Lower Churchill Power Development in Labrador

The Globe and Mail has reported (January 13, 2010) on initiatives of the government of Newfoundland and Labrador’s energy conglomerate Nalcor to gain transmission access through Quebec for power capacity it hopes to develop on the lower reaches of the Churchill River. See: Hydro transmission tiff heats up

Nalcor is arguing that Hydro Quebec is flouting open access rules and making it difficult to gain access to transmission service through the province. Given HQ’s practice of allocating the costs of transmission lines providing dedicated service for remote generators to the network pool of transmission costs rather than to the cost of generation, Newfoundland would appear to have a powerful argument. However, it is ironic and hardly complimentary to Nalcor that it is litigating its case in the pages of the Globe and Mail rather than respecting the process of the Regie de l’energie.
A friend has suggested that with New England Renewable Energy Certificates (REC), currently at approximately $8/MWh, and the NEISO Forward Capacity Market, currently $4500/MW-Month, and wholesale power in New England priced based on natural gas over the long term creates substantial opportunities, particular for vendors with transmission rights. I see the REC value to be vulnerable to politics and forward power prices in New England to be highly volatile. On transmission, I note that when New Brunswick was auctioning space on its new international power line  a few years ago, Nalcor did not participate.

The best market for Nalcor may be Ontario. With Ontario, Nalcor would face no currency risk. There is a much better demand outlook in Ontario vs. New England due to more nuclear replacement requirements in Ontario. The Ontario government has a high willingness to pay for renewables. Ontario’s existing interties with Hydro Quebec have significant spare capacity.

Newfoundland faces credibility challenges in negotiating with Ontario and Quebec, particularly due to the caprious way Newfoundland treated  participants in its 2005 “Expression of Interests (EOI) and Proposals” process related to Churchill development. For the announcement canceling the EOI process see: NL cancels EOI

The federal government, with its constitutional authorities with respect to interprovincial trade, could play a positive role in promoting a negotiated settlement for transmission access, although the federal government would be well advised to continue declining persistent requests and proposals for federal funding for transmission development. Specific consumers, not general taxpayers, should be responsible for paying for their own energy usage.

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