A new report on the merits of developing Muskrat Falls, calls the project desirable but risky. Author Gordon Weil, at the Atlantic Institute for Market Studies (AIMS), suggests a series of measures that would reduce the financial burden on the province.
Weil suggests Newfoundland and Labrador conduct a regulatory-type review that would include scrutiny of the cost and a more comprehensive analysis of the impact on customers. The review he says would go beyond the PUB report. He identifies three areas of risk; project cost, protection of customers, and the pure business model of the proposal. When looking for sales in the U.S. Weil says there are major obstacles including; transmission through at least four grids that would add 10 per cent cost per system. He also points out New Englands move to a system favouring natural gas. Weil says the Nalcor plan does not meet continental reliability standards which would be essential to later interconnect the system. Doing so he says will add to the cost. Weil would like to see a regional system in Atlantic Canada. The creation of a pool of power he says would reduce costs for this province.
A separate federal government analysis shows Muskrat Falls is the least-cost option for energy in the province, at least under certain conditions. The report was done by Natural Resources Canada as part of the environmental assessment process.
The project was found to be the lowest-cost option if demand for electricity increases but if the demand for power remains stable or even decreases, then either Churchill Falls recall power or some combination of wind power and small hydro would be cheaper. If consumer demand remains flat, the federal analysis says eliminating a thermal plant on the island and reducing fuel consumption would save Nalcor $800-million than if it were to build Muskrat Falls. It said, however, Nalcor's assumptions about demand growth, oil prices, investment and operating costs were reasonable and consistent with other forecasts. The report only looked at two alternatives for supplying power to the island: the interconnected option, and the isolated island option. The report recognizes its own limitations in scope. Calling the project nationally important, it says connecting Newfoundland to the North American grid brings benefits that cannot be easily captured in a least-cost analysis. The larger benefits, it says, are beyond the scope of the report.
Read the article & listen to the audio on the VOCM website here