Submission to the Standing Committee on Natural Resources

Strategic Inter-ties

September 25, 2017

Mr. Keith Cronkhite Senior VP Business Development & Strategic Planning Power Corporation 515 King Street, , New Brunswick E3B 4X1 506/458-6631 [email protected] www.nbpower.com STANDING COMMITTEE ON NATURAL RESOURCES

Strategic Electricity Inter-ties

New Brunswick Power (NB Power) NB Power is a publicly-owned utility that safely and reliably serves New Brunswick residential, commercial, industrial and municipal customers with competitive rates. Its vision is to provide Sustainable Electricity for Future Generations with a mission to Be Our Customers’ Partner of Choice for Energy Solutions.

NB Power is well positioned, based on its generation mix, to provide its customers with electricity generated with consideration for the environment. External purchases, largely hydro, help supplement this mix resulting in over 70 per cent of the current in-province energy requirements being supplied by non-emitting generation. By 2020, the generation mix will achieve 75 per cent non-emitting (40% renewable, 35% nuclear). When considering greenhouse gas emissions, NB Power is approximately 52 per cent below 2005 levels. Attachment A provides an overview of NB Power’s system.

With respect to electricity inter-ties, NB Power is one of the most interconnected utilities in North America. The main interconnects are as follows: • New Brunswick – Quebec 1000 MW (includes radial load) • New Brunswick – New England 1000 MW • New Brunswick – Northern 110 MW • New Brunswick – 300 MW • New Brunswick – 300 MW

Attachment B provides overview of the Interconnection Map.

Introduction We will touch on five key areas of consideration related to Strategic Electricity Inter-ties. 1. Regional electricity independence 2. Low-carbon electricity distribution 3. Opportunities for alignment with Canadian Energy Strategy 4. -U.S. Energy Trade and Relations 5. Employment and economic impacts

Regional Electricity Independence Canada spans a very large and diverse geography. Each region within Canada is very different and has its own uniqueness. Electricity production within Canada has similar characteristics. Some regions benefit from vast hydro resources or natural gas, while others require a more diverse supply through small hydro, wind, imported hydro carbons as well as electricity imports. Given that electricity is necessary to sustain an acceptable quality of life and critical for economic prosperity, each region has established the necessary regulations to ensure a reliable

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supply of electricity is available. Historically this has been done by each province ensuring their needs are satisfied first and foremost.

As the electricity sector has evolved, provincial independence has expanded into a more regional landscape. Utilities in the Maritimes , Quebec and New England have a long history of over 50 years of collaboration through the purchase and sale of energy and capacity, and in the operation of the power system to the benefit of customers in the respective provinces or states. This started with the signing of interconnection agreements and continued with operating and energy agreements. With the introduction of open access transmission tariffs and mandatory reliability standards, it became necessary to demonstrate to the outside world through the North American Electric Reliability Corporation (NERC) that this collaboration results in safe and reliable interconnections with all neighbours. By working together, the Maritimes have been able to minimize the operating costs in meeting these standards.

With the Muskrat Falls development in Labrador by Nalcor, the ongoing hydro development with Hydro Quebec and consideration of a second nuclear reactor in New Brunswick, the concept of regional collaboration envisions the participation of the four Atlantic Provinces and Quebec.

As noted above, transmission interconnections are the key enabler to allow regional collaboration to occur. As robust as New Brunswick's transmission system is, it is anticipated that investment will be required at the Quebec, Prince Edward Island and Nova Scotia interfaces and NB Power’s in-province transmission system to maintain and enable further collaboration to move additional non-emitting energy across those interfaces.

Low Carbon Electricity Distribution As a modern utility it will also be important to optimize NB Power’s ability to integrate renewables on its system. NB Power currently has approximately 300 MW of wind capacity under contract through power purchase agreements. An additional 80 MW of renewable energy from First Nations and community will be added by 2020 to achieve 75% non-emitting energy supply for in-province customers. Recent experience shows NB Power is reaching the limits of its ability to integrate wind due to challenges with the variability of wind generation and the need to have other forms of generation to follow and provide back-up such as hydro and natural gas generation. Therefore, it is vital that the proper balance is maintained to ensure system reliability.

Each province has its own unique challenges to reduce its carbon footprint for electricity production. This is primarily due to limited renewable generation sources or the intermittency related to wind and solar production. To enable regions to reduce their carbon footprint, strategic inter-ties are necessary to facilitate the movement of renewable/non-emitting electricity across a broader region. These strategic inter-ties unlock these available resources to benefit the broader region.

