Upper Churchill Power The Unexamined Alternative

Two Variants of the Interconnected Option

A Discussion Paper on Muskrat Falls Volume VI

By: JM

December 2012 One Has to Look with Their Eyes Open

Two Variants of the Interconnected Option

Executive Summary
The terms of the Federal Loan Guarantee clearly demonstrate the risk to the Newfoundland ratepayer in the event that Emera do not complete the Muskrat Falls project. The final sanctioning by Emera is not absolute and the declaration by Government of Newfoundland and Labrador that it is low risk can only be viewed as irresponsible. Instead the Federal Loan Guarantee, and the referral of the project to the UARB, should provide much needed pause to the project, to ensure that the Muskrat Falls development is truly in the best interest of the people of Newfoundland. The Government has suggested that by delaying the project by 1 year, until the UARB review is completed, the Newfoundland consumer will be forced to pay hundreds of millions of dollars in needless oil generation at Holyrood. However, this may not be the case. The Author would like to re-iterate earlier arguments [Ref. 11] for a phased development of the Muskrat Falls Project, in which the generation component of the project would only be sanctioned when Nova Scotias involvement is certain. In this phased approach, the Labrador Island Link would be built within the current project schedule, or even expedited. The completion of the link would allow access to three potential sources of energy: 1. Remaining RECALL energy from the Upper Churchill [Currently 1 TWh of annual energy available]. 2. The wind potential of the Churchill Plateau. 3. Power purchases from the North American Grid. This immediate access to energy would allow the partial displacement of fuel oil from Holyrood, providing immediate benefit to the people of the province. There are other positives associated with this phased development: 1. Commitment to the Muskrat Falls generating facility only when Emera involvement (and the FLG) is a certainty. 2. Delay of a major construction portion of the project until after the current resource labour boom (Vale, Hebron, Wellhead Platform) has been completed. This would help provide long term sustainability to the Newfoundland construction industry. 3. The Newfoundland energy market (ie; future of Corner Brook Mill) is more certain. 4. The long term impact of the Shale Gas revolution in the US is better understood. 5. The potential of Labrador mining is quantified, such that a Gull Island first may prove to be the better long term decision [Refs. 28,29]. 6. The Water Management Agreement can be tested by the courts. Or at least it can be tested in practice by banking RECALL power in summer, for use during the winter. 7. Provide Nalcor the opportunity to review additional, lower cost options, to meet the islands energy requirements.
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Two Variants of the Interconnected Option With reference to the last point, Government and Nalcor have not investigated any other interconnected options other than the Muskrat Falls project [Ref. 30]. Nalcor have also previously advised that they did not see any situation where the link would be built in the absence of the Muskrat Falls Plant [Ref. 31]. Volume VI of this discussion paper series will investigate 2 additional alternatives to the Interconnected Option. Both are premised on the early construction of the Labrador Island Link (LIL) but not proceeding with the Muskrat Falls Generation Facility (MFGF). The first alternative is the use of available Upper Churchill Recall power, combined with continued thermal generation at Holyrood, until 2041 when large quantities of power will become available following the expiry of the 1969 Power Contract. This option was recommended by the Joint Review Panel, but was not included by Nalcor in their submission to the Public Utilities Board. The back of the envelope calculation indicates that it is 1 Billion dollars less than the Isolated Option presented by Nalcor within their PUB submission (DG2). The second alternative presented is a slight variant to the first. Although Holyrood is maintained, it is supplemented by wind energy to reduce the high cost of oil. Due to the interconnection provided by the Labrador Island Link, Manitoba Hydro concluded that up to 400 MW of wind can be used on the island. This option will rely on 250 MW of new wind added progressively from 2017 until 2041. At that point the Upper Churchill power is again assumed available to meet the island requirements. The cost of this alternative is slightly more expensive than the Muskrat Falls option presented by Nalcor. The following is a summary of the results (Based on DG2 numbers).
Description Nalcor Options New Alternatives Option 1: Isolated Option Option 2: Interconnected Option (Muskrat Falls) Option 2A: Interconnected (Recall + Thermal) Option 2B: Interconnected (Recall + Thermal + Wind) CPW 2010 $ $ 8,809,480 $ 6,655,365 $ 7,687,063 $ 6,917,763

The economic assessment of the two proposed alternatives are back of the envelop and have not been optimized. However, they both are less expensive that the Isolated Option presented by Nalcor, and being used as the benchmark to validate Muskrat Falls as the lowest cost option. This paper recommends that Nalcor should optimize these alternatives, and then introduce them into the DG3 decision making process. By initially proceeding with the link we would get immediate access to RECALL power, and the potential to purchase low cost power from the North American grid. This is not a wasted investment. Then following the review in Nova Scotia the decision can then be made to proceed with the generation facility. If this does not proceed then the province have a full range of options available, several of which are lower cost than the isolated no project option.

