additional. Remains to be seen how that works out.

      Delete
    2. Assumptions are Nalcor's forte. Nalcor's submissions to the PUB are full of erroneous assumptions, and you too seem to make the 'assumption' that I work on a particular assumption. Not a good way to proceed. I prefer to work based on the facts, the evidence --- as I find it. In this case, I happen to be commenting on one aspect of Nalcor's continuous selection of certain data, often at the exclusion of other relevant data, and oftentimes with the result that it is more likely to erroneous point towards a wrong conclusion --- a pattern long seen in its PUB submissions and other so-called pubic information documents.

      Nevertheless, I appreciate your comment. As I suspect readers are quite capable of making their own rational judgements. Maurice Adams, Paradise

      Delete
    3. Fair enough. I appreciate the reply and clarification.

      Delete
    4. Just to clarify, for non technical people (I am technical trained): The phrase above says `Mr. Adams seems to be working on the assumption that the island system is energy constrained as opposed to capacity constrained`. So what does this mean.
      Energy constrained suggests that we do not have enough of water generated electricity, as we are primarily a hydro generation province, some 85 percent is renewable energy from the rain and snow fall. Hydro generators capture most but not all of this energy. Example, a torrential rainfall over a few days can supply too much water and we need to spill some, as it is not economic to try and collect and store all of that water.
      Capacity constrained suggests we have insufficient generator capacity (not big enough horsepower or kilowatt sized generators) to meet winter time peak loads, as these electric loads are very high during cold snaps, due to our use of baseboard electric heating, which is the main driver of peak winter electric heaters . So at times we may have ample water for generation, but insufficient hydro generator size and capacity. This is a reality based on sound economics, and average rainfalls etc, as to have very large capacity generators to capture all the rain is uneconomic.
      So, it there a better , more economic solution to use our island water resource. The answer is yes.
      A solution is to reduce the winter peak electric load. Worldwide, an approach is to reduce the peak loads. In a warm climate like Florida, a peak would be in summer when air conditioning is used a lot.A solution there is more efficient air conditioners, windows that reflect heat, efficient lighting that reduces air conditioning loads. These things are being done.
      In northern locations, the peak is usually in winter, especially for areas where there is no gas heat, and electric heat is used more. This is our great problem here with winter peak load mostly due to space heating .
      To reduce this peak load, efficient space heating, efficient water heating, more efficient windows, higher insulation levels, tighter air sealing, heat recovery from hot water residential water, windows oriented to the south to take advantage of solar gain, are significant options to reduce winter peak load. This avoids capacity restraint, and optimizes are water energy supply. This should have been started in a serious way a decade or more ago.
      I believe Mr Adams has addressed this to some extent in his information on his site VISION 2041 (thought limited) on minisplit heatpumps, as an EFFICIENCY SOLUTION. Heatpumps is the low hanging fruit, as they say, being the first and most effective way to counter capacity restraint. Less capacity is then needed.
      Not sure if this is sufficiently non technical, or explains Maruice`s perspective.

      Delete