In our travels to different parts of the world, leading trade missions and helping to facilitate international partnerships for our members, those that we meet are very interested to hear that Newfoundland and Labrador’s electricity grid is derived from 90+% renewable sources.
This is not just a fortuitous circumstance for our province from an environmental perspective, it is a powerful investment attraction asset that is leading to all sorts of economic development opportunities and inquiries from businesses and industries interested in the low-carbon production of goods and services.
The thing is, though, that there is not a whole lot of extra electricity that we can provide. The demand for electricity in NL has been steadily increasing – driven in no small part by efforts to electrify heating, transportation, and other aspects of our economy to reduce GHGs (and in many cases – save money). The myth that we will have oodles of extra energy thanks to Muskrat Falls has been busted. These trends aren’t going anywhere, and are expected to continue to drive increased electricity demand for many years to come.
Newfoundland and Labrador Hydro’s 2024 Reliability and Resource Adequacy Study Review concludes that – at minimum – the province needs at least 385MW of additional capacity and 1.4TWh of new energy by 2034 to address load growth and reliability needs. While 2034 sounds like a long ways away, it’s less than ten years from today. This is a blink of an eye when it comes to electricity planning.
For our part, econext‘s assessment is that the demand forecast used in this analysis is conservative; based on the level of interest that we see in NL’s clean electricity, we believe that there is the potential for much greater demand to materialize. The wrench in those economic development opportunities is that electricity utilities will typically not build generation infrastructure that is over and above what has been determined to be absolutely necessary. There’s good reasons for this – namely ensuring that ratepayers aren’t on the hook for investment into assets that are not immediately necessary. That’s risky! Therefore, electricity utilities won’t build in anticipation of growth that could happen, they will build for growth that they are certain will happen.
From an economic development and diversification perspective, therein lies the chicken-and-the-egg scenario. A utility won’t build capacity for an industrial customer until it can guarantee offtake. But an industrial customer will struggle to obtain financing or make final investment decisions for its proposed activities until it can guarantee access to the clean electricity it needs. As it stands, one party would need to make an unreasonable leap of faith to crack the egg.
So… if clean electricity is a powerful investment attraction asset, how does NL deal with the increased interest in its electricity when it doesn’t have a lot to currently give?
I don’t have a clear answer to that question, but believe that how we make decisions about electricity infrastructure in this province is going to be a key part of it.
In my recent experience as Chair of NL’s Net Zero Advisory Council, I had the opportunity to learn quite a bit about how electricity projects come to be. The reality is that it takes a long time for them to be conceived, analyzed, proposed, scrutinized, built, and operational. I can say that if we need at least 385MW of additional capacity by 2034, we are going to have to be swift in our decision making in order to make that happen.
And that’s just to meet our minimum needs in a business-as-usual scenario. The reality is that in the years ahead our regulators are going to be entertaining all sorts of different projects that are going to be ‘new’ to them from a decision-making perspective. I anticipate that regulators will be considering more interconnectivity with other major clean energy projects (i.e., large wind-to-hydrogen projects); various energy storage technologies (i.e., via compressed air in salt domes); and proposed projects that test the value of environmental sustainability versus mandates and directives to choose the ‘lowest cost’ options.
These are all very complex discussions, but we won’t have the luxury of a whole lot of time to consider them. On the one hand, the global push towards net zero GHGs is accelerating clean energy demands and also economic development opportunities for NL to an unprecedented level. On the other hand, the threat of disruption due to the actions of the United States are creating an urgent need to diversify our economy.
Our clean electricity is a solution to both of these pressures. To meet the moment, we need to be open to new ideas. Regulators need to adequately resourced to deal with what is going to be coming. And it will be important for our decision-making to be nimble and flexible. Analysis, engagement, and decision-making need not be lengthy to be robust.
NL’s electricity clean grid is key to Newfoundland and Labrador’s economic development and diversification. Whether or not we can capitalize on this will depend on our ability to see the forest from the trees and make sure our processes are fit for purpose in a world that is changing at great speed.
// Kieran Hanley