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Part I: Introduction
In 2006 the present incarnation of the Lower Churchill Project was initiated by the provinces energy corporation, Nalcor. In July of 2010 the mandate of Nalcor changed from development of the Lower Churchill for export to development of Muskrat Falls for island consumption [Page 32, Volume 2 of Ref. 3]. With this change in project mandate there was a clear obligation under the Electrical Power Control Act 1994 [Ref. 1] to review all potential sources of energy to ensure the island consumer is provided the least cost alternative. This legislative obligation was also reflected within two earlier commitments made by the Provincial Government in the 2007 Energy Plan. 1. Conduct a comprehensive study of all long term electrical supply options in the event that the Lower Churchill project does not proceed [Page 32, Ref. 2] 2. Explore options for Gas to Wire electricity generation and export [Page 40, Ref. 2] However, upon review of the alternate energy studies referenced within Nalcors November 10, 2011 submission to the Public Utilities Board [Ref. 3] is it clear that this legislative mandate to conduct a comprehensive study of all the options was not completed. Rather the work presented by Nalcor was largely qualitative and there was no costed screening study of the various options. To effectively discount the alternatives such as gas to wire, electricity imports and LNG a full engineering study should have been performed. Such a template was provided by Nalcor within Exhibit 29 to the PUB [Ref. 4]. This 1981 engineering study completed by Shawmont for Newfoundland and Labrador Hydro included a full economic comparison for 5 different supply options. It was a very good reference document to use for a current study to help determine what would be the lowest cost source of electricity for the island. In accordance with Nalcors gated management process Decision Gate 2 was for Approval of the Development Scenario and to Commence Detailed Design [Page 34, Volume 2 of Ref. 3]. A high level screening study of all the options should have been a deliverable to support the DG2 decision in November 2010. Yet, the DG2 internal documentation to proceed with Muskrat Falls to meet the islands demands did not appear to include any assessment of options other than continued oil fire generation, which was simply described by Nalcor as the no project alternative [Ref. 5]. This lack of investigation of alternatives was confirmed by the Joint Review Panel [Ref. 6] which was the first independent assessment of the project. In their August 2011 report the Joint Review Panel recommended that:

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Two Variants of the Interconnected Option

This paper will present 2 variations to the interconnected scenario which should be regarded as both practical, and lower risk alternatives to the Muskrat Falls project. Neither of these options were considered by Nalcor/Government within their DG3 information release. They both rely on the early construction of the Labrador Island Link and the immediate access that it will provide to the Recall power presently being wheeled through Hydro Quebec. The islands requirements beyond this will be added by thermal or other energy sources, which are added in a progressive manner. That is until 2041 when it is assumed that the Upper Churchill power can be redirected to the island. These 2 new alternatives to be examined in this paper include: Option 2A Construction of Labrador Island Link, use of Recall power which is supplemented by continued thermal generation from Holyrood and the small hydro projects included as part of Nalcors Isolated Island scenario. As per option 2A, but the displacement of part of the oil fired thermal generation with increased used of Wind Energy. In their final report Manitoba Hydro concluded that with the interconnection of the island with the North American grid, and additional 400 MW of wind energy could be added to the island grid.

Option 2B

Both these options were recommended by the Joint Review Panel [Ref. 6] and David Vardy within his Action Canada Report [Ref. 9]. Within this essay the Author will attempt to quantify the Cumulative Present Worth of these options, and compare them to the 2 primary options previously considered by Nalcor at decision gate 2. Due to the lack of detail associated with the DG3 release, this analysis is completed on the DG2 reports contained within the PUB website. References are provided where appropriate.

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Two Variants of the Interconnected Option

Part II: Nalcors PUB Offering

Within the Public Utilities Board process Nalcor presented an economic model for the Interconnected Scenario which consisted of the Labrador Island Link, Muskrat Falls Generation Facility, and additional small hydro/thermal to meet the islands growing energy demand. The second alternative presented by Nalcor was the Isolated alternative, which was the no project case described to the Joint Review Panel. In the isolated alternative there was a combination of small hydro and continued oil fired generation to meet the islands needs. When comparing these 2 options there was a 2.2 Billion dollar preference for the Interconnected scenario, which validated Muskrat Falls as the lowest cost alternative of the 2 options examined. The method of comparison was a Cumulative Present Worth (CPW) analysis which discounted the cost to 2010 dollars. It compared the total cost of each alternative, and not the final unit costs to the island consumer. The detail assessment of the CPW analysis for each option is contained within Exhibit 99 to the PUB [Ref. 7]. This component costs of each alternative is summarized within Table 1.
Table 1: CPW Summary of Isolated and Infeed Options.

