Black gold on tap

Mia Rabson
The Winnipeg Free Press
February 18, 2007

If you listen carefully, humming deep within the sound of crystal clear water rushing through the pristine wilderness of northern Manitoba is the faint echo of a fortune to be made.

It is the sound, economists and energy experts agree, of Manitoba’s black gold.

“Manitoba Hydro is a huge opportunity for Manitoba,” says Tom Adams, executive director of Energy Probe, a Toronto-based environmental think tank. “I think you’re looking at a wonderful future.”

Premier Gary Doer and his government are heavily promoting and investing in hydroelectricity for Manitoba’s future. They have committed Hydro to spending $1.2 billion to build the new Wuskwatim Dam, and last fall, promised to move forward on the long-awaited dream of Conawapa, a dam that could cost in excess of $5 billion to erect.

Doer has repeatedly referred to it as the province’s ticket to economic fortunes.

But is he right?

Scotia Bank economist Mary Webb says yes.

“Is it as good as people are saying?” she asked. “I’m saying to you, yes, this is a significant strategic advantage for Manitoba.”

Manitoba in recent years has fallen behind its western cousins on economic growth.

Doer doesn’t like the comparisons much, but in most economic performance measures, British Columbia, Alberta and Saskatchewan have left this province in their dust.

But their success, particularly in Alberta and Saskatchewan, can be explained in very simple terms: oil and gas.

Last year, the Alberta government gleaned $14.7 billion – yes that is nine zeros – in royalties and taxes and other fees from oil and gas. That amounts to more than $4,400 dollars for every man, woman and child living in Alberta.

Some economists have compared that to the equivalent of a 20 per cent provincial sales tax.

The sector is responsible for 275,000 direct and indirect jobs, and accounts for over 28 per cent of the province’s annual gross domestic product, equivalent to about $61 billion a year.

In short, it’s huge.

Manitoba Hydro, by comparison, looks like a poor cousin. It is responsible for about 18,000 direct and indirect jobs, and has an annual economic impact of about $500 million. The provincial government took in $252 million from Hydro in water power rentals, taxes and fees in 2005-06. That is just under $220 for every person in the province.

But when you factor in the dreaded “e” word that can strike fear into an oil and gas economy’s heart, Manitoba Hydro’s future fortunes begin to develop a bright, sunshiny glow.

Webb said environment and climate-change policies have come a long way forward, even in just the last year, and that will have a significant impact on a company like Manitoba Hydro and a province like Manitoba.

“We’re entering a new era and I think that will play out quite well for Manitoba,” she said.

Adams said with the growing priority to develop clean, renewable energy, Manitoba Hydro’s cache is exceptional.

“It’s better than black gold because black gold has a big question mark hanging over it,” said Adams.

Ontario is desperately trying to find thousands of additional megawatts of power to keep its lights on. That search is growing more desperate as the province struggles to close its coal-fired electricity plants which contribute mega amounts to the province’s greenhouse gas emissions.

Ontario’s Nanticoke coal station emitted 17.6 million tonnes of greenhouse gas in 2005. That alone is six times the climate-changing pollutants emitted in the entire province of Manitoba in 2005.

And while Saskatchewan and Alberta are rolling in oil dough, they too will have to find some way to curtail their emissions, making the clean, cost-efficient and renewable electricity Manitoba Hydro can provide an increasingly attractive option, notes Webb.

Then there are the customers in the United States, the ones already buying the lion’s share of Manitoba Hydro exports.

Webb said Manitoba Hydro is “a strategic, economic advantage for Manitoba.”

“Recognition of that has only increased with all the attention in Europe and the UN and the U.S. on energy security and the whole climate change issue,” said Webb.

She said Manitoba Hydro is also recognized as a leader in improving the environmental impacts of hydro developments by figuring out ways to reduce flooding. And its negotiated agreements with First Nations affected in the past and by future development have not gone unnoticed.

Manitoba Hydro also has a lot of room to grow. It currently has an installed capacity – meaning the total amount of energy it can produce if every generating station were running at full tilt – of 5,469 megawatts. A few hundred megawatts are generated by non-hydroelectric sources, such as wind power and the remaining diesel stations and coal plants. The coal plants are used as back-up when demand for electricity is high or water levels are low.

Another 200 megawatts will come online around 2012 when the Wuskwatim dam is completed. The Conawapa dam project will bring another 1,250 megawatts, probably sometime around 2020.

But Hydro president Bob Brennan says there are at least six more potential dam sites in the province that would be cost-efficient and realistic to build, and all told would more than double the current installed capacity.

Power generation and sales aside, just building those dams would give a boost to the economy through construction jobs and accompanying spinoffs, says Webb.

“That is going to underpin the Manitoba economy for the next decade and beyond,” she said.

Every new megawatt of power that comes into the system is a megawatt Manitoba Hydro will export. While Manitoba Hydro’s installed capacity is quite small compared to that in Quebec (34,571 megawatts), British Columbia (11,300 megawatts) and Ontario (22,000 megawatts), Manitoba Hydro has one distinct advantage over those utilities.

Manitoba produces far more power than its residents and businesses consume.

Last year, we exported 40 per cent of the power Hydro generated. Hydro Quebec comparatively exported just eight per cent of its power. B.C. Hydro and Ontario Power Generation use all the power they produce and import more just to meet domestic demand.

Manitoba Hydro makes most of its money on exports. Domestic prices are kept low to make affordable power an advantage to living and working in Manitoba. Export prices, however, are based on market demand.

Ironically, higher gas prices are not just good for Alberta’s bottom line. Manitoba Hydro’s export prices are largely dictated by the volatile prices of natural gas. If gas costs more, we can charge more, and vice versa, says Brennan.

And because export prices are higher, and all the new energy developed would be exported, doubling Manitoba Hydro’s installed capacity would more than double its bottom line.

One big barrier Hydro has to overcome is how to get more power to its customer.

Manitoba Hydro can transmit 2,200 megawatts to the United States, 300 megawatts to Saskatchewan and between 225 and 250 megawatts to Ontario.

“Last year, when the water levels were high, the lines were pretty busy,” said Brennan.

A month ago, an east-west power grid – electricity transmission lines – was a fast-fading pipe dream. The vast majority of the current lines run south into the U.S., and very little power is actually transmitted between provinces.

But newfound voter awareness of the environment, and a coinciding interest in climate change coming out of Ottawa, has just recently breathed new life into the plan.

The east-west grid is seen as a federal responsibility, much like the railway was when it was built in the 19th century. Building a bigger line just from Manitoba into Ontario would cost a minimum of $700 million, and likely more than $1 billion.

Brennan is realistic when comparing Hydro’s future to the oil boom in the west. We’re never going to sell so much hydroelectricity that Manitoba Hydro can hand the provincial government a $14.7 billion cheque.

But it’s still going to be big, he says.

“When people make the suggestion that Hydro is our oil you’ve got to make it comparable to the size of the province,” he said. “It would be our oil, it really would. And that would be a great thing.”

What’s watt?

A kilowatt hour of electricity is the amount of power it takes to burn a 100 watt lightbulb for 10 hours straight.

A megawatt hour of electricity is 1,000 times that much.

A terrwatt (Twh) hour is 1 billion kilowatt hours.


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3 Responses to Black gold on tap

  1. Lina says:

    You have the monopoly on useful ifonrmaiotn—aren’t monopolies illegal? ;)

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