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Opportunities for Alignment with the Canadian Energy Strategy When considering the Canadian Energy Strategy two key opportunities are present through strategic electricity inter-ties. First, the ability to move electricity east to west or west to east within Canada is important for security of supply and stability within Canada. Many regions within Canada are limited or at capacity to exchange electricity with their neighbours. Development and expansion of strategic inter-ties to facilitate this activity is necessary. Strong inter-ties have served New Brunswick and its neighbours well over the past 50 years and strengthening these connections are critical moving forward. Second, the “Transition to a Low Carbon Economy “, as studied by the Standing Committee on Energy, the Environment and Natural Resources in 2016, is only made possible through the development and expansion of strategic inter-ties. Optimizing the abundance of hydro generation, expanding renewable generation, and embracing new nuclear development, allows each region in Canada to meet its future electricity needs in a reliable, safe and environmentally sustainable way.

Canada – U.S. Energy Trade Relations As seen in New Brunswick, Quebec, and other parts of Canada, strong interconnections with the U.S have proven very beneficial over the past 50 years. These interconnections have provided new and ongoing revenues to Canadian utilities through the buying and selling of electricity at opportune times which have allowed for lower and more stable rates in both Canada and the United States. Looking forward, Canada is well positioned to continue to benefit from strong interconnections and new strategic inter-ties with the U.S. as they look to reduce their carbon emissions. The recent Massachusetts request for large quantities of renewable electricity is a good example of these opportunities. With respect to trade relations and the recent North American Free Trade Agreement discussions, it will be important to ensure electricity is not subject to any new duties which could jeopardize the long standing mutually beneficial relationship as it relates to electricity.

Employment and Economic Impacts A cornerstone to NB Power’s ability to provide reliable and competitively priced electricity with limited indigenous energy resources is its diverse portfolio of generation assets and via transmission interconnections. This diverse generation mix including hydro, wind, nuclear, biomass, biogas, and thermal ( and oil) has been an effective strategy to mitigate fuel cost volatility in the past and is seen to be an important strategy for the future. From an environmental perspective, this diverse generation mix supplemented by external purchases through interconnections, largely hyrdo, results in over 70 per cent of the current in-province energy requirements being supplied by non-emitting generation. By 2020, the generation mix will achieve 75 per cent non-emitting.

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Electric Intensive Economy As a result of the preponderance of electricity-intensive industries, such as pulp and paper, mining and petroleum refining, New Brunswick has one of the most electricity-intensive economy in the world. • The economy of New Brunswick is among the most electricity-intensive in Canada, after Quebec (Attachment C illustrates). • Compared to the rest of the world, the economy of New Brunswick is among the top five most electricity-intensive economies, comparable to that of Norway which has the most electricity-intensive economy in the world.

An adequate, secure and reliable electricity supply is of paramount importance to sustain economic growth in New Brunswick because of the electricity-intensive nature of its economy.

New Brunswick’s Economy Is Very Export Dependent In addition to having an electricity-intensive economy, New Brunswick’s economy is also one of the most export-dependent compared to other provinces of Canada. A competitive electricity supply cost structure in New Brunswick is therefore of utmost importance to maintain the competitive advantage of New Brunswick’s exports.

New Brunswick competes in the forestry sector with low electricity rate jurisdictions such as Quebec, Wisconsin and British Columbia. Similarly it competes in the petroleum sector with Alabama, Louisiana and the U.S. Midwest for petroleum refining. It is therefore important that NB Power maintains or improves its electricity rates competitiveness with these jurisdictions.

Given New Brunswick’s electric intensive economy and export dependency, competitive electricity rates are absolutely critical to sustain the New Brunswick economy. As such, maintaining strong interconnections and building new strategic inter-ties will be vitally important to facilitate the movement of economic low carbon electricity moving forward.

Conclusion The utilities in the Maritimes, Quebec and New England have a long history of over 50 years of collaboration through the purchase and sale of energy and capacity, and in the operation of the power system to the benefit of customers in the respective provinces or states. This has been enabled through strategic inter-ties.

Canada’s Energy Strategy and the transition to a low carbon economy are dependent on the efficient movement of low carbon electricity across provincial boundaries and regions. This ensures Canada is optimizing it natural resources at home first. Strategic inter-ties are essential to realize a made in Canada solution.

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New Brunswick has one of the most electricity-intensive economies in the world and its economy is very export dependent, which means New Brunswick businesses require competitive electricity rates. Given this dependency on competitive electricity rates to sustain the New Brunswick economy, it is essential for NB Power to maintain and expand strategic electricity inter-ties with its neighbors.

Finally, given the independence and uniqueness of each province, it will be important for the Federal Government to support and promote the development of strategic electricity inter-ties across provincial boundaries.

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Attachment A – New Brunswick Power Overview

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Attachment B – Interconnection Map

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Attachment C – Electricity Intensity

Notes and Source: 1. Gross domestic product is expenditure-based, in current million $. From Statistics Canada 2. Electricity consumption is total made available for consumption, defined as generation + imports - exports - transmission losses. From Statistics Canada.

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