Pincher Creek Voice
Chinook Area Land Users Association, Letters to the Editor
Enclosed are two letters written by the Chinook Area Land Users Association (CALUA), a land owner group in the M.D. of Pincher Creek, to the Alberta Electric Systems Operator regarding the proposed “Goose Lake to Etzikom Coulee” (GLEC) transmission line which would be a part of SATR. CALUA met with AESO on March 13, 2014 to discuss the possibility of re-opening the needs assessment (NID) for this line. The second letter is in response to this meeting.
Editor’s note: The original letters as reproduced below were addressed to Alberta Electricity Systems Operator (AESO) Calgary Place, Attn: David Erickson, President and CEO
First letter February 5, 2014
Dear Sir:
The Chinook Area Land Users Association (CALUA) is an active organization representing over 200 individuals and more than 80% of the land owners in Division 1 and 2 in the MD of Pincher Creek.
CALUA is writing this letter to express our deep concern as land owners and Alberta tax payers to future implementation of decisions arising from AESO’s Future Demand and Energy Outlook 2009-2029, and in particular, conclusions drawn relating to the South Alberta Transmission Reinforcement (SATR) projects in Southern Alberta. Our concerns relate to the fact that changing economic trends, and projected changes in consumer patterns in oil and electrical demand call into question the conclusions in the report, which were based upon substantially different economic projections largely derived from historical, high oil prices prior to the economic crisis in 2008.
In December 2008 AESO submitted its original Needs Identification Document (NID) to seek Alberta Utilities Commission (AUC) approval for a massive increase in transmission line capacity in Southern Alberta, most notably designed to tie-in wind power generation in three phases called SATR I, II and III.
CALUA is of the opinion that a review of the needs for certain components of the SATR project is warranted due to significant recent changes in oil demand, changing forecasts for energy requirements, and a growing awareness of the unfavorable economic and ecological characteristics of wind energy. At today’s pace of economic change, virtually all current developments indicate that the principles applied in AESO’s 2009 study are no longer valid. Combined with the current cost overruns in Alberta’s expansion of transmission line network, we believe that it would be prudent and in the public’s best interests to undertake a thorough review. To not undertake the review would be negligent.
We also believe that AESO is feeling the pressures related to the new trends given the information provided in AESO’s SATR update of August 2013 informing its stakeholders of the cancellation of the Ware Junction to Langdon substation SATR III component, and the delay of three further SATR components: i) Picture Butte to Etzikom Coulee, ii) Goose Lake to Etzikom Coulee (GLEC); and iii) Etzikom Coulee to Whitla. In addition to AESO’s SATR III cancellation
CALUA believes that the Goose Lake to Etzikom Coulee (GLEC) route is also not needed and that an upgraded transmission circuit can be achieved using existing routes.
Further, it is our understanding that the intertie analysis that relates to the tie-in requirements of AESO’s transmission line projects to British Columbia, the US and Saskatchewan apparently needs to be reviewed indicating to us that AESO is re-considering the scope of the SATR projects with respect to actual costs, power demand and grid capacity.
Whilst CALUA recognizes AESO’s strategy to balance benefits and costs in the wake of significantly increased costs in the build-out of Alberta’s transmission system is partly driven by longer than expected permitting processes, and higher than forecasted construction labour costs (e.g. increased costs of $200 million for the Western Alberta Transmission Line (WATL), currently standing at $1.65 billion), we believe this only strengthens the need for a review of the 2009 study.
Understandably, it is difficult to predict long term trends, but inaccurate forecasts lead to wrong conclusions, and in particular when applied to long term investments they can do irreparable damage to an economy and its people. Lately, many fundamental trends have been emerging that were not considered in the 2009 AESO study, and CALUA believes they fundamentally affect the assumptions and conclusions made in the study.
Increase of global oil demand may be lower than predicted:
In 2006-2008 it was impossible to predict the shale gas boom which puts an enormous downward pressure on natural gas prices, and consequently, on oil demand. The downturn is pinching provincial coffers, with royalties from gas expected to reach only $965 million this year, about one-sixth the 2006/07 levels used in the original 2009 study.
