Lower Mattagami could become a $10 billion boondoggle

Today the government of Canada approved a pipeline, which some see as contrasting with it declaring a climate emergency yesterday. To assuage the concern the government has promised to do blindingly good things with profits from the pipeline, including promising “every dollar the federal government earns from this project will be invested in Canada’s clean energy transition,” and launching, “the next phase of engagement with Indigenous groups on ways they could share in the benefits of the expansion, including through equity ownership or revenue sharing.”

When the Prime Minister was elected he brought two veterans of Ontario’s Liberal government to Ottawa as his top advisors, so this seems an opportune time to examine one “clean energy” initiative geared to invest in Aboriginal communities.

The $2.6 billion expansion on hydroelectric generating stations on the Lower Mattagami river.

Ontario’s nominally public generator says of a hydro project completed for 2015:

The $2.6 billion Lower Mattagami Project has allowed Ontario Power Generation [OPG] to produce more clean, renewable electricity from new generating units.

I checked – all the way back to the construction of the first of 3 generating stations OPG built on the Lower Mattagami. A fourth site, Smoky, already existed but it was a private generator until 1991, so I had to estimate that data. If the completed project has allowed OPG to to more, OPG has found other reasons not to do so.

view graphic in Google Sheets

The data for annual generation for Lower Mattagami sites is from:

  • Ontario Hydro Statistical Yearbooks (1963-1992)
  • Monthly Generator Disclosure Reports (2003-2008)
  • IESO Generator Output and Capability Reporting

Annual output for the Smoky Falls Generating station is estimated for the 1963-1992 period as the facility was not in reporting: it was the first unit on the river but owned privately until 1991. Estimates for the earliest years are 68% of Little Long, and from 1967 on the Smoky estimate is 20% of the combined output from the 3 stations in reporting.Had the facilities not been moved into a new entity sharing ownership with a First Nations body,  the existing generators would almost certainly have a regulated price of 4.4 cents/kWh now, instead of a contracted rate closer to 14 cents/kWh?Here’s what the Auditor had to say in the office’s 2015 Annual report, chapter 3.05:

In January 2010, the OPA expressed concerns to the Ministry after the Lower Mattagami hydro project’s estimated costs increased substantially since its initial estimate, by $1 billion. The Ministry directed the OPA to proceed with the project because it would assist in meeting the Ministry’s renewable targets and investing in Aboriginal communities and the economy of northern Ontario. The average cost of electricity produced at this hydro facility is $135/MWh, while the average cost of electricity produced at two other recent hydro projects outside of the Mattagami River area in Ontario is $46/MWh. One of the projects involved adding an extension to an existing facility and had a lower cost of $35/MWh; the other project involved building a brand-new facility and had a higher cost of $56/MWh. Our review of other recent hydro projects in other Canadian jurisdictions show that the $56/MWh is comparable. 


note: available hydro contracts I’ve seen have had rates indexed to inflation, so I expect the price has risen since 2015.
At roughly 2 TWh of output, the annual difference in costs due to the higher rate approached $200 million.Furthermore, OPG’s 2018 financial report indicated 0.3 TWh of “forgone hydroelectric electricity generation due to [Surplus Baseload Generation]” not attributed to its regulated facilities in 2018, and 0.7 TWh in 2017. I’d expect most of this curtailment occurred at the Lower Mattagami generating stations. OPG receives compensation, through the regulatory process, for its fully-owned sites, but these sites are contracted through the IESO. I expect they also receive compensation for curtailment – but I’d also expect the IESO to provide fulsome reporting on curtailed supply, and they do not show figures for curtailed hydro.So … $200 million seems a base estimate of the annual increase in costs for generation from the Lower Mattagami facilities over the past 3 years. Most IESO contracts are for 20 years – and $4 billion might be a big enough price tag to capture people’s attention.These contracts are for 50 years.50 X $200 million = $10 billion…and that’s for just one “assist in meeting the Ministry’s renewable targets and investing in Aboriginal communities.”

Postscript:

I received an e-mail with a number of interesting points on this project, the best of which was a link to a Comprehensive Study Report for the Lower Mattagami River Complex Project produced for the Environmental Assessment required by the project. From that document:

The approximately 470 MW increase in generation capacity will translate into an additional 885 GWh of electrical production.

That means the incremental capacity was only expected to produce at a 21% capacity factor – whereas 3 of the existing units (Little Long, Harmon and Kipling) generally produced at 50-55% capacity factors, while the fourth generating station (Smoky Falls) operated in baseload mode with an expected annual capacity factor of 82%.

The actual performance may be a little worse than planned, but the plan was for extraordinarily ramping up consumer expense for only a small benefit.

One thought on “Lower Mattagami could become a $10 billion boondoggle

  1. This is mind-boggling. The media had a field day over $1.3 billion wasted when the Liberal cancelled two gas-fired power plants. The incompetence and/or corruption to waste $10 billion of ratepayers’ money should certainly be newsworthy.

    Like

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