From Churchill Falls to Muskrat Falls: An Interview with the President and CEO of Newfoundland and Labrador Hydro
This week, our guest is Jennifer Williams, President and CEO of Newfoundland and Labrador Hydro. Hydro manages Newfoundland and Labrador’s electricity system, generating and transmitting most of the province’s electricity, and exporting electricity to other parts of Canada and the United States.
Newfoundland and Labrador Hydro operates several hydroelectric plants, including the Churchill Falls Generation Station in Labrador, which has a capacity of nearly 5,500 MW and is among the top ten hydro dams in the world outside of China. The utility has also recently commissioned Muskrat Falls, with a capacity of 824 MW.
Here are some of the questions Peter and Jackie ask Jennifer: What percentage of the electricity generated in the province is exported? Is Muskrat Falls operating at full capacity now, including the undersea transmission lines? What were some of the reasons for the high cost of Muskrat Falls? Can you discuss Churchill Falls, the technical achievement of building the project, and the contract that set a low power price for 70 years? How much potential is there to develop additional generation in the province? Do you anticipate green hydrogen projects operating in the region? From your perspective, why was the Atlantic Loop transmission project scaled back? Are you concerned about the draft Clean Electricity Regulations legislation, which proposes net– zero electricity by 2035?
Content referenced in this podcast:
- The Canadian Association of Petroleum Producers (CAPP) commissioned a report on the economic impact of the federal government’s proposed oil gas emissions cap on the conventional oil and gas industry
- Muskrat Falls Inquiry Website
- Supreme Court of Canada Judgment: Churchill Falls (Labrador) Corp. v. Hydro‑Québec
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Episode 243 transcript
Disclosure:
The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.
Announcer:
This is the ARC Energy Ideas podcast with Peter Tertzakian and Jackie Forrest. Exploring trends that influence the energy business.
Jackie Forrest:
Welcome to the ARC Energy Ideas podcast. I’m Jackie Forrest.
Peter Tertzakian:
And I’m Peter Tertzakian. Welcome back. So, Jackie, I’m calling from overseas. I guess there was some news in Canada recently about the emissions count.
Jackie Forrest:
Right. Yeah, so about a week ago or so, CAPP released a study from S&P Global Insights, so they commissioned a study to quantify the impacts of a strict oil and gas cap on the conventional oil industry. So, this is not the oil sands who’s committed to reducing their emissions and putting in the CCS. This is the conventional, which actually is more difficult to reduce emissions because it’s geographically dispersed over four provinces, and in a lot of remote areas where electrification and CCS is pretty challenging and pretty expensive.
Peter Tertzakian:
Well, certainly CCS is challenging in the far fringes of the large and vast geography of our western provinces.
Jackie Forrest:
Right. So, they had a number of cases. I’m just going to focus on the reference case, which they estimate that the total industry just for conventional, including natural gas and oil, that’s non-oil sands, reaches 5.9 million BOE per day in 2035 versus about 5.5 now. So, there is some growth, and most of that is in the next several years to meet the growing LNG export facilities that are coming online like LNG Canada.
Peter Tertzakian:
Right. That looks like about 8% to over 11 years. So, it’s really not that much in the reference case.
Jackie Forrest:
No, it’s like a 1% per year growth. And now the stress case assumes a 40% reduction in GHG in 2030 due to the oil and gas cap. Now, there was some documents that the overall reduction could be met through offsets and actual reductions, but in general together they’re around 40%. So, they looked at what the impact of this would be to production, and they estimated under that stress case that production would be down to 3.8 million BOE per day for conventional. That’s a 35% drop in the production. So, that’s going to have an impact to this industry, which today is $82 billion a year industry. That’s like basically carving out $30 billion of revenue from our economy. They have some other information like $92 billion lost in GDP over 10 years, $75 billion lost in investment over 10 years, and 51,000 less jobs due to this policy.
Peter Tertzakian:
Yeah, it takes it all the way to the end of understanding the implications to the broader parts of the economy, including employment. But I think it’s important to reiterate Jackie that the stress case assumes a 40% reduction in GHGs by 2030, which is only five years away. And this is why it’s called the stress case because a lot of things can’t be done in five years. In many instances you can’t even permit electrical lines in less than five years. So actually, building out facilities to the vast expanses of our western provinces is really unrealistic if not stressed case. And so, the only way to reduce the GHGs is to dramatically reduce the production basically, and therefore the knock-on effects to the broader economy in terms of GDP per capita and employment.