The profitability of oil sands is increasingly coming under pressure as fracking has revolutionized oil and gas production in North America, paving the way for the U.S. to surpass Saudi Arabia as the world’s top oil producer, thereby reducing its dependence on oil imports (including from Canada), and pushing Canada to find new markets for growing oil production.
Recent developments increasingly indicate that global oil demand may not increase as predicted due to improved automotive technology, national programs to reduce energy dependence, China’s recently imposed policies designed to “leapfrog” the country’s transport system, changing driving patterns and an emerging variety of alternatives to oil as transport fuel.
Alberta oil will be landlocked for years to come (e.g. debate over Keystone XL, Northern Gateway, Energy East), and the recent rail accidents in Quebec, North Dakota and New Brunswick have brought additional public pressure on the industry. In the EU, resistance against Alberta oil has been building steadily, which is reflected in the EU’s Fuel Quality Directive fueled by pressure from environmental activists, which is also growing.
The above mentioned effects caused discounts on Canadian heavy oil opening up a provincial government budget deficit. The lack of export pipeline capacity was repeatedly cited in price differentials that ranged from $10 to $40 a barrel during the year and reportedly costs Canada’s economy $18 billion annually. In 2013 alone, these effects are expected to result in about 6 billion dollars less in provincial revenue.
The need for grid based electricity systems may be lower than expected
Worldwide public pressure against subsidized grid-based renewable energy and the required massive transmission systems is increasing. Examples are i) Australia’s push to fully abandon subsidized power generation and ii) Germany, once the poster child of renewable energy has become the cautionary tale for Europe, an example of where the wrong energy policies are damaging, perhaps mortally wounding, its economy, punishing consumers while undermining the green objectives, of reduced CO2 emissions, it set out to achieve.
In 2014 German consumers will be forced to pay $30 billion to subsidize electricity with a real market price of $4 billion. Two thirds of the electricity price increase is due to new government surcharges and taxes to sustain renewable energy (prices per kWh, transmission fees, etc.). Per-household costs have tripled in the last five years and are likely to continue rising. Compounding problems, when the wind stops blowing the electricity supply needed to power the national grid is becoming scarce pushing Germany into an increased use of fossil fuels leading to higher carbon dioxide emissions proving that wind energy is not “green”, when seen in context of permanent availability.
Public perception of wind energy’s inefficiency is growing. Based on AESO’s NID and its 2012 Market Stats an efficiency of 25% is a realistic assumption. CALUA is concerned that Alberta tax payers are being misled by AESO’s strategy to only advertise “nominal” wind energy production capacity whilst effectively only 25% can be realized. For example, compared to AESO’s statement that “at the end of 2012, generating capacity from wind power facilities totaled 1,087 MW which constituted 7.5 % of Alberta’s total installed generating capacity” the actual (real) wind generation was less than 300 MW which is equivalent to only 2% of Alberta’s generating capacity.
There is an increasing trend to develop decentralized energy production (e.g. gas fired power generation, such as the Shepard plant) and smaller, community based distribution concepts eliminating the need for large transmission networks with the associated line losses.
From all we can see, the current trend seems to be that natural gas will be the fuel of choice for the foreseeable future. Natural gas will help achieve climate goals and reduce CO2 emissions. It offers plenty of room for future development until decentralized, diverse energy generation based on renewable resources will take over. The power grid as proposed by AESO may be no longer be a sound technical option based upon the emerging global trends and the inherent inefficiencies in wind power and long distance electrical transmission.
Alberta as a province is in the same dilemma as any business owner. In times of uncertainty, spending money on potentially non-revenue generating infrastructure projects is very risky as it generates permanent fixed costs, uses up consumers’ disposable income, and reduces liquidity in times of need; all of which increase costs to consumers ultimately. The expansion of the transmission grid will cost billions at a time when royalty revenues are dwindling and its ultimate need will be subject to significant uncertainties over the coming years. In times of limited liquidity, expenses for questionable wind energy projects must be avoided.
The NID estimate for all three stages of the SATR project, which includes allowance for funds used during construction (or carrying costs) and escalation of $1.16 billion, was $3.44 billion. Given the province’s budget deficit of $6 billion in 2013 alone, and the cost overruns for lines already under construction, AESO should cut costs by eliminating non-essential components of the originally proposed transmission network.
