09 November 2011

We all can’t be wrong #nlpoli

There’s no small amount of humour in Kathy Dunderdale trying to claim that people who oppose the Muskrat Falls scheme are poorly informed.

At last count, anyone with significant experience in energy policy in the province over the past 40 years is four-square against the insane idea of doubling the public debt, driving up electricity prices in this province and selling discount energy to other places.

And there are a whole raft of other people with a lot less experience – but with the ability to think – who also have rejected the Conservatives’ scheme for the hare-brained mess it is.

Add to that list one of the original Bright Young Men who rose to prominence in the 1970s:  David Vardy.  For those who don’t know about the Princeton-educated economist, here’s a short version of his biography:
David Vardy is a …graduate of Memorial University, the University of Toronto and Princeton University. Early in his career as an economist, he taught at Memorial and at Queen's University and served in the Public Service of the Government of Canada, in the Departments of Fisheries and Finance. …he has held a variety of senior positions at the Deputy Minister level in the Government of Newfoundland and Labrador, including President of the Marine Institute …, Deputy Minister of Fisheries, Chair and Chief Executive Officer of the Newfoundland Public Utilities Commission, and Clerk of the Executive Council, the most senior Deputy Minister position in the Province.
The Harris Centre released his latest paper on Monday.  It’s a review of Muskrat Falls titled Making the best use of the Lower Churchill. Not Surprisingly, some of Vardy’s comments have already garnered some media attention.  As the Telegram reported, for example, Vardy offered these observations.  On whether Muskrat is the cheapest option for meeting the province’s energy needs:
“The Muskrat Falls project is probably a second- or third-best option,” Vardy writes.

“Even though hydro might offer us stable options in the future, we could end up being stuck with prices so high that we’re out of step with the rest of North America.”
Vardy notes that the abundance of natural gas is changing the American electricity market.  And he repeats an idea readers of these e-scribbles will find familiar:
“A lot of these grandiose schemes, in terms of our history, have gotten us into trouble.”
Read the paper itself, though,  and you’ll find a bunch of other observations that only reinforce what many people have already said about Nalcor’s claims:
  • On Nalcor’s energy demand projections:  “As a forecasting tool the 40 year growth rate of 2.3%,  used by Nalcor to estimate future trends, is suspect, given the lack of growth in the period 1990-2010, notwithstanding that electric heating is being used in 85% of new homes.  It can credibly be argued that  the historical period from 1990 to 2010, during which growth was flat, might be a more relevant reference period for future planning. (page 9)
  • On what is driving the need for extra power:  “This suggests that it is not the forecast  of robust growth in demand that is driving the Muskrat Falls project. Rather it is more closely linked with the goal of removing the Holyrood Thermal Plant from the system”  (pp. 9-10). 
  • On alternatives to Muskrat:  “Fisher et al have undertaken a desk study for the Harris Centre of Memorial University which examined the potential for very small hydroelectric developments, along with additional wind power.  They claim that such developments are sufficiently economic to avoid further dependence on thermal power in the absence of a Lower Churchill megaproject. The conclusions of the report require additional study but the authors have made a case for investing in further exploration of the options before the Province commits itself to a large and expensive project such as Muskrat Falls.” (p. 11)
  • On the PUB review and Gull Island:  “The provincial reference to the Public Utilities Board does not include consideration of this option, which is unfortunate. The reference limits the enquiry to consideration of Muskrat Falls,  in comparison with Nalcor’s Option B, the Isolated Island alternative. However, development of Gull Island is an attractive option if  wheeling  arrangements can  be negotiated with Quebec, possibly with Federal help, and if markets can be found for firm energy commitments.” (p. 12)
  • On another option, thus far unexplored:  “Option D is to negotiate with Quebec to access power, possibly supplied from the Churchill Falls power plant. It is unlikely that Hydro Quebec  would sell the power at the same price stipulated in the power contract between CF(L)Co and Hydro Quebec. However, the price might be more advantageous than the cost incurred to develop Muskrat Falls, with 40% of the energy remaining unsold. Transmission lines would still need to be built to connect Labrador with the Island but the cost of building the new
    generation site at Muskrat Falls would be avoided, as would the cost of the link with the Maritimes.” (p. 12) 
  • Vardy’s Option E is aggressive pursuit of demand management (given that the demand forecasts are dubious.  he figures this could work until 2041 when more power is available from Churchill Falls for use within the province. (p. 12)
  • Option F is a variant of the Isolated Island alternative. It includes a thermal plant at Holyrood but one which is converted to use natural gas, a cleaner and cheaper alternative, rather than Bunker C, with its high emissions. Abundant natural gas is available on the Grand Banks in association with producing oilfields.”  (p. 12)
In his conclusion, Vardy writes:
Due diligence requires further consideration of all of the issues raised by the Joint Panel,  particularly the following:
  • The lack of firm purchase agreements for surplus power and a clearer understanding of marketing possibilities;
  • The use of other thermal alternatives, such as natural gas;
  • The inefficient use of electric space heating; and
  • Opportunities for conservation and demand management.
None of Vardy’s commentary will surprise anyone who has followed the public discussion, including the posts at SRBP going back to late 2010 when Danny Williams first announced his retirement scheme.

Vardy has added another voice to the chorus of critics and dissidents who feel the project is being rushed and that, ultimately, it is a bad idea.

So many people have looked at the Muskrat Falls project and found substantive problems in every aspect of the arguments offered by the provincial government and Nalcor.

All those people are not ill-informed.

All of those people cannot be wrong as Kathy Dunderdale and her colleagues claim.

So why are the provincial Conservatives and New Democrats and so many Liberals – including opposition leader Yvonne Jones and erstwhile Liberal leader Dean MacDonald – supporting the Muskrat Falls development?

- srbp -