Nova Scotia Power Inc.’s under-performing biomass plant in Point Tupper will save ratepayers more than $9 million in annual fuel costs, starting in 2016, because it is incapable of meeting its output targets.

The plant is operating at about 70 per cent of its gross capacity of 63.8 megawatts. At its best, it can produce 80 per cent of the power originally required under renewable energy regulations, according to recent evidence on fuel costs prepared by the utility for a forthcoming hearing on fuel costs. Plant maintenance and moisture levels in the fuel stock have reduced the output of the plant, according to the utility.

In a filing made to the Nova Scotia Utility and Review Board in August, in relation to resetting the base cost of fuel, the utility said it expects the biomass plant will continue to operate at these low levels in 2015 and 2016.

The shortfall in power from the plant will be met by other forms of renewable energy, and the utility says it can still hit provincial targets for renewable energy.
 Less power coming from the costly biomass plant means less money is being spent on fuel stock, so ratepayers will be charged less for the fuel component of their bills when the utility resets the base cost of fuel in 2016.
But even though about $9 million will be subtracted from the utility’s annual fuel costs, starting next year, the base cost of fuel will still be set $111.4 million higher than in 2014, when the base cost of fuel was set at $450.7 million. Variations above or below the base cost are added to or subtracted from power bills in the following year.

Nova Scotia Power owns the biomass plant. It is annexed to the mill owned by Port Hawkesbury Paper LP, which pays for steam drawn from the plant but not for electricity generated at the plant.

Power produced from the biomass plant is more costly for ratepayers than power generated from coal and sometimes also from natural gas, but the government requires the utility to operate the plant regardless of cost.

The province, meanwhile, is considering putting a hold on even more expensive, small-scale biomass projects that have been approved under the community feed-in tariff program. Government cancelled that program this month, due to the extreme cost of buying power from small-scale projects with locked-in power rates for 20 years.

As well as cancelling the feed-in tariff program, it has asked the utility for an estimate of cost savings if 10 megawatts of biomass projects, approved under the program, were not constructed in 2016.

While government seems keen to find potential savings to keep a lid on power rates by barring further biomass generation from small-scale plants, the utility is pressing ahead with a tentative agreement to purchase an equivalent amount of biomass power from Minas Energy, formally known as Minas Basin Pulp and Paper Co. Ltd.

A Minas Energy executive, John Woods, confirmed in an interview Friday that the company has “a power purchase agreement with Nova Scotia Power (that is) still in the negotiation stage.” Woods said the 10-megawatt biomass project planned for Hantsport, on the cards for years, remains “in development stage” but should be built and operating by 2017.

Nova Scotia Power’s most recent load forecast anticipates having that extra 10 megawatts of capacity from the proposed biomass plant on hand in the winter of 2016-17 to help it meet peak demand.

But the shortfall in power from the Point Tupper plant, and the resulting savings, raise the question of whether it is cost-efficient or necessary for the utility to purchase additional power from a new biomass plant, especially when the province seems keen on stalling biomass production to save costs and keep a lid on power rates.