Muskrat Falls Hydro – More Federal Money to Address a Problem Created by the Federal Government

There has been a lot of publicity lately on the Muskrat Falls hydro development in Newfoundland, and our federal government have stepped in to bail the project out, spreading the extreme cost to all Canadians.  But before blaming the people and government in Newfoundland for this, there are a few issues that need to be considered.

The electric grid in North America is a collection of electric utilities that work together to ensure that everyone has a reliable source of electric power.  Many utilities trade energy between each other, sharing surplus capacity when it exists with others that may have shortages.  New generating plants may have surplus capacity for a few years, that can be sold to others, and these transactions may take place over extended distances.

In recent times, this ability has provided great value to everyone. Canadian utilities in BC, Manitoba and Quebec, with large capacity hydro storage have been providing support for US utilities as they grapple with the surpluses and shortages caused by intermittent solar and wind capacity.  When there is surplus at a US utility, they may send energy to these provinces to be stored, only to request to get it back, when they need it.  These occur as purchase and sale transactions, and the Canadian utilities have made excellent returns on the transactions.  BC Hydro (Powerex) trades frequently with CAISO (California Independent System Operator).  In the afternoon, when there is an excess of solar capacity in California, that cannot be accommodated, CAISO sells energy to BC Hydro, who use this imported power to provide for their customers, while reducing capacity at large hydro plants in the BC system.  As a result, these hydro plants store water and the lake levels behind their dams will rise by a very small amount in a few hours.  After sunset, when the solar power has stopped for the day in California, CAISO purchases the energy back from BC Hydro.  The California evening peak capacity may rely in the availability of this capacity.  Hydro storage capacity of this form is almost 100% efficient and these transactions have been beneficial for both BC Hydro and for CAISO.  This is much cheaper than installing batteries.

BUT there is no direct connection between BC Hydro and CAISO.  Instead, the power flows through Washington and Oregon with connecting transmission to California.  This transition may include multiple utilities and may cause added losses, but these are generally paid for through “wheeling charges.”  This grid has worked extremely well to help to minimize costs and provide improved reliability for everyone.  I can recall a time some years ago, when two major lines from the interior to Vancouver were severely damaged in a winter storm.  The interconnection with the US prevented a major blackout that could have caused a serious disruption in Vancouver.

Hydro Quebec uses the same system, transporting energy through multiple utilities in both Canada and the US to get to utilities that they are dealing with in the US.

Why can Newfoundland not do the same?

When the Churchill Falls plant was built many years ago, I expect that the intent was to export energy to US customers, through the province of Quebec.  This is the same process used today by Alberta, exporting, and importing power to US utilities through BC Hydro and it is exactly the same process used by Hydro Quebec to access the US utilities that they contract with.

Quebec blocked the process, and managed to make it stick.  Newfoundland is paid for the power from Churchill Falls under a very old contract, and the payment amounts are miniscule.  Hydro Quebec sells the energy from Churchill Falls either within Quebec, where it receives a good return, or it can sell it into the US, at a high price.  Hydro Quebec has done extremely well on this basis, but they rely on exactly the principle that they don’t allow for Newfoundland to get their energy to US customers.  I can remember some years back, looking at the numbers.  Hydro Quebec was seen as a big electric power exporter, and was making large profits on their trade, BUT the amount of energy from Churchill Falls was actually MORE than Quebec was exporting.  At that time, Quebec was actually a NET IMPORTER, but made great profits on Churchill Falls energy.  This seems a little ironic at best.

When Newfoundland decided to build the Muskrat Falls project, Quebec expressed loud protests when the Federal Government agreed to help to fund an underwater transmission line, at great cost, that essentially went around the province of Quebec.

And now that the entire project is again in trouble, the Federal Government has agreed to pour more money into it.

Why has the government never seen fit to inform the Government in Quebec that we ARE a country, and it and not neighbouring bands of pirates?  The very principle needed by Newfoundland is already used by Alberta, and by Quebec itself to export to utilities where they have no direct connection (New York is a good example).  Why is Quebec allowed to utilize this benefit – for their own exports when they will not allow Newfoundland the same privilege.

It seems an outrageous cost, paid for by all citizens of Canada – to allow one province to essentially hold another for ransom. The Federal Government seems happy to spend the money from all Canadians to satisfy the selfish demands of Quebec, by not requiring the same co-operation that exists in the entire North American electric grid.

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