Northern Energy Hub

Imagine that you had a wealthy neighbor with an insatiable appetite for something that he had the capability of providing for himself, but apparently not the inclination. It might look like a good business opportunity. This is essentially the situation facing the Canadian Province of New Brunswick, which is at various stages of planning and constructing a new "energy hub" consisting of three big projects, an LNG terminal, a new refinery, and a nuclear power plant, all primarily intended to serve the market in the northeastern US. Yesterday I was interviewed by the St. John, New Brunswick radio affiliate of the Canadian Broadcasting Corporation on whether the expected US demand for these projects is likely to materialize.

Between the call from the show's producer and the actual interview I looked up the electricity forecast for the Northeast from the Energy Information Agency (EIA) of the US Department of Energy. The EIA expects electricity demand to grow by 22% by 2030, compared to 2005. That's somewhat slower than the average for the US as a whole, but still about 0.8%/year, and without any demand factored in for plug-in hybrid cars or other uses not already tapping the grid.

I suggested to the host that the key uncertainties for New Brunswick to consider were energy efficiency, the growth of renewables, and the Northeast's allergy to new energy infrastructure. Efficiency is clearly going to play a role, but will it reduce absolute demand or merely provide new headroom for growth--compact fluorescent light bulbs saving the power to run plasma TVs? Renewables could also satisfy much of the incremental demand in the region, helped along by state Renewable Portfolio Standards and a potential federal RPS, but only if big projects such as Cape Wind and the smaller Long Island wind farm can overcome strong objections by local interests. Nor does it seem very likely that the Northeast will build enough LNG import capacity of its own, given the opposition to projects like Broadwater.

The toughest question I received was for an up or down call on building a nuclear power plant in New Brunswick to supply the US. I hesitated, because it's not yet clear that nuclear power will be widely accepted as "green", even though some prominent environmentalists have endorsed it as a key strategy for countering climate change. The total regional demand growth anticipated by the EIA works out to about 7500 MW of new capacity within 25 years. One new nuke plant would deliver a big chunk of that, and unless its output got that "green e" label, it might face a tough fight for market share. But compared to the likeliest alternative source for baseload power in this period, a coal power plant with carbon sequestration, I think an export-oriented nuclear plant could succeed.

In order for New Brunswick to win the bet it is preparing to make, all that really needs to happen is for the public and governments of our northeastern states to continue doing what they've been doing: using energy in steadily growing quantities, despite high prices, and reacting with hostility whenever someone wants to build new infrastructure to meet their anticipated future needs. Of course, if they heeded the various wake-up calls they've been getting--the Blackout of 2003, climate change, and air quality problems--and suddenly started conserving or investing more, New Brunswick's new facilities might end up sitting idle.