Jackie Forrest:
And it assumes further reductions to 2035 to get to that net zero by 2050. My perspective on this is that it really doesn’t make sense in my view to cut our oil and gas production at a time when the world is still demanding oil and gas. Who else is prematurely cutting back their industry? Like let’s wait until demand starts to be reduced and we will fight for market share, but why would we prematurely shrink our economy, our ability to create jobs, wealth prematurely? We don’t know what oil demand’s going to be in 2030 or 2035. And I think there’s a lot of evidence to show it will continue to be relatively high and there’ll be a need for Canadian oil and gas.
Peter Tertzakian:
Yeah. Well, I think that word prematurely is one I want to key in again, because the stress is the timeframe and the timeframe for the next five, 10 years. Of course, we’re going to be still using large quantities of oil and gas. Nobody that I know in the industry is really saying that net zero by 2050 isn’t something that is achievable. Some oil fields are certainly more challenging than others, but 2050 gives you at least a fair bit of runway and a long-term target. But this 40% by 2030 is the real stress.
Jackie Forrest:
Yes, for sure. And that’s just too short of a time. Let’s talk about electrification in Northern Alberta and BC. It’s very difficult to build power lines into these remote areas. At the end of the day, I think studies like this are very important because the government needs to really understand the full cost of some of these policies. And I hope that we have more of a conversation around this and I’d like to see other studies look at this situation as well.
Peter Tertzakian:
Yeah, good point. So, speaking of electrification, we have a guest.
Jackie Forrest:
Yes, we’re very excited. We’re going to talk about electrification on the other side of the country, all the way to Newfoundland and Labrador. And we’re very excited today to welcome Jennifer Williams, who is the President and CEO of Newfoundland & Labrador Hydro, to tell us more about the power situation there.
Welcome, Jennifer.
Jennifer Williams:
Thank you so much for inviting me. I’m really pleased to be here.
Jackie Forrest:
All right. Well Jennifer, maybe we can start with if you could tell us a bit about Newfoundland & Labrador Hydro.
Jennifer Williams:
Sure. Yeah, I would love to talk about hydro. I could talk about it all day. We’re a government-owned utility and we’re really vertically integrated. We have some pretty big generations, I’ll get into that, transmission and we’ve got a little bit of distribution. We operate in every corner of our province, and we’ve been around for decades. From an employee perspective, we got around 1500 employees. We operate in some very, very harsh northern climates and in these very remote communities of Labrador, but we also operate some of those country’s largest and most critical generating assets, Churchill Falls being one. We supply power to every home in the province. Our grid is primarily a hydroelectric grid. We’ve finished the last couple of years with a more than 90% renewable energy grid. Outside the province we also deliver to customers as well. We actually deliver power to about 15% of Quebec’s supply, and that’s really coming from Churchill Falls. We’re around eight to 10% of Nova Scotia’s needs, that comes from the hydroelectric assets that we do have. We have about 8,000 megawatts. Domestically we only use a little over 2000, maybe 2200.
So, we’re really critical to the region because of the resources that we do have. We also deliver them to New England and New York. We’re pretty proud of that.
Peter Tertzakian:
Yeah. Well, we’re going to talk about some of the exports and stuff, Jennifer. But I want to highlight one of the words you used about Newfoundland & Labrador, which was challenging in terms of bringing the power because seven or eight years ago, my wife and I did a tour on the island for a month and went all the way up north to St. Anthony and to L’Anse aux Meadows. And you really have to go to The Rock, as you call it, to understand the challenging terrain and the windy weather and so on, to understand the complexities of stringing wires across such a vast province across such rough terrain and climate.
Jennifer Williams:
Yeah, we have very extreme weather throughout the province. We don’t get the extreme cold, let’s say for example, like Ontario, sometimes we get it a little bit, but we get frequent bad weather, a lot of snow, a lot of ice on the wires. We’re a small population province, but we have geographically people all over the place. So, we have a lot of poles and wires going between everywhere. So, we do have a lot to manage in those extreme conditions. And it’s important for us to think about, as you talked about electrification at the beginning, thinking about how do we manage that as we electrify our system further and we still have to pay attention to our existing assets. So, it’s a pretty exciting time for hydro and as it is, I think for anybody who’s involved in the utility space, you can be daunted by it or you can be excited by it. And I take the position of being excited by what’s in front of us.
Jackie Forrest:
Well, you’re in a unique position because across Canada, a lot of jurisdictions are starting to really be concerned about how they’re even going to meet their domestic growth. And you’ve got the excess power since you’re sending so much electricity to other regions. Well, let’s talk a little bit just in terms of context, are you a Crown corporation and how do you work with the province?
