Manitoba Hydro's Keeyask dam was 'risky investment strategy,' says U.S. energy expert
Even 5 years ago, U.S. energy market was leaning toward natural gas, says Ian Goodman
A U.S. energy expert who sounded warnings about Manitoba Hydro's Keeyask dam and Bipole III transmission line five years ago says he's not surprised to hear both projects will leave the utility — and the province — with massive debt.
Ian Goodman, an energy economics consultant based in Berkeley, Calif., told CBC News in 2011 that Manitoba's then-NDP government should think twice before starting work on Keeyask or Bipole III, taking into consideration the changing energy market in the United States, where some of the generated electricity would be sold.
A report released last week by Manitoba Hydro's board of directors says the government made decisions that led to billions of dollars in unexpected costs for both projects.
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The board said the Crown corporation's debt is expected to grow from its current level of $13 billion to about $25 billion within the next three or four years, jeopardizing both its financial situation and that of the province.
"It's very unfortunate that events are not working out well for Manitoba Hydro and for the province, but these are problems which were foreseeable," Goodman said in an interview.
Goodman said his main issue today, as it was in 2011, was with the 695-megawatt Keeyask hydroelectric generating station, which is being built on the Nelson River in northern Manitoba.
"My concerns were much more about Keeyask, because that was really an optional choice which is not working out well," he said. "Basically, Hydro doubled down on a risky investment strategy."
It was a risky strategy, he said, because natural gas is relatively inexpensive in the United States and renewable energy sources, such as wind and solar energy, are becoming more popular there as well.
"Energy markets are very dynamic. They're always shifting, but there were definitely trends emerging even several years ago that undercut the economics of Keeyask for export," he said.
"Even several years ago … natural gas was very inexpensive and was likely to remain inexpensive, and that was going to undercut the profitability of exports."
Delays and rising costs
The review of Bipole III and Keeyask, which was ordered by the current Progressive Conservative government, has revealed costly issues that include construction delays, rising costs and a more expensive route choice for the Bipole III line.
Bipole III is now expected to cost $4.9 billion, up $300 million from estimates last year. Keeyask's price tag has jumped by $700 million to at least $7.2 billion, the report says.
Neither project is on track to be done on schedule. Hydro is currently projecting delays of 12 to 15 months for Bipole III and 21 to 31 months for Keeyask.
"The problem is they're gambling with the province's money, and so it's problematic to be taking these types of very speculative ventures, but basically the losers are the electricity ratepayers or potentially the taxpayers," Goodman said.
The PC government is blaming the NDP — which is now in opposition — for Hydro's financial woes, saying it pursued an aggressive capital campaign and spent millions of dollars on the two projects without fully considering value for money.
Manitoba Hydro says it plans to host information sessions later this fall to answer the public's questions about the utility's financial situation.
Goodman said Manitoba Hydro should conduct more independent reviews so decisions aren't always subject to the whims of the government in power.