Total Fixed Charges for Infrastructure Fossil Fuel Before 2017 Fossil Fuel Post 2017 Total Power Purchase MF PPA Operating Costs TOTAL

Option 1 Isolated Option $1,402,503 $1,127,000 $4,921,000 $743,283 $615,694 $8,809,480

Option 2 Interconnected Option $1,749,508 $1,159,576 $14,000 $676,000 $2,682,000 $374,281 $6,655,365

Table 1 effectively demonstrates that over 50% of the costs of the isolated option can be attributed to fuel oil. The detailed annual fuel costs, and the resulting unit costs per MWh of energy is provided in RFI - KPL-27 Rev. 1 [Ref. 8]. It is a relatively simply calculation to perform a back of the envelop assessment of the present worth of the costs associated with the proposed Options 2A and 2B. Considering all other infrastructure costs in the isolated option remains unchanged (as per Table 1) the incremental fixed costs can be added, with the fuel price reduced accordingly.

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Part III: The Cumulative Present Worth of Option 2A

Option 2A considers that the Labrador Island Link is built and commissioned in 2017. The Recall power presently remaining under the 1969 power contract is assumed to be available at 2 $/MWh which is the same rate Upper Churchill power is being sold to the Hydro Quebec. Following 2041 Upper Churchill energy is assumed to be available at a rate of 20 $/MWh to represent a regulated energy pricing regime (See Footnote 1). Attachment 1 provides a summary of the incremental costs of this alternative. The fuel costs (Column 10) are the prorated fuel costs associated with the required thermal generation when the Recall power is considered. Column 13 is the sum of the incremental costs which include Recall purchase, Upper Churchill purchase (Post 2041) and thermal generation (Pre-2041). The Cumulative Present Worth (2010) is shown as 1.7 Billion. This incremental CPW is less that the Fuel Costs, but it does not include the LIL (1.76 Billion) or the MF-CF transmission link (0.33 Billion). The resulting summary is shown Table 2.
Table 2: Summary of Alternative 2A Compared to DG2 Alternatives Option 1 Isolated $1,402,503 $1,127,000 $4,921,000 $743,283 $615,694 Option 2 Interconnected $1,749,508 $1,159,576 $14,000 $676,000 $2,682,000 $374,281 Option 2A LIL + RECALL + Thermal $1,402,503 $1,127,000 $743,283 $615,694 $1,706,739 $1,758,655 $333,189 $8,809,480 $6,655,365 $7,687,063

Total Fixed Charges for Infrastructure Fossil Fuel Before 2017 Fossil Fuel Post 2017 Total Power Purchase MF PPA Operating Costs Add Incremental Fuel + Power Purchase LIL MF to CF Link (Prorated MF PPA) TOTAL

The results for option 2A show that it is approximately 1 Billion more than the Interconnected option. However, the reader must be aware that this scenario includes all the thermal generation facilities included in the Isolated Island scenario. It also includes the Holyrood Upgrade in 2017, and the replacement in 2033. Therefore it is likely this option can be optimized to reduce the cost. However, it is an immediately better option (by 1.2 Billion) compared to the base case isolated option originally offered by NALCOR as a benchmark to justify the Muskrat Falls expenditure.

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Part IV

The Cumulative Present Worth of Option 2B

It has long been identified that both Labrador and Newfoundland have excellent potential for wind generation. However, without the electrical link to the mainland the amount of wind on the island is limited to about 80 MW without suffering spillage on the island reservoirs. The construction of the Labrador Island Link, will provide access to the hydro storage of the Churchill River, and will allow the ability for the construction of much higher amounts of wind energy. Within their final report MHI recommended that upto 400 MW of wind energy could be built into the system for island consumption [Ref. 10].

