Looking Past the Hype: What We Don’t Know about Importing More Hydropower from Canada

Christophe Courchesne

In recent months, Canadian hydropower has won a (forgive the pun) flood of glowing mentions in discussions of New England’s energy future. We’ve seen Massachusetts legislators propose a bill to buy huge amounts of it; we’ve seen the Boston Globe editorialize in its favor; and the six New England governors are trying to finance transmission lines to import more of it. While CLF has long been open to more hydropower under the right conditions, unmoderated boosterism for the resource has reached a fever pitch.

canadian-hydropower

Daniel-Johnson Dam, Manicouagan River, Québec (photo credit: flickr/Axel Drainville)

In New Hampshire, Northeast Utilities (NU) and its local water-carriers are pouring vast sums into promoting Canadian hydropower – and the Massachusetts and Connecticut-based megautility’s battered Northern Pass project that would transmit it through the Granite State to southern New England—as the key solution to our region’s supposed energy woes. NU’s marketers also are relentlessly pushing a tired falsehood on hydropower’s environmental benefits and have even found a way into my Facebook feed, with the message: if not hydropower, “then what?”

The selling points, trumpeted by NU, some transmission developers, and state officials, have been repeated again and again: hydropower’s “cheap and affordable;” it’s “reliable;” it’s “clean and renewable;” and it’s on our northern doorstep. That last part is certainly true (although it is a pretty big doorstep as some of the hydropower projects are as far north from Boston as Miami is south), but the adjectives are more public relations work than anything. They do not convey any context or substance that would promote an informed discussion of our region’s energy future.

More discouraging than this short-hand sales job is that there is surprisingly little to back up the hype, especially given the New England governors’ apparent plan to invest billions of dollars of ratepayer money in new transmission that would mostly serve to bring hydropower south – a plan, we have noted, that has been developed out of public view. Here are three big things we don’t know about importing more hydropower—things we should know with the benefit of hard data and rigorous analysis before we rush headlong into billions of dollars of infrastructure investment.

Is It Reliable?

The reliability of new imports – both short and long-term – is an important question.

A critical fact here, at least in the short term, is that most of Québec uses electricity for space heating, which means that the highest demand for electricity is on the coldest days of the winter. When the cold hits Québec, the province can come close to running out of power and has sometimes decided to restrict its exports. (A similar phenomenon has been happening in Newfoundland and Labrador.) Of course, it’s cold here at those times too, and we have important system reliability challenges at just those times. On December 14, 2013, a cold Saturday evening, Hydro-Québec unexpectedly curtailed exports to New England because Québec demand was higher than forecast. As a result, New England faced a “capacity deficiency” event, and several oil power plants were turned on to maintain system reliability. (During other cold spells this winter, Québec residents were asked to conserve power while high levels of very lucrative exports continued. Will the Québecois tolerate this treatment every winter?)

There are longer-term reliability risks with imports, too:

  • New scrutiny of hydropower build-outs. Within the energy realm, authoritative voices within Québec are questioning the economic merits of its long-term energy strategy – now shared by the government and Hydro-Québec and on which the entire concept of stepping up exports to New England rests—to continuing building new dams. And elsewhere, the increasing costs of Labrador’s pending Muskrat Falls project are likely to inform and influence the province’s decisions on pursuing the larger Gull Island project. If the next generation of hydro projects are not constructed, the Canadians’ exportable energy supplies may be much less than many now expect.
  • Québec’s infamous contract with Newfoundland and Labrador. Québec’s deal for what is essentially 5,000 megawatts of free power from the massive Churchill Falls Station expires in 2041, and any changes to the terms would scramble power arrangements across northeastern North America.
  • Québec’s long flirtation with sovereignty. A vote for separation from Canada would have dramatic economic implications for the province and its relationship with the United States and other provinces. That possibility has taken center stage in the province’s upcoming elections. Meanwhile, the intolerant nativism that appears to be driving political outcomes there could have implications for open and fair energy trade with New England.
  • Security and resilience. Hydropower must travel very long distances to reach customers in southern New England, and severe weather, equipment failure, or more nefarious disruptions anywhere along transmission lines can have reliability impacts literally a thousand miles away. Relying on large slugs of power from central hydropower stations so far from customers and under the control of another country presents important risks that few hydropower boosters have seriously considered. Such an approach is arguably at odds with the region’s efforts to encourage distributed generation and boost electric-system resilience.

