Wind-hybrid power a sound alternative

Opinion

Hey there, time traveller!
This article was published 25/02/2021 (1302 days ago), so information in it may no longer be current.

While in office, former NDP premier Greg Selinger constantly pushed for expansion of hydroelectric dams in Manitoba’s north. Ultimately, in 2014, the Public Utilities Board allowed construction of the 695-megawatt Keeyask project. That decision, however, remains controversial, the subject of a high-profile inquiry initiated by current Progressive Conservative Premier Brian Pallister.

The results of that inquiry, led by former Saskatchewan premier Brad Wall, are expected to be released Friday. At the same time, after many delays, the first phase of the Keeyask project has finally come on-line. 

From the NDP perspective, however, support for Keeyask was hardly unanimous. Tim Sale, retired MLA and former energy minister, was a notable voice of dissent. Sale objected, at the time, to putting all the eggs in a single “mega-project” basket, given inherently high risks (“Sale sounds warning on escalating costs,” Dec. 20, 2013).

He was and remains a strong advocate for renewables, especially wind. He even proposed a novel solution to address intermittency of wind, a long-standing concern of Manitoba Hydro. This involved building utility-scale wind, but backing it up, kilowatt-for-kilowatt to start, with generating capacity based on natural gas turbines to ensure power always would be available. 

MBA students studying sustainability economics during the Winter 2021 session evaluated this case to determine who, in the end, was correct — Tim Sale or Manitoba Hydro management? The analysis looked at relevant capital and operating costs for Keeyask, as well as the hybrid-wind option, to estimate respective electricity prices required to break even and cover all costs. (As a note, annual operating costs for both hydroelectricity and wind are low, but important for natural gas turbines.) 

Unfortunately, official final costs for Keeyask are not yet public. Instead, students relied on the most recent estimates, from late 2017, in the range of $9.5 to $10.5 billion. Combining the anticipated lifespan of 78 years for Keeyask, and Manitoba Hydro’s cost-of-money of 4.7 per cent, translates to electricity prices in the range of 10.4 to 11.5 cents per kilowatt-hour.

These are very expensive, and would need to be fully met for the dam’s entire output well into the future if Manitoba Hydro is to not lose money. They do not, however, include costs for the additional Bipole transmission line needed to allow Keeyask power to flow south. 

For the hybrid system, on the other hand, capital costs and lifespans come from current literature, and include a rough unit cost for natural gas of 15 cents per cubic metre. If implemented by an independent power producer, necessitating a higher cost-of-money, the hybrid system price is cheaper by three to four cents per kilowatt-hour. If implemented by Manitoba Hydro itself, the hybrid system price is cheaper by five to six cents per kilowatt-hour. 

All of these values are much lower than for Keeyask, primarily due to dramatically lower capital costs — i.e., less than $2 billion to achieve the same output. Further, no Bipole is needed. While carbon taxes are not included, such impacts are much less than might be expected.

First, the basic hybrid system, as outlined, is not so sensitive, with carbon taxes needing to be at least $100 to $140 per tonne for Keeyask to be remotely comparable. Second, as wind implementation increases, the proportion of natural gas backup needed declines. The wind component of the overall system is the least costly, so the incentive in any event is to maximize wind power. 

The conclusion is clear:  Sale was right and his advice on this matter was prudent. That said, we cannot simply fixate on Selinger’s past mistakes, nor continue to cry over spilled milk and lost opportunities. The decision was made, and we are stuck with excessively pricy power. So, what are we to do now? 

Fortuitously, one important solution appears available: electrifying our vehicles. Electrifying passenger and heavy-freight vehicles alike would certainly save enormous greenhouse gas emissions, but those are merely side benefits. The main attraction for Manitoba is that electric vehicles represent a new and high-value domestic market for our own electricity.

We can even dare to imagine wildly higher prices — say, 12 cents to 15 cents per kilowatt-hour, respectively, for freight vehicles and passenger cars. These are unimaginable from export sales, and more than cover Keeyask. Yet, at the same time, for vehicle users, net fuel savings exceed 70 per cent in all cases. 

The economics of electric vehicles turn out to be hardly sensitive to the price of electricity. The extra power from Keeyask can also support a relatively high level of vehicle electrification without any new generation. Transitioning to the future does, however, force us to get over a long-held Manitoba obsession over “low-price” electricity. Instead, we need to focus on achieving full value for our electricity, and into the near future the best place for that is here at home in our own vehicles.

Robert Parsons teaches sustainability economics and quantitative methods in the I.H. Asper School of Business, University of Manitoba.