Strong case for Northern Pass

Last modified: 5/20/2011 12:00:00 AM
The Northern Pass Transmission project proposes to build a transmission line that will bring up to 1,200 megawatts of hourly electricity and associated electric generating capacity into New Hampshire and New England from Quebec. For comparison, 1,200 MW is about equal to the energy production capacity of the Seabrook nuclear power plant. Unfortunately, while there has been concern expressed about the project's route and aesthetics, there has been little attention paid to the specific benefits the project will deliver to New Hampshire and New England and why this project is needed.

Here are five reasons that it should be given serious consideration:

First, electricity will be sourced from Quebec's predominantly low-carbon, hydroelectric system. The energy will be competitively priced, compared with New Hampshire and New England's existing energy resource mix. It will displace other, more expensive and higher-carbon emitting, sources of electricity. The reduction in carbon emissions projected from the Northern Pass is significant and is equivalent to taking off the road nearly 900,000 cars annually.

Public opinion, environmental policy and economics are driving utilities to seriously consider and plan for renewable sources of power. Coal and oil power production are on the decline here in New England, but another fossil fuel source - natural gas - powers nearly 45 percent of the electricity consumed in New England today. Natural gas, as a fossil fuel, also contains carbon. Therefore, carbon is emitted when natural gas is used to produce electricity. Although not a high probability today, if a moratorium on shale gas extraction is enacted in the future, it will have substantial implications for natural gas prices in the region. In addition, if some existing generating resources are retired, this will exacerbate the constraints on the local gas infrastructure system in New England and would require switching to oil generation with increasing frequency, and ultimately, electricity prices and emissions would increase.

Second, unlike other energy transmission projects which are seeking guaranteed consumer subsidies, Hydro-Quebec has committed to financing all capital and operating costs of this project. As a result, there will be no direct investment risk for New Hampshire or New England electric consumers.

Third, although most consumers are not aware of the fact, the New England wholesale power market is a fully integrated one that spans across state borders, covering six states.

Lower power prices in Massachusetts, for example, as a result of lower demand or the introduction of low-cost generation, drive down the price of electricity in all the other New England states. Northern Pass will create direct energy market benefits for all electricity consumers in New Hampshire and New England in the form of lower spot market energy prices. But, in addition to such spot market price benefits and regional environmental benefits, Northern Pass will also create local economic benefits for New Hampshire, in terms of more construction jobs and property tax revenue.

Fourth, Northern Pass provides insurance against 'game changing' events that could lead to higher electricity costs for consumers. These game changing scenarios include unforeseen events like a shortage of natural gas or gas delivery constraints and resulting spike in prices as outlined above. They also include a natural disaster that takes down a major power plant, as recently occurred in Japan; the retirement of aging oil and coal fired plants; or the closure of one of the region's nuclear power plants. New England has an aging fleet of power plants and more than 14,000 MW of capacity - 46 percent of the current supply base in New England - is at some risk for retirement.

Fifth, Northern Pass will improve the reliability of electricity service in New Hampshire and New England by increasing and diversifying the supply of power to the region.

The Northern Pass transmission project - coupled with energy sourced from many of Hydro Quebec's storage reservoirs - will be a controllable and reliable form of supply, in contrast to the typical run of river hydroelectric plant.

Northern Pass fits well within New Hampshire's energy policy framework. It meets a number of fundamental objectives, including the need to transition to lower-carbon renewable energy, minimize government market intervention, contain costs for consumers, and make viable and reasonable long-term plans for the state's energy future.

There are clear, substantive benefits for New Hampshire residents if Northern Pass moves forward. The cost-benefit proposition is compelling, confirming the need for this project from the New Hampshire consumers' and policymakers' perspective.

(Julia Frayer is managing director of London Economics International's Boston office. She was retained by Northern Pass to analyze the New England energy market and the project's potential impact.)

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