Jennifer Williams:
Yeah, so we are a Crown corporation, and I think it’s growing and strengthening relationship with government it’s something that I have prioritized. We are here to meet government’s mandate. So, we have legislation that we work with government on to ensure it evolves appropriately. But we also have a board of directors. So, both of those from a governance perspective really help us get to the right place. And having a strong relationship with our government is critical so that we can inform public policy that makes sense and hopefully be listened to. And we are working on that relationship and also to enable government policy when it does come out. So being a Crown corporation, I think we have that luxury, if you want to call it that, that we can indeed inform public policy. So that’s actually something I love about this job, is that ability to be part of public policy.
Peter Tertzakian:
Yeah. Well, you’ve got a lot of electricity generating assets. You mentioned earlier that pretty much all of it is renewable. Can you talk about your biggest assets and the energy mix and how much of it is consumed by domestic Newfoundland and Labrador versus export?
Jennifer Williams:
Yeah, so we have primarily hydroelectric. So, of our about 8,000 megawatts that we currently have constructed… and I wouldn’t mind talking later about the other things that we don’t have constructed because we still have a lot of untapped resources. But on the 8,000 megawatts that we have constructed, say about six or 700 is fossil fuel based. And we have a plant at Holyrood, which is just outside St. John, that has been a critical facility for us for many decades. And Muskrat Falls was brought online to essentially over time take the role of Holyrood, but it’s still in place and that’s programming a really good service for us. Now we have a few peaker units. But of the 8,000 megawatts that we do have, about 75% of that is indeed exported. Of that 75% that we’re exporting, 88% I think recently is going to Quebec, about five to Nova Scotia, about five to New York, and just a little bit to New England. So that’s really where our energy goes. So, we’re only keeping in province about 25% of what we actually have, and that’s of the developed assets we can develop even more.
Jackie Forrest:
Yeah, I mean that’s really unique in terms of Canadian jurisdictions. Now, we just actually had a podcast last week about China and they found that their hydro is really not performing because of all the drought situation. Has that been an issue in Newfoundland as well?
Jennifer Williams:
We have had some low water in the last couple of years in Labrador. The island, we haven’t really seen that much. We actually planned from an island domestic perspective, we look at a basic of 30, 40 years of data that we looked backwards at and that we had a critical sequence. It was a very dry period. So, we always keep in storage the amount of water that if we were to experience that, we would still be okay. So, we’re fairly conservative with regards to our planning for water availability. But I do know that the Northern Quebec, and certainly in Labrador we have had a dry period the last couple of years. We haven’t had an issue with regards to being able to supply our customers. So that’s good again, because we’re pretty tight on how we’re managing that water and being very careful. But it is something from a climate change perspective that we have to keep an eye on go forward.
What is that change going to be? A drought in theory is temporary as long as it isn’t that long-term view, and you’ll have to adjust accordingly for a drought period. But again, managed well, I’m not saying that China’s not managing it well, but managed well it should be okay. It’s the long-term climate change that we want to keep an eye on and science it’s showing we shouldn’t be negatively impacted. We should get in theory perhaps more water. The question is will you get it in bigger deluge that it’s harder to catch versus and then spill. So, it’s more to come on how the climate change impacts will affect water.
Peter Tertzakian:
And you’re not dependent now on just one hydro source. You’ve got Churchill Falls and now you’ve got Muskrat Falls, which is your newest generation asset, and that was, I believe completed recently. Is that operating at full capacity now?
Jennifer Williams:
Yeah, so Muskrat Falls is 824 megawatts and it’s four units. The plant was commissioned a couple of years ago and the transmission line that brings that to the island was commissioned last year. So yeah, with regards to dependence on Muskrat Falls, right now it is an important line, but we’re keeping hold of it in place in its early years to make sure that we work out all of the bugs. So, when we commissioned the transmission line to bring the Muskrat Falls power to the island, we tested all the software and all those sorts of things. So, it’s actually fully commissioned at this point. And what we’re seeing is, I guess what anybody would see with any brand new, very large asset is the few bugs in the early years of things that had to be strengthened. But we obviously measure like any utility measure the actual availability statistics of these assets in addition to our legacy assets.
And the Muskrat Falls plant itself is knocking it out the park with regards to its availability. It’s incredibly reliable and the Labrador Island link is also operating quite well. So, we’re quite pleased with where it is today. It’s only going to get better. In addition to those assets, we do have a lot of other hydroelectricity on the island. For example, we’ve got a system we call Bay d’Espoir, and that’s over 700 megawatts. It’s a series of plants there. And then we’ve got other plants throughout the island, 75 megawatt units, 127 megawatt units. So, we do have hydroelectricity all over the province.
Jackie Forrest:
Well, let’s back up because maybe not all of our listeners will know about the fact that Muskrat Falls is kind of unique. We’re going to talk about Churchill Falls, which is a very large hydro dam, been around for a long time, but its power is actually transmissioned on land through Quebec, but Muskrat Falls is different. You’ve actually run underwater, undersea cables that take the power back to Newfoundland, and then there’s another cable that takes the power to Nova Scotia. So, explain a little bit about these underwater transmission lines. How big are they? What’s their capacity and are they like a technology that is used in other parts of the world or is this really leading technology?
