First in a series about how success can't be bought in a Green Energy project for 50M people.
The transition to green energy has something for everyone. It turns out that in some cases, “something” includes cost overruns, underbudgeting, delays, unforeseen obstacles, and general frustration. Large public projects that don’t work out are a staple of every city news outlet. We’re focusing on The Muskrat Falls project because it’s emblematic of the larger issues surrounding the green energy transition. You can’t buy your way out of an ill-conceived project!
A project originally designed to provide clean, low-cost hydropower to 500,000 Canadians built with high expectations is late and way over budget. The damage does not stop there. The delays in this project push back the green energy transition for 50,000,000 people in Canada and the northeast US.
Muskrat Falls is a hydroelectric project started for all the right reasons. It’s green. This large hydroelectric power is made possible by the natural geographic flow of the Churchill River. It was going to pay for itself. Prosperity would follow electricity from a carbon-free power source, renewed by nature, at a huge scale, under local control and prices. It would provide energy independence for this part of Canada. No foreign power or corporation could dictate prices. Prices could be locked in for generations. It had been done before. 50 years earlier, an even larger project had been completed successfully. Finally, it was located far away out of sight from virtually all the consumers.
Unfortunately, the reality of the project has turned out to be not so dreamy. The millions of ‘downstream’ electricity users in New England, New York, Nova Scotia, and beyond are waiting to get the inexpensive, inexhaustible green power they counted on.
Muskrat Falls is more than five years late going into full operation. Using oil and natural gas generators while waiting has increased costs by more than CAD$100M per year for just the fuel. The extra costs may continue until 2030. The ongoing problems are pushing back full operation and will continue to drive costs up while slowing export revenues.
After all the money and effort to lower greenhouse gasses, emissions have not yet been avoided. Short-term project reliability is elusive, putting longer-term financial stability at risk.
The 280,000 primary customers in Labrador and Newfoundland fear huge electric rate increases approaching 75%. Instead of a future with good rates, there’s been a CAD$5.2B bailout. Subsidies and financial tricks hold hopes of easing the shock of big bills. Power and mechanical engineers drive expensive work on design and operational problems. Meanwhile, financial engineers are trying to head off costs that could increase by CAD$1M per day even as higher interest rates make even more debt more expensive.
Costs to complete the project, and achieve capacity and capability, have increased from CAD$6.2B to CAD$13.4B and are continuing to go up. Electricity rates per KWH, after the Canadian Federal Government intervened in 2021, still went up from CAD$0.039-0.12 to CAD$0.147 now and are set to rise to at least CAD$0.19. Securing reliable power sources and financing costs are likely to add billions yet to the project’s final costs.
Disappointments and stresses from a CAD$13.4B electricity generating, transmission, and distribution project impact dreams and wallets. Benefits may still be huge from selling renewable, low-carbon electricity to the USA. Expectant customers are hoping engineering – all kinds – gets there. Stakeholders need the project to succeed for many goals. The decisions coming will teach all who watch.
Photo Credit: Thanks to Andrew Patrick
Comments