Monday, 15 April 2019

CEO MORE POLITICAL TOOL THAN ECONOMIST

Guest Post by PlanetNL
PlanetNL25: Nalcor CEO – Economic Skills Are Non-Essential to the Position

At Nalcor’s Annual General Meeting last week, CEO Stan Marshall offered up a view on Muskrat not heard before.  He has chosen to reframe the Muskrat Project as a combination of a good generation project saddled down by the burden of much too costly transmission systems.  Stan further suggested that had Muskrat energy been sold exclusively via Quebec transmission routes, it would be considered an attractive project, the envy of those other provinces still building their questionably expensive hydro projects.

In the PlanetNL17 post, entitled Exploding Transmission Costs a Terrible Blunder, the cost of Muskrat Project transmission was analyzed and found to be just as stupidly expensive as Stan says.  It’s nice to agree with the utility occasionally.  His assertion that Muskrat generation could be economic, however, is a long way from reality.  This post does some quick calculations to show that Muskrat Falls generation in its simplest guise isn’t viable in any market.



Estimating the Cost of a Muskrat Export-Only Project
Stan Marshall explained the best economics for Muskrat would’ve come from an interconnection with Churchill Falls and exporting all energy to or through Quebec.  In this scenario, the Labrador Island Link to the Island and the Maritime Link from the Island to Nova Scotia would not have been built.  That’s a lot of useless baggage removed but what’s left is still very expensive.

The main asset in this scenario is the Muskrat generation station.  The direct construction cost before financing charges is a known number at $5.5B.  That number may still have potential to swell but we’ll leave that aside.
The Muskrat generating station needs connection to the grid at Churchill Falls to export the power to other jurisdictions.  This exact line was in fact built for the overall Muskrat Project at a capital cost of $0.9B.  This brings the total base construction value to $6.4B. 

This analysis assumes the existing 735kV transmission lines running westward through Labrador and then through Quebec could accommodate the extra power from Muskrat during periods when Churchill Falls itself is at or near maximum output.  This is a key question the PUB needs clarity on to evaluate export opportunities.  Upgrades could add a lot more cost and may not be worth the trouble. 

We’ll go lean and assume zero upgrading is needed to the existing transmission system but the threat is real that congestion on the lines may limit the potential sales opportunities on many winter days.  When the original Lower Churchill concept was mainly Gull Island with the possibility of a Muskrat add-on, an entire transmission upgrade through Labrador and Quebec was a given – what is needed just for Muskrat energy is unknown.

Annual Cost to be Recovered
As most know, the Muskrat generation and Churchill transmission interconnection were not amortized in a conventional manner.  Instead, the costs were heavily and cruelly backloaded to later decades in the 50-year financing term.  This approach to rate design would not be permissible if Muskrat were an export-only project not for domestic use.  At minimum, conventional cost of service calculations would apply eliminating the backloading.  In addition, financiers may limit the term to 35 years but again we’ll leave that detail out and stick to a 50 year term for this scenario.

Conveniently to this analysis, the Labrador Island Link uses a conventional cost of service financial methodology.  The LIL, having a base construction cost of $3.7B, computes out to having a $380M annual cost of service in 2021, inclusive of financing costs.

Applying the same ratio of annual cost to total construction cost, Stan’s Muskrat for export scenario, having a construction cost of $6.4B, comes out needing about $650M annual revenue requirement to be a passable project.  Considering the project may have higher financing charges than for the LIL, a lower debt to equity ratio, and no Federal Loan Guarantees, the true costs are likely to be a good bit higher but again, we’ll simply set that aside, giving Stan’s notion a better chance at feasibility.

Required Selling Price of Energy
For this analysis, it would be reasonable to use the same firm output of 4.6 TWh as is expected to be delivered to the Island grid.  Losses via transmission through Labrador and Quebec to US markets probably won’t be any less.

Keep in mind, if there are periods in the winter where transmission congestion prevents selling, and Muskrat has near-zero storage capacity, total sales will suffer.  Presumably Stan would have gotten a clear water management agreement to coordinate flows and potentially store energy in the Upper Churchill.  Hydro Quebec has flat out rejected the simple ponding of energy concept Nalcor tried to impose but let’s assume Stan’s concept would have included every accommodation possible from HQ to maximize energy production and sales revenue.

The math here is simple.  Divide the annual required revenue of $650M by the energy sold.  The result is $143/MWh or 14.3 c/kWh.

This is not the only selling cost, however.  HQ transmission fees must be paid that are presently about 1 c/kWh and are likely to escalate significantly as their asset renewal programs become more intensive.  Additional transmission fees await in other markets.  The minimum wholesale price needed to be paid is likely in the range of about 16 c/kWh in Canada or about 12 c/kWh USD for entry via New York. 

Redo the numbers at higher equity, over a 35 term, with higher financing charges and no FLG probably drives up the minimum average required selling price 30% or more.

Cost Far Exceeds What Customers Are Paying
We can keep this quite short.  Wholesale energy contracts are coming nowhere close to this level.  In Canada and the US, major new wind power sites are being constructed at 4 c/kWh or less.  In the sunny US southwest, utility scale solar has also broken below this threshold.  Any jurisdiction now has options to build their own generation facilities and will typically do so close to their major load centers therefore avoiding upgrades to transmission infrastructure.  Why would they import power at several times the cost and incur additional costs in transmission upgrades in their own state? 

Not only is high cost long-distance hydro a non-starter.  Publications like Bloomberg New Energy Finance are advising that renewable energy with modest battery support are likely to put a full stop on the construction of natural gas fired peaking plants in the US despite low gas prices.

And that’s just the economic picture.  Why too would they choose to be dependent on a long-distance supplier leaving them prone to transmission reliability risks and dependent on external governments and their agencies that are known to be at least a little bit politically volatile?   

The chances of getting firm power contracts at the high breakeven rate needed for Stan’s Muskrat export concept amount to exactly zero.  At best, only a tiny percentage of power could be sold into spot markets during volatile peak demand periods, however, even those events are becoming less and less frequent as the electricity market further decouples from natural gas.  

Export to the Maritimes
Stan also dangled to the media at the AGM that Nova Scotia and New Brunswick have 1700MW of thermal generation in need of replacing with greener alternatives in the future.  Here, Stan may be reaching beyond Muskrat to whisper that Gull Island would be the next great development to meet this need.

