13 December 2009

On the one hand…

Jean-Thomas Bernard, economics professor at Laval, finds the Hydro-Quebec move to the Maritimes a bit puzzling since he believes that HQ will have to bring expensive power online to feed the Maritimes.

"My position is that cheap hydro is gone, definitely gone," Bernard said.

"We still have a fair amount of (undeveloped) hydro but this is expensive hydro. We're talking about 10 cents (per kilowatt hour), 12 cents," he said, referring specifically to the Romaine megaproject far from Montreal on the province's north shore - poised to begin bringing 1,550 megawatts of power online for Hydro-Québec in 2014.

On the other hand, Jean-Thomas Bernard also thinks that New Brunswick would actually win from this deal:

However, Bernard said in the long-term Hydro-Québec may regret this deal because the corporation may wind up selling its power to New Brunswick at a much cheaper rate than to its other customers in the United States or in Ontario.

The same issue is at the heart of both Bernard’s comments.  He is looking at the pricing issue and the cost of developing new power projects.

In the short-term HQ gains markets;  in the medium to long term it may face a situation where it could sell the power more lucratively elsewhere but be forced to sell at lower prices in New Brunswick under the terms of the MOU.

It’s an interesting observation about a complex issue.

But here’s an idea for you to consider:  if La Romaine and other new HQ projects are being developed at the price of around 10 to 12 cents per kilowatt hour, how would the Lower Churchill compare to that?



pig said...

10 or 12 cents per kwh, or more, will probably be a decent price as energy becomes more expensive in future and consumers and governments increasingly insist on greener energy. Looking at these developments through the lens of today's prices doesn't make any sense and doesn't convey an appreciation for the structural changes that we'll likely see in the coming years in regards to energy consumption. Keeping La Romaine or the Lower Churchill offline would be dumb. Remember that developing the Upper Churchill wasn't a sure-fire economic bet when they built it but has proven to be a gold mine. Energy prices will move up and clean energy will likely command a premium. Better to build it all asap at a lower cost.

Ed Hollett said...

I just love it when the plants come forward and push the same sort of thinking that led to the Churchill falls fiasco in the first place.

Instead of assuming low, you are assuming always high. Brilliant plan.

WJM said...

And as energy prices rise, there is absolutely no inflationary pressure on the costs of construction, right, pig?