Liberal Electricity Plan: Some guys have all the luck

The Liberals, whose victory two years ago owed much to the claim they could do a better job than the NDP with the power file, brought in their electricity manifesto last week, with legislation to follow. Grandly titled Our Electricity Future: Nova Scotia’s Electricity Plan 2015-2040, the report was the result of one of those pro-forma consultations in which “stakeholders” give their views in various forums and the government ‘s communications experts write up a final report made up of what their client wants.

The whole exercise used up a lot of time and undoubtedly a fair bit of electricity. The final report was preceded not only by the consultations but also by redundant legislation (since when does the government need legislation to produce a policy document?) and several technical reports. Each stage of the two-year process was accompanied by leftover campaign rhetoric about breaking the Nova Scotia Power monopoly and making NSP more accountable.

In the end, however, the Liberals got what was most important to them – political credit for relatively stable power rates past the next election and into 2019 and the bragging rights that may go with that. As a bonus, the Liberals get to don the green cloak, and imagine, as the report has it, that “by 2040, the province will have moved from among the most carbon-intense electricity generators in the country to a green powerhouse.” For those fortunate circumstances the Liberals should give thanks to the New Democrats, the NDP’s Conservative predecessors, a stagnant world economy and, going forward, the Kingdom of Saudi Arabia.

The Conservatives, back before they went all in on fracking, started the renewable energy ball rolling in the mid-2000s. The NDP picked it up and ran with it, bumping up renewables, putting hard caps on NSP’s greenhouse gas emissions and pushing energy efficiency. Over Liberal objections, the Dexter government also championed the Maritime Link, without which any talk of Nova Scotia as “a green powerhouse” would be laughable.

The NDP’s green agenda (a tough sell in this province) was propelled by the expectation that fossil fuel costs would keep going up, making green electricity good for both the environment and the pocketbook. The Energy Department dutifully produced the NDP’s electricity plan, which announced that it was time to “bite the bullet” and make the investments needed for, as Darrell Dexter put it “a secure, safe, affordable and sustainable energy economy.” Unfortunately for the NDP, just as Nova Scotians were being called upon to make modest investments in clean electricity yet to come, their household budgets sustained an attack from dirty power plants past. The cost of generating electricity with fossil fuels jumped nearly 13% between 2009 and 2010 and remained almost as high in 2011. Power rates rose with the fuel costs and the opposition managed to convince a lot of voters that the NDP’s green electricity initiatives were at fault. So much for affordability, at least in the short term.

The Conservatives were upfront in their critique, eschewing their environmentalist past and delighting in throwing the “bite the bullet” call to arms back at the NDP. The Liberals were a little more nuanced, using power rates to hammer the NDP while focusing their green electricity critique on energy efficiency and the so-called electricity tax. But given the role that power rates had in the Liberals’ election win, there’s no doubt that if push came to shove, keeping rates down would take precedence over greening the electricity system – something that became clear at hearings this year where the Liberal government sided with NSP to limit spending on energy efficiency. The fortunate fact that the Liberal electricity plan now can tout rate stability without paying a political price that would come from ditching the NDP’s green agenda is thanks to a drop in fossil fuel prices that started in 2011 and shows no sign of turning around.

Unpacking fuel costs

The price Nova Scotia Power pays for fuel is a closely guarded secret, hidden from the general public and available to interveners at utility board hearings only through an oath of confidentiality. The idea is to prevent potential suppliers from using price information to gain an advantage in negotiating contracts. The effect is to construct public regulatory hearings in which the public and the media are in the dark about a crucial aspect of those hearings. Despite some rhetoric about making the regulatory system more “transparent and accountable,” the brave new electricity plan carries on this tradition of covertness.

The report provides no details to back up the assertion that power rate increases are “mainly due to global markets,” and implies a lockstep relationship between coal prices and power rates. “Over the past decade the average cost of power in Nova Scotia has increased by more than 70 per cent…not coincidentally, the international price for coal climbed by as much as 70 per cent over the same period,” is how they wordsmith it.

Not so fast. Data that presumably represent Nova Scotia Power’s fuel costs, are hiding in plain sight. Statistics Canada (CANSIM Tables 127-0004 and 127-0005) publishes national and provincial data on cost and consumption of fuel by electric utility thermal plants. (In the absence of other utilities with thermal plants in the province it can be reasonably assumed that the data apply to Nova Scotia Power). The on-line tables go back to 2005 and the most recent year reported is 2013. For the record:

  1. In 2005, 2,670,292 metric tons of coal were consumed for electric power generation by electric utility plants in Nova Scotia at a cost of $225,546,000 for a per unit cost of $84.46;
  2. In 2010, 2,753,265 tons were consumed at a cost of $307,186,000, a per unit cost of $111.57, the highest cost recorded over the nine years reported by StatsCanada;
  3. The increase in cost per ton from 2005 to 2010 – the peak year – was 32. 1%.

