The biomass power project slated for Port Hawkesbury is working out to be another example of why politics and monopolies make bad bedfellows.
The political pressure to meet aggressive renewable energy targets, coupled with the business opportunity at hand, have combined to produce a deal characterized as risky in a report commissioned by staff of the Nova Scotia Utility and Review Board.
Written by John Antonuk of The Liberty Consulting Group of Pennsylvania, ahead of hearings into the project next month, the report highlights the "uncertain nature" and "frail economic condition" of NewPage Port Hawkesbury Ltd.’s line of business.
It also questions the quality of the almost 30-year-old boiler that Nova Scotia Power wants to buy from NewPage as part of a power deal worth close to $209 million. There are also risks from the potentially escalating price of biomass.
Under the deal, the paper mill will sell its aging boiler and other assets to the utility, but it will operate those assets and sell the power back to the utility.
NewPage will also get to use the steam from a new generator to make its paper.
The Liberty report asserts that "NSPI has not laid a convincing basis for assuming that the boiler can last another 40 years."
Nova Scotia Power maintains the boiler is "in acceptable condition" for the long haul and that its agreement with NewPage gives adequate protection against rising fuel costs, plant repairs and even failure.
But such confidence is "easier to express when it is customers who bear the risks if confidence proves to have been misplaced," counters the report.
It also suggests the utility might be more risk-averse if it was betting "its money rather than customer money on its optimistic views of the project."
Nova Scotia Power argues the deal is the best and fastest way to generate power to meet the provincial government’s renewable energy deadlines and balance the intermittent supply provided by wind-generated power.
To get a better handle on the reasonableness of the costs and the risks of the biomass project, the utility issued a request for third-party proposals for alternative projects.
But the results will only become available just before the hearings, leaving a slim window for evaluating them or changing plans.
As well, the report suggests the process for soliciting alternative projects may have been distorted by "the wording" in the request for proposals, which may have "encouraged responders to make offerings whose costs are higher than" the actual project requirements.
To avoid any perception that the process may have "negatively influenced" the alternative bids, the report suggests an independent evaluator should review the whole process as well as the bids themselves.
But despite these significant risks and questions raised about the process, the biomass project will likely go ahead for lack of better alternatives.
Nova Scotians would have been better served by having all the evidence placed on the table before the power company and the government snuggled up to close the deal.
Rachel Brighton is the publisher of the regional magazine Coastlands and a former business editor and journalist.
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