Canada Has a Glut? of Clean Energy - Yet Madness Rules Utilities

Fascinating to read on The Sir Robert Bond Papers a breakdown of Danny Williams' breakdown of the status of the Lower Churchill hydro development.  Even more interesting, a (year-old!) report about five years of secret negotiations between Hydro Quebec and Newfoundland over HQ taking on an equity role in the Lower Churchill with NL setting aside redress over the original Churchill Falls deal.

Awash in Green - ergy?

These reports are just more confirmation that the energy situation in Canada is baffling, convoluted, incomprehensible and just completely fried..

1. Apparently Canada has a massive excess of clean green energy. So much so that a lot of it isn't even developed. Even though it is safe, clean and relatively easy on the environment in many or most cases.

Committing to Overpriced Energy

2. Yet for some as yet unexplained reason, Ontario and B.C. are entering into electricity contracts like there's no tomorrow, committing to paying out huge sums that vastly exceed going market prices for utility power, and Alberta, of course, continues to go hogwild, producing the dirtiest energy in the world .

If you don't believe #1 - then why is it that scads of undeveloped hydro potential remains untouched in remote parts of Labrador and Quebec? One reason is supposedly because Hydro Quebec and Newfoundland are both worried about throwing a dam power sale and having no one show up. And, both parties seem to be jealous about protecting whatever angle they have (or would have or hope to have or dream to have) at selling electricity in the U.S. market.

Water Taps Behaving Like Flamethrowers

Meanwhile, back in the Q, exploration companies are falling over each other to stake out claims in the Utica shale "gaz" biz. This is the whole hydrofracturing blitz that's going to occur below all the sweet farmland in the lower St. Lawrence. This, despite the fact that miffed residents of upstate New York and Pennsylvania are having loads o' fun posting videos of their water taps behaving like flamethrowers... and searching on Google for places to get their water tested.

You fracking betcha.

Luv Those "Free Mining" Principles

Well, you can't really blame the Quebec prospectors for luvin' it. Given that oil and gas in Quebec still falls under the venerable "Mining Act", which, under "free mining" principles, allows exploration on a "first-come-first-served basis", with license holders obliged to pay annual "rent" of $2.50/hectare. Based on that the rental cost of the rights to explore 1 million hectares would be about $2.5 million, seemingly a far cry from what is being spent by industry in western Canada.


In fact, B.C. has raked in over $3 billion since 2008 from auctioning off exploration rights for its own shale gas motherlode. Maybe that's why B.C. figured they could afford to pay $825 million for a 1/3 share of the Waneta Dam. Which is an astronomical amount to pay, especially when you consider that the original deal for Hydro Quebec to buy N.B. Power - lock, stock and 15 hydro, coal and diesel generating stations, was $4.75 billion.

Now What is NB Power Gonna Do?

Which brings us to the whole Hydro Quebec N.B. Power non-buyout fiasco. Rejected by New Brunswickers for all the wrong reasons. Officially, ultimately declined by Quebec for the bogus reason that it would be "too risky".

Geo-Thermal Ignored

Why, amidst all these other conundrums, does geo-thermal energy get so little serious play?

Why does none of this make any sense?

Coveting Enron

Besides the fact that corporate vultures are circling everywhere around this ecosystem, eyes glazing over with greed at the thought of somehow, some way, setting up another Enron.

Do we chalk it all up to petty regional jealousies?

Is there any light at the end of the tunnel for a sane energy plan in Canada?

Hydro Quebec wangles 500% better deal with NB Power than B.C. Hydro gets from Teck Resources?

B.C. Hydro's amazing purchase of a 1/3 share in the Waneta Dam from Teck Resources has been approved by the B.C. Utilities Commission.

The decision actually came down a month ago and I missed it - so I just publish this as a matter of follow through to previous blog posts and also to provide a little more insight. And, some may also want to hold this sale up against the NB Power sale to Hydro Quebec., which has been delayed until May to allow for more public debate in New Brunswick.

You can actually go to a BCUC website and read the submissions by the intervenors, which include the City of Trail, the Sinixt Nation, the B.C. Public Interest Advocacy Centre and so forth. Mind you, no guarantee that all the submissions are shown... One of the many submissions to the BCUC proceedings on the proposed purchase was submitted jointly by the B.C. SUSTAINABLE ENERGY ASSOCIATION and the Sierra Club B.C.

Although many of the submissions from a variety of parties were opposed to the purchase, this joint submission in favour of the transaction, from two environment-conscious organizations, I felt warranted a closer look. So I've put the link here to the argument, which is relatively easy reading.

Following were the criteria "to be considered" in determining whether the Waneta Transaction would be in the public interest:

a) cost in comparison with feasible alternative

b) need, in consideration of forecasts

c) considerations of clean, green and B.C. origin

d) "opportunity cost" of Teck Resources

e) and the so-called "honour of the Crown" with respect to First Nations issues

In short, in consideration of all of the above, this joint submission found the transaction to be in the public interest. So, read that if you want.

What I find to be the most pertinent part of the argument, and the hardest part to swallow, is the cost.  I get that they are talking "comparables".

So, let's compare: B.C. Hydro is getting access to 167 MW of capacity for $825 million. NB Power had 3,297 MW of installed capacity as of 2008, most of which Hydro Quebec is supposed to be taking over for a revised price of $3.2 billion. So, put simply, HQ pays four times the price and gets 20 times the capacity!

To all appearances, a 500% better deal than B.C. Hydro negotiated with Teck Resources! One New Brunswick hydro station alone, Mactaquac, provides 672 MW of capacity for NB Power. A person truly needs more time to delve into these matters because what meets the eye does not make sense.

