Muskrat Falls remains the best option

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Nalcor Energy is focused on delivering the Muskrat Falls project to Newfoundlanders and Labradorians in an economical, cost-effective way that provides the most value for our energy resources today and for many generations to come.

Every decision we make considers the value that the Muskrat Falls project will provide to the province today, tomorrow and into perpetuity. Hydroelectric developments are long-term investments and we are making the right decisions to maximize the long-term value from our resources well into the future.  

We understand fully that the decisions we make today are of paramount importance to the people of the province, who are the owners of this important asset and consumers of the electricity it will produce.

Investments in our generation and transmission assets are necessary to continue to meet our customers’ requirements for safe, reliable and affordable electricity. When we look across Canada, other utilities are making similar investments in their systems. The Conference Board of Canada estimates that an investment of some $350 billion must be made in the country’s electricity system over the next 20 years.

While Muskrat Falls plays a significant role in ensuring we can meet our electricity needs, we are also making other critical capital investments through Newfoundland and Labrador Hydro (Hydro), such as the new combustion turbine at the Holyrood plant and the new transmission line from Bay d’Espoir to Western Avalon, to name a few.

Together, all of these investments will have an impact on electricity rates for consumers. As well, in the coming years, before Muskrat Falls is in service, electricity rates are expected to increase as a result of rising oil prices and our dependence on the Holyrood Generating Station to generate power for island customers.

In 2018, electricity rates for households on the island are projected to be 16.4 cents per kilowatt hour (kWh), which is about $249 for an average monthly bill, approximately half a cent higher than the rate estimated at sanction of the Muskrat Falls project (15.9 cents/kWh). Looking out to 2020, electricity rates will be around 17.3 cents/kWh or about $262 for an average monthly bill. This includes anticipated rate increases with Muskrat Falls in service and all planned capital projects by Hydro on the island. When Muskrat Falls is fully operational and our province is powered almost exclusively by renewable energy sources, rates will stabilize for customers, increasing on average around one to two per cent per year.

The Muskrat Falls project will generate significant value and cash flows for our province — around $30 billion in nominal value over the life of the project. It will also give the provincial government considerable flexibility when deciding how to invest the additional revenue — from improving the province’s infrastructure, funding health care and schools, to reducing our debt.  

It is important to remember why the decision to build Muskrat Falls was made in December 2012. The project was sanctioned because it was, and remains, the least-cost option to meet our electricity needs in this province.

Even though we are developing this resource first and foremost for our province, we also recognized that there will be sufficient excess power to provide for power exports. Rather than let the extra water go over the dam we challenged ourselves to capture the absolute greatest value for the people of Newfoundland and Labrador. We met that challenge by reaching agreements with Emera of Nova Scotia.

Emera will purchase 20 per cent of the power from Muskrat Falls for 20 per cent of the project costs. The approximately $1.58-billion Maritime Link Emera is financing and constructing, which will be included in the electricity rates in Nova Scotia, will give our province a brand new route to market.

Our partnership with Emera will provide Nalcor with transmission access

to Nova Scotia and beyond to New Brunswick and into New England. Surplus energy not needed in our province will be sold outside the province and revenue

will be returned to Newfoundland and Labrador. Nalcor estimates this value at close to $3 billion in nominal value over the life of the Muskrat Falls project.

The development of Muskrat Falls remains the best option to meet the energy demands of Newfoundlanders and Labradorians. The project is bringing economic and employment benefits to the province during construction, will mean savings for homes and businesses through stable electricity rates long into the future, and will set the stage for Newfoundland and Labrador to manage its own energy and economic future without relying on others to meet our power needs.

Muskrat Falls will transform our province from an economy dependent on non-renewable resources to an economy built on renewable, sustainable energy resources.

Nalcor Energy, together with the government and over 1,500 Newfoundlanders and Labradorians, are building a valuable, long-term, power-producing asset that the people of our province will be the owners of and can take great pride in.

Ed Martin,

President and CEO,

Nalcor Energy

Organizations: Conference Board of Canada, Newfoundland and Labrador Hydro, Holyrood Generating Station

Geographic location: Muskrat Falls, Canada, Newfoundland and Labrador Holyrood Nova Scotia New Brunswick New England

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Recent comments

  • Dave Moore
    July 20, 2014 - 23:16

    I thought this was an analysis, but it is just a sales pitch from Ed Martin. It may be a good project but we have yet to see ant sort of accountability in terms of where the money we are borrowing is being spent. There seems to be no oversight on costs escalating and talk of NL rate payers paying far more than NS customers, or big companies really drives home the idea that perhaps this project is not being run the right way.

