Sunday 7 November 2010

Let's call the whole thing off

This is worrisome:

The cost of building Manitoba Hydro's new transmission line from the north could escalate from an estimated $2.247 billion to almost double that amount, Hydro CEO Bob Brennan said Friday. - fp-
Double? Wow. The stadium cost overruns don't look so bad. How could this happen? Well, according to Brennan, it has nothing to do with the route itself, but solely due to the converters:
But when you get into specialized conversion equipment, that is a limited number of people globally. That one, we just don't have the same sort of confidence in.
So to recap: the cost of the Bipole III line is almost doubling from $2.2 bil to, say $4.3 bil, and the increase is entirely due to the converters, and the converters only made up $1.1 bil of the original estimate. That means that the cost of the converters is almost triple what they estimated. Like, holy smokes dude. That's bad. Hydro is in the electricity business, and the best they can do in pricing out AC/DC converters is plus or minus 200%? Hey, what's that noise? Oh look, it's my bullshit-o-meter:

You know what I think? I don't think it's the converters at all. I think Hydro found out that none of the farmers want to sell their land for a Hydro right of way, and that it's going to cost a hell of a lot more to buy them out than they originally figured. The cost of the route must be going up somehow.

In any event, this raises all kinds of questions. Like: how certain are we about the cost of the new power dams that will be generating the volts that will be traveling through these lines? The estimated cost of the Wuskwatim generating station has gone up to $1.6 billion ... but it's almost completed. The real question marks are about Keeyask and Conawapa -- the dams we'll need if we're going to fulfill our contracts to Wisconsin and Minnesota Power. Estimated cost of Conawapa is $5 bil. Hydro isn't publishing a cost estimate for Keeyask, but figure something around $2.6 bil based on its size relative to the others. Now: factor in the "specialized equipment, limited suppliers, and we don't know what the fuck we're doing" adjustment and it could be anything.

So the real question is: are we going to make any money off all of this? Or are we just exporting electricity for the sake of appearing green? When I did my sanity check a couple months ago, the numbers did not look great, but that was when I thought that bipole was going to cost only $2.2 bil and Wuskwatim only $1.3 bil. Now suddenly we have another $2.5 bil or so of cost to make up for by selling electricity to the U.S. at something like 3 cents per kWh.

Manitoba Hydro is a crown corporation, which means that we all have a stake in it. With all of this uncertainty, Hydro and the MB gov't are ploughing ahead with this development like it's no big deal. Before we sign and seal either of the new export contracts, we need more clarity. A lot more clarity. We could very well end up billions of dollars in the hole as a result of this development, but Brennan has his marching orders from the government and he'll never admit that there's any risk of that happening.

Firing the board of a crown corporation is a bit of an odd election promise, but that might be the best thing McFadyen and the Tories could do. That probably means that Brennan's days are numbered as well. We can only hope.

(I had a little blog posting spasm there ... I appreciate comments C & R, but I had to deleted it.)


Anonymous said...

I think your bullshit'ometer is broken.

cherenkov said...

That's impossible. The magazine ad said "100% accuracy, guaranteed!"

Anonymous said...


Now get to work.

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