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Northern Exposure: Canadian Hydro in the Spotlight

Thomas Edison received his patent for the incandescent light bulb mere months before the Ottawa Electric Light Company completed Canada's first hydropower project, but the plant still preceded the modern vacuum cleaner, radio receiver and air conditioner by two decades. Not even the double-edged safety razor, Teddy bear or crayon had been invented by the time the Chaudiere Falls facility began generating power in 1881. While electricity in its infancy was primarily reserved as a novelty for the rich and a resource for captains of industry, Canada was quick to see hydro's potential.

Fittingly, it was Edison who quipped that electricity would become "so cheap that only the rich will burn candles." Although his remarks were almost certainly made with regard to his own New York-based utility company, their application is not lost on his northern neighbors. In the decades since Ottawa Electric Light introduced hydropower to Canada, "hydro" has become all but synonymous with "electricity" — and with the majority of the country's power being generated by hydroelectric facilities today, the colloquialism makes sense.

Still, Canada — whose 500 existing hydroelectric facilities already combine for 74,000 MW of installed capacity — could increase its hydro output more than two-fold, according to the Canadian Hydropower Association. And even though hydroelectric production already dwarves Canadian nuclear, coal and natural gas sources — each of which contribute about 13 percent of the country's overall energy — CHA said new hydro development could potentially translate to more than a million jobs and $125 billion in investments over the next 20 years.

The 3,074-MW Lower Churchill project is amongst Canada's largest hydroelectric facilities currently in development, with its first phase, 824-MW Muskrat Falls, receiving an official go-ahead from Newfoundland and Labrador Premier Kathy Dunderdale in December 2012. Meanwhile, BC Hydro continues making headway on its 1,100-MW Site C proposal, and Manitoba Hydro is developing the 1,485-MW Conawapa and 695-MW Keeyask plants.

Upgrades to existing facilities are also proving to be sources of significant new energy, with recent additions to Lower Mattagami, Mica Dam and Sir Adam Beck combining for more than 1,600 MW of additional capacity.

BC Hydro's 126-MW John Hart project is currently undergoing a number of upgrade and rehabilitation projects that will increase the 65-year old plant's capacity to 138 MW.

"The country of Canada has the third-largest amount of surface water on the planet, but we only have about 30 million people," CHA President Jacob Irving says. "We have the population of California spread across the second-largest landmass in the world. What that means is that we've got a lot of water, a lot of land, a lot of elevation change, and a lot of hydro potential."

Bringing Canadian Hydro to the U.S.

The role of hydroelectricity as Canada's most prominent source of energy has been unquestioned for more than a century, but politics and growing emphases on First Nation relationships, social accountability, environmental stewardship and international exports are changing the way the country's developers and operators are positioning this valuable resource for the next hundred years.

Reading further into Irving's comments then, the potential for Canadian hydropower is such that the country could easily parlay its resources into an exportable commodity — a point that has not been lost on American utilities. Some U.S. states are already working to modify their renewable portfolio standards to include hydropower imported from Canada. For example, the state of Connecticut passed a law in June that would allow for large-scale hydropower from outside the region to count toward the state's RPS requirement in certain circumstances, while a 2008 agreement between Manitoba Hydro and the Wisconsin Public Service Corporation will see the U.S. utility import 500 MW of power from two Nelson River projects.

Meanwhile, New Hampshire-based NU Transmission Ventures Inc. has been fighting for its Northern Pass transmission line since the Federal Energy Regulatory Commission in the U.S. approved its participant-funded financing approach in May 2009. The controversial $1.4 billion project would allow for the transmission of 1,200 MW of hydroelectricity from Hydro-Quebec into New England, and although its scope is perhaps not indicative of import arrangements made by other utilities, it reflects a rising interest amongst U.S. companies in Canadian energy.

"We're not saying that we should provide 100 percent of the U.S.'s electricity consumption," Irving says, noting that Canadian hydro already represents 1 percent of America's power. "We wouldn't even be able to do such a thing. But at the same time, we think that there's reasonable room to grow there."

Irving says CHA's intent is to market Canadian hydro as a baseload supplement as the U.S. works to cultivate more intermittent forms of other green generation, such as wind and solar. "What we're focusing on at the federal level is just trying to make it better known within the U.S. amongst our counterparts in Washington about the existence and availability of Canadian hydro to help enable and develop U.S. renewables," Irving says.