The reality is those provinces will be no more interested than American markets in paying a higher price than is necessary.  Surely, they will have learned from our Muskrat blunder how not to go about revamping their utilities and will consider a wide gamut of options.  These include load reduction through conservation programs, and then adding local wind, solar, battery, or other storage. 

In addition, they will place much of that new infrastructure near their major load centres and terminal stations to minimize the cost of new transmission – that very thing Stan had pointed as definitely being too costly.  To import energy on this scale, major transmission upgrades all the way from Churchill Falls to Halifax would cost many billions.  It’s almost certain the cost of transmission alone would exceed the cost of local alternatives for supply.   Neither Gull nor Muskrat could achieve payback in competitive markets – all they could do is bleed massive losses. 

Deliberate Distraction from Reality
The only way energy can be sold into other jurisdictions is to compete at the price of other energy options.  The most economic version of Muskrat as notionally suggested by the Nalcor CEO last week would probably wouldn’t get 20% of its required revenue.  It would be an unmitigated economic disaster only slightly less awful than the actual version of Muskrat being brought to completion by the CEO.

We can conclude easily that Stan’s notion that Muskrat is a good generation project is a comment made in extreme ignorance of reality.  After three years on the job, Stan Marshall really should understand the economics of Muskrat and the North American energy business much better. 

Given that his predecessor demonstrated equally poor economic judgement (or worse), it appears such core relevant skills are not a required part of the job description.  The absence of these core skills in the CEO position is something for which Government and select politicians need to be held accountable for.  The action of the crown corporation CEO is undoubtedly the product of their orders. 

It seems Stan, like his predecessor, is ready at the Premier’s beck and call to deliver political points.  Sounding off that Muskrat is a good project is just Stan doing his duty as the loyal supporter of his boss.  But Stan is just the warm-up act.  Get ready for the main event when Premier Ball calls an election and finally reveals his election platform.  Will he finally reveal something meaningful about rate mitigation for Muskrat?  Will he grandstand on developing Gull Island?   Or will he resist critical analysis on these issues by simply putting off decisions and hoping others will solve the problems later?

73 comments:

  1. First one small point, MF is amortized over 57 not 50 years.

    Duh of course Stan the Man will choose the last option and stall to put the problem in the hands of the next "decider" to quote Bush the junior. It appears that spreading a thick layer of bullshit is the main qualification for Nalcor CEO.

    Some of us have been jumping up and down making the points you now make. What wiped the cobwebs from your eyes? The cost of MF when it goes over the dam it has priced itself out of any external market. NL has stuck its ratepayers with an unmanageable burden with MF.

    It will break Winston's heart reading this analysis! He fears battery backup and can't wrap his head around battery backup and close renewable generation onshore or near offshore. NL can get into the revolution in generation and storage by burning plans for CCT's and building backup wind generation on the Avalon backed up by batteries.

    Homeowners that can afford it would be wise to back up an unreliable supply from Nalcor with a Powerwall.

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  2. Nothing new here, just confirmation, where studies ove the past several decades has shown that the maratime link is simply not feasible economically. No study ever done showed conclusively that power on the Churchill river could be developed and sold in the maratimes or New England market economically via the maratime link...period. Even if the maritime provinces needs 1700MW replacement in the next decade. It is simply not economical, as PlanetNL has pointed out and confirmed by all studies done. So why are we beating our gums about it and wishing for pie in the sky. Some may say, well if we don't make any money on the first hundred years, we will make money during the second hundred years, when it is all paid for... Maybe that could be true. The only proposal that might have succeeded was Grimes proposal because it was in conjunction with Quebec, and maybe both provinces working together, with power lines going through Qc. It may have been economical. The only question that remained was how much return would we as a province have made. Guess we will never know, as that ship has already sailed, and and it is far too expensive to build that same ship now or in the future. New long distance transmissions projects are like sailing ships , they have been replaced by simpler, less expensive alternatives says Joe blow.

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    1. That is a good analogy with sailing ships Joe!

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    2. Watch and post your analysis:

      Employees invited to attend announcement regarding protecting residents from the cost impacts of Muskrat Falls

      Premier Dwight Ball will be joined by Minister Siobhan Coady and Minister Tom Osborne at an event this morning to announce a framework that will protect residents from the cost impacts of Muskrat Falls. The event is taking place in the lobby of East Block, Confederation Building, at 10:00 a.m.

      Public service employees are invited to attend the announcement which will also be streamed live on the Government of Newfoundland and Labrador Facebook page.

      Premier Dwight Ball

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    3. Could not access. Anything important? or just pre-election huff?

      Delete
  3. How do you like dem apples?

    https://www.cbc.ca/news/business/snc-lavalin-trial-board-1.5096153

    How different this Board than NALCOR Board? Note the Ben Aissa character, had some involvement with Libya, Montreal and possibly Muskrat Projects. Boards facilitated some skullduggery, shady deals.

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    1. Robert @ 10:25:

      I don't remember Ben involved in NL works, I do remember Stephane though.

      I am still having some trouble accepting Canada has a right to prosecute for something that is a crime in Canada when the action occurred in another country - by comparison, are we going to charge Vale with the dam failure in South America because that construction didn't meet Canadian Standards? I guess the follow-up question would be, is bribery even a crime in Libya?

      No issue for the Montreal events - charge under the relevant legislation.

      PENG2

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    2. PENG2; The Boards are all Canadian Citizens. International Law and Extradition Treaties can take the "Rule of Law" wherever the Politicos deem necessary. Crime is in the eye of the Powers. Culpability by the Public on Boards such as SNC-Lavalin and NALCOR's malfeasance, should be taken to court, as crime

      Delete
    3. Robert @ 11:29:

      By your argument, I expect the Canadian government to start proceeding against Saudi-Canadian nationals due to women's rights oppression in the Kingdom? I guess the same could also apply to Americans working in Canada that smoke weed - Americans can now be charge stateside?

      The precedent for this type of action has been set - Canada doesn't usually extradite a criminal to face the death penalty. Additionally, we have charged/prosecuted bounty hunters with kidnapping when the crossed the US-Canadian border to retrieve a US criminal.

      I don't accept that any country has a right to exert its system of laws into another's sovereign borders. Canadian government is walking a dangerous line threating judicial sovereignty - I am not sure the risk is worth it, especially if bribery is 'accepted' is Libya.

      National sovereignty is dear - we must protect, but must also observe.