If the 70% increase in the international price for coal over the past decade translates into a 70% increase in NSP’s price for coal, it is not reflected in the Statistics Canada data which show an increase of less than half that number.

As noted, the cost to Nova Scotians of coal used to make electricity peaked in 2010. The cost of other fuels (natural gas, petroleum coke, oil and an insignificant amount of wood) rose as well, producing a total fuel bill of more than $500 million that year. But over the next three years, as the world economy struggled, the input cost of producing power from those fuels went down, even as power rates went up. Calculations using the StatsCanada costs already cited, and electricity generation counts from Environment Canada show the trend.[1]

  • In the peak year of 2010, generation from fossil fuels and wood cost $49.09 per megawatt hour, up 31% from 2005;
  • In 2011, the cost dropped to $48.07mW/h;
  • In 2012 the cost dropped 8% to $43.94 mW/h;
  • In 2013, the cost rose to $46.17mW/h.

Saudi Arabia’s mid-2014 decision to flood the market with cheap oil in an effort to drive the high-cost shale and tar sands producers out of business nipped in the bud the 2013 upward trend. The oil price war has caused sharp declines in all fossil fuel prices since 2013. According to one source (www.indexmundi.com), coal from Columbia (a main supplier to Nova Scotia) dropped 32% in price between January 2014 and this October. Over the same period, the price of natural gas dropped by 51% and heating oil by 54%. The U.S. Energy Information Administration projects stable or lower prices for those commodities in 2016 and only slight increases in coal and natural gas prices by 2020.[2]

Liberal greenwash?

Cheaper electricity from cheaper fossil fuels has made it possible for NSP to add green energy to the fuel mix while keeping rates stable. Thanks to external forces, the affordability part of Dexter’s 2010 plan for “a secure, safe, affordable and sustainable energy economy “ is in hand for the time being. Energy security has been enhanced by the increase in locally generated renewable electricity, and will take a quantum leap with completion of the Maritime Link. Those renewables provide Nova Scotia with better protection for the inevitable long-term increase in fossil fuel prices and/or the day that the world takes serious action on climate change by putting a steep price on carbon. However, Dexter’s notion of “safe” and “sustainable” energy, as expressed through a current commitment to reduce greenhouse gas emissions is in doubt.

The McNeil government’s Electricity Plan says some of the right things about GHG pollution and climate change, noting that in addition to cutting emissions from NSP, “reductions are also required across the rest of the economy, consistent with G7 commitments for deep reductions in GHGs by 2050 and a carbonfree economy by 2100. Most importantly, reductions are required to meet our moral obligations to future Nova Scotians.”

In the short term, however, the Liberals aren’t discussing any targets for GHG emissions – not even the “10% below 1990 by 2020” that’s already in legislation. The problem is the continued flirtation with LNG exports and the government’s refusal to set limits on GHG emissions from such developments. The Department of Environment has already given conditional approval to two potential LNG operations. If they go ahead they could add some five million tons of greenhouse gas to the Nova Scotia inventory, blowing the legislated targets out of the water.

The electricity report glosses over the problem. After noting that “the potential for the construction and operation of new facilities to chill natural gas and condense it into a liquid (liquid natural gas, or LNG) for export … would need massive new supplies of electricity,” (my italics), the report fudges. The self-generation option, the one that has been approved and could add the 5mt of GHG “would be addressed by national requirements and provincial policies to ensure best practices.” Whether that means throwing the short-term targets for GHG emission cuts under the bus is not clear. But it’s hardly a rousing start to the launch of the “transparent and accountable” regulatory system presented as one of the main themes of the new plan.

On the Chronicle-Herald’s op ed pages last weekend the right-ish Yin (Bill Black) and the left-ish Yang (Ralph Surette) produced a consensus that the Liberals’ electricity plan has taken much of the politics out of the power issue. They may be right, but it depends on a couple of factors. One is the strength of the climate change movement in Nova Scotia, the other is the cost of fossil fuels. If either of those increase significantly, the Liberals’ skin deep commitment to the environment will be tested and Nova Scotians could well find themselves embroiled in a new round of power politics.

 

[1] Environment Canada, National Inventory Report, Canada’s UNFCCC Submission, Annex 11, Electricity Intensity Tables

[2] EIA, Annual Energy Outlook 2015, Energy Prices by Sector and Source

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About Richard Starr

RICHARD STARR has had careers as a journalist, public servant, broadcaster, political staffer and freelance policy adviser. He is author of numerous newspaper and magazine articles, appearing in everything from Atlantic Insight to Atlantic Progress. A lifelong student of Maritime history, Starr is married to playwright and former MP Wendy Lill. They live in Dartmouth.
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