Dams for Dilbit: How Canada’s New Hydro Dams Will Power Oil Pipelines

The cancellation of TransCanada’s Energy East pipeline in early October had major consequences for a rather unexpected player: Manitoba Hydro.

The company had been counting on the energy demand from the pipeline, and now the cancellation is putting extra strain on a company already plagued by debt and in the middle of building an $8.7 billion dam.

Back in 2014, the provincial utility company anticipated that almost 40 per cent of electricity generated by its proposed 695-megawatt Keeyask dam in northern Manitoba would be allocated to “pipeline load” for the Alberta Clipper, Line 3 and Energy East pipelines.

Specifically, the electricity would be used to run pumping stations, which force crude oil through pipelines via a series of pumps and motors. Among those pumping stations were those that would move bitumen from the oilsands to New Brunswick through the Energy East pipeline.

But Energy East is now officially dead.

A recent document filed by Manitoba Hydro to the province’s public utilities board estimated that will result in a loss of 534 gigawatt-hours in annual demand, equivalent to 12 per cent of the dam’s production — which comes at an awfully bad time given the utility’s ongoing debt issues, proposed rate hikes and cost overruns, which have resulted in the utility laying off  900 staff.

Building Renewables for the Fossil Fuel Industry

The connection between the Keeyask Dam and the Energy East pipeline raises important questions about renewable energy projects that are built, at least in part, to meet the demands of the fossil fuel industry.

On the one hand, powering the industry with cleaner electricity is a step in the right direction. But on the other hand, building new electricity, even when it is renewable, has serious impacts, and hydro is no exception.

It’s not the first time a hydro dam has been proposed to meet the electricity demands of the fossil fuel industry. In British Columbia, the rationale given for the controversial $10.7 billion Site C dam has at times included powering the liquefied natural gas export industry and Alberta’s oilsands.

What has been talked about a lot less in B.C. is that the new Kinder Morgan Trans Mountain pipeline would use 1,046 gigawatt-hours of electricity per year (PDF, page 64), or the equivalent of about 20 per cent of the production of the Site C dam (about half of that power will be consumed in B.C. with the other half being consumed in Alberta).

In B.C. that power will be sold at a subsidized rate and is expected to result in a cost to BC Hydro of $27 million a year. In Alberta, the Trans Mountain pipeline will use nearly a quarter of the new generating capacity created by the newly announced wind contracts.

Shifting Justifications for New Dams

Manitoba Hydro’s game plan for the Keeyask dam became clear during two sets of hearings during late 2013 and early 2014.

Peter Kulchyski, professor of Native studies at the University of Manitoba and long-time critic of impacts of hydroelectric projects on northern Indigenous communities, said in an interview with DeSmog Canada that Manitoba Hydro presented two very different narratives.

The first presentations — made to the Clean Environment Commission, which explores social and environmental impacts — saw the energy utility boast about the potential for new hydro projects to help fight climate change by exporting electricity to other jurisdictions and displacing the use of coal and natural gas.

In 2016-17, Manitoba Hydro exported $460 million of electricity to other jurisdictions. But that number has effectively flatlined due to the shale gas boom in the United States. In its most recent annual report, Manitoba Hydro listed “loss of export market access” as one of its most significant risks, alongside “catastrophic infrastructure failure” and “extreme drought.”

Kulchyski said the review of the project then moved on to the Public Utilities Board, which looks at economic modelling. At that point, some of the early financials from the newly built and way over budget 211-megawatt Wuskwatim Dam were emerging. They weren’t good.

At the time, Kulchyski said the Wuskwatim Dam was selling power at four cents per kilowatt-hour while it was costing seven cents per kilowatt-hour to actually produce power. The dam hadn’t ever been profitable (and still hasn’t been to this day, resulting in a restructuring of the agreement with local First Nations).

That’s when the “pipeline load” first entered the picture, Kulchyski said.

“As they were scrambling for where they would sell the power, they publicly came out saying they could sell power to the pipelines that are being built,” he said. “On one hand they’re fighting climate change, on the other hand they’re quite willing to sell to the pipelines.”