      PENG2

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    4. So a company with Canadian headquarters and hundreds of employees should not be able to sue for bribery committed in Libya???? Get real!! It does explain your loose morals at MF PENG2!

      You have the nerve to make a case exonerating the already convicted and the charged now facing trial!

      Bribery by a Canadian company is bribery, period. Stop making ridiculous and erroneous claims. Show your miserable, fraudulent face!!

      Delete
    5. Bruno @ 12:42:

      The concept is extra-territorial jurisdiction. The magnitude of the crime is irrelevant when considering sovereign boundaries, though punishment consequences can determine is extradition will be granted to a person to face charges (Charles Ng is an example).

      If we consider 3 cases:
      1) an American enters Canada for a vacation and smoke weed
      2) a Canadian who smoked weed in Canada enter the US a week later
      3) a Canadian enters the US and smokes weed on US soil

      Only the Canadian in #3 has committed a crime, it is prosecuted in the US and not in Canada.

      By the same token, can you even say SNC committed a crime in Libya?

      PENG2

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    6. Here are the reasons for denying a DPA. Are you denying this also??

      "But the documents reveal for the first time why prosecutors have denied SNC-Lavalin a DPA, stating the company doesn't qualify for three reasons:

      The "nature and gravity" of the case.
      The "degree of involvement of senior officers of the organization."
      The fact that SNC-Lavalin "did not self-report" the alleged crimes that are at the centre of the case."

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    7. Bruno @ 13:30:

      So what laws are you suggesting SNC be held to: circa 2010 in Canada, circa 2019 in Canada or something else?

      You are confusing several different events - if this is your opinion, I should hope you never travel or need help of a Canadian embassy.

      PENG2

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  4. Mitigate this Dwight!
    What about year 31 or year 47?

    Seems like 2021 is covered but beyond looks as bleak as ever.

    Is the 200 million from Ottawa in perpetuity? How long can NALCOR oil revenues last?

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  5. Just wondering what ever happened to the "water management agreement". Have not heard any comments regarding this issue recently.

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    1. Legal case (referred to as the Block Theory) is at Quebec' Court of Appeal. Judgement will not be before months.
      Considering that CFLCo's arguments were as stupid as usual in all their legal cases, do not hold your breath until the decision comes....

      Delete
  6. From the announcement this morning ...

    Funding needed 725.9 million

    Holyrood net fuel savings -178.2
    NL Hydro surplus energy -49.1
    Nalcor dividend -200
    Organizational change -20 (lower salaries to government rates)
    Muskrat falls operations and maintenance -12 (cheaper elsewhere so cut)
    Isolated diesel systems -7.4 (new green solutions, RFP soon)
    Electrification of gov buildings -15 (ignores conversion costs)
    Add value to energy surplus -35.5
    Carbon credits -8.7 (from holyrood)
    Government of Canada -200

    Amount Remaining zero.

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    1. For anyone analyzing the electrification of government buildings, there are two things going on. Schools using oil will be converted to electric baseboard. This costs from $600,000 to $2,000,000 since it requires new 600 volt service, distribution wiring, transformer, panels, a modern control system and generally, all wiring is replaced including lighting. Asbestos materials are often encountered which drives up cost. Government buildings using oil would have an electric boiler use the existing heating system. This would be considerably cheaper up front since a new service could be brought in solely for the boiler. Without going after the really big oil plants (hospitals / MUN / trade schools), it is a minor initiative.

      I object to giving data centers a break on electricity. They use electricity and offer little employment -- cryptocurrency farms are the worst in this regard. Why not offer cheaper electricity so that all oil furnaces, commercial and residential, get replaced due to the economics? That seems like a better way to use the "surplus" energy and maximize revenue.

      If Nalcor engineers are going to work at government rates, they are in for a shock. Engineer salaries start at $52 thousand. A senior engineer in government tops out at $86,013. That is likely below the starting salary for a recent graduate at Nalcor. Anyone know the lowest engineering salary at Nalcor?

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    2. Note the omission of CDM in the mitigation plan.
      The Synapse study shows that for electricification, it requires keeping in check, and preferable reducing our winter peak load.
      The Marginal Cost study also shows we , with MFs have a surplus of only 72 MW, which can get eaten up quickly with electricification. And that at peak load times, costs of power to Nfld Hydro is already 29.5 cents /kwh and reaching 1.41 per kwh for very short durations in 2021 winter peak.This is assuming power rates of 17 cents, and the elasticity effect of 17 cents would dampen the load growth some. 13.5 cents requires another reset of the marginal cost analysis with load growths as compared t 17 cents, and from Ball's plan announced today to add loads.
      Maybe this is why Nalcor is not present today;this is political BS, not supported by proper energy plan analysis, that even Nalcor is keeping it's distance. Ball can sell horseshit to an uninformed public, and Ball will not get his day on the Inquiry stand until after the election.

      Already they promote switching houses from oil heat to electricity, and now schools, and maybe MUN, and also EVs.
      NONE of this is prudent without CDM to permit the electricification.
      Is this not obvious? Otherwise we are back as before , and needing new additional generation for base load.
      So how many EVs is Ball planning? we know of Nalcor's 1 car for Churchill Falls location. Will Nfld Power also get one? The devil is in the details, and Ball hides the details. Does it follow that Ball is therefore devilish, hidden behind that perpetual smile?
      Winston Adams

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    3. The savings in Diesel communities doesn't make any sense. Communities with diesel generation use oil or wood for heating. Public buildings in diesel communities use oil heat. The potential savings from efficient wood stoves would translate into trees, not diesel fuel.

      These communities are too small to support commercial wind farms. Building transmission lines into these communities would never pay off.

      Little Bay Islands has voted for resettlement, so they can claim that gain. They really ought to close all the diesel communities by charing non-profit, actual cost for electricity and ferry. People there can adapt to self sufficiency, or accept some reasonable, humanitarian, relocation assistance.

      Grey River is another diesel/ferry community that ought to close. Look it up on google maps/earth and look at the satellite image. It is tiny!

      https://www.google.com/maps/place/Grey+River,+NL/@47.5877925,-57.1036135,604m/data=!3m1!1e3!4m5!3m4!1s0x4b6fcd0b90accf93:0x2fc7d1d6eddcc1cc!8m2!3d47.585206!4d-57.110428

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    4. Anon @ 13;18, you make the case for a separate rate structure for the Avalon, that alone caused the MFs project, as this area alone needing the Holyrood 500MW thermal.
      So about right, in fairness, to have double the rates for the Avalon compared to west of the Avalon.Or resettle all on the Avalon to west of the Avalon.
      Winston

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    5. From twitter, Ball: this is about financial restructuring not about feds coming with a cheque. PM Trudeau and Bill Morneau agreed to work with us to achieve this. We know we can.