Is It Clean?

As for the “clean and renewable” label, we’ve exhaustively documented on this blog (most recently here, in the context of Northern Pass) that the clean moniker blithely accorded Canadian hydropower is in fact deeply incomplete and can be simply false. While it is especially galling when offered by leading regional polluters like NU or by opponents of local clean energy, pollyannish state officials have uncritically sung the praises of hydropower’s environmental attributes while completely eschewing any meaningful evaluation of them. (Witness, e.g., the states’ “white paper” and utterly useless “emissions analysis” of hydropower imports, which both ignore hydropower emissions as beyond the scope of the work.) Until the region accounts for the significant greenhouse gas emissions of Canadian hydropower, it will not be in a position to understand the value and extent of the potential climate and environmental benefits of new imports, if any.

What Will It Cost?

Unfortunately, we have very few data points on what the actual cost of hydropower would be if New England dramatically increased its imports. To take the most significant example, Hydro-Québec sells large amounts of power into the New England grid over existing transmission lines. In many cases, the utility is a price-taker, meaning consumers pay Hydro-Québec the wholesale market price. Because the price of natural gas typically sets that price in New England, we pay just as much for hydropower as we do for volatile fossil-fuel power. Even Vermont’s most recent long-term contract with Hydro-Québec tracks the market price, rather than providing a discount.

This is unsurprising, as former U.S. Department of Energy official Susan Tierney explained yesterday on the Boston Globe’s Podium website (arguing against imports on behalf of the region’s undoubtedly self-interested power plants):

The economic interest of a provincially owned Eastern Canadian electric utility (like Hydro Québec and Nalcor) is, understandably, to provide value to its parent (the Province of Québec, or Newfoundland and Labrador) more than to New England consumers. Hydro-Québec and Nalcor would be foolish — and a bad business partner for their shareholders — to sell the power at anything but the going price of electricity. At the average price of power in 2013 (around $55 per megawatt-hour), the contract would be over a billion dollars a year to buy at least 18.9 million megawatt-hours a year.

[Major new contracts to buy hydropower, such as those contemplated in Massachusetts] will likely require that those Eastern Canadian utilities add new hydroelectric dams to ensure the capacity is available for export over that entire period. The price offered … would have to reflect such investment costs (and are not likely to be supported by the $1 billion annual cost mentioned above). Moving that much power into the New England grid would also require substantial investment in electric infrastructure, adding further to the price tag (even if it isn’t directly reflected in the contract price, but rather through higher transmission rates paid by consumers). For example, the estimated price tag for one of the proposed transmission lines (Northern Pass) is over $1 billion, which would be on top of the energy contract price. When considered in total, the costs of the power and the transmission delivery will not come cheap for … consumers.

In other words, New England customers need to pay enough to cover the transmission to move hydropower very long distances (on both sides of the border) and also the new hydro dams that Canadian provinces are building and planning. In no case will consumers pay less than the market price set by natural gas. It is worth noting that those new hydro dams and associated infrastructure have much higher costs than the Canadian hydropower developed in the 20th century (in economically favorable locations and with few environmental protections): the Romaine project now under development in Québec will cost at least $6.5 billion, three times the cost per megawatt of the proposed Footprint gas-fired power plant in Salem, Massachusetts.

So far, NU and state officials have prepared only crude estimates of potential cost savings that new imports would bring. Those estimates rely on economic models that predict energy-market prices based on a set of highly debatable assumptions, including that imported hydropower will always be offered at less-than-market prices or supplied under below-market long-term contracts. Right now, we simply do not know what all the costs would be or whether alternatives to imports could deliver equivalent benefits at a lower cost.

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Given the scale of investment in transmission (and in new gas infrastructure) the governors are contemplating, CLF has been demanding greater transparency and rigor in this regional effort since it began. Last week, we took additional steps to shine sunlight into the process. But until the process is opened up and we have real answers regarding reliability, environmental impact, and cost, the wisdom of New England pursuing major increases in hydropower imports remains very much an open question.

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