Saturday, March 31, 2012

Time for a National Electricity Grid

As a Newfoundlander on the far coast of Canada I have followed the Muskrat Falls hydro-development debate with some interest. For the most it part it has devolved in to a partisan brawl where it is hard for anyone to step back and take a look at the real issues. On one side the common sense says that in an energy hungry environment it is foolish for a province as well-endowed with hydro-electric resources as Newfoundland and Labrador to not develop them. For this side of the debate opposing Muskrat Falls is a failure of imagination and a form of treason. On the other side of the debate sensible people point out that taking power from Labrador, to the island and the across the Gulf of St. Lawrence to sell a Maritime power company which is then free to re-sell it to the states is madness that will just lead to the waste of money and the gnashing of teeth in the long run. This is particularly so, they point out, as the energy demand picture has changed dramatically with the decline of the eastern seaboard’s industrial economy and the development of shale gas in New York Sate and Pennsylvania.

To my mind this actually misses a bigger picture reality that I was reminded of while attending National Energy Board hearings concerning the construction of the Northern Gateway Pipeline across the interior of British Columbia to the ocean. This pipeline exists to serve one industry and one industry only – the Alberta oil sands industry. British Columbia has no real interest in the product that is being shipped and in fact takes the brunt of the associate environmental risk. Beyond a scattering of jobs (pipeline maintenance workers and tug operators mostly) BC will see few jobs or direct benefits. Instead the benefits enjoyed by BC are largely the indirect benefits that flow from improving the economy of all of Canada (offset of course by the detriment of the expected increase in gas prices). But BC’s concerns in this respect whether they are for or against are, in fact, only a small part of the decision to whether or not this project will get built. Why is this?

In the 1950’s and 1960’s Eastern Canada recognized that it was in its interest to have unimpeded access to Western energy resources. Similarly, oil and gas producers recognized that it was equally in their interest to have a regulatory system in place that was not beholden to what they viewed as parochial local or even provincial interests. As a result the Federal government asserted a strong regulatory presence in the field of inter-provincial pipeline construction that was designed to ensure not only that pipelines were regulated and developed in an orderly fashion but also that they could and would be built over the objections, if necessary, landowners, towns, cities and provinces. In the context of hydro-electric power this same power was not asserted – that is, while international power sales are regulated in Canada, the National Energy Board Act does not create mechanisms that would allow transmission companies to force their way across other provinces over local objections.

The reasons for this are obvious in one sense – Quebec would use this as a cause celebre in the fight against confederation. The optics of empowering a Newfoundland power company to use Quebec soil to transport competing electrical power are obviously not good and unappetizing in the extreme for Ottawa. This would have been particularly so in the days when Newfoundland and New York would have been the main beneficiaries. Now however, the full price of this policy should be recognized. Ontario’s economy is in part creaking and groaning because of the question of how to obtain power for its population and industry. Cheap power costs are gone and the prospect of having to refurbish or replace aging nuclear power plants looms. Local hydro-electric reserves have largely been tapped. Wind and solar power are marginal players and there is deep seated opposition to coal and fossil fuel driven generation. Access to ample and reliable hydro-electric power would be a huge boost to the Ontario economy.

The reality is that if Newfoundland could secure a useful means of transporting its electricity across Quebec it is not just Muskrat Falls that would be developed. Instead we would be talking about the development of the whole potential of the Lower Churchill. This would be squarely in Ontario’s interest as well as in the interest of Newfoundland. It would reduce the pressure to invest in very costly and somewhat unreliable nuclear plants and force Ontario and its neighbours to continue to have to figure out how to accommodate immense amounts of erratic wind generation post-haste. Yet as things stand this will not happen, simply because the Quebec file remains so controversial.

The creation of a national system for the rational and orderly distribution of natural gas by an independent regulator has led to a reasonably peaceful state of affairs between the western gas producing provinces. They are equally competitors in the production of natural gas and yet at no time do they question the wisdom of a unified national pipeline system. This system is robust and allows for the producers to flexibly reply to changes in market demand and physical production. It largely operates in a way that is invisible to most politicians except when a particularly large project comes along. Perhaps it is time that we tried to do the same for electricity – create a strong robust integrated transmission system that extends from the Atlantic Coast to at least the Saskatchewan-Manitoba border.

Unfortunately this is not going to happen until real progress is made on the Quebec file. This was a hard fight even when we had governments that recognized national unity as being the most important file to sit on the Prime Minister’s desk. With a shift of interest away from developing better relations with Quebec – for the most part much of English Canada has largely thrown up its hands – it is difficult to see how this government is likely to focus the necessary attention on this file. If there is to be any progress it will probably have to be led by Ontario and developed through a process of inter-provincial diplomacy designed to create a workable arrangement between the relevant provinces. Newfoundland and Quebec are too deeply invested in their ancient fights to possibly resolve these issues on their own. Unfortunately until they are resolved the Lower Churchill and Muskrat Falls will remain untapped and Ontario will remain underpowered.

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