Jennifer Williams:
You’re right. Basically, the power from Muskrat Falls is generated in Labrador and then it transitions a bit over land and then it goes underwater for a fairly short distance, 30 kilometers, I would call that a short distance. And we actually have three cables that are transmitting that. We have two, I’ll call it active cables and a spare, and they’re 350 kV, so quite significant cable. Then when it goes, then it comes onto to the island, and then obviously it’s transmitted over land on the island. And then we connect over to Nova Scotia and that is the Maritime link, which is owned by Emera. And that is two cables a lot longer, 167 kilometers. And that is a 200 kV line, and they have two cables for Emera.
So, with regards to the technology itself, it’s certainly new for… at that voltage, it is new for us. We do have some underwater cables ourselves in our system as well. But around the world, the subsea cables are pretty typical obviously for offshore wind farms, which you would see your listeners would know a lot of those were they are. And they are really becoming quite prominent because they are with… the HVDC anyway, certainly becoming fairly cost competitive because you’re using one cable in HVDC versus three in HVAC and there are lots of different voltages around the world. So, I don’t think there’s really leading technology, but it is an increasing technology.
Jackie Forrest:
Let’s talk about Muskrat Falls. I think the project itself cost about 13.5 billion and that was about two times more the original expected price. And I think part of that was those underground cables were a big part of that. Now, our listeners actually just heard about Trans Mountain a couple of episodes ago, and that was four times its original expected price. So, I guess two times doesn’t sound too bad, but maybe you could talk a little bit about from your perspective, what were the drivers of the higher price and has that resulted in higher power prices for people in Newfoundland and Labrador?
Jennifer Williams:
I think you hit a nail on the head that any project of a very large magnitude, history shows they go over budget and there’s books out there. Actually because of the cost of this project, even before it was done, the government here ordered a judicial inquiry into the project and there’s actually quite a good report that anybody can Google. It’s just Google Muskrat Falls Inquiry. You’ll get to have a look at that. And I would suggest that anybody who is contemplating a very large project can have a look and see is there learnings there that they might want to consider. Some of them are definitely jurisdictional and relationship between the organization and government at the time. So, there’s those pieces that are specific to here and maybe they’re learnings from other places, but they’re really specific to here. But certainly, one of the witnesses at that inquiry wrote a book basically about large projects and essentially concluded that most of these projects really do go over budget.
So, you mentioned Trans Mountain pipeline. We can certainly probably talk about site C. All these products generally go over budget. And when I think about what could be done differently or what would be some of the learnings here is third party oversight was something that I think would early in the process would be really important to have. So, you don’t just have one group of folks who are focused on a project and keen to continue on. The cost estimate range obviously has to be better understood before proceeding and the risks that could drive that. And are you okay with the cost proceeding? It has to be part of that decision making. It can be using, for example, a P-50 for their cost estimate. That’s really important. One of the things that a gentleman who has been a witness in traditional inquiry basically said, “It’s cheap to think. And so, spend more time there.”
Once you enter the project, it’s hard to make the adjustments, but at the beginning before you really start, you’ve got to do more thinking and more planning. And I think the phrasing he uses is think slow and act fast. So that’s something that I think any project should absolutely be considered. Really, that’s mega projects, but that can apply to large projects as well. When I think about, we’re about to undertake a lot of building for electrification here, we are absolutely taking the findings from the Muskrat Falls Inquiry and incorporating those learnings into our next decision making. And we are spending time at the beginning doing better planning with having third parties help us. So, we really are trying to incorporate those learnings and hopefully we’ll have better outcome.
Peter Tertzakian:
Was there a dominant theme in these cost escalations? Was it time and therefore more labour or was it materials or was it permitting or is it all of the above?
Jennifer Williams:
I think it’s all of the above. This size of project in Labrador hadn’t been done since the 60s. Everything had changed. The contractor that was chosen or the project was an Italian contractor hadn’t worked in this kind of northern climate before. That was certainly a component. I think there was a whole host of things that, going back to the outcome, the more thinking and planning at the beginning. I think even the amount of engineering that was done before proceeding was quite small in comparison to what probably better practices would suggest that would be a component that we want to do better go forward. So, I think it was a host of things that need to be improved upon.
Jackie Forrest:
The power prices, has it impacted power prices in Newfoundland and Labrador having this higher cost source of energy?
