In late July, Newfoundland and Labrador's power company Nalcor Energy signed formal agreements with Nova Scotia's Emera Inc. that will lead to the construction of the huge Muskrat Falls hydroelectric project on Labrador's Lower Churchill River. Power lines and underwater cables will carry the electricity to Newfoundland and on to Nova Scotia. It was a major milestone for the $6.2-billion development, which could get under way as early as this fall if the Newfoundland government gives the go-ahead. Nalcor's CEO Ed Martin is steering the project through its complex litany of approvals.
Why is this project important to Newfoundland and Labrador, and Canada as a whole?This large hydro development will provide significant greenhouse gas reductions across Atlantic Canada. Newfoundland will be almost 100-per-cent GHG free from an electricity generation perspective. Nova Scotia will be closing coal-fired units, based on their [ownership stake]. There are economic benefits for the province, but also for the Atlantic provinces, Quebec and Ontario, which are providing some of the manufacturing backup, and also people. All of a sudden you have the island of Newfoundland connected to the national grid for the first time. It will be able to fulfill its own needs but also export power.
How important a milestone is the signing of the contracts with Emera?
Signing those agreements was one of the final foundation pieces of the project. [Others included] having the appropriate amount of engineering complete – we are close to 50 per cent. We had to get our aboriginal arrangements finalized with the Innu Nation, and that has been done and ratified. Environmental approvals are in hand. The last element is finalizing the federal loan guarantee. Then we will be in a position to recommend the way forward to the province.
If you get approval this fall, when would construction start?
Within days we would award the contracts. Then the shovels go in the ground and we begin the construction phase. [Power will flow] in 2017, provided we begin this fall.
What comes after Muskrat Falls?
The Lower Churchill is two projects. The second is Gull Island, much larger than Muskrat Falls. It is a 2,250-megawatt development, which is probably big enough to supply all of Nova Scotia's needs. That is next on our radar screen. Following that, it is wind development. We have some of the best wind regimes in the world, and the hydro to back it up.
What do you say to critics who say smaller projects would be better than huge ones?
It comes down to an economic decision. The economy is booming, residential demand is growing, and we need more power, so we have to build something. When you run the numbers and you do a sound analysis, Muskrat Falls with a link to the island of Newfoundland offers the best and lowest cost, along with stable electricity prices.
What happens if natural gas prices stay low? Does that weaken the economics of the project?
We can time [the delivery of electricity] to the market. If prices are such that a profit is not available for that day or that week, we have the ability to store the power, and wait. With the projections of increasing demand throughout North America, and the need to replace aging infrastructure in the United States, Ontario and Atlantic Canada, we are confident we are going to be in good shape with export opportunities.
Is the interconnection of the project as important as the generation of power?
Newfoundland has been an isolated system, so the connection will be a huge benefit from a reliability perspective. For the first time we will be like every other province or state – we will have the ability to seek backup arrangements.
What are the components you'd like to see in a national energy policy?
As a country we have a unique opportunity because of the large stores of clean, green, hydro and wind energy. On the other side of the equation, we have large non-renewable resources as well. Packaging those renewable and non-renewable pieces, from a national perspective, presents a very compelling picture.
We also have to get provinces aligned with respect to transporting energy across their borders. This debate has been going on for decades, [specifically regarding] the movement of electricity across Eastern Canada, from Newfoundland, through Quebec and into Ontario. These things are eroding our competitive advantage. If we can think nationally, and think about our competitive advantage, that can only be good.
What do you think of the polarized Northern Gateway debate?
We have great country from a pristine-environmental perspective, and we all want to make sure we retain that. But we also have future generations to consider, from an economic and development perspective. We need be economically and commercially sensible, while making sure we cover off necessary environmental concerns. It is always about finding the balance.
How important is Nalcor's offshore oil business?
It is hugely significant. We have doubled our net income over the past five years, driven by the oil business. It will continue to be a significant growth area for us.
One of the most effective ways to transfer a portion of this oil wealth is to invest in renewables. The long-term vision is a renewable economy, which will bode extremely well for Newfoundland and Labrador for hundreds of years. The oil business is giving us the base to make these kinds of decisions and get these projects off the ground.
You have an oil industry background. Was it a big shift of mindset to run a company so heavy on electricity production?
It was a bit of a shift, from a technical perspective. But the concepts are the same. My job is leadership, setting a vision for the company, finding the right people and putting them in the right places and creating a structure for them where they can drive the company to the next level. I love the oil business, I always will. But the opportunity to come into a Crown corporation and create a sustainable future for the province doesn't come up very many times in a lifetime.