The advantage that wind offers over Muskrat Falls is that it can be added incrementally, as the island demand grows. This reduces the risk associated with predicting the island demand over an unprecedented 50 year period. It must be remembered that the economics of Muskrat Falls is premised on a 50% growth in island demand, over the 50 year return period. This is while assuming no real growth in the islands population. The Author has attempted to complete a back of the envelop calculation of the scenario where the LIL, and small hydro are constructed as per the isolated island option. RECALL power is utilized and the remaining thermal generation is offset by increasing the amount of wind energy. The cost data for the wind farms was summarized within Volume II of the MHI report [Ref. 10], as included within Table 3. Table 4 provides what the reduction in fuel cost would be, if wind was added in the system, with the intention to remove ~50% of the thermal generation. It is assumed that the wind would be added at Holyrood location assessed in the MHI wind report [Ref. 32] and on the Churchill plateau. No major transmission costs are therefore included.

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Two Variants of the Interconnected Option Table 3: Wind Farm Costs Data

Appendix A includes a summary of the approximate calculations for Option 2B. The value of $769,300 is the incremental savings determined for this option. It should be noted that as thermal generation is now limited the funds allocated for the Holyrood upgrade have been excluded. The estimate CPW of this option is included within Table 4. It is clear that this option, while still slightly more expensive that Muskrat Falls (At DG2), will provide a competitive alternative. Furthermore, it is a solution which ensures that we still have sufficient winter capacity to meet the islands demands. Unlike Muskrat Falls which will depend upon the Water Management Agreement, and access to Upper Churchill generation, to ensure that island demand is met. Finally, this solution is not optimized. However, it does show that the use of small hydro, wind and thermal (peak loads) is a cost competitive alternative. In their DG3 assessment of wind, government did not include the interconnected scenario, which was not consistent with what was recommended by MHI in their DG2 report. Nor was it consistent with what was recommended by the Joint Review Panel. So the question must be asked why did Government exclude the interconnected case from the MHIs terms of reference on wind? {Ref. 33] Table 4: Summary of Option 2B Compared to Interconnected Option
Option 1 Isolated $1,402,503 $1,127,000 $4,921,000 $743,283 $615,694 Option 2B Option 2 LIL + RECALL + WIND + Interconnected Thermal $1,749,508 $1,402,503 $1,159,576 $1,127,000 $14,000 $676,000 $743,283 $2,682,000 $374,281 $615,694

Total Fixed Charges for Infrastructure Fossil Fuel Before 2017 Fossil Fuel Post 2017 Total Power Purchase MF PPA Operating Costs Add Power Purchase + Wind + Thermal Fuel LIL MF to CF Link (Prorated MF PPA) TOTAL

$937,439 $1,758,655 $333,189 $8,809,480 $6,655,365 $6,917,763 Page 8

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Part V: The Biggest Risk Island Demand Growth?

Part III and IV of this paper presented 2 additional variants of the interconnected option. When considering the variability in the forecasted island demand, either of these options could prove less expensive to the island consumer when compared to the Muskrat Falls option. As both options have the generation capacity of the island gradually increased to meet demand, there is also much less risk to the island consumer. Within the Authors original submission to the PUB [Ref. 11] there was an attempt to evaluate the risk of Muskrat Falls if the islands demand did not grow as predicted. There were three demand models which were developed, based on the Provincial Governments forecasted growth in households on the Avalon Peninsula. A High, Medium and Low demand model was presented, as shown in Figure 1.

Figure 1: High, Medium and Low Demand Model

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Two Variants of the Interconnected Option Also shown in Figure 1 was Newfoundland Hydros forecast in 1979 [Ref. 4], in a report which also recommended that the Lower Churchill Project be completed to meet island demand. These forecasts are not absolute, and although they may be completed using best practices there is a certain variability in their outcome. When evaluating the lowest cost option there is a responsibility to check the sensitivity of the results with the different and varying load demands. Using the models shown in Figure 1, the Author determined what would be the cost impact on the Newfoundland consumer. This was also done assuming all revenue was directed to lowering the rates of the island consumer. Although not exact, it does demonstrate the large impact the Newfoundland demand has on the final rates we will pay under the Power Purchase Agreement.

It is clear that the variability in the island demand will have an impact on the final rates paid by the island consumer. The variability now due to the fluctuations in the cost of oil, will be replaced by variations in the demand. The closure of the Corner Brook Mill for example would lead to increased rates under the proposed Power Purchase Agreement for Muskrat Falls. Under any other scenario the removal of such a large industrial customer would lead to a reduction in the unit rates for consumers.

