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Judging energy costs


Dear editor, Nalcor Energy, through one of its public information brochures, is reporting that "between 2017 and 2036, the average annual fuel oil expense for the Holyrood plant is projected to be $384 million, for a cumulative total of $7.7 billion.”

Accordingly, these projected costs are being used, in part, to argue that Muskrat Falls must go ahead.

But are these 'projected' costs credible?

For the 10-year period between 2001 to 2010, Holyrood's average annual fuel oil costs were not $384 million, but instead only $96 million, for a cumulative total over a projected 20-year period of only $1.9 billion.

During that 2001-2010 period, the average fuel oil usage was less than 2.3 million barrels per year, with the actual fuel oil usage going down from 3.3 million barrels in 2001 to less than 1.4 million barrels in 2010.

That's a usage reduction of 59 per cent over the last 10 years.

Furthermore, the annual fuel usage for the last six years (for every year from 2005 to 2010) remained well below the 10-year average of 2.3 million barrels per year.

So, even if the cost per barrel of oil from 2017 to 2036 did increase (as they did from 2001 to 2010) by as much as 150 per cent, the past 10 years has shown that an increase in the price of oil alone does not equate to reliable cost projections 20 years down the road.

From 2001 to 2010, while international fuel oil costs increased from $30 to $75 per barrel (an increase of 150 per cent over 10 years), the actual annual fuel oil cost for Holyrood increased by a total of only about two per cent over that same 10-year period — from $98.4 million in 2001 to $100.6 million in 2010.

If Newfoundland and Labrador's 200,000 households were to cover the entire average annual fuel oil costs for Holyrood, that would amount to an average cost per household of only about $40 per month.

Even if the cost per barrel of oil over the next 20 years doubled, the cost of fuel oil usage at Holyrood, excluding any capital cost upgrades, would mean only a cost per household of an additional $40 per month.

Over the next 20 years, even if Holyrood's oil costs were to increase by four times as much as the average cost over the past 10 years, a $400 monthly electric bill would increase by only an additional $160 per month.

If Muskrat Falls is going to mean a doubling of a $400 monthly household electric bill from $400 to $800, and even if oil usage costs for Holyrood quadruples, Holyrood oil costs will only increase a $400 per month electric bill by an additional $160 per month (four times $40) to $560 per month.

So, even if Holyrood's oil usage costs over the next 20 years did increase by as much as 400 per cent, a 400 per cent increase in Holyrood's costs would still be less than half that from Muskrat Falls — an increase of $160 per month compared to an increase of $400 per month for Muskrat Falls.

So, is Muskrat Falls the least cost option? Is Nalcor's 20-year cost projections for Holyrood, at the consumer level, credible?

You be the judge.

 

Maurice E. Adams

 

Paradise

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