  • The Answer Is Blowing In The Wind
    July 14, 2014 - 21:26

    I have some issues with this analysis. How can the "average" electric bill be $249 in 2018? No homeowners' bill average bill is anywhere that even today, and I have serious doubts that the average of all residential electric bills in this province is anywhere near $249 today. How much will the increase be on $100? That's what we need to know. The MF project does not remain the least cost option to provide our energy "needs." We don't even need 60% of the power that will be generated. The 40% that we will use could have been generated at a much lower cost using other generation means like windpower. A hundred 3 MW turbines would generate 300 MW at a cost of 1.5 billion, perhaps. Why will rates continue to increase 1-2% per year beyond 2020? 2% 0f $500 is $10. (I can't believe that homeowners' bills will be less than $500.) So we can expect electric bills to continue going up by $10 every year into the future? And here is the kicker for me: You tout the project as a boon for the people of the province. You say that it will result in 30 billion in "revenue." You then go on to say that only 3 billion will result from the sale of excess power. SO 90% OF THE "REVENUE" (27 BILLION!!!) COMES FROM THE RATEPAYERS OF NEWFOUNDLAND AND LABRADOR???? And this is something for us to be proud of and excited about? EVEN IF THE 3 BILLION WAS USED TO OFFSET OUR RATE INCREASES, WE STILL HAVE TO PAY 27 BILLION FOR THIS FIASCO! IT IS A JOKE TO SAY THAT THE 3 BILLION IN SALES REVENUE WILL BE USED TO IMPROVE OUR INFRASTRUCTURE OR REDUCE OUR DEBT! WE'RE PROBABLY GOING TO SEE 3 BILLION IN OVERRUNS ON THIS PROJECT DURING ITS LIFE! WE'VE ALREADY SEEN AN OVERRUN OF 800 MILLION!!!

  • Henry Jefford
    July 14, 2014 - 11:22

    Building "The Muskrat Falls" with a Transmission line to the island Then on to the mainland with transmission lines that would also be capable of transmitting the UPPER CHURCHILL FALLS power when THE ONE SIDED CONTRACT THAT AS PAID QUEBEC " ONE HUNDRED BILLION DOLLARS" FOR THE SALE OF CHURCHILL FALLS POWER TO NFLD " ONE BILLION DOLLARS ? THIS HIGHWAY ROBBERY WOULD BE OVER ! IF NFLD DOES NOT HAVE A WAY TO TRANSPORT THE CHURCHILL FALLS POWER AFTER 2014 when the one sided contract now in place EXPIRES THEN QUEBEC ! NOT NFLD WILL STILL HAVE FULL CONTROl of the CHURCHILL FALLS POWER !

