Winnipeg Free Press

Re: Report brings alarmist rhetoric from Hydro chairman (Nov. 2)

John Loxley’s recent commentary would have been powerful had it been objective. Loxley described recent comments by Manitoba Hydro’s new board chairman as both excessively alarmist and "politically motivated." The same descriptor, however, applies to Loxley’s own analysis.

Clearly stated in his own online CV is that Loxley served from October 2009 to March 2010 in the highly political role of transition team manager for premier Greg Selinger. Clearly there is a political agenda at work here. Economically, Loxley’s commentary would make sense as long as large-scale hydroelectric developments continued to always represent a low-cost means to produce electricity, both for domestic use and for export markets.

Except, as Manitoba Hydro has been painfully discovering, hydroelectric developments are not low-cost, but instead expensive. Importantly, there may be a simple explanation as to how this changed. Hydroelectric projects are long-term and renewable in character, but their construction involves significant fossil-fuel inputs, e.g. for steel, concrete and earth-moving. These are manifest in the cost.

From 2000 to 2008, fossil fuel prices rose steadily, more than doubling. This was also roughly the same timeframe as the Wuskwatim project. Estimated costs for Wuskwatim rose steadily too, in the end roughly twice the original estimate. In the process, Wuskwatim went from what seemed a stellar marquee project to a money-loser.

There have also been significant changes in export markets. Depressed electricity prices to the south are only partly due to the sluggish U.S. economy. Significant, low-cost alternatives have come online, especially in the past 10 years. The three states to the south of Manitoba, alone, now feature more than 5,700 MW of installed wind-power capacity, which is more than Manitoba Hydro’s overall total. Loxley appears stuck in the past. The world has changed, and moving forward today requires new and innovative ways of thinking.