Jennifer Williams:
Right. So, if you think about the original cost, as you mentioned, is essentially doubled. So, let’s call it a six, $7 billion project ended at 13 and a half. So, it would be a doubling of what the cost would be. And when the estimates were done, if all of the full costs were immediately to go on customers’ rates, as soon as the project was commissioned, rates would’ve come close to doubling. And what governments a number of years ago had committed to is rates will not double. Obviously, there has to be some cost recovery in customer rates associated with the project because we had to do something, and it was sanctioned at half of the cost. So, rates would’ve gone up even at half of the cost. But a lot had changed over the last dozen years from when it was sanctioned to it being in service and rates being done.
But from a timeliness perspective, governments and hydro just announced a couple of weeks ago the rate mitigation plan to help smooth the rate changes associated with the project. So, rates currently are just a little over 14 and a half cents here per kilowatt-hour, and they would have gone to over 23 cents a kilowatt-hour. And what government has announced a couple of weeks ago was that rates would go up 2.25% for the next six years to smooth rates in. So not anything insignificant to customers, but not what it could have been if they were to have had all the rates go in.
So, government is really taking a lot on by choosing to mitigate rates for customers. Basically, Hydro’s dividends are going to be cycled back in into rates for customers as opposed to those being given to the government treasury for other reasons. So yeah, rates would’ve gone quite high, but government has chosen to mitigate those rates via dividends from the Crown corporation.
Jackie Forrest:
When it’s at 23 cents a kilowatt-hour, does that include your fees for distribution and transmission, or is that the electricity only component?
Jennifer Williams:
That would’ve been everything. However, it wouldn’t have considered future rate increases associated with, for example, the distribution utility, because that is a component I didn’t mention at the beginning, is we are the primary generation and transmitter of the electricity. We have a little bit of distribution, but there’s a private company here that does most of the distribution. That’s Newfoundland Power. And so, the 23 plus cents would’ve been at a point in time, what the cost would’ve been, but obviously as different power costs go up, that number would’ve gone up as well.
Jackie Forrest:
That’s, I think, generally quite reasonable, actually, if you look at electricity costs across Canada.
Jennifer Williams:
Well, I was asked a question there a while ago following the rate mitigation announcements by one of the media houses here and, again, I understand the concerns with the cost of living, I really do, but we have to be thoughtful about, what does it mean when costs go up for electricity, for example? And I try to use the example for people of teachers and nurses and for us, for example, our power line technicians, over time you negotiate new contracts and people appropriately expect their salaries to evolve and therefore costs go onto the supply of power and costs go into your supply of healthcare and supplier schooling. So, costs can’t remain stagnant when you think about labour.
Labour is really 60% of your costs, or 50% of your costs often. So, we can’t have costs that never go up and it sounds obvious to state that, but sometimes we’re not really talking about that with the public. So, I am trying to help people say costs can’t ever not go up. They have to go up. So, you’re right. I mean 23 and a half cents is a big jump, but we’re really trying to allow for some and slow and thoughtful increases to happen to help people adjust over time.
Jackie Forrest:
You mentioned Muskrat Falls in the context of the biggest project since the 1960s, which I think was Churchill Falls, which we also mentioned earlier. Churchill Falls was a huge achievement. It’s still operational, and I think it’s one of the top 10 hydro dams in the world in terms of capacity. Can you describe Churchill Falls for Canadians who listen to this podcast and the significance of that project and also where it is geographically?
Jennifer Williams:
Yeah, happily. Churchill Falls is definitely a jewel for the province, but certainly for the country. Outside of China, it’s definitely one of the 10 biggest in the world. It’s the second-biggest hydro plant to Canada by only 200 megawatts, second to a plant in Quebec by 3% or 4% difference. So, one of the two biggest in Canada. It is in Labrador, in Central Labrador. So, if anybody knows where Goose Bay is, and it’s about 300-ish kilometers west of Goose Bank. It is 5,428 megawatts. And if I think about Alberta, for example, Alberta’s demand around about these days is about maximum of 10,000 megawatts. So, this one plant could supply about half of Alberta’s electricity demand on any day these days. So, it’s a huge plant.
It’s got 11 units below ground, which is also really interesting for anybody who’s able to visit. It’s actually an underground hydro plant. You’ve got to take an elevator or the big mining, basically, a big tunnel to drive under, but the tunnel where the plant is, is about the height of the Eiffel Tower down below ground. It’s an engineering marvel to participate and see what this plant is like in the country. From a renewable perspective, it’s been in service since 1971. I think the first unit delivered power to Quebec.
And then really from a construction feed perspective, a plant of that size, it was five years under construction and then first power. I mean, that to me is astounding.
The thing is. From today’s perspective, it’s tough to even contemplate that because when you think about the safety standards appropriately, the consultation standards appropriately, the environmental protection standards that we have, for a 5,400 megawatt plant to be done in five years, or first power commission, because the rest of it came on over the next subsequent years, but it really is an astounding feat for this country.
