Hydrophobia, A Literal Unreasoning Fear of Water, Which May Actually Be Reasonable

Blog, Energy, Ian Madsen

While neither the literal ‘fear of water’, nor the gruesome rabies virus, the aversion to massive and unnecessary, expensive new hydropower development is growing.

Aside from the extensive environment disruption, human displacement, and ecological damage big new hydroelectric dams and diversion schemes can cause, their vaunted ‘low cost’ power may not be all it seems, either.

There are dubious assumptions made about economic growth, the energy intensity of that growth, the prices that the power companies will be able to obtain for their increased power output, and what the North American energy industry will look like.

On the demand side, electricity consumption has been very slow growing for several years, now.  Partly due to the severe recession in most of North America, it is also part of a long-term trend to a lower intensity of energy use in the economy.

Computers and televisions, among other things, are much more energy efficient, now, along with lighting, most notably with Light Emitting Diode lamps and other components.  Mobile telephones, tablet and notebook computers also use far less energy-hungry technology than a few years ago, reducing heat, allowing for smaller devices, and lowering costs for consumers.

What few people fully appreciate is that our economy is growing more in services that add value to other services and goods production and distribution, and are less energy intensive than the latter two things, and are becoming a greater part of the economy.

To oversimplify, there are not a lot of new factories being built, but new employment tends to be in offices and retail, wholesale, education, and medical services, which are not as highly energy consuming.

These tertiary and quaternary industries are growing, if not necessarily rapidly, whereas the primary and secondary ones, on a net basis are growing slowly, if at all, in most advanced nations, and these energy intensive sectors are becoming a smaller part of GDP, so overall energy consumed per unit of GDP is declining.  Even in aviation, less fuel per passenger mile or unit mass of freight is being consumed with the new planes and engines that are coming out.

There is another major factor which can disrupt or thwart the plans of the established, legacy power producers in Canada and the U.S.:  distributed power, roughly defined as the independent production of electric power with surplus sold into the market.  While merchant power producers, large companies which produce power independently for sale into the grid, or to dedicated large commercial or institutional customers have existed for some time, they are not what the major ‘threat’ is.

What started out as a government policy to encourage ‘green’ energy such as solar and wind, and small independent ‘run of river’ hydropower or biomass energy plants, has grown to include mandatory utility purchase of surplus solar or wind power, making the large legacy monopoly power utilities the default, backup supplier, increasing their costs and reducing their output.  This means their costs have to be spread over fewer kilowatt-hours sold, raising their prices, as most of their costs are fixed, particularly for the hydroelectric and nuclear-based companies, Crown or private.  These large companies also have the costs of operating and maintaining long and high capacity transmission lines, and the overall grid.  This has, to this point, been tolerable to them.

The new development that is worrisome is that large customers now have options to produce their own power through very efficient fuel cells, using increasingly abundant and inexpensive natural gas, or Stirling engines, which are analogous to a kind of steam engine (without necessarily using steam as the energy-conversion fluid medium).

There are also new heat recovery processes for these sorts of energy production which greatly increase their efficiency and thus lower their costs further, particularly for co-generation, the production of steam and heat for industrial or other uses, along with electricity.  These large customers are now being joined by medium-sized commercial and institutional ones, even building owners, including residential developments.

Meanwhile, as natural gas prices have dropped with the glut brought about by the shale revolution, oil and gas companies are concentrating on finding liquids such as crude oil, but they still find and produce gas as a byproduct.  As crude production has surged in places like North Dakota, West Virginia and Texas, and, increasingly, in Saskatchewan and northeast BC, natural gas production continues to climb, too.

Customers are increasingly confident that this situation will persist well into the medium to long-term future, as exemplified by the striking, radical change in philosophy in Mexico, where the seventy-five-year constitutionally-ordained government monopoly accorded to ineffective and inefficient Pemex has been rescinded.  This could soon cause imports of Texas gas into that nation to be backed up as independent and foreign companies start to develop and produce reserves of gas Pemex has heretofore not had the capacity, funds, or ability to exploit.

Abundant and inexpensive natural gas in North America, and its use in flexible and low-cost distributed power makes dubious any sort of projections of demand for major new hydroelectric projects.

Large customers like utilities, industry, railroads, and trucking companies are increasingly confident of affordable gas prices into the far future.  So, independent production is very likely to make further inroads in lowering potential and actual demand for the output from the large legacy utilities.

Some of these technologies may be scalable down to the level of a family home, endangering the whole premise of economies of scale and the giant utilities that fill that role conceived for them over a century ago.

However, the Crown power companies in Canada persist in advancing plans that suppose demand for their greater output will be there, and at prices that will pay for their massive developments, even assuming that there are no cost overruns, which has never been the case.  Caution and skepticism is warranted, if not outright ‘hydrophobia’.