As stated before, the current effective wind capacity installed in Southern Alberta is less than 300 MW. This power generation capacity can be handled by the existing grid. All of the existing wind farms are tied-in through existing substations. Between 2008 and 2017 the NID which is the basis for all SATR stages assumes only 320 MW effectively coming from wind (nominal 1,600 MW). In the same document AESO lists a number of not further substantiated wind interests with an overall effective capacity of nearly1,900 MW (nominal 7,500 MW). From this list at least one sizable wind project, the Wild Steer Butte project with an effective capacity of close to 200 MW (nominal 790 MW), has been abandoned by Shell due to unfavourable economics.
In the extreme South only two wind interests are shown with a combined effective capacity of less than 100 MW (nominal 470 MW). The southern leg of SATR II, the GLEC expansion is a 220 km transmission line designed to tie-in these 100 MW. AESO is seemingly aware that this line is over-designed as it is planned as a double circuit 240 kV single-strung transmission line. The cost for just this line is expected to be around $400-500 million.
Beside the fact that this transmission line is planned to run through the most pristine land of the Waterton Prairie-to-the-Mountain corridor the costs of $500 million are not justifiable to tie-in 100 MW of wind power.
We believe that it is a waste of tax payers’ money to tie-in a handful of wind farms with questionable economic features (low efficiency, low cost-to-benefit ratio, need for subsidies and huge footprint expressed in MW/acre (almost 2,000 times higher than the Shepard plant). In today’s world of cheap gas the installation of new wind energy farms is no longer an attractive alternative.
In a diverse world with a fast-paced, ever changing economic environment long term forecasts that support large infrastructure projects (e.g. transmission line grids) are increasingly becoming a concept of the past.
Clearly, the majority of the assumptions that drove the conclusions in the 2009 Demand and Outlook report are no longer valid, and as such, the conclusions in the report are also no longer valid. CALUA hereby strongly urges AESO to review the original Needs Identification Document based on the trends that have arisen since the original data was collected in the mid-2000’s and eliminate unnecessary components of its transmission line network to prevent irreversible, permanent financial liabilities to all Albertans. Some sober second thought now could save Albertans from a costly white elephant that they will have to pay for through their utility bills for generations to come.
Sincerely
The Board and Executive
Chinook Area Land Users Association
Second letter March 31, 2014
Dear Sir,
The Chinook Area Land Users Association (CALUA) greatly appreciates AESO meeting with us in order to better understand our concerns, as expressed in our letter to AESO dated 05 February 2014. We met with five AESO representatives on March 13, 2014 in the Twin Butte community hall to exchange our views of the matter. The discussion revolved around technical, procedural and, at times, the emotional aspects of AESO’s proposed power corridors in the Chinook area.
In the following paragraphs we want to summarize the results of the meeting:
CALUA presented its case that the need for the “Goose Lake to Etzikom Coulee (GLEC) transmission line faces significant uncertainty due to doubts about the viability of wind power in the region and the reduction in wind interests along the planned route. During the process AESO was also presented with a map showing strong opposition to wind and transmission line developments by a large majority of constituents in Divisions 1 and 2 of the MD of Pincher Creek (the “Waterton Corridor”)
During the meeting, AESO confirmed that the wind efficiency factor is only 25-30%, meaning that wind farms can only deliver 25-30% of their “nameplate” capacity. In other words a wind farm rated at 100 MW will in average only produce 25-30 MW. This is fundamentally different to gas fired power plants which are designed to continuously run at nameplate capacity. Transmission lines for gas plants must therefore be designed for nameplate capacity and that means transmission lines dedicated to wind power generation are 3-4 times oversized.
AESO acknowledged the “per-MegaWatt” foot print (land used) of wind based power generation is about 1,800 times higher than for natural gas based power generation, which means that the projected wind farms would use up roughly 100,000 acres of land for an energy equivalent which can be achieved with a 60 acre area gas production foot print.
It was also mentioned that wind power, due to its unreliability and the continuous need for fossil back-up does not provide any real CO2 benefits.