Jackie Forrest:
Yeah, Jennifer, I had met you earlier this year and you got me interested in learning more about Churchill Falls. And really, as someone who’s been following energy in Canada for most of my career, I was surprised I didn’t know that much about it. So, I really think it should be much more celebrated. I mean, it was a huge technical achievement. Interestingly enough, built at about the same time as the first oil sands project, the Great Canadian Oil Sands in the late 60s, which a lot of people do know the achievement of unlocking the oil sands, and here we unlocked this massive hydropower from a very remote area. And I was thinking about, well, why don’t people know about it? As a kid, I visited the Bennett Dam for my summer holiday. That’s the kind of holiday our family took. But I remember it really well and I just think if more Canadians could see it, because it’s just so remote, they might appreciate more what a national asset it is.
Jennifer Williams:
You’re right. And I think sometimes part of it is just our geography and it’s hard to get to. So, it is tough for folks to pay attention if it’s out of their line of vision, I’ll say. And your family might be unique visiting dams, which I’m totally impressed with that was your history. I’m working on people having a better appreciation for electricity, and similar to the oil industry, so much of our society sits on top of the electricity industry and all of us take it for granted. A lot of people take it for granted. So, I think step one is to make sure that we have people understanding electricity and how much we rely on it.
And I’m not sure what comes first, the chicken or the egg. Do you get respect for the electricity system by really seeing these engineering marvels, or do you have an understanding of respect your electricity system and say, “Oh, well, where does that come from?” And then you have an appreciation. But it really is pretty incredible what can happen. Part of it is the issue of the distance from a large population, but I’m quite happy to talk about Churchill Falls and all these assets anytime, anywhere because they really are a national treasure and an engineering marvel, engineering marvel 100%.
Peter Tertzakian:
Yeah. And we’re going to have to respect electricity more and more, first because achieving net zero depends upon shifting a large part of our energy demand from liquids to electrons. But there’s the other dynamic here where there’s an increasing demand for electricity that we seem to take for granted from the internet, artificial intelligence, data centers, so on. And then on top of that, electric vehicles as well. So how does Newfoundland and Labrador think about that? How does your hydro company think about that? Because we just talked about the supply side to this point.
Jennifer Williams:
Yeah, so, from an electrification perspective, I referenced at the beginning, but I’ll restate it anyway, we are currently, with our current users, we’re more than 90% being supplied by renewable power, so in quite good shape. But as you mentioned, I personally have been driving an electric car for the last four years. I’ve switched to a heat pump at my house. That’s happening, and it’s happening at the micro level. And while there is public policy, absolutely, that is enabling a lot of that, that’s not one big industrial facility showing up in your system and, is it going to happen? Is it not going to happen? Electrification is coming at us stealthily, and so we have to be ready for it. When you’re going to be ready for it, you often have to do other fairly significant big projects too.
So, we’re actually in the process of announcing, I’ll call it, a few more projects for us as an island that’ve got some documents in front of our regulator now where we’re letting them know what we’re planning on building. And so, we plan on installing a peaker unit, a combustion peaker unit that will be able to transition to renewable fuels when they are reliably available. But we’re also going to build another 150 megawatts hydro unit, and we’re going to add some wind. We don’t have much wind now because we haven’t needed it, the system, we’ve had a lot of hydroelectricity, but we’re going to start adding some wind. So that’s how we are beginning to handle some of that. But when you mentioned to say some of these larger, probably international opportunities and international ideas that are happening, we actually have about 4,000 megawatts of undeveloped hydroelectricity in Labrador.
It’s basically in between. It’s all the same river, the Churchill River. So, you’ve got Churchill Falls at the top of the river, the head of the river, Muskrat Falls is at the end of the river. And there’s a project that some of the listeners may be familiar with called Gull Island. And Gull Island is at 2,200 megawatts. So, it’s another huge, huge facility, and it all uses the same water. So the water gets used once at Churchill, it could get used at Gull, and then get reused then at Muskrat Falls. You’re basically generating the same water three times. And that plant at Gull Island is one of probably the best remaining hydroelectricity project in North America. For our domestic purposes, we’ve got options available to us that we’re advancing and we’re going to be starting construction on soon. And then we also have other opportunities that are available regionally/nationally/internationally if you want to use it for some kind of hydrogen creation that you can ship elsewhere. So, we definitely have opportunities available to continue with the de-carbonization trend that we’re seeing.
