A Sustainable Business Case for the Transition to a Low Carbon Economy in

New Brunswick2019 Integrated Resource Plan

Prepared By Chris Rousewww.newclearfreesolutions.com

Overview2

• Objectives

• What is a IRP

• Renewable Portfolio Standard

• Motivation

• Feasibility

• 3 Step Solution

• Financials

• NB Power IRP

• Timeline

• Peer Review

• Conclusions

• Call to action

Objectives 3

Transitioning 95% of our total energy needs by 2050 to renewables using

our own local renewable energy

sources

NCFS Integrated Resource Plan (IRP)4

• Long-term business plan for NB Power

• Guides decision-making based on:

o Least cost

o Environmental, social, and economic sustainability

• An alternative to NB Power’s current IRP

A made in New Brunswick Green New DealNCFS=New Clear Free Solutions

RPS1

Green the electricity grid 95% Renewable

(already 75% carbon free)

RPS2

Green energy consumption

95% Renewable

(fuel shift or electrification)

Renewable Portfolio Standard (RPS) Model5

Work on both efforts at the same time

Motivation6

• As the owners and customers of NB Power we want clean energy and low rates

Clean Energy36%

Lowest Rates33%

Customer Options

17%

Debt Repayment

14%

New Brunswickers Priorities 2017 NB Power IRP What Was Said Report

So

urc

e N

B P

ow

er

7

FeasibilityNo Economic or Technical Barriers

8

• NB carbon tax of approximately $24/T

• Replace the Federal Carbon Tax $50/Ton

• Replace planned NB Power rate increases

• Will be lower cost to consumers

Investment Plan-Step 1 of 3 “Tax Carbon”

Investment Plan-Step 2 of 3 “Invest In Solutions”

9

Wind, 42%

Fossil Fuel, 5%Hydro, 13%

Solar, 10%

Geothermal, 25%

Bio, 5%

2050 RPS 2 Renewable Generation Mix

• Invest the revenue into renewables and efficiency

• Report annually

• Public input

Investment Plan - Step 3 of 3 “Reinvest In Solutions”

10

• Leverage the Power of Compounding

• Created By Reinvesting

• Displaced Fuel and Purchased Power Cost

• Increased Revenue

Investment Plan11

Year-Technology

Type

Carbon Tax $/Year

$24/Ton

Accumulated Reinvestent

$/Year

Total Investment $/Year

Efficiency/Fuel Switching

Investments-Debt

Repayment-Dividend

Displaced Cost - (O&M

+Fuel)

2019 Hydro $370,000,000 $0 $370,000,000 $24,093,1232020 Hydro $370,000,000 $24,093,123 $394,093,123 $25,661,9842021 Wind $370,000,000 $49,755,107 $369,755,107 $50,000,000 $27,935,1762022 Wind $370,000,000 $77,690,284 $397,690,284 $50,000,000 $30,045,6922023 Wind $370,000,000 $107,735,976 $427,735,976 $50,000,000 $32,315,659

2024 Natural Gas

$370,000,000 $140,051,634 $360,051,634 $150,000,000 -$7,596,005

2025 Geothermal

$370,000,000 $132,455,629 $312,455,629 $190,000,000 $31,419,524

2026 Bio $370,000,000 $163,875,153 $233,875,153 $300,000,000 -$4,843,3592027 Wind $370,000,000 $159,031,795 $229,031,795 $300,000,000 $17,303,462

Total RPS Stage 1 Efficiency/Fuel Switching, Debt, Dividend $/Lifespan: $5,100,000,000Total RPS Stage 2 Efficiency/Fuel Switching, Debt, Dividend $/Lifespan: $8,150,000,000

RPS 1&2 Projections vs. Business-as-Usual-12

2040 RPS 1

2050RPS 2

2014-15 NB Power Annual Report

Total Generation (MWh) 18,223,000 32,755,591 18,223,000

System Rate ($/MWh) $101 $101 $101

Total Revenue $1,791,000,000 $3,183,055,378 $1,791,000,000

Total Fuel and Purchased Power (incl. exports) $383,197,360 $450,842,040 $826,000,000

Net Debt $0 $0 $4,913,000,000

Financing Cost/Interest $0 $0 $229,000,000

Net Earnings $641,938,977 $1,246,925,026 $73,000,000

Total RPS Stage 1 Capital Investment $/Lifespan: $10,850,823,211Total RPS Stage 2 Capital Investment $/Lifespan: $22,203,125,185

