The Public Service Commission of New York has approved a plan to build a 330-mile high-voltage transmission line from the province of Quebec to New York City. The project will cost $2.2 billion and take 3 years to complete. The majority of the transmission line will run under the Hudson River and under Lake Champlain. Additional information about the project can be found via the following links:
This post is not meant to re-hash the facts of the project, but to provide some insight into why this is happening, and to provide you with enough information to form your own opinion. I have a bias in this case – I grew up in Quebec. But, this does put me in the position where Hydro-Quebec was my utility. In fact, Hydro-Quebec built a small hydro power plant in the town in which I grew up. So, let me provide you some insight into Hydro-Quebec, and how I believe this project will impact the city of New York.
NYC Power Market
First, let’s start with a quick explanation of the electricity market in New York City. Typically, a single city isn’t big enough to necessitate its discussion independently as an electricity “market”, but the local geography, the definitions of the local independent system operator, and just the size and density of New York City means that it has its own local market forces at work that are just different enough.
New York City is an island. Just like car traffic goes into New York City through just a handful of bridges and tunnels, so does the electricity going into New York City travel through just a few connection points. Because of the few number of connections points, there is a great deal of electricity traffic along these few lines. Imagine the Brooklyn Bridge at rush hour, and you’ll get the picture.
Adding to the congestion problem is that New York City is part of the New York ISO (Independent System Operator). An independent system operator controls the high-voltage transmission lines in a given area, and operates the wholesale hourly markets. Because going from New York City into New Jersey and Connecticut involves a change in the independent system operator (PJM ISO for New Jersey and New England ISO for Connecticut), the majority of the transmission capacity for New York City comes from the rest of New York state, meaning that there is just a small neck of land just north of New York City in which all of these transmission lines travel. Going back to our car traffic analogy, picture the new traffic on the Brooklyn Bridge if you removed the Holland Tunnel, the Lincoln Tunnel, and the George Washington Bridge.
Also, the metro area of New York City has the highest population density of any metropolitan area in the U.S. That means that per square mile, New York City uses more electricity than any other metropolitan area. So, you have a small area that uses a lot of electricity, has little generation locally, and has constraints on the amount of electricity that it can bring in from the outside. This leads to New York City having some of the highest electricity rates around. In January of 2013, residents in New York City paid an average of 20.2 c/kWh, while the average across the U.S. was only 12.9 c/kWh.
So, how do you lower the price for the city of New York? There are a couple options. First, you could build more power plants in or near New York City. Land prices tend to be a little high around there, so it’s probably not going to make sense to do this. (There are a few power plants near New York City. These are relatively old and tend to use oil to produce electricity.) Second, you could increase the amount of electricity that you bring in from the outside. Building a high voltage transmission line is an expensive proposition. Transmission lines can cost anywhere from $1 million per mile to over $10 million per mile. And, that’s before you include the cost of the electricity itself.
Hydro-Quebec is the power company owned by the government of the Province of Quebec. It is a massive company which provides electricity to the entire province of Quebec, and has been supplying electricity to New England since 1997. It employs more than 20,000 people, and has revenues in excess of $12 billion per year. So, it’s about the size of ConEd.
But, that’s all information you could have found elsewhere. Here’s the info that’s unique – my personal experience and knowledge of them as a company. 98% of the electricity produced by Hydro-Quebec is hydro-power. It’s got “hydro” right in the name. (It used to be 97% hydro, but they recently turned on a couple large hydro plants in northern Canada. So, almost all of the power that the city of New York is going to get from Hydro-Quebec is going to be carbon-free. Not a bad deal! (And, a big chunk of the remaining 2% is wind.)
Plus, because it’s all hydro, the price of electricity in Quebec is ridiculously cheap. Most people don’t use natural gas or fuel oil to heat their homes in the winter. Everyone uses electric heaters, because residential electricity is around 6 c/kWh. (There’s one river in northern Quebec in the middle of nowhere that has essentially 5 Hoover Dams along the course of the river. It’s spectacular!)
I also have a more personal involvement with one of Quebec’s hydro-plants. I grew up in a town in Quebec called Charny. In the 1940s, they dammed the top of the local water fall (Chutes-de-la-Chaudiere) to power a local manufacturing plant. By the time I lived there in the 1980s, the mill had been long gone, though the dam at the top of the water fall remained. In the late 1990s, the dam at the top of the falls was repaired, and a new micro-hydro turbine was installed in the park surrounding the falls. This power plant has a capacity of 24 MW, enough to power 15,000 homes (which is about the size of Charny). The most amazing part of this power plant is that the waterfall and the park around it look almost exactly the way they did when I was a kid! People still hike there, fish there, picnic there, and my personal favorite, skip rocks along the river there.
My point is that this deal is really good for the city of New York. A private equity firm will be paying for the transmission line, so that rate payers won’t be charged for the project. They’ll get cheap, renewable energy from a company that has a long track record in the power industry, and one which whom I’ve had good personal experiences. The benefits are that New Yorkers will get less expensive power from a greener source. The downside is that some power plant operators will probably lose their jobs at their current power plants. But, the funny part is that the transmission line is going to need construction workers for the next 3 years, and maintenance workers and line operators to make sure it works properly for years once it’s been built. I can’t think of a scenario where the highly skilled operators from ConEdison won’t be able to find gainful employment with the transmission line.
That’s my 2 cents folks. Feel free to disagree with me – I encourage it. Healthy dialogue on issues like this one are the best way to make people aware of what’s going on around them.