AESO acknowledged that wind interests have declined drastically since the 2008 Needs Identification Document (NID) but stated that the “need” for the GLEC line was re-confirmed in its latest “AESO 2013 Long-Term Transmission Plan”. A copy of this document was provided to CALUA.
CALUA conducted a review of this document and has the following comments:
The 2014 overall energy consumption for the entire province of Alberta in 2013 is roughly 70,000 GWh. On page 60, the study states that at the end of 2012, total generation capacity in the province was 14,404 MW. Industrial installations in average operate about 340 days per year (8,160 hours/year), and the 14,404 MW generating capacity would be able to produce 118,000 GWh per year. This indicates that Alberta’s existing energy generation supply already exceeds the demand by 75%. This begs the question: Where is the need to add more generating and transmission capacity?
Based on the same document, Alberta’s overall energy consumption for 2032 is projected to be about 115,000 GWh. Based on our reading this means that the current power generation is sufficient for at least the next 20 years. Based on page 60 the installed generation capacity is expected to grow to approximately 23,600 MW by 2032, which would provide 193,000 GWh – almost 3 times of the current demand and almost twice the projected demand in 2032. Again, we would ask, where is the need for the additional generation and transmission capacity?
AESO’s 2013 Long-Term Transmission Plan document does not appear to take into account changing realities. The original NID mentioned a wind queue of 7,500 MW nameplate capacity for southern Alberta. At our 13 March 2014 meeting and on page 88/89 AESO indicated that the current queue has been reduced by 75% to a nameplate capacity of only about 1,875 MW by 2032 a portion of which is located mainly on the eastern leg of the GLEC line. This significant reduction would further call into question the need for additional transmission lines in the Chinook area.
In its 2013 study, AESO frequently mentions the risks and uncertainties of inaccurate predictions. The precision range of the study is described as being accurate within ± 30%. Given the information in the above points, ±30% really doesn’t alter any of the conclusions reached by CALUA in reviewing the document. Further, ±30 percent is really only feasibility level analysis and is hardly the confidence level a government should be spending large sums of public dollars on.
Page 29 states that “in recognition of this uncertainty, the 2003 Transmission Development Policy provides direction to AESO to be proactive in its planning and build transmission lines in advance of need”. As a policy, it does not have the force of law and potentially puts AESO in the position of doing too much development, too far in advance.
1,875 MW of nameplate capacity are equivalent to an actual capacity of only 470-625 MW within the next 20 years. Arguing that under the circumstances described above a C$ 500 million – 250 km single-strung transmission line to capture 470-625 MW of wind power which by design has to be 3-4 times oversized is necessary does not seem credible to the Alberta tax payer. The amount of power from all projected wind farms along the GLEC line could be provided by one (1) gas fired power station of the size of the Shepard plant.
From the meeting we understand that AESO is reviewing the NID on an ongoing basis and now, more than before, we feel strengthened in our belief that at least portions of the GLEC line are not needed. CALUA believes that it is unconscionable for AESO to continue on its proposed development path in the Chinook area and to forever compromise the majesty of the Waterton corridor by running massive 240 KV transmission lines through one of Alberta’s most scenic landscapes for two minor wind development when other alternatives exist. By its own statements AESO’s models are not designed to consider scenery. Since CALUA’s concerns are not part of the development considerations, we feel completely ignored by AESO, Altalink and the Alberta Government. With the vast majority of local land owners signed on and opposed to this development, we believe Government needs to step in and provide some balance to the discussion.
Once built, this majestic region will be forever compromised. CALUA recommends:
A moratorium on power transmission development in the Chinook area until such time as a current needs assessment has been done that accurately reflects the changing realities of wind power generation, Alberta’s power requirements and the broader desires of the population of Alberta to have some unspoiled vistas; and
A mechanism whereby taxpayers interests are recognized before significant amounts of tax payer’s dollars are spent unnecessarily and in the absence of a compelling need.
Projects like this often have a significant momentum due to time and resources invested and frequently get done despite changing circumstances. It takes courage and leadership to back out of such projects and we encourage AESO, the AUC and the Alberta Government to demonstrate that leadership and courage, and do the right thing.
Sincerely
The Board and Executive
Chinook Area Land Users Association