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Two Variants of the Interconnected Option The Government has not properly explained the risk if demand does not grow as predicted by Nalcor. A template for what would only be considered a minimum engineering deliverable for this project is shown in Table 5. It includes the total costs (CPW) and the unit cost, for each option when considered a varying demand growth. This has been the template for Newfoundland Hydro previously [Ref. 4], and it should be considered an absolute requirement now.
Alternative Isolated 1 Small Hydro + Oil Thermal 1A Small Hydro + Wind Isolated Options 1B LNG 1C Gas Line to Shore 1D Interconnected Muskrat Falls 2 RECALL + Small Hydro + Thermal 2A High Demand Low Demand Medium Demand RECALL + Small Hydro + Wind + Thermal High Demand Low Demand Medium Demand LNG With Export High Demand Low Demand Medium Demand Natural Gas with Export High Demand Low Demand Medium Demand Power Imports High Demand Low Demand Medium Demand High Demand Low Demand Medium Demand High Demand Low Demand Medium Demand High Demand Low Demand Medium Demand High Demand Low Demand Medium Demand High Demand Low Demand Medium Demand High Demand Low Demand Medium Demand Examinined Yes No No No Yes No No No Yes No No No Yes No No No Yes No No No Yes No No No No No No No No No No No No No No No No No No No No No No No CPW $/kwhr (LUEC)

2B Interconnected Options 2C

2D

2E

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Two Variants of the Interconnected Option

Part VI: Conclusions

In the opinion of the Author there are three basic conclusions which can be made. (i) The securing the Federal Loan Guarantee is a critical pre-requisite for the Muskrat Falls Project. The economics of the project are marginal at best when considering the benefits of the lower interest rates. Proceeding with the project, without a committed loan guarantee, would be a foolhardy deciscion on the part of the Government of Newfoundland and Labrador. It just places an unreasonable amount of risk on future generations of tax payers. The Federal Loan Guarantee is very effective in protecting the rights and interest of the Federal Government. It is laden with provisions of default, which would leave the province holding the bag. Certainity of the Loan Guarantee is therefore considered by the Author to be an absolute requirement to sanction the project. The project sanctioning should be put on hold until the UARB process is therefore completed in Nova Scotia. There will be a time when the province is electrically connected to Labrador. Under the Muskrat Falls plan it will be in 2017. Without Muskrat Falls it will be ~2037 in advance of the termination of the 1969 Power Contract.

(ii)

(iii)

As part of their DG2 decision Nalcor should have completed costed screening assessments of additional interconnected options. This was not done. However within this paper the Author has presented 2 variants of the interconnected option which may preferrable to Muskrat Falls from a cost and risk perspective. This preference would be visible to all if Nalcor completed economic models which examined the sensitivity of final costs (on a $/MWh basis) to variation in the island demand. The Federal Loan Guarantee has provided an opportunity to take a time out and review the project holistically. Nalcor should quickly establish the merits of the alternative offered in this paper. Are other interconnected alternatives lower cost than the isolated alternative? If the answer to this question is yes, then we should expidite the construction of the LIL. Then, with this reprive send the decision to sanction the Muskrat Falls generation facility back to the PUB. The timeline should be less than than within the UARB in Nova Scotia. There are mulitple benefits associated with this approach. The most important being the tremendous derisking for the people of the province. The government has the obligation to duly consider this alternative. These options should be examined and optimised by the engineers at Nalcor. Hopefully it is not too late to do the right thing.

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Footnotes
1)

The cost of 2 $ / MWhr until 2041 is very low, but it is consistent with the rate which CFLCo would sell Upper Churchill power to Nalcor under the Recall provisions of the 1969 Power Contract. The reader should note that within their DG3 analysis there is some 64 million allocated to Upper Churchill power which is allocated to the island [Ref. 34]. On October 30th the author questioned Nalcor (via email provided on Power In Our Hands website) regarding the cost that was assumed for Upper Churchill power in their DG3 analysis. Although there were assurances provided that my question would be answered within 2 business days, as of December 20th there has been no response to this query. Thus the Author continued to use 2$ in this analysis.

