The Northern Pass Transmission project proposes to build a new transmission line that will bring up to 1,200 MW of hourly electricity and associated electric generating capacity into New Hampshire and New England from Québec. For comparison, 1,200 MW is approximately 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 its aesthetics, there has been very 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 specific reasons that it should be given serious consideration by the New Hampshire public and policy makers.
First, electricity on the Northern Pass will be sourced from Québec’s predominantly low carbon, hydroelectric system. The energy will be competitively priced when compared to 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 project 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 in their portfolio mix. Coal and oil power production are on the decline here in New England, but another fossil fuel source – natural gas – powers nearly 45% of the electricity consumed in New England today. Natural gas, as a fossil fuel, also emits carbon when used to produce electricity. Natural gas is plentiful currently and moderately priced but conditions can change in the future. Supply shocks can reduce availability of supply. 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 emission levels would increase.
Second, unlike other energy transmission projects which are seeking guaranteed consumer subsidies, Hydro-Québec has committed to financing all capital and operating costs of this transmission project. As a result, there will be no direct investment risk for New Hampshire or New England electric consumers. Hydro-Québec has agreed to take on the market risk of the transmission investment in order to open up export opportunities for its generation.
Third, the New England wholesale power market is a fully integrated one that spans across state borders, covering six 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 revenues.
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 spikes 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 or more nuclear power plants.
It is not widely known, but New England has an aging fleet of power plants and more than 14,000 MW of capacity – 46% of the current supply base in New England — is at some risk for retirement.
Finally, 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 Québec’s storage reservoirs – will be a very controllable and reliable form of supply, in contrast to the typical run of river hydroelectric plant.
In summary, 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 and substantive benefits for New Hampshire residents if Northern Pass moves forward. The cost-benefit proposition is very compelling, confirming the need for this project from the New Hampshire consumers’ and policy makers’ perspectives.
Julia Frayer is managing director of London Economics International’s Boston office.