Here are some treats to keep you up with the latest developments on the Muskrat falls front.
For starters, CBC’s Anthony Germain interviewed Tom Adams on Thursday about Adams’ contention that the Muskrat Falls project will add a significant debt load on the province. It’s the third audio file from the top on that linked page, incidentally.
How’s $12,000 per person for a significant debt load?
Adams points out that the industry standard way of figuring out costs for electricity projects makes Muskrat Falls hideously expensive. Nalcor’s estimate, incidentally, is that the cost using the industry-standard means puts Muskrat falls at a cost of at least 21 cents per kilowatt hour. When your humble e-scribbler and others said Muskrat would double the price of electricity for consumers, we were wrong. it would actually triple it or worse.
Because Muskrat Falls is so hideously expensive, Nalcor Energy and its whole-owned subsidiary - the Government of Newfoundland and Labrador - plan to use a costing method that transfers the costs and the huge risks for the project into the future. That makes it appear cheaper at the front but ensures that consumers get it in the end.
Clever, eh?
Adams’ comments are based on a post he made on March 21.
A couple of days later, Adams posted a link to slides from David Vardy’s presentation to the Rotary Club of St. John’s. That’s your second treat.
Most of this is stuff you may have heard before. One of the things you might want to pick out, though, is a point Vardy makes at the bottom of slide 18:
Access to financing will depend on the form of the loan guarantee.
Federal officials have talked about delivering their loan guarantee in a number of forms depending on what works best for them. Provincial officials haven’t really talked about this because it is a very delicate issue. How the feds deliver their commitment will affect the cost of the project significantly.
It can also determine whether or not the provincial government can raise the cash they will need for this very expensive project that has no apparent chance of ever making a nickel from export sales. Potential investors are looking at this project like hawks. They aren’t going to be fooled by Twittered bullshit about a 15% cost over-run and revenue streams that make it wonderful and viable.
Financing is the key to this project. Note Vardy’s point. You might also want to go back and check two old posts from this corner: one from December 2010 and another from February 2011.
Bruneau walked through the entire issue, including availability and potential costs. The slides are here in pdf.
He also looks at the risk of a pipeline rupture. Interestingly enough, the proponents of the Muskrat project are grasping at that one to try and fight off the threat to their dream posed by natural gas.
Bruneau estimates that the fuel costs for a Holyrood-sized gas plant would be one quarter of the cost of Holyrood. That’s based on an assumption that we cost the natural gas at current American market prices. The overall construction cost is in the neighbourhood of your humble e-scribbler’s estimates of under $2.0 billion. Bruneau estimates construction would be two years or so.
One of the things that opponents of low cost electricity forget is that you actually need a mix of generation types to deliver a stable supply of electricity. Natural gas would be the logical compliment to the existing hydro-electric generation on the island.
And, for those folks, that’s a significant issue. They love Muskrat and criticise natural gas because it isn’t green enough. What they fail to admit is that their plan for Muskrat includes more thermal generation from oil than the island current has. The Green Fallacy is just another example of how Muskrat proponents have to cut corners on the facts in order to push their project along.
- srbp -