References
1 2 3 Electrical Power Control Act - 1994: http://www.assembly.nl.ca/legislation/sr/statutes/e05-1.htm Government of Newfoundland and Labrador Energy Plan 2007 http://www.nr.gov.nl.ca/energyplan/energyreport.pdf Nalcor November 10, 2011 submission to the Public Utilities Board http://www.pub.nf.ca/applications/MuskratFalls2011/files/submission/Nalcor-SubmissionNov10-11.pdf Exhibit 29: 1981 Shawmont Engineering Study for Energy Supply Options http://www.pub.nf.ca/applications/MuskratFalls2011/files/exhibits/Exhibit29-Rev1.pdf Exhibit 22: Nalcors Decision Gate 2 Detailed Summary http://www.pub.nf.ca/applications/MuskratFalls2011/files/submission/Nalcor-SubmissionNov10-11.pdf Page 29-35 of the Joint Review Panel talk about alternatives to Muskrat Falls http://www.ceaa-acee.gc.ca/052/details-eng.cfm?pid=26178#desc http://www.pub.nl.ca/applications/MuskratFalls2011/files/exhibits/Exhibit99.pdf http://www.pub.nl.ca/applications/MuskratFalls2011/files/rfi/CA-KPL-Nalcor-27-Rev1.pdf
David Vardy Action Canada Paper http://www.pub.nl.ca/applications/MuskratFalls2011/files/mhi/MHI-Report-VolumeII.pdf http://www.pub.nl.ca/applications/MuskratFalls2011/files/comments/11-JM-2012-02-29-Rev1.pdf http://www.scribd.com/doc/104937414/Upper-Churchill-The-Unexplored-Alternative-1 http://www.gov.nl.ca/lowerchurchillproject/muskrat_falls_pub_final_report.pdf http://www.scribd.com/doc/49612493/Muskrat-Falls-Term-SheetJuly presentation to the PUB Shawn Skinners Interview http://www.cbc.ca/onpoint/ [13:50 into interview of August 11, 2012] http://www.pub.nl.ca/applications/MuskratFalls2011/files/presentation/Nalcor-ProjectOverviewJuly18-11.pdf Page 13

4 5

6 7 8
9 10 11 12 13 14 15 16

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17 18 19 Please go to Slide 146 of http://www.pub.nl.ca/applications/MuskratFalls2011/files/comments/11JM-2012-02-29-Rev1.pdf This was once an active link to Nalcors site, but has since been disabled. http://www.pub.nl.ca/applications/MuskratFalls2011/files/rfi/CA-KPL-Nalcor-141.pdf http://www.nalcorenergy.com/uploads/file/02%20%20ECA%20%28Execution%20Copy%20July%2031%2012%29%281%29.pdf Page 20 of this document outlines how the energy can come from multiple sources from within the Nalcor generation profile. http://newenergynl.ca/news-piece/20120503-4/ http://www.nalcorenergy.com/uploads/file/nalcor%202010%20business%20and%20financial%20repo rt_final_may%203%202011(1).pdf On Page 80 it states that there is 19.6 million paid to Hydro Quebec to gain access to 265 MW of wheeling power. http://www.nalcorenergy.com/uploads/file/nalcor%20energy%202009%20business%20and%20financ ial%20report_%20low%20res(1).pdf http://www.nalcorenergy.com/uploads/file/05%20%20NS%20TUA%20%28Execution%20Copy%20July%2031%2012%29%282%29.pdfment The charge for the tariff is located on page 3. http://www.nalcorenergy.com/uploads/file/06%20%20NB%20TUA%20%28Execution%20Copy%20July%2031%2012%29%282%29.pdf The daily charge for the tariff is provided on page 3. http://www.nalcorenergy.com/uploads/file/07%20%20MEPCO%20TRA%20%28Execution%20Copy%20July%2031%2012%29%282%29.pdf This is the MEPCO transmission agreement. The rates are provided on page http://www.pub.nl.ca/applications/MuskratFalls2011/files/rfi/CA-KPL-Nalcor-169.pdf http://www.tomadamsenergy.com/2012/02/01/manitoba-hydro-endorses-nalcors-productionestimate-for-muskrat-falls/ Governments Labrador Mining Report http://www.powerinourhands.ca/pdf/Economic_Analysis.pdf Governments Gull Island First document http://www.powerinourhands.ca/pdf/GullIsland.pdf Governments sheet on CPW alternatives http://www.powerinourhands.ca/pdf/CPW%20of%20Alternatives.pdf RFI where Nalcor recommend not building LIL w/o MF http://www.pub.nl.ca/applications/MuskratFalls2011/files/rfi/CA-KPL-Nalcor-169.pdf http://www.powerinourhands.ca/pdf/Economic_Analysis.pdf MHI Wind Terms of Reference http://www.powerinourhands.ca/pdf/Terms%20of%20Reference%20%20MHI%20Wind%20Analysis.pdf MHI October report http://www.powerinourhands.ca/pdf/MHI.pdf