Jackie Forrest:
So, Jennifer, Gull Island, we have heard about that that’s a potential for another big hydro plant. I wanted to come back to Churchill Falls because it’s related to developing new hydro plants in Labrador. The dam is not without its controversy. Although it’s an engineering marvel, it was built without this underwater cable. Maybe that technology didn’t exist in the late ’60s. And the electricity flows through Quebec, and Quebec at that time, back in the early ’70s, late ’60s, negotiated a very low power price that I think goes for a very long period. Could just tell us about that power price and the situation in terms of why that contract came to be? And do you think there’s potential for a new power plant that would go through Quebec, because I think that would be a lower cost way of transmitting the electricity?
Jennifer Williams:
Sure, yeah. There was certainly a vision in the ’60s to develop this incredible asset, and the government at the time wanted it to happen. But for a series of, I guess, reasons, we needed a partner. A bit of a complicated evolution, but Quebec is a partner and is actually a one third owner of Churchill Falls as well. So, this jurisdiction owns two-thirds and Quebec owns the other third. And then as part of, I guess, getting the project to conclusion and completion, a contract was set up for Quebec to purchase the most of the power. So, they purchased basically 4,900 to 4,800 megawatts of that facility from the early-70s right out to 2041. So, a very long period of time. There were things that now that we have many years under our belt, and actually the controversy between for the contract started decades ago, but there was no escalator clause for pricing. There was a series of things that were really done poorly at the time from a contract perspective. And it’s made for a difficult relationship, with regards to fairness. So, here in this province has been quite a bit of litigation, even to the Supreme Court of Canada to basically try to say, “This is not fair. We should reopen this.” And it didn’t really go… The contract was not found to be legally required to be reopened. So, it has stacked and the power price that is being paid is 0.20 cents a kilowatt-hour.
Jackie Forrest:
Wow.
Jennifer Williams:
So, I mean, just an astronomical low number. And you’re basically generating the power and selling it at that price. To operate the plant is actually quite cheap as well. What that can get sold for then, either domestically or in the market, is you’re talking 10, 20, 30-fold difference, 40-fold difference. And so, from a proper, historically… so this province has felt quite bitter about that for quite a long time. But we’re really working… and I’ll say this to you operationally, the folks, because Newfoundland Labrador Hydro runs the Churchill Falls plant. We have a really great operational relationship with Quebec. Our teams operationally work really well together. Our systems are interconnected.
So, I know that we do have this really good relationship from engineers and plant operators running the plant and running the facilities and the system. But that history has been difficult for this jurisdiction. So, what has been certainly on the, I’ll call, central and east of Canada, a lot of attention between our premiers is resulting from renegotiation or the ability to try to renegotiate that contract and to consider what else could these two jurisdictions do together for new assets in Churchill Falls or on the river, for example, Gull Island. Could that be part of our future together?
So, both of our premiers have basically said, “Let’s talk and see what we can do, understanding history, but not having retribution for history. Because both of us are going to need good assets.” So, we’re currently having discussions with Quebec, hopeful that we will get to a good place. But it’s an incredibly valuable asset today. It’s going to be even valuable when the contract expires in 2041, and we want to make sure that the value of that asset is much more reflective than it currently is. But, pretty exciting of what is possible there.
Peter Tertzakian:
Can you comment on the Clean Electricity Regulations? As you know, it’s highly contentious in the western provinces that are heavily reliant upon natural gas fire generation. But, where you are, because the bulk of your electricity is generated by hydroelectricity, it may not be as much of an issue to comply with the Net-Zero legislation by 2035. How is it that you’re viewing the Clean Electricity Regulations that are proposed these days?
Jennifer Williams:
Yes. So, we certainly have a team of folks that are participating and providing input to the considerations that the federal government is undergoing. And you’re right that the regulations for us are not as significant for all the jurisdictions that are not in the same place that we are. So, we respect that. The thinking that we are putting around is, when we electrify, we have to be able to have peaker units. So that’s where we’re focused, is that, where the load is not always where even your clean electricity sits, and the wind is, as we know, intermittent. So, the view that our jurisdiction is taking, and it’s there, is to advocate, to make sure that how we use peaking units in a pre-renewable fossil… or renewable fuels period, that it is respectful of our ability to respond to electrification, while still being able to meet… the liability is really keen for us. So that’s the lens that our jurisdiction is certainly taking.
Jackie Forrest:
Right. And I think the peakers were the original draft, it was very low utilization if they weren’t abated, something like 5%, which would be quite limiting.
Jennifer Williams:
Yeah. Yep. One of the things, we don’t have access to natural gas, so that is an issue for us with regards to diesel, for example. So, if we need to import diesel, and let’s say, we don’t need the peaker or we need very little bit of it, but we need to plan to use it, we’re going to have to store all this diesel, what do we do with it if we don’t use it? Obviously, it does go stale. Are we going to burn it off? Does that meet Clean Electricity Regulations? So, again, I think our issues are nowhere near as significant as some of the other jurisdictions, but there are definitely things that we want to make sure were heard with regards to the regulations.