  • Nichol
    July 13, 2014 - 15:58

    Mr. Martin, with all due respect, you have just put your name to an article that was surely composed in conjunction with the best spin doctors the Government has to offer. Indeed it is nothing but another sales pitch. It is nothing new and a rehash of everything that is wrong with your project. Hydropower projects like Muskrat Falls can normally attract private capital. MF could not. To a potential investor, who follows energy markets, you seemingly ignored market realities in the US and elsewhere over the past ten years. The politics of your situation took precedence over the realities of the marketplace. The premise of such a high cost, isolated project as MF, with a relatively small production capacity was fundamentally flawed in expectation, and particularly, in timing. You sold it as a project where 40% of output was to replace Holyrood, 20% to NS in return for the ML, and 40% for export, at a time when the energy markets were undergoing a paradigm shift in the US due to rapidly increasing production of shale oil and gas, some 8 to10 years ago. Today the production of shale gas is estimated at enough to last 100 years, with much more inferred. This change has lowered wholesale electricity prices dramatically in the markets you targeted. More NG plants have and are being constructed to replace the old oil and coal burners. NG and LNG is the much more desireable and clean burning fuel. The UK has recently built the largest LNG storage facility in Europe in Wales. LNG carriers, now having capacities of 175,000 cubic meters and up are able to capture economy of scale in transport. My point is, that Nalcor did not even consider this option, the Government eliminated the PUB from the process, and the Manitoba Hydro review mandate was simply too narrow. Market conditions including pricing and supply of NG changed substantially before MF sanction in 2012. There are no sales that we know of for 40% of MF production, and even if US sales were to materialize, market wholesale prices guarantee a loss, as does the 20% to NS. Hydro Quebec, a leading hydropower producer, is expected to have a massive surplus of some 30 terawatt hours this year. They are canceling all new projects, and with the Quebec energy review commission about to recommend cancellation of the last two phases of the 1550MW Romaine project, (where power was estimated to cost $0.0600/KWh), things are very bleak for MF as a competitive project. This scenario should have been recognized some time before MF sanction. You quote some expected 2017 domestic sales prices for the 'average' consumer. When spread over a 12 month period theses averages certainly do not come closes to the annual cost of heat and domestic hw for the average new home on the NE Avalon. This is deceptive at best. The real question the owners of Nalcor want answered, is how much will MF power cost to produce, transmit and sell in the various markets, and how much will that cost us. A positive return on our investment is certainly a long, long way off in that 50 year agreement. With 2041 only 27 years away, I submit that the acceptance of a vain political mandate to build around Quebec, at any cost, was a self defeating proposition. Nalcor, our little energy Company, was the same group, by their own admission, that inexcusably, and inexplicably introduced unsuitable fuel to its' own equipment in January 2013, causing severe damage to the Holyrood unit, and affecting decaying downstream equipment as well. This is the same team that wants us to trust them on the MF project. Hydro Quebec produces some 35,000MW annually, and are among world leaders in this business. When we remove the 5400MW produced by CFLCo, Nalcor produces less than 2,000MW. This comparison of scale is reflected in the way Nalcor conducts the MF project. They could not resist the very questionable, ego driven political pressure to build around Quebec after court challenge losses. HQ are very professional in protecting their interests, but that is history, and now we have a relatively small Nalcor being supported by non compete legislation, which also ensures all costs of MF are paid by the NL ratepayers, when no private investment at all would touch it. We could have built a combined cycle 500MW NG replacement for Holyrood, which is much, much cleaner than the bunker oil now burned. It would be more efficient and the overnight capital cost would have been around $1B including LNG storage. These units have sufficient life cycle to carry us past the 2041 reversion date, and we need back up anyway. Then, the Strait crossing and transmission facilities could be built in time for 2041. Lower Churchill generation facilities may be feasible by then...again, maybe not. With population decay in NL continuing, and industrial demand nowhere on the island horizon (Terra Nova Shoes being just another example), where, exactly, is the demand for MF power coming from...other than Holyrood replacement? When will Governments in NL learn that the days of 'the great industrial development announcements' of the Smallwood era in NL are long gone? Spending at least $18B in oil revenues, and running a $500M deficit this year alone, appears to have done nothing to improve the lives of the average NL family. Other jurisdictions, Quebec, Ontario, Manitoba, as examples, have overbuilt generation resources, made mistakes, and admitted them. We have not. NL needs to recognize the fundamental errors in timing and expectation of the Muskrat Falls project, and come clean with the ratepayers who have been legislated to pay for it all. You have not done that Mr. Martin, and your continued leadership of Nalcor must be reviewed. We will review the political leadership next year.

    • Tony Rockel
      July 14, 2014 - 09:30

      --- a devastating analysis that really says it all!

  • Cyril Rogers
    July 13, 2014 - 12:55

    I can almost guarantee that Mr. Martin will be singing the same song if the final price tag for Muskrat Falls comes in at over TEN Billion dollars….a highly likely scenario….given that it has gone from 5 to 8 billion in just 3 years, and it is still years away from completion. You are simply burying your head further into that sand, Mr. Martin. On the other hand, will you take full responsibility when the costs continue to climb….and resign your CEO position at NALCOR!

  • Gerry
    July 12, 2014 - 19:14

    Whenever I read an item about Muskrat Falls the article is always about cost. Cost is important but we are getting something that is priceless in value in years to come. This is something that nobody speaks about and everybody ignores. We can reap the benefits without falling on our knees begging Quebec to carry our transmission lines. In fact we don't need Quebec. We arte in control of our own resources. Within 50 years Quebec will not be a part of Canada but we will still have Muskrat bringing energy to NL who will be able to use it and export it without begging another nation for its permission. It is money wisely spent.

    • Tony Rockel
      July 13, 2014 - 13:59

      When the cost of a project far exceeds any financial return you can possibly get from it, how can you you call it "priceless"?

    • Priceless Open Graft
      July 17, 2014 - 15:04

      Social cost opportunity cost river mercury river temp rise sky carbon pie of piece top down driven will be challenged and shutdown by Metis and water rights won't allow it anyhow. NALCOR can't build it anyway so they will suck da money until someone shuts it down and energy resettlement continues - the liberals said it "manage the fallout" did you think it was fucoshima?!

  • Corporate Psycho
    July 12, 2014 - 14:19

    The project should be stopped now Mr. Martin.

  • Tony Rockel
    July 12, 2014 - 12:15

    Spare us the song and dance, Ed. We stopped believing you long ago. Repeating a falsehood a hundred times doesn't make it the truth. When the full cost of this gigantic blunder becomes apparent to everyone, you will go down in history as one of its main perpetrators. I hope you'll be feeling "very comfortable" with that.