The Dalton Report and Nova Scotia’s energy future

Larry Hughes

Last Friday, Premier Dexter spoke at a breakfast meeting organized by Maritime Energy. He used the opportunity to present his views on the proposed Maritime Link and the recently released Dalton Report on the Maritime Link.

During his speech, the premier argued that relying on the Maritime Link made more sense than relying on Hydro Quebec because a repeat of an extreme weather event such as the 1998 ice-storm could damage transmission lines and cut off the electricity supply to Nova Scotia for weeks — the implication being that since Nova Scotia will be connected to the island of Newfoundland by a subsea cable, electricity from Newfoundland and Labrador will not be affected by extreme weather. While one cannot argue with the fact that the Maritime Link will not be subject to the vagaries of the weather, the fact is most of the transmission system from hydroelectric facilities in Labrador will be above ground and, like any link from Quebec, will also be subject to extreme weather events.

The premier also criticized those advocating the use of natural gas for generating electricity in the province. It was unclear whether he included the Dalton Report in his criticism as the report assumes that natural gas will be used to generate increasing quantities of electricity in the province (to offset the decline in electricity produced from coal and petroleum-coke) and that after 2040, the province will get more electricity from natural gas than from the Maritime Link. If the premier is dead-set against using natural gas for electrical generation, he might want to consider opting for electricity from Hydro Quebec since, according to the Optimal Supply Scenarios in the Dalton Report, the Hydro Quebec scenario will always use less natural gas for electricity than will the Maritime Link scenario (in fact, after 2035, the Hydro Quebec scenario is expected to use less than half).

The premier’s defense of the Dalton Report may be ill-advised for at least three other reasons.

First, the report assumes that all the electricity that can be carried by the Maritime Link will be used by Nova Scotia. This means that over the lifetime of the project, slightly more than 23% of Nova Scotia’s electricity will be supplied from Newfoundland and Labrador — a far cry from the roughly 8% envisaged in the original 35-year agreement. Furthermore, only the 8% will be sold at the long-term, fixed rate, while the remaining 15% will be subject to market rates.

Second, according to the report, after 2022, Nova Scotia’s demand for electricity will remain flat at 10,832 GWh per year because of “aggressive conservation programs that would offset load growth.” This is an optimistic assumption as it fails to consider the very real prospect of homeowners switching from fuel oil to electricity for heating (the Dalton Report expects the cost of liquid fuels to rise markedly over the next 40 years). This is already occurring in Nova Scotia, where most new homes are being heated with electricity. If this trend continues, it is unlikely that Nova Scotia’s demand for electricity will remain flat. Moreover, if the transportation system turns to electricity because of supply and price volatility in world oil markets, the province’s demand for electricity can be expected to rise.

Third, the report fails to recognize that climate change may affect the supply of electricity from hydroelectric sites in Labrador (notably Churchill Falls, Muskrat Falls, and Gull Island) as one of the possible effects of climate change in this region is not less precipitation but less precipitation in the form of snow. This is an important distinction because hydroelectric facilities such as those in Labrador require a snowpack to act a reservoir from late spring into summer. If snow falls as rain, it simply spills over the dam — less snow will ultimately mean less electricity.

The government’s preoccupation with electricity supply overlooks the drivers of the province’s energy system: the energy services. At present, about 40% of the province’s final energy demand is for transportation (from oil products) and 40% for heat (from fuel oil, electricity, and biomass), with the remaining 20% from electricity for electrical services (such as lighting, appliances, and computers). This division (in terms of energy sources and uses) will probably change over the next 40 years, driven by the province’s demographics and job market, the growing demand for energy in Asia (affecting both supply and price), and environmental concerns.

Rather than arguing over whether electricity will come from Labrador, Hydro Quebec, or natural gas (ultimately, all three will probably be used, driven by supply and price), the government should focus on where the demand is expected to come from in the future and how this demand can be met. In short, rather than focusing on one small, albeit important, component of the province’s energy system, the government needs an energy strategy to ensure the long-term energy security of the province.

Published 22 January 2013