An arrangement approved in 2012 between Minnesota Power and Manitoba Hydro exemplifies this sort of partnership. Per a 15-year power purchase agreement that begins in 2020, Minnesota Power will use 250 MW of electricity supplied by Manitoba Hydro's Keeyask plant to help balance a wind farm in North Dakota.

"We think that the high-capacity wind in North Dakota, coupled with a base load resource like hydro and the system Manitoba has, is sort of like the holy grail of renewable energy," Minnesota Power Executive Vice President David McMillan says. "This is a great opportunity to marry those two." The deal hinges on regulatory approval of a new 500-kV transmission line, but the speculative gamble is one parties in both countries are willing to make.

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For Canadian developers, such arrangements can help hydro projects gain support and also provide an enticing option for American utilities looking to bolster their own renewable portfolios.

"In 2005, we were 5 percent renewable and 95 percent coal," McMillan says. "At the end of last year, we were 20 percent renewable and 80 percent coal. By the end of next year, we'll be at 25 percent and 75 percent and headed for something like one-third, one-third and one-third in coal, renewable and gas in market purchases. That's kind of the game plan, and Manitoba is crucial to that."

The Politics of Hydro

Cross-border relationships between the U.S. and Canada will be thrust onto an even more prominent stage as parties in both countries begin preparing to negotiate the terms of the Columbia River Treaty.

The treaty, established in 1964, affects how groups on both sides of the border develop and manage resources along the 1,200-mile-long river. The document states that either country can cancel most of its provisions after September 2024 with a minimum 10-year notice, meaning treaty talks will likely begin in 2014.

With American negotiations being coordinated by the U.S. Army Corps of Engineers and Bonneville Power Administration, and Canada's coordinated by provincial utility BC Hydro, a number of issues have emerged since the treaty went into effect. Amongst these are ecosystem-based functions, navigation, recreation, irrigation and climate change, in addition to considerations for indigenous groups in both countries that are absent in the original treaty. Both groups collected public comments in fall 2013, with more focused recommendations expected in 2014.

Even though CHA will not have a direct hand in the treaty's negotiations, Irving said the 50-year-old agreement still stands as a model of cooperation. "As it comes open for re-discussion and renegotiation, I think it is a good opportunity for everybody to remember the mutual benefit that has been achieved on that shared waterway," Irving says. "I think most parties will be able to look back on a lot of positive achievements and should be able to build on those going forward."

Hydro policies are also being discussed at Canada's federal level, with the government passing bills C-38 and C-45 to improve environmental regulation. They were "omnibus bills," meaning they were broad in scope and amended or replaced existing laws.

The government stated that it wanted to reduce regulatory duplication within federal jurisdiction and between federal and provincial levels. It also wanted to focus regulation on significant environmental risks, obligate officials to render timely decisions and strengthen enforcement. Officials are completing the regulations and implementation policies needed for the new legislation.

During 2013, there was a cabinet shuffle that saw several Ministers change departments, and a new session of Parliament was initiatied with a new legislative agenda. Despite these interruptions, work on regulatory improvements continued and many of the changes relating to hydropower are now in force, with the remaining regulations anticipated to be implemented by the end of 2013.

Observers believe hydro may see benefits from the regulatory improvements. In the past, hydro projects faced much longer approvals than competing projects.

"The perennial difficulty for hydropower is, of course, its high up-front capital costs," Irving says. "But I think here in Canada, we're getting better at understanding that the renewables could and should complement each other. There's a fairly good understanding that in a place like Canada where you have 60% hydropower, it is a good place to be able to bring on other renewables because you have that reliable baseload backup that hydro gives."

At a more local level, Ontario Minister of Energy Bob Chiarelli recently said, "hydroelectric power is a central pillar of the government's renewable electricity portfolio," while officials in other provinces have also made similar proclamations.

The benefits of hydro's initial costs ultimately pay dividends, Irving said, noting that Manitoba and Quebec — both of which feature about 98 percent hydro in their energy mixes — have some of the lowest power rates in North America. "There is a long-term economic advantage that we offer," Irving says. "It's proven itself and it's undeniable."

Combined with its many other attributes, hydropower's long-term payoff makes the sector's future in Canada bright. "It's a good news story, and it continues to make us one of the cleanest and most renewable generation systems in the world," Irving says.

This article was originally published on HydroWorld and was republished with permission.

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I provide daily content and updates for HydroWorld.com, which is the online extension of Hydro Review and Hydro Review Worldwide magazines. I am also responsible for assembling materials for our weekly electronic newsletter and video newscast.

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