Lowest-cost Option for Electricity Consumers

Nalcor examined a broad range of generation supply options to meet the island’s growing and long-term electricity needs, including natural gas, small hydro, wind power, biomass, solar, enhanced conservation efforts, continued oil-fired generation at the Holyrood plant, and other thermal-based options.

After examining all available options to determine which ones were viable, two alternatives were confirmed:

  • an oil-dependent alternative with continued use of Holyrood and the addition of more thermal generation, wind power and small hydro (Isolated Island); and
  • Muskrat Falls with a transmission link to the island (Interconnected Island).

Building Muskrat Falls is the lowest-cost option for meeting the province's growing electricity needs.

Remaining isolated would mean a future that is dependent on thermal generation, burning millions of barrels of oil at the aging Holyrood plant. It would also include development of a series of smaller hydro, thermal and wind generating facilities around the island. The combined cost of building and operating the Isolated Island option exceeds the cost of building and operating the Interconnected Island option by more than $2.4 billion in 2012 (present day) dollars.

“MHI has found Nalcor’s work to be skilled, well-founded and in accordance with industry practices. The result of the CPW analysis indicates a preference for the Interconnected Island option of $2.4 billion over the Isolated Island option … MHI therefore supports Nalcor’s finding that the Interconnected Island is the least cost option of the two.”

MHI Review, October 2012, page 8

The development of Muskrat Falls would mean the island would no longer operate as an isolated system, and would have the ability to import or export power.

With Muskrat Falls, the province will own a revenue-generating asset and have an interconnected system, with transmission links from the island to Labrador and to the mainland.

Why is Muskrat Falls the best option?

Muskrat Falls is less costly for electricity consumers and will mean lower electricity rates as compared to a continued dependence on Holyrood and other thermal generation. In addition to being lower cost, Muskrat Falls will generate clean, renewable energy, provide stable electricity rates long into the future, and provide extra revenue through export sales.

Did you consider other options such as small hydro plants, wind generation and natural gas?

Yes, these options were considered in the Isolated Island alternative, which includes the addition of small hydro plants and wind generation facilities around the island, as well as the addition of significant thermal generation. We also examined natural gas, but the resource is not yet readily available to the province and the cost of developing the required infrastructure is not economically viable. In the end, developing the hydro resource at Muskrat Falls proved less expensive than all other viable alternatives and presented better long-term benefits.

We live in such a windy province. Why isn’t wind generation an option?

Wind on its own isn’t a viable alternative for replacing the Holyrood facility. Wind power also requires a certain amount of generation to back stop or to be available should the wind turbines stop generating power. Generally, this is a traditional generation method such as hydro or thermal. Nalcor has incorporated a total of 279 megawatts (MW) of wind power into its generation expansion plan for the Isolated Island alternative. An independent review of the island’s electricity system concluded that 300 MW is the maximum amount of wind that can be economically and technically integrated into the isolated island grid.