The connection between the Keeyask Dam and the Energy East pipeline raises important questions about renewable energy projects that are built, at least in part, to meet the demands of the fossil fuel industry. https://t.co/zn9yyRNL9w

— DeSmog Canada (@DeSmogCanada) January 10, 2018

Manitoba Could Sell Excess Power to Saskatchewan

Despite these concerns, Keeyask is still being constructed, anticipated to be in operation by late 2021. A $5 billion transmission line, Bipole III, is also being built to transport electricity from the dam to the south of the province.

Enbridge — which owns both the Alberta Clipper and Line 3 pipelines — didn’t respond to a request for comment by DeSmog Canada.

Manitoba Hydro still expects Keeyask to have a “pipeline load” of more than 1,000 gigawatt-hours, meaning that one-quarter of the dam’s capacity (4,400 gigawatt-hours) will go to helping pump Alberta bitumen through Line 3 and Alberta Clipper.

That leaves a lot of excess electricity without a clear market though, which could require future ratepayers to cover the difference. Manitoba Hydro is already requesting significant hikes in rates — currently pushing for 7.9 per cent increases per year until 2023-24.

Electrification Will Bring New Demand: Clean Energy Analyst

But there are plenty of opportunities for Manitoba to use the excess electricity from Keeyask in positive ways, Dan Woynillowicz, policy director at Clean Energy Canada, said in an interview with DeSmog Canada. That includes moving to electric vehicles (including freight trucks and buses) and heating buildings with electricity instead of with natural gas.

“In a hydro-dominated system like Manitoba where you’ve got plentiful, affordable, clean power, the emissions benefit of applying that to transportation is particularly significant,” Woynillowicz said. “We certainly need to be capitalizing on that from a climate change perspective.”

He added there’s also the potential for increased exports to the U.S. and other Canadian provinces —especially Saskatchewan, given that it’s right next door and “still has one of the dirtiest electricity grids in Canada.”

“There’s still a lot of low-hanging fruit in terms of cleaning up Saskatchewan’s system,” he said. “Definitely one element of that could be increased imports of hydro from Manitoba.”

Canada May Need 150 More Keeyasks to Meet 2050 Climate Targets

Canada’s mid-century long-term low-greenhouse gas development strategy reported that over 100,000 megawatts of additional hydro capacity will be required by 2050 to reach greenhouse gas reduction targets.

That’s equivalent to almost 150 Keeyask dams in capacity.

Canada is the third-largest hydro producer in the world, with over 80,000 megawatts of capacity already in place. One of the benefits of large quantities of hydropower is its ‘dispatchable’ nature, meaning reservoirs essentially act as giant batteries that can be drawn from when needed.

ICYMI: What’s the Future of Hydroelectric Power in Canada?

Yet often left unaddressed by proponents of additional hydroelectric power are the devastating impacts that dams can have on local and Indigenous communities, especially the ability to hunt, fish, trap and gather on traditional lands and waters.

Opponents of hydro dams also point out the high costs of building large dams crowd out small-scale and more localized sources of energy like wind, solar and geothermal.

And Manitoba, a hydro-heavy province, hasn’t seriously explored renewable electricity sources other than hydro. In 2014, a former NDP energy minister accused the utility of making it “virtually impossible to build wind [power] here.” The province has just 260 MW of installed wind energy capacity, less than New Brunswick.

But outside of rapid innovations in battery storage, transmission lines and the emergence  of alternative low-carbon baseload power (such as geothermal), it’s unclear how Canada will dodge the conflict over hydro.

There are some obvious options to help reduce demand, such as energy efficiency retrofits for existing buildings and reducing industrial load.

Woynillowicz noted that the biggest chunks of new demand come from large industrial projects. For instance, in B.C., a single large LNG plant could consume the equivalent of all of the power created by the Site C dam.

Ultimately, the public needs to know the planned end use of new electricity projects before being able to form an educated opinion on them.

With files from Emma Gilchrist.