20 21

22 23

24

25

26 27 28 29 30 31 32 33

34

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Difference Average Island Heirloom Recall UC Power in 2017 6800 1000 54.7 GWhr GWHr $/MWh Other Generation Required Isolated GWhr
5 Col 2 - Col 3

758,262 CPW Fuel 2010 $ 4,556,845 $ 2017 7,809,632

CPW Alt CPW LIL CF-MF Line 1,706,739 $ 1,758,655 $ 333,189 2,925,051 NALCOR

KPL - 27 Rev. 1 Year Demand GWh

2

Recall GW hr

Recall Cost $ perMW hr 1000 Pre 2041 Post 2014

8

Thermal Req GWh 100.0% 10%

9
(Col 6 - Col 7) *Therm %

UC Power Fuel GW hr 0.0% 90%

10 Prorated Column 4 11

Cost MW hr 2.0%
12

Thermal Energy Fuel $

Generation

Total Fuel + Power Purchase

6 Col 2 - Col 5

13

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 2051 2052 2053 2054 2055 2056 2057 2058 2059 2060 2061 2062 2063 2064 2065 2066 2067

7586 7710 7850 8214 8488 8607 8625 8665 8734 8806 8973 8967 9064 9172 9234 9292 9374 9463 9544 9626 9704 9782 9860 9938 10016 10087 10157 10228 10298 10368 10431 10493 10556 10618 10681 10744 10806 10869 10931 10994 11048 11103 11158 11213 11267 11322 11377 11431 11486 11541 11596 11650 11705 11760 11815 11869 11924 11979

1524 1583 1522 1574 1543 1639 1822 1890 1947 2028 2116 2195 2274 2351 2427 2503 2581 2667 2737 2802 2880 2949 3019 3081 3141 3202 3262 3323 3381 3439 3498 3557 3614 3672 3756 3811 3865 3919 3972 4028 4089 4143 4198 4252 4307 4361 4413 4453 4503 4555 4610

269,937 290,425 286,441 300,528 301,294 326,864 371,487 393,041 413,365 439,740 468,239 496,080 525,380 554,636 584,733 616,174 649,155 819,546 858,148 928,729 1,017,949 1,063,001 1,109,376 1,154,403 1,198,330 1,244,658 1,291,655 1,343,035 1,394,320 1,447,040 1,501,181 1,556,241 1,612,205 1,669,573 1,744,918 1,805,898 1,867,867 1,931,436 1,995,122 2,066,360 2,141,148 2,212,557 2,284,510 2,359,492 2,437,135 2,517,755 2,597,852 2,667,416 2,748,889 2,837,713 2,930,426

7141 7151 7284 7399 7424 7425 7350 7344 7345 7346 7347 7349 7352 7353 7355 7357 7357 7349 7350 7355 7348 7349 7349 7350 7352 7354 7356 7358 7363 7367 7371 7374 7380 7376 7347 7347 7348 7348 7350 7349 7342 7343 7343 7344 7343 7344 7347 7362 7366 7369 7369

1524 1583 1522 1574 1543 1639 1822 1890 1947 2028 2116 2195 2274 2351 2427 2503 2581 2667 2737 2802 2880 2949 3019 3081 3141 3202 3262 3323 3381 3439 3498 3557 3614 3672 3756 3811 3865 3919 3972 4028 4089 4143 4198 4252 4307 4361 4413 4453 4503 4555 4610

1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000

2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 20.00 20.60 21.22 21.85 22.51 23.19 23.88 24.60 25.34 26.10 26.88 27.68 28.52 29.37 30.25 31.16 32.09 33.06 34.05 35.07 36.12 37.21 38.32 39.47 40.66 41.88

524 583 522 574 543 639 822 890 947 1028 1116 1195 1274 1351 1427 1503 1581 1667 1737 1802 1880 1949 2019 2081 2141 220 226 232 238 244 250 256 261 267 276 281 287 292 297 303 309 314 320 325 331 336 341 345 350 356 361

92,813 106,960 98,241 109,595 106,029 127,435 167,597 185,083 201,056 222,906 246,954 270,075 294,342 318,721 343,805 370,000 397,642 512,255 544,612 597,277 664,494 702,539 741,911 779,718 816,818 85,595 89,568 93,887 98,192 102,627 107,203 111,873 116,611 121,490 128,035 133,203 138,459 143,860 149,283 155,336 161,751 167,851 174,032 180,458 187,128 194,042 200,917 206,840 213,843 221,472 229,476