      So the $200 million is coming from refinancing? More back loading, or longer amortization? This is like reducing your mortgage by turning it into a perpetual lease. Lower annual costs, but you are a slave forever.

      This $200 million sounds like a dangerous path that only makes things worse. In the long term, we pay even more.

      Delete
  7. Ironic to see Osborn standing there while the previous government being blamed. https://www.cbc.ca/news/canada/newfoundland-labrador/independent-mha-osborne-defends-muskrat-vote-1.1266273

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    1. Anony @ 11:45:

      I mentioned in the past that there are 6 sitting MHS that have voted for MF - 7 is we count a person who was an Assistant Deputy Minister at the time.

      Of those 7, 6 are running in the 2019 election, and this doesn't account for CM or DK - 2 that I would classify as opportunistic and would have voted either way; and GM I am still out on since he has changed alliances more than 1x.

      For reference, the 7 are:
      Keith Hutching(not running)
      Tom Osborne, Tracey Perry, Kevin Parsons, David Brazil, Paul Lane (all expected to run)
      Barry Petten (was ADM during the MF vote)

      As I said before - my vote this time is easy, my incumbent member is one of those 6.

      PENG

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  8. A great photo of the North Dam recently discussed at the Inquiry. The dam of high strength concrete, conventional design, budgeted at 118 million came in as double the cost, and changed by suggestion of a contractor to this low cost, stepped, low strength rolled concrete design, like the side of a pyramid.
    Yet some 80 Million? of change orders outstanding, and this only a portion of the total change orders, as Dunderdales' lawyer is looking for details of all the change orders. So was there any net savings for lower strength?
    Now the photo suggests in appearance that this looks sturdy. Yet the waters are yet to rise another 60 ft. I assume the opposite, upstream side is also stepped, so the mass is greater than the photo suggests? Perhaps PENG2 can confirm?
    WA

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    1. This comment has been removed by a blog administrator.

      Delete
    2. SNC is guilty of more than bribery in Libya. They got away with illegal campaign financing in Canada. "Normand Morin's plea means Canadians may never know which Liberals, Conservatives received SNC Lavalin money". Canada is also corrupt. We should have had a complete list of everyone who received illegal campaign contributions. Instead, we allowed a legal loophole to protect Canadian politicians.

      https://www.cbc.ca/news/politics/election-financing-snclavalin-charbonneau-1.4984823

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    3. I hope the dam collapses as soon as it is filled and nobody dies and those responsible service hard time. Let the sword of Damocles fall now rather than torturing the local population who must wonder every day when they will die. I think the probably of its failure is 100% - a small earth tremor would likely suffice. It is only a matter of time before such a dam fails. At a minimum, I would relocate mud lake residents and anyone in the downstream flood plain to high ground and compensate them.

      Delete
    4. WA @ 13:19:

      RCC was an option in the initial tender docs - also, a terraced(ie stepped) face provides the same downstream dissipation of an contours surface.

      The intake faces upstream are not terraced in the same fashion.

      PENG2

      Delete
  9. PlanetNL has unintentionally tossed Bruno a bone, and Bruno responds" It will break Winston's heart reading this analysis. He fears battery backup and close renewable generation onshore or near offshore.
    Bruno claims to speak the truth. It appears to be his truth, as he distorts it. Winston's heart is not broken, and agrees with most of PlaneNL analysis. Bruno again ignores location, climate, and arithmetic to reach HIS TRUTH.
    Winston.

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    1. That is the line used by Trump apologists Winston. Truth is absolute, something is true or it is not!

      Delete
    2. Bruno, Did not Pilate ask Jesus "What is truth" and Jesus made no reply.
      At other times Jesus said "I am the truth and the life" And too said "all men are liars". There are half truths too do you deny? Some say half truths are worse, as intended to deceive. If there is half truths, then half truth is not absolute truth, you agree?
      If all men are liars, are you a man to admit you are sometimes a liar, or is Jesus wrong, as it applies to you Bruno?
      Truth may be absolute,when you can find it, but human good character, as to absolute truthfulness is very rare. Very little of it was on display at the Inquiry, you agree? Yet they swear to tell the truth, the whole truth and nothing but the truth. Name those that met the full test there, absolute truth?
      My older brother, Clyde, now passed, was very truthful, but would joke when questioned, saying "I don't lie, except where the truth don't fit". I am not aware he ever told a lie, but may have. Your standard of truth,sometimes by omission of facts, is not at a high standard, I suggest. You do not even acknowledge what may be termed "honest mistakes". Everyone makes mistakes, where there is no intention to be be untruthful.
      So, truth is fact is it not? Facts are not owned by anyone, they are not your facts or my facts. But you have your truths, your version of your truth, which seldom is absolute.
      Your refusal to do arithmetic is an example of your aversion to truth. Your statements often don't add up, so not truthful. Nalcor has been grossly untruthful. Stan, the so called Straight Shooter, is now seen falling short of his reputation on truth.
      As to me, I make no claim on this blog to be absolute on truthfulness, or to be truthful at all. I say this is my analysis, check it out if correct, or this my opinion, and show me where I fall short, as sometimes I do. Now Dunderdale says telling the truth to he public is the "cardinal rule" of politicians, which she was one. Jesus never said women were liars! A bible typo maybe.
      Winston Adams