Jackie Forrest:
Okay. Another thing that will help with decarbonization is moving more electricity from different parts of Canada. You seem to have an abundance of clean energy, not a lot of provinces can say that. I wanted to talk about this Atlantic Loop Project that was proposed. Initially, it was supposed to be a big loop that included tying power from Newfoundland and Labrador to other parts of the country. It has been really cut back. I think it’s now a short transmission line between Nova Scotia and New Brunswick. Just give us your perspective on why it was cut back, and do you think that there’s a real chance that we’re going to get big transmission lines when you consider some of the issues there?
Jennifer Williams:
Yeah. I’m an optimist and I’m somebody who thinks a lot of things can be done. But that original vision was very big and very complicated. And if you think about it, you had five provinces, Quebec, Nova Scotia, New Brunswick, PEI, Newfoundland and Labrador, and you had the utilities associated with that. Some were Crown, some were private. Then you had the governments associated with that, and then you had the federal government. So, that is a lot of people and a lot of interest trying to make a decision on a massive investment. So, I fundamentally think that that’s why it couldn’t get where it needed to in a timeframe that it needed to. You just had so many different views and perspectives. And I’ll say this, and then you had regulators on top of that. So you had governments, utilities, and regulators, which the regulators weren’t even really brought into the loop, pardon the pun.
So, that, to me, it was really huge, incredibly visionary, perhaps the right thing long-term. But, I think, the step to take, I call, smaller steps and to do it more chunky and piecemeal is the right way, because you’re able to have a smaller group of decision makers, a smaller group of oversight to do that. I really get a bit defeated sometimes when we talk about these really visionary national conversations. It’s almost like healthcare. If you’re going to have these really, really big conversations, the more people you involve, the more difficult it is to actually move an inch. And I’m a bit of an incrementalist. I’d rather move an inch, move an inch, move an inch, and before you know it, you move a foot, versus saying, “Okay. How do we move a foot?” It can be really, really difficult to do.
So, I do think that the path to enabling decarbonization is smaller chunkier bits, even though they’re not insignificant, as opposed to these massive ones. Because, at the end of the day, folks appropriately need to look out for their jurisdiction. They need to think about what does this mean for my jurisdiction? And the more folks you have involved, it can be very difficult to get to any conclusion and decision. So, that to me is why that would be. I still think you can get big things done. You just need to do them in chunkier bits.
Jackie Forrest:
Okay. So, yeah, maybe it’s more bilaterals between each province and eventually it becomes a loop. Hey, we’re running out of time. This has been a fascinating conversation. One last quick question. Over a year ago, we had Pattern Energy on the podcast telling us about their plans for green hydrogen in Newfoundland. Can you just tell us a bit about what your expectations are for green hydrogen and how much load that could add potentially?
Jennifer Williams:
Yeah, sure. So, what the government did was they basically enabled and opened up this opportunity. And, as I mentioned, we have no wind here. There’s such a big opportunity for wind to be associated with these hydrogen developers. So, we’re really ripe for this opportunity. Going back to what I said earlier about being a Crown corporation, we’ve been at the government side at the very beginning of this to do everything we can to enable this industry. So, we helped them evaluate projects, that should make their way through the various portals, if you want to call it that, the very steps in the process. So, right now, where we are is that we are working with the proponents who have passed through various steps with government, and I absolutely envision something that’s going to stick. The amount of interest that’s happening here in this province that something is not going to happen. So, something is going to stick.
With regards to the impact on our electricity system, I think it can have both a push and a pull. We’re going to be calling for some wind supply. A lot of these wind developers are overbuilding. We’d like to buy their excess. Then there’s jobs that they’re going to want to buy back from us. So, we just have to keep reliability in mind in how we do those exchanges. But, right now, we’re in the, called, system impact study stage with regards to hearing from those proponents, what is it they actually need from an interconnection, and then we’re doing the engineering analysis. And so, we’re going down the path. So hopefully something comes to fruition pretty soon.
Peter Tertzakian:
Well, great, Jennifer. It’s always wonderful to get perspectives on energy from across the country, especially the other end of the country. So, thanks very much for joining us. I think, we all learned much about hydroelectricity, the key or the flagship infrastructure projects that we have in Canada, like Churchill Falls and much more. So, thanks again for joining us.
Jennifer Williams:
Yeah, no delays to be here. Thanks for having me.
Jackie Forrest:
Great. Thank you, Jennifer Williams, the President and CEO of Newfoundland Labrador Hydro. And thank you to our listeners. If you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.
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