NEPGA uses Tierney report to question need for Canadian hydro contracts

The New England Power Generators Association (NEPGA) has released an analysis finding that a Massachusetts proposal to contract for Canadian, provincially-owned hydropower is very expensive and “completely unnecessary,” the trade group said in a Sept. 16 news release.

Gov. Charlie Baker (R-Mass.) introduced Senate Bill 1965 providing authority for utilities to sign 15-to-25 year contracts for up to one-third of all electricity consumed in the state per year. In announcing the proposal, the Governor said it was necessary to meet the carbon emissions targets laid out in the Commonwealth’s Global Warming Solutions Act.

Susan F. Tierney, PhD, of the Analysis Group conducted an independent review of the proposal finding that Massachusetts power plants have met their 2020 carbon emissions reduction targets as of 2013 and that the cost of the contracting proposed in the legislation would dramatically raise costs for consumers.

Tierney had also issued a report in the spring of 2014 that cautioned against Massachusetts’ over-reliance on Canadian hydroelectric power.

Tierney is a former Secretary of Environmental Affairs and a former public utility commissioner in Massachusetts, as well as a former Assistant Secretary of Policy at the U.S. Department of Energy (DOE).

NEPGA called Tierney a recognized leader in environmental advocacy, clean energy and competitive electricity markets. NEPGA commissioned Tierney to provide an independent review of Senate Bill 1965.

Report calls hydro measure costly, unnecessary

Tierney’s report states, “The bottom line is clear – Massachusetts is on pace for power plants to far exceed their 2020 emissions goal under the Global Warming Solutions Act. Senate Bill 1965 is simply not necessary to meet these goals, especially at the direct and indirect costs it would introduce into the region’s energy system.”

One chart in the 29-page report shows that coal and oil-fired generation have gone from being large chunks of New England’s power mix to niche players in less than 20 years.

Around 2000 nuclear energy was the region’s top power source at 31%; followed by oil at 22%; coal 18%; natural gas 15% and hydro and other renewables 14%. In 2015, however, natural gas is the top source at 44%; followed by nuclear at 34%; hydro and other renewables at 16%; coal at 5% and oil 1%, according to the chart.

Tierney’s report notes, “This amount of power is not needed for reliability. Nor can it be low cost in light of the full investments (including transmission and new generating assets) needed to supply firm power into New England for so many years…”

Based on her cost analysis, the likely price of the contracts would lead to “$777 million in above-market costs that Massachusetts consumers would be paying every year. Such an exorbitant cost does not appear to be justified even with the other policy considerations weighed.”

“I wish I could agree with the proposed policy, because it is so important to move toward an electric system with lower carbon emissions,” Tierney said. “In fact, I recognize that hydro power from Eastern Canada may have value for Massachusetts under some circumstances. But unfortunately, the approach authorized by Senate Bill 1965 is too risky and not a sound basis for accomplishing its intended goals.”

Although significant reductions in CO2 emissions across the economy will be required to meet the state’s statutory targets of 80% reduction by the year 2050, emissions trends are heading down, Tierney said.

Among other things, Tierney pointed to the declining cap on emissions under the nine-state Regional Greenhouse Gas Initiative (RGGI); and upcoming federal requirements (under the U.S. Environmental Protection Agency’s (EPA) new Clean Power Plan) to reduce CO2 emissions from power plants.

There won’t be much incentive for Canadian utilities to sell power cheaply in the Northeast United States, Tierney said.

“Understandably, Hydro Quebec and Nalcor will need to take into account the economic interests of their provincial governments (Quebec and Newfoundland/Labrador), and it would be bad business for their provincial shareholders and electricity consumers to sell the firm power into New England at below the going price of electricity,” Tierney said.

“Plus, committing to provide at least one third of Massachusetts’s electricity needs for several decades will likely require investment in new hydroelectric dams, whose costs will be significant,” she added.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.