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  10. As to this analysis by Planet NL
    1. I have in the past stated that both the generation component and transmission component is uneconomic. PlanetNl also says that.
    2. New wind at 4 cents is hindsight as to presanction, MFs, but is the reality now for markets. As to Nfld , presanction MFs, wind at even 7 or 8 cents was very attractive, but ignored for the Isolated option as to reasonable amounts and timing for Nfld. I have questioned on this blog, Hatch, MHI and Nalcors rationale, and I have suggested at least 300 MW should have been considered for the Avalon, and sooner rather than later. I have not at all advocated for offshore wind , as it is unnecessary and much more costly.
    3. PlanetNL notes the benefit of solar for the US south west, not for Nfld. Bruno has advocated as to the large quantity of solar even at the North Pole, in his erratic statements as not to consider Nfld climate impact. Indeed , I offered him a prise to write a piece for UG as to his analysis. He says "Believe me, analysis is not needed" Sounds Trump like.
    4. Building generation close to the loads is rational, and why , nearly 50 years ago, Holyrood thermal was near St John's, when oil was cheap and GHG was not much of an issue.
    5. Avoiding upgrades to transmission infrastructure: Texas spent 7 billion doing just that so to get West Texas wind to East Texas loads, 300-400 miles away. So to transmission upgrades is good, I suggest for the Avalon power restraint from central Nfld hydro power.
    But long distance transmission is more of an issue for very long distance, which is the argument of Planet NL
    Bruno always refuses to define the term long distance, and says "NO good Bbelieve me". Transmission losses involves arithmetic and knowledge of the various component losses. Bruno understand none of that,and makes general statements.
    Winston

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    1. Stay with your #4. BUILD GENERATION CLOSE TO THE LOADS IS RATIONAL;

      This is the essence of Sustainable Development. Take only what you need, and leave resources for your children to survive also. Advice given to Mines and Energy in the 1980's, was, divert BOE, utilize wind energy, combined with solar hot water, photovoltaic, conservation, with embargo on baseboard heating. Here we are in 2019, putting baseboard heat in schools??? Stupidity through time! There is NO hope that this generation of overpaid Engineers, Bureaucrats and Politicians understand cost benefit analysis for the ratepayer and taxpayer they serve.

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    2. 6. PlanetNL and Bloomberg advises that MODEST battery support may put a full stop of natural gas fired peaking plants in the US despite low gas prices. However few jurisdictions have what we have in Nfld: a 2.5 winter peak to summer peak due to our inefficient baseboard heating. "Modest" battery systems cannot give reliability to most of our circumstances on our grid. Planet NL refers to the USA marketplace, and Bruno interprets that to imply batteries is a salvation for our problems, even for power backup. Tear up plans for GTs he says. If we have no such backup, I guess Nflders can throw out all their portable gas generators bought since DarkNL? Planet NL correctly counters Stan's statements.
      7. Planet NL correctly refers to the Maritime priority : CDM for load reduction, adding local wind, solar, battery or other storage.
      This I agree with, for the Maritimes, but would add that solar and battery is less an advantage as an option to Nfld. CDM and more wind should have been a priority for Nfld, and a case even now.
      8 . As to 1700 MW thermal load in the Maritimes, perhaps Heracles can say if HQ has sufficient surplus to feed those loads, and the costs for transmission upgrades?

      In summary, Winston is not broken hearted, agrees with most of Plantet Nl, and welcomes more analysis by PlanetNL.
      Winston

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    3. If I am not mistaken Winston Texas is undergoing a major infrastructure upgrade to transmission to allow efficient shipping of abundant green (wind and sun) energy they have a surplus of across the continent .

      Someone in Texas is planning for the future of fossil free energy. You should lift your head up from the weeds and look at the big picture mate. Nalcor should do the same and build wind capacity on the Avalon backed up by batteries that have become cost effective, not the ten year old prices you quote prior to crashing battery and converter costs. And don't forget batteries balance load in real time to save moola. You have a hard time with that.

      Delete
    4. This the Breaking News of today: Bruno suggests a possibility he MIGHT be mistaken! But only a might.
      I might be mistake but I think this is the first time Bruno had mentioned Texas, their wind/solar, their infrastructure, and whether they import or export abundant green energy across the country. I, howevner, have given data on Texas before.
      Where Bruno MIGHT be mistaken:
      1. Texas has for some years and continues significant wind capacity, not a new thing for them. As I reported before,they are at about 20% wind, and on one day achieve about 40%. Nfld is only about 2.5 % wind.
      2. No, they are not involved in efficient transmission of renewable energy across the continent. The continent is some 4000 miles across. Texas is essentially an isolated grid. It has a DC interconnection, but almost no energy transfer with the interconnect.Instead of transmission interconnection across the continent, their transmission upgrades are within their own state, for wind energy transfer from west to east Texas, so about 300-400 miles, not thousands of miles, Their transmission is similar to distances within the island of Nfld hydro transmission.
      3. Texas is planning for the future of fossil free energy? Hardly, not a leader. Nfld preMFs was 85% renewable. Texas now, I suggest 25 %. I suggest solar in Texas is less than 5 %? Others might check and advise.
      4. Nfld should do the same as Texas: wind backed up by batteries, says Bruno? How much battery back up does Texas currently have? How much contracted for? Also advise as a % of their peak load? What data can you give to back up your suggestion?
      5 Batteries balance in real time to save moola? How much moola? Is it cost effective? How long does it last in a power outage that we may experience? I suggest for Nfld it is not very cost effective at present or the near future.
      So......are you mistaken Bruno, as to Texas? Or Texas vs Nfld?

      A question Bruno....what is reliable service to you, how many hours per year without electricity?
      Winston Adams

      Delete
    5. <1 per annum Winston.

      With your inability to fathom load balancing offered now as a service as a cost saving by some utilities seems proof one cannot teach an old dog new tricks.

      Delete
    6. Can't teach an old dog new tricks:
      Bruno cites Texas as a model for renewable energy including solar.
      I said Texas has less than 5 solar energy.
      Seeing Bruno did not admit to a mistake, I just checked and see as of Dec 13,2018 , Texas has less than 1% solar energy.
      Now that is proof as to who is old and who can't learn new tricks.
      So too, Bruno suggests his methods can reduce Nfld hrs without electricity from present 2.8 hrs design to less than 1 hr.
      How he will teach that concept he does not say,but likely via Bruno Batteries, as Robert has termed the magic technology.
      Did you err as to Texas Bruno? And how many BBs does Texas have?
      They trim high summer peaks by raising rates to 4 dollars per kwh, did you know?
      Bruno, if you ran for election here, you could offer "A chicken in every pot , a Bruno Battery in every house." And likely you would do good, seeing so many believed in the magic of MFs.
      Winston

      Delete
    7. Do you realize " a Bruno Battery in every house" and a charged EV plugged in would give you an unbreakable system?

      It would make such better energy supply planning. A thousand points of light and a chicken in every pot! Winston for Premier!