0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 20.00 20.60 21.22 21.85 22.51 23.19 23.88 24.60 25.34 26.10 26.88 27.68 28.52 29.37 30.25 31.16 32.09 33.06 34.05 35.07 36.12 37.21 38.32 39.47 40.66 41.88

55 56 57 58 59 60 62 63 64 65 67 68 69 71 72 74 75 77 78 80 81 83 85 86 88 90 92 93 95 97 99 101 103 105 107 109 112 114 116 118 121 123 126 128 131 133 136 139 142 144 147

94,812.98 108,960.06 100,240.61 111,595.34 108,028.93 129,435.08 169,597.32 187,082.80 203,056.32 224,905.68 248,954.03 272,075.44 296,342.18 320,721.07 345,804.69 371,999.81 399,642.02 514,254.66 546,612.01 599,276.82 666,494.49 704,539.49 743,911.28 781,718.48 818,817.74 107,389.36 112,054.11 117,086.21 122,127.97 127,323.44 132,685.42 138,167.13 143,743.60 149,488.94 156,929.16 163,021.99 169,232.75 175,620.33 182,062.85 189,170.06 196,673.96 203,898.97 211,242.86 218,870.62 226,783.10 234,981.21 243,183.59 250,478.85 258,900.66 267,996.72 277,516.77

Option 2A: Incremental Cost In Lieu of Fuel Post 2017

A Muskrat Falls Discussion Paper Volume VI

Page 15

Two Variants of the Interconnected Option

Energy Required Year
RFI - KPL-27 Pg 6

Net Recall GWhr GWh 524 583 522 574 543 639 822 890 947 1028 1116 1195 1274 1351 1427 1503 1581 1667 1737 1802 1880 1949 2019 2081 2141

Fuel Costs Net Recall Appendix A 92,813 106,960 98,241 109,595 106,029 127,435 167,597 185,083 201,056 222,906 246,954 270,075 297,342 318,721 343,805 370,000 397,642 512,255 544,612 597,277 664,494 702,539 741,911 779,718 806,818 1,549,757 $2,656,011

Wind Capacity

Wind Energy

No. Wind Units

Unit Cost

OM

CAPEX

OPEX

Cost

Comments

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041

GWh 1524 1583 1522 1574 1543 1639 1822 1890 1947 2028 2116 2195 2274 2351 2427 2503 2581 2667 2737 2802 2880 2949 3019 3081 3141 NPV 2010 NPV

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

MW 75 75 75 75 75 75 100 125 125 150 150 175 175 175 200 200 200 200 250 250 250 300 300 300 300

GWhr 264 264 264 264 264 264 352 440 440 528 528 616 616 616 704 704 704 704 880 880 880 1056 1056 1056 1056

3 3 3 3 3 3 4 5 5 6 6 7 7 7 8 8 8 8 10 10 10 12 12 12 12

$71,219 $72,643 $74,096 $75,578 $77,089 $78,631 $80,204 $81,808 $83,444 $85,113 $86,815 $88,551 $90,322 $92,129 $93,971 $95,851 $97,768 $99,723 $101,718 $103,752 $105,827 $107,944 $110,102 $112,304 $114,551

$1,493 $1,523 $1,554 $1,585 $1,616 $1,649 $1,682 $1,715 $1,750 $1,785 $1,820 $1,857 $1,894 $1,932 $1,970 $2,010 $2,050 $2,091 $2,133 $2,175 $2,219 $2,263 $2,309 $2,355 $2,402

$ 213,656 $ $ (733,152) $ $ $ $ $ $ 80,204 $ $ 81,808 $ $ $ 85,113 $ $ $ 88,551 $ $ $ $ 93,971 $ $ $ $ $ 203,435 $ $ $ $ 215,887 $ $ $ $

4,480 4,569 4,661 4,754 4,849 4,946 6,727 8,577 8,748 10,708 10,922 12,997 13,257 13,522 15,763 16,078 16,400 16,728 21,328 21,754 22,190 27,160 27,703 28,257 28,822

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

264,187.66 (670,057.63) Holyrood Upgrade Removed 53,216.76 63,943.02 59,328.15 79,731.94 182,758.33 183,965.59 116,388.47 204,237.76 141,037.43 232,404.73 166,829.22 186,919.56 283,925.56 212,771.47 236,976.62 312,649.50 493,463.36 327,353.43 375,643.78 564,938.89 381,571.57 412,308.63 437,695.59 780,457 $1,337,566

Savings On Fuel (2010)

769,300

Option 2B: Savings on Fuel if Wind Was Used

A Muskrat Falls Discussion Paper Volume VI

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