Another criteria to note is the 890GWh of energy that B.C. Hydro expects to get from Waneta. I haven't found exactly what the equivalent "energy" figure would be for NB Power.

OK, here is is: NB Power - 07/08 power sold, inside and outside of the province, total: 16,500 GWh. So, the ratio of 20-1 holds true for both capacity and power generated.

Sale of NB Power to Hydro Quebec - beyond the high voltage rhetoric

Face it, NB Power has got itself in a position where $4.8 Bil of debt is sinking it. NB residential customers are paying 60% more for their power than Hydro Quebec customers and industrial users are paying 20% more. And, with major assets coming up for replacement, the future is looking bleak indeed.

Prices and discontent with the utility are already high - and a viable operational model for the utility has yet to be unveiled by NB's official opposition or the opponents to the Hydro Quebec deal.

Now major renovations are underway at the Point Lepreau nuclear facility and several old coal generating stations are due to be refurbished or scrapped, which, when all is said and done will add perhaps billions more to the debtload.

Not surprisingly, the announced sale to HQ has caught New Brunswickers in an already owly mood. And it's not getting any sweeter.

Frantic commentators on message boards, news story comment rants and blogs have stated things like, "Quebec is trying to spread French across Atlantic Canada", "no truck nor trade with separatists", "this deal will be NB's Churchill Falls", or... "I'm not paying one cent to the separatists". Obviously, there is already a severe brainpower shortage in certain parts of NB, (as is the case everywhere!). The fact remains though that there is a huge opposition to the deal even though New Brunswick business (i.e. McCains & Irvings) and government are very much in favour of it.

Really, it comes down to a perceived loss of sovereignty and a (simply unthinkable) perception of getting shown up by Quebec. New Brunswickers, especially the English-speaking population, just cannot bear the humiliation of having mismanaged their utility into the ground, only to have it magnanimously 'rescued' by Quebec.

In all the hyperbole written over this deal, I don't think I have seen a single reference to price vs. value. Meanwhile, HQ is already supplying over one-third of the electricity consumed in New Brunswick, so the question of sovereignty over energy supply is already well watered down.

I think that if one person (like, say, a "news reporter") in New Brunswick would actually take the trouble to discover that B.C. Hydro is now in the process of buying a one-third share in the 450Mw Waneta Dam for $825 million, then the already high decibel level of the protest going on would be increased by tenfold!

The trouble is, the nature of the protest in NB is totally knee-jerk and emotional, so no one seems to care about finding actual reasons why the deal should be opposed.

And, having just said that, I think it is the B.C. Hydro - Waneta deal with Teck Resources that is the exceptional case, going against the grain of market price logic. The NB Power deal seems to be well justified by market conditions, even if the pending BC deal makes it look like a giveaway.

So... what would make the deal palatable to New Brunswickers?

This would answer the problems that most people have with the deal:

1. A clause that would tend to narrow the difference paid by NB and HQ residential customers after the five-year rate freeze already agreed by HQ
2. Some way of making the sovereignty of the assets less of an issue

If the deal succeeds, it opens up opportunity for greater synergies. With the NB coal-burning generating stations nearing the end of their useful lives, it must be assumed that HQ has in mind to replace a lot of this high-emission dirty energy with clean sustainable energy from the HQ grid.

The other possibility is that HQ would take advantage of the opportunity to introduce new elements of alternative sustainable power into NB, leaving the utility free to sell additional excess hydro power to the U.S.

Although New Brunswick and Quebec share many common features, there are also many differences that could prove interesting as the search for plausible future models of heating and power generation are concerned.

For one thing, has anyone thought of this...?:

Geo-thermal conversion for New Brunswick

Someone out there ought to be researching practical ways of introducing geo-thermal heating into the mix, for example. Say the New Brunswick government, using a small portion of the theoretical debt carrying potential that is freed up with this deal, were to sponsor a geo-thermal installation program that could be implemented on an individual home-by-home basis... This would effectively put the heat-generating capability in the hands of the individual homeowners of New Brunswick.

Do the math. There are 300,000 households in New Brunswick. Let's say, for example, that an individual geo-thermal system could be engineered to sell for $10,000. And let's say that 100,000 households would qualify and take advantage of an initial 10-year program.

That would represent a $1 billion price tag - a pretty small price to pay for the virtual guarantee of sovereignty and sustainability for heating in an entire province! We see, though, that the $1 billion doesn't really need to be paid by N.B. The price would largely be paid by home owners (perhaps via a system of provincially guaranteed loans) and this, largely, out of savings they would realize in their heating bills.

The program could include aspects of manufacturing to be handled in New Brunswick, and of course there would be the jobs benefit of the contracting to install the systems. The resale value of the homes would be greatly increased. The high concentration of geo-thermal heating in N.B would set the province up as a center of excellence and expertise in sustainable energy, potentially developing export products.

A substantial portion of geo-thermal conversions would be from oil, as well as electric, so both heating oil and electricity suppliers would be losing sales. However, since Irving and HQ are seen to be big winners in the deal to sell NB Power, it seems like a no-brainer that they would be on board for such as deal as this. Not to mention that any electricity not needed to heat N.B. homes could be heating U.S. homes more profitably.

The province, meanwhile, wouldn't have to actually go into debt to manage the program - it could be a cooperative arrangement amongst all stakeholders - the province, banks, utilities, contractors and home owners.

The project could be run in conjunction with other projects for commercial and industrial buildings.

The whole thing would contribute to massively reduce the carbon footprint of New Brunswick at virtually no cost to the province, or to anyone, at the same time as building a new industry and providing thousands of permanent jobs.

Frankly, it appears to me that it would be so easy to turn this thing into a massive positive for New Brunswick, that my "conspiracy theory" sensors are starting to tingle...!