      Delete
    8. Bruno , you have trumpeted before as to the unbreakable power systems, which Robert Holmes, an engineer of long experience, correctly says does not exist. Even HQ wold not make such a claim.
      A Bruno Batteryin every house and charged EV at every house is a pipe dream that Bruno will not live to see. If Winston was to run for Premier on such a platform, it would be dishonest, not truthful, and would have to admit is is a Bruno silly and foolish idea based on present costs and ineffectiveness. I would have to advise voters to vote for ABW (anyone but Winston ).
      You are too smart by half to try and fool UG readers that I would endorse such foolishness you suggest.
      Robert has tagged you as the Bruno Battery man, and it will stick to you, not me. Maybe, in time, PlanetNl will do more on Bruno Batteries, utility scale and wall packs, as to our grid operations.
      Winston

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    9. If you are interested in the evolution of grids accommodating renewables this SCIAM story is informative.

      https://www.scientificamerican.com/article/as-hawaii-aims-for-100-renewable-energy-other-states-watching-closely/

      "Another puzzle that Hawaii is exploring is whether large, reliable energy storage systems will emerge in time to store excess solar and wind energy at reasonable costs."

      Robert should be interested too.

      It mentions the evolution of electronic inverters to balance load.

      Delete
  11. NL has officially crossed into the Twilight Zone with this ditti.

    "A lot of that money will come from taxpayers, with government committing $200 million annually in what's called a Nalcor dividend".

    Just call a 200 million annual debt a dividend and poof the deficit at MF vaporizes. This is Newspeak that would make Orwell blush! I suspect most of these scams will be a bust and are just poorly crafted political spin.

    ReplyDelete
  12. I wonder how a Boondoggle Project in Mr Marshall's Terms could now be a good thing if the Energy is sold through Quebec?If HQ is not willing to risk the reliability/stability of their Transmission Lines with justification, how we can force them? Plus it must be clear to all of us that there is no market for this Energy no matter what route it is transmitted to, only the captive Island consumers will carry the burden.Yes Marshall must be towing the line dictated to him.Developing Gull without firm sale contract would be even bigger blunder.

    ReplyDelete
  13. Trump, Peckford, and Obama on same page; Tiger is the greatest. Then sadly, we all watched as Notre Dame burned. I asked my wife, "Where are the Water Bombers?". Trump chimed in. Later it was explained that water bombing would do structural damage to the heritage building. Who is this guy Osborne? Don't tell me he is running again. Doesn't he already have a heat pump, or a Bruno Battery? How much CCP+ House Pension does an MLA need? Never saw the day that Trump and I on the same page:-)

    ReplyDelete
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    1. Shame on you Robert....to even think you could think like trumpie....a guy who is always wrong.... but thinks the opposite...and will never admit it for sure says average Joe.

      Delete
    2. Hi Robert, hope you were not upset with my trumpian comment, it was with tongue in cheek, and I would have said the same thing to Winston, Bruno, and others. Cheers, average Joe.

      Delete
    3. Joe, relax, like yourself, I don't get upset too easily. I like an open mind like yours.

      Delete
  14. Thanks Mr. Winston Adams, but to tell the truth I just scroll down through the UG blog now and skip right over your excessively frequent and interminable commentary, because it never varies from its predictable and repetitious themes, indeed to the point where it has unfortunately sucked all the oxygen from the UG blog.

    So here's a suggestion... why don't you just start up you own blog where you and your "Joe Blow" sidekick and the other two or three in your click can prattle on ad nauseaum with your same old same old?

    Instead of monopolizing the UG blog to the point where it's original purpose as a source of interesting and informative commentary for all has been effectively usurped by a small group of malcontents who just won't STFU.

    So how about it?

    ReplyDelete
    Replies
    1. Wow, we have a new blog adm....step aside UG...and we can just call him STFU..or STUF the FU - K UP. What an idiot says average joe.

      Delete
    2. Why would you thank me for what you describe as commentary of no value, and your same view of comments by Joe Blow and a few others?
      Your statement is dishonest on it's face, you do not thank me nor the others.
      The purpose is for opinions that bite. Perhaps we just nibble and don't bite?
      You here seem to repeat your view stated a few weeks ago, and not a single word as to PlanetNL piece today. My comments are almost always on MFs, and energy, electricity issues,climate change and against Nalcor, government policy, and against Bruno foolishness.
      STFU? Shut the fuck up!
      I have been waiting for the moderator to suggest that to me, but not happened yet.
      Start my own blog? And try to compete against the Uncle for readers? A lost cause. Maybe sometimes there are useful nuggets in my ramblings.
      To your question, "How about it"?
      Answer: NACIH (Not a chance in hell).
      Winston

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  15. I think the Liberals wanted to get there million dollar economic diversification report out there among a couple other doozy announcements (rate mitigation and auto insurance) and hope no one noticed just how a complete waste of money it really was. If it wasn't so sad, it would make a cat laugh.

    ReplyDelete
  16. Today we hear that rates will be held at 13.5 cents max, so up just one cent from the present 12.5 cents. How is 12.5 cents,or 13.5 cents arrived at?
    My power bills show the rate as 11.391 cents, for just power rates, but meter charge and taxes are in the final bill.
    If you pay your bill on time and get the 1.5 % discount, then add the 16.01 meter charge, also add the 15 % Hst tax, and assume about 1350kwh usage for a month, you can achieve a figure of 12.5 cent rate. But if the power consumption is more or less than 1350 ,the all in rate varies.

    My house, main residence, I get $471.67, and 3515 kwh, so a rate of 13.4 cents tax in, 11.67 tax out.

    My cottage, I get $77.61 for 461 kwh , so 16.8 cents tax in, 14.64 cents tax out.

    For my shed, a bill of $18.64 for just 4 kwh, so 4.66 kwh for tax in, and 4.05 for tax out.

    Now the difference from the main residence to the cottage , with taxes in goes from 13.4 cents up to 16.8 cents. This is a 25 % increase for a house using a modest amount of electricity, as most small houses do, and non electric heat houses.
    And large and monster houses get the lower all in rates, and encourage waste and encourage expensive new generation assets such as MFs.
    So middle and lower income families get the shaft for paying for the boondoggle. The elites benefits in many ways, including basically being subsidized for their excessive low efficiency baseboard heat.
    This seems opposite to income tax rates, where the rate increases if your earn more income. Here the all in rate is less when you consume more electricity. This is how ERCO operated for decades to use up excess electricity, while poluting Placentia Bay.
    So.... which party in the elections has done the arithmetic, and is for the average Joe or Jane, or the big energy users, causing our high peak loads in winter.?
    Is my arithmetic off?
    Winston

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    Replies
    1. This notional rate is based on 1521 kwh per month which is roughly the average energy use by residential customers. Leave discount and taxes out of the calculation. The $16 admin fee adds almost 1.1 c/kwh to the energy rate of 11.3 c/key. Therefore the total they talk about is about 12.4. Yes, there seems to be 0.1 cents missing. Anyway, the energy rate will go up another 1.1 c/kwh before Ball's wondrous scheme kicks in.

