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Canadian hydropower could boost wholesale power costs in New England: study

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Canadian hydropower could boost wholesale power costs in New England: study

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Wholesale power costs in New England would rise an estimated $777 million/year if the region's electric customers are forced to subsidize the cost of building new transmission lines to import up to 2,400 MW of hydroelectric power from Canada, the New England Power Generators Association said Wednesday.

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NEPGA, which opposes a Massachusetts bill that would allow utilities to sign long-term contracts for hydropower from Quebec and Newfoundland & Labrador, said an independent study from The Analysis Group found Massachusetts power plants already are meeting their 2020 carbon-dioxide emissions reduction target and that the proposed import of Canadian hydropower is not needed to meet the state's CO2 goal.

The study also estimated that the delivered cost of Canadian hydropower would likely be about $97/MWh, or $42/MWh above the average wholesale power price in New England over the past three years. Based on a conservative cost analysis, it said, the likely price of the hydropower contracts would lead to "$777 million in above-market costs that Massachusetts consumers would be paying every year. Such ... exorbitant cost does not appear to be justified, even with the other policy considerations weighed."

NEPGA President Dan Dolan said the study underscores that the power-generation fleet in Massachusetts exceeds the state's environmental mandates and therefore, the contracting that Massachusetts Governor Charlie Baker proposes "is unnecessary to hit carbon-reduction mandates."


Baker proposed a bill, SB 1965, that would authorize utilities in the state to enter into long-term contracts for Canadian hydropower.

Dolan added, "we don't take any issue with a particular type of resource --many of our members in fact own and operate competitive large-scale hydro facilities -- NEPGA is solely concerned with ensuring that resources compete on a level playing field."

Dolan said the new study shows CO2 emissions from the existing generation fleet in Massachusetts "already meet some of the most aggressive requirements in the country. There is also the law of unintended consequences and if more provincially owned hydro is brought in through these subsidized contracts, it may very well knock out other existing plants that provide huge environmental and cost benefits today."

One example, he said, is the nuclear fleet. The study noted the "price suppression" effect of allowing transmission costs associated with the Canadian hydropower to be subsidized is "likely to undermine the financial viability of other relatively efficient, low-cost existing power-generation resources currently in the market." Specifically, "it may hasten the retirement of existing nuclear power plants that produce power with no carbon emissions, thus undermining the stated objective of SB 1965."

The study said when Vermont Yankee was retired at the end of last year because of anticipated prices in New England's energy markets, "the region lost roughly 5 million MWh[/year] of zero-carbon electric energy ... with most of it replaced in the near term, at least, by fossil-fired generation."

It said that if a long-term contract for hydropower suppressed prices in New England's wholesale market and led to the retirement of Pilgrim nuclear station, for example, it would mean another 5 million MWh of zero-carbon supply/year would be retired."

That "would lead to higher emissions -- in effect offsetting more than half of the carbon emissions intended to be avoided a contract for 9.45 million MWh of hydroelectric power from Canada being procured by Massachusetts, and would end up bumping up prices in the region's wholesale energy markets, without reducing any of the above-market costs borne by Massachusetts electricity consumers for the contract for Canadian hydroelectric supply."

--Housley Carr, newsdesk@platts.com
--Edited by Valarie Jackson, valarie.jackson@platts.com