Under a complex arrangement, Nalcor will send electricity from Muskrat Falls to Quebec in place of electricity from Churchill Falls during some months of the year.
Nalcor hasn’t disclosed any other details of the arrangement. It appears Nalcor’s Muskrat Falls company will swap the electricity - possibly free of charge - with its affiliate Churchill Falls (Labrador) Corporation, which will send it to Quebec under the terms of the 1969 contract at 1969 prices.
And rather than getting electricity from Muskrat Falls, Nova Scotians could receive electricity from Churchill Falls or any of Nalcor’s other hydro-electric generating stations on the island
You can find aspects of the arrangement in a clip from NTV.
There’s more to it, though.
What’s more interesting about the NTV report is that it confirms what some critics of the project have been saying since January.
Let’s clear up one erroneous comment in Mike Connors’ otherwise fine piece. That will give a good starting point for the rest of the story.
Critics of Muskrat Falls – SRBP included – have pointed out that Muskrat Falls will not produce the full capacity of its 824 megawatts. Nalcor has confirmed this by referring to an average output of 4.9 terawatt hours per year. If you do some basic math, that works back to the equivalent of a plant with an installed generating capacity of about 560 MW.
Tom Adams pointed this out early in 2012. He noted, among other things, that the water flows through Muskrat Falls in January and March would be the lowest of the year. Unfortunately, that’s also the time when Nalcor would need the most electricity to meet its island needs without Holyrood and Nova Scotia commitments under the deal with Emera. As a result, Muskrat Falls did not appear to produce electricity to meet its commitments.
Nalcor boss Ed Martin accused Adams of being wrong but Martin never demonstrated how Adams got it wrong. He just pointed to the agreement between Nalcor’s two subsidiaries - Muskrat Falls and CFLCo - that would manage the water flows on the Churchill river.
SRBP added to the discussion by pointing to electricity that Nalcor receives from Churchill Falls under the recall provisions of the 1969 contract. The generating capacity at Churchill Falls is fixed. As it stands, Nalcor can’t legally get anything from Churchill Falls other than what they get now. One place Nalcor would be the 300 MW of recall power.
NTV’s report confirms that what Adams and SRBP have been saying is correct.
But here’s an extra detail: in May and June when water flows on the river are at peak and Nalcor’s demand is low, Muskrat Falls electricity will actually go to Quebec to help CFLCo meet its obligations under the 1969 contract. As a result, CFLCo will use less water from the Smallwood reservoir during the summer months. Martin calls this storing energy. CFLCo can then have more water for January to March when demand is at peak.
But that doesn’t mean that Muskrat Falls will produce more than the 4.9 TWH (560 MW equivalent). Nalcor already factored in the water management agreement when they came up with that figure. As it appears, Muskrat Falls alone still won’t be able to meet the commitments to Nova Scotia and to Newfoundland, let alone anything on top of that.
So Nalcor plans to do lots of shuffling around to meet all its commitments instead. You really get a sense of what all the dancing will look like when you listen to a comment Martin made about using all the water resources in the province as if they were one big bowl. Then, said Martin, “…you can sit back and manage the water in all the reservoirs and treat it as one big reservoir…”.
This concept is in the formal agreements between Nalcor and Emera. Everyone has been talking about shipping a portion of Muskrat Falls output to Nova Scotia. The truth, as shown in the “Energy and Capacity Agreement,” is something else.
Under section 1.5 (b), Nalcor can meet its Nova Scotia commitment from any source, as long as Muskrat Falls produces at least the equivalent of the Nova Scotia commitment.
The section renders to stored energy. There’s a definition for that:
Nalcor will ship electricity to Nova Scotia from the Churchill Falls recall or from the huge surplus on the island at Bay d’Espoir. And if Corner Brook Pulp and Paper shuts down as well, Nalcor will possibly send electricity from Deer Lake to Nova Scotia.
Indeed, given Nalcor’s own demand projections for electricity in the province, Muskrat Falls could well spend most of its first decade producing electricity for the island during only three or four months a year. That’s all Holyrood does now.
For the rest of the year, Muskrat Falls may be shipping a small amount to Nova Scotia for free. The rest of Muskrat Falls output could just “spill”. But if Nalcor wanted, they might send most or all the other Muskrat Falls electricity CFLCO – and hence to Quebec - for most of the year while Nalcor sends electricity from the island to Nova Scotia.
No matter what, though, the only people paying for the electricity - aside from the pittance CFLCO gets from Hydro-Quebec - will be the people of Newfoundland and Labrador.