      Delete
    2. As stated previously, We rent a two bedroom apartment in Cranbrook, BC. I find your extensive analysis directed at owned home energy very interesting and revealing as to living costs across the country. NL's current energy cost equation, mitigation of sunk capital cost debate, etc. points up the deep disparity between home owners and those who rent. The latter group do not have much choice, with respect to technology options. Can anyone do some annual cost comparisons for this disadvantaged group, say a two bedroom, 1,100sf, space; annual KWH, including baseboard heat, and b) hot water central heat?
      Thank you.

      Delete
  17. Read Hollett's piece of this morning, and seems for rate mitigation plan for the liberals and PCs is much like twiddle dee and twiddle dum. Six of one and half a dozen of the other. Using the same numbers from pub and nalcor, where the tail is still wagging the dog. Pick a number, add a number, and a bit more arithmetic, and bingo we have the rate. Simple as pie. So not much to choose from there. But guess under the circumstances a rate of 13 or 14 cents is not bad. So the question is do I invest in a mini split heat pump or wait a couple of years. I will invest, just a matter of when, not maybe, muskrat is long term not for just one election says average Joe.

    ReplyDelete
    Replies
    1. AJ @ 10:15:

      I said of the PC plan that there was no new money form outside the economy - Liberal plan isn't any better. If there is no new money from outside the economy, we are going to experience a reduction in services somewhere.

      The number we all need to get use to is about $550/yr for 57 years - that is what everyone of the 500k persons in NL will pay annually to cover the $12.7b capital costs.

      My biggest issue is when PCs/Liberals start talking efficiencies or 'new development - this effectively means we are wasting money today if we are not taking advantage of that now.

      Either way, covering the MF costs isn't going to be pleasant for taxpayers (or equivalently ratepayers, more or less).

      PENG2

      Delete
    2. Read the piece you mention, you sum it up good, and neither well thought out.
      As to what rates are best, Dave Vardy's old ELASTICITY factor is critical, and much of a guessing game.
      Many people moving to minisplits when rates were 10.5 cents, and now 11.4.
      My thoughts are that any higher rates than present will be detrimental to power sales, 17 cent rates and moves away will be quick, at present rates moves will be shower, at 13.5 moves will pick up.
      My costs noted above shows the low cost cottage with minisplit. I have on hand my minisplits for the main house this past 2 years, but not yet got around to having them installed, but regret this winter not doing so, as bills for Jan and Feb exceeded 600.00. As you say,.... not if but when.
      So customers installing these are actually saving and reducing the Holyfood fuel cost. Can customers investments do this fuel reduction and also Nalcor and govn claim MFs will save the same fuel reduction?
      And how to achieve electricification if we don't reduce winter peak load via minisplits, as also Synapse says? Govn plan is still to increase peak loads, ignoring the consultants advise, and not waiting for the PUB to hash it out. So just playing politics.
      My gut feeling, as to eleacticity effect, any rate increase beyond the present will be detrimental to the economy, even 13.5 cents is too high.....so back to the drawing board.
      Winston Adams

      Delete
    3. PENG2, it seems to me that external income from power sales means sales not exceeding 5 cents per kwh ,long into the future, and any sales increase from island electricification at rates greater than that is more beneficial. Even the zero cost power to NS negatively impacts, to some extent, electricification here for 35 years.
      Have you looked at the numbers from Synapse? The actual achievements may be more or less than the potential they suggest, but betting on exports is a bigger money loser, as the rate per kwh is so low, except what is truly surplus to what we can use here.
      Your thoughts?
      Winston

      Delete
    4. WA @ 11:13:

      I haven't totally digested the Synapse report yet - its on my desk and I am working it over, so I wont say anything yet. Hedging our purchases estimates isn't sound practice, this got us into trouble a couple time before - agreed.

      I am having trouble making the MF finances work - maybe the unpopular option I mentioned a while back might be our best choice, that is buy UC power from HQ to fulfill the NS bloc over the LIL, and then consider what to do in the Island separately. I come up with somewhere in the neighborhood of $50m annually for the NS power purchase from HQ, then we still have to transit it to NS. I am inclined to disagree with PlanetNL, the only valuable portion of MF is the transmission (though it has value only because we agreed to poorly conceived commitments with NS).

      In any event, whether we buy HQ power or use MF power is irrelevant to the Avalon situation since the upgrades required/recommended are going to be the same in either case.

      PENG2

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    5. PENG2 @ 12:26:

      And I am thinking that this could possibly mean running a LIL drop to bottom Brook, disconnecting from Granite Canal and the necessary adjustments to the existing contracts.

      I am not confident in the LIL/MF extension cord, and even less so in our ability to 'claim LIL downtime' as a reason not to supply NS with power as the contracts are currently written.

      Granted, this will require cooperation (and we have no leverage) by external parties that have lived up to their end of the deal, but its probably our best chance now.

      PENG2

      Delete
  18. Few thoughts. Whats stopping Nalcor from putting capital expenditures used at MF on other capital expenditures? Hence, keeping the cost of MF status quo. Would this be illegal or just a slight of hand? Would auditors expose this slight of hand?

    Was Stan told by Ball to keep it "good news" at the AGM, at least until after the campaign?

    ReplyDelete
  19. Hello Winston!

    I found interesting reading your 10:54 comment above:

    "...any higher rates than present will be detrimental to power sales " and;

    "...as to elasticity effect, any rate increase beyond the present will be detrimental to the economy, even 13.5 cents is too high"

    Doesn't it remind you our lengthy discussions about the usefulness of spending any government $$$ to subsidize an EE program? The more we save individually, the less Nalcor earns to repay MF.
    And furthermore (as you also you say above), the greater the rate, the more detrimental it is to the economy -> businesses being less competitive etc.

    We did however agree about the usefulness of a "temporary" winter peak rate "surtax" to avoid possible black outs - and to flatten/decrease somewhat the peak loads, relieving Holyrood a little).

    Such a winter peak rate surtax should disappear if MF gets into production as intended (and the LIL...).

    ReplyDelete
    Replies
    1. That's an interesting approach. Politically suicidal/impossible but otherwise very sensible.

      A possible structure may be to assess a residential customer consuming a surcharge of 5 c/kwh (or more??) on consumption above the monthly average of 1521 kwh. Even with my minisplits I'd still be a little over that in the coldest months but not much.

      This would've been an excellent concept pre-Muskrat. The returns on it are now diminished.

      Delete
    2. EX, with only 72 MW surplus with MF, and plans to add loads with electrification, Synapse puts considerable CDM back into the mix, to get optimum use of the power resource, which seems prudent, more so than temporary surtax to discourage winter peaks. . Have you assessed Synapse, if not have a look and get back?
      Winston

      Delete
    3. Hi Winston,

      I'm not sure when I'll have time to read that brick, but whenever I do, I'll comment.

      Delete
  20. From the article...

    "It seems Stan, like his predecessor, is ready at the Premier’s beck and call to deliver political points."

    I highly doubt that Stan Marshall is in any kind of thrall to the likes of the truth-challenged Ball.

    Ball had to practically go to Marshall begging on his knees for Marshall to come out of retirement and take over the MRF debacle after Ball's dishonesty and colossal incompetence for his infamous part in the ED MARTIN SEVERANCE PAY SCANDAL.

    People just don't forget such pathetic, ignominious performances as that.

    ReplyDelete
    Replies
    1. NTV said the budget had 1 million for minisplit rebates. My wife asked if I knew that. I replied "Yes, so now I can die happy" She laughed.
      The plan allows for 1000 dollar rebates, so can accommodate 1000 homes. The Telegram mentioned it, but CBC more correct, defining it as a pilot program.A pilot program is usually to see if the technology works. Yes , I wonder?
      At 1000 homes a year, all houses would get converted after 200 years.If this for 4 years, so 250 per year and continues at that for the future then conversions for the island will be 800 years.
      What's not to die for, with so many worried about high heating bills?

      These units first invented in Japan in 1983, first in Canada in 1991, rebates started in NS in 2008, and ramped up to 20,000 units per year in NS by 2011. Residents here now, without rebates have installed 28,000, 10,000 just last year alone. A survey by NP in 2014 showed customers were very satisfied with them and reliable.
      ICF study for NP stated their great energy reduction potential.I submitted on their benefits preMFs sanction and also after with performance confirmed.
      For residential only these could knock 390 MW off our load in winter time, reduce yearly bills 30 %, and need only about 1 billion for conversions, financed by customers under typical EE incentives. Instead we got the boondoggle for 12.7 billion, power likely unreliable, needing backup at more added cost,... but still needing to reduce winter peak load.......with minisplits.
      PreMF sanction I had proposed about 40 million, for a conversion rate of about 13,000 per year.Synapse now proposes about 35 Million for CDM to permit their electricification program for mitigation of rates. Instead of 35 million, Ball govn gives 1 million.
      So I can now die happy, as they have bought into CDM big time, we can see. But the customers are much ahead of them, not waiting for mini pilot programs.
      In 2014 the power companies said all minisplits would shut down in our weather conditions, a "conservative assumption" they stated, falsely. Even now they still avoid recommending cold climate models, the ones that are resistant to shutdown. Scallywags galore.
      So they play games still, and hold technical conferences in secret, to reach their false assumptions.
      A milestone, after 7 years late: rebates for a few (NS used to rebate 1500, here 1000. NS 20,000 in 1 year, here likely 250 a year.

      This a token gesture, to buy a few votes. Money left , right and centre since last week for vote buying. Ball and clique, gone to the dogs. No shame. Maybe a shoe should be thrown at them, like happened to Bush. Bush ducked, but the message was sent.
      Winston

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    2. At a nominal installation fee of $4K, for the $12.7 billion cost of the MRF debacle, the NL government could've provided every man, woman, AND child in NL with a brand new heat pump, installed, every 8 years for the next 50 years.

      DUNDERDALE, MARTIN and the rest of those God-Damned Rotten Fuckers should be arrested and hauled into court for what amounts to gross criminal negligence on the part of the NL government, and a massive bait-and-switch fraud on the part of Nalcor.

      Delete
    3. FTI, Pre MF sanction, I presented on HPs at the PUB. Gilbert Bennett was there, and while I was presently I could see Bennett was studying intently a copy of my presentation. But he asked not a single question to counter it's value.
      Bennett is to return, and should be questioned, but already others have said CDM and EE was not part of the alternatives, so too, I suggest, their assessment of appropriate wind and island hydro was a sham. They cannot say that their assumptions was on best available knowledge at the time: big uptake in NS 4 years before, part of their CDM program. NP was there, an and also asked no questions. Most lawyers at the Inquiry now ask no questions, but there to protect the those responsible.

      Winston

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    4. Winston, Read this yet?

      https://www.scientificamerican.com/article/as-hawaii-aims-for-100-renewable-energy-other-states-watching-closely/

      "Another puzzle that Hawaii is exploring is whether large, reliable energy storage systems will emerge in time to store excess solar and wind energy at reasonable costs."

      Robert should be interested too.

      Delete
  21. Has the national media picked up on the story of the proposed annual $200million from the feds to the province of NL to help mitigate? Or is Seamus still "under the hood" wiring up the mitigator? Seems to me if that story broke across the country, wouldn't every province rightfully demand the same royal treatment from the feds?

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    Replies
    1. Good question. But not all totally clear, have to wait for all the dust to settle, elections over etc. Hard to dicifer the wheat from the chaff. Is the 200million just for this year or longer...seems unclear. Now the 167$ million for each of the next 10 years and up to 1.9 billion over 35 years or so, is a little clearer. That is based on the Feds 8.5 percent equity shares in Hibernia. The province wanted to buy them from the Feds a few years ago but not for sale. So now the Feds give us the income from that up to a couple billion over time. I think what that really is, although seems no one tells us that, but that will turn out to be the Feds share as enablers of the muskrat boondoggle. But neither side wants to admit that. But should become clearer down the road, in years to come. Always lots of political tricks and maneuvering without calling a spade a spade says average Joe especially in an election year.

      Delete