Sensitivity Analysis Technology 13

Technology Sensitivity Gas 95% Renewable NuclearTotal Generation MWh 18,223,000 18,223,000 18,223,000

Total System Rate $/MWh $101 $101 $101Total Revenue $/Year $1,791,000,000 $1,791,000,000 $1,791,000,000

Total Fuel and Purchased Power Including Exports

$/Year$494,701,520 $383,197,360 $429,464,080

Total O & M $/Year $327,672,649 $367,169,556 $358,441,627Debt to Equity Ratio 0:100 0:100 0:100

Financing Cost/Interest 0 0 0Total Net Earnings $/Year $652,533,078 $693,514,966 $600,987,223

• Renewables are Least Cost Option

• Renewables are Least Risk

• Renewables are Most Profitable

Public Vs Private Financing (PPA’s) 14

Financing Sensitivity

Private Financing (Power Purchase

Agreements)Public Financing via Carbon Tax

80% Debt Financing

Annual MWh In Province 13,648,000 13,648,000 13,648,000Annual MWh Export 4,575,000 4,575,000 4,575,000

Total Generation MWh 18,223,000 18,223,000 18,223,000Total System Rate $/MWh $101 $101 $101

Total Revenue $/Year $1,791,000,000 $1,791,000,000 $1,791,000,000Total Fuel and Purchased Power

Including Exports $/Year $1,340,331,600 $383,197,360 $383,197,360Total O & M $/Year $191,072,000 $367,169,556 $367,169,556Debt to Equity Ratio 0:100 0:100 20:80

Financing Cost (Interest) $/Year $0 $0 $387,027,411Net Debt 2040 $0 $0 $7,442,834,825

Total Net Earnings (Interest) $/Year $179,929,733 $693,514,966 $306,487,556

• Privatization Will Cost YOU More

• Privatization Will Reduce OUR Profits

• Privatization Will Benefit Very Few

NB Power IRP-Reduce and Shift Demand15

• Relies on Efficiency Subsidies

• Very Little Renewables

• Deferral-Almost all capacity Needs Replaced in 20141

So

urc

e N

B P

ow

er

Year NB Power Plan Capacity2018 Reduce and Shift Demand 621 MW2020 Embeded Generation 13 MW2021 LORESS 80 MW2031 Millbank Ste Rose Refurbishment 297 MW2033 Mactaquac 653 MW2040 Lepreau Replace in Kind 660 MW2041 Natural Gas 1236 MW2041 Millbank Ste Rose Refurbishment 198 MW

Efficiency Subsidies-Economic Sustainability 16

$1,165

$1,858

$0

$500

$1,000

$1,500

$2,000

Net Earnings

Net Earnings Comparison Total 2019-2028 (in millions $)

With Efficiency Without Efficiency

• Efficiency Subsidies results in $700 Million lost in Net Earning over 10 years

So

urc

e N

B P

ow

er

Efficiency Subsidies-Social Sustainability17

So

urc

e N

B P

ow

erProgramTotal

Participants 2015 to 2021

Total In Rate Class

Percentange of Particpants VS

Non ParticpantsResidential Home Retrofit 9776 366487 2.7%Residential Direct Install 8100 366487 2.2%

Residential New Contruction 2260 366487 0.6%

Ductless Mini-Split Head Pump 14659 366487 4.0%

Commercial Building Retrofit 428 31326 1.4%Small Buisiness Lighting

Program4600 31326 14.7%

Commercial New Contruction Program

18 31326 0.1%

Small/Mediam Industrial Program

197 1827 10.8%

Large Industrial Program 69 1827 3.8%

• Very Few Rate Payers Benefit

• We All Pay for the Programs

• Large upfront costs = Barrier to Accessibility

Efficiency Subsidies-Environmental Sustainability18

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000Annual Emissions Mt/Year Efficiency Vs No Efficiency

With EfficiencyWithout Efficiency

• Only 5% Reduction in Emissions Over 25 Years

• Because our Grid is already 75% Carbon Free

• Using Less Electricity doesn’t mean less carbon

So

urc

e N

B P

ow

er

Instead of Subsidies: Efficiency Investments 19

Program UnitsCost Per

Unit Investment Return On Investment

Electrode Boiler MW 400 $300,000 $120,000,000Increased Electricity Sales Dependent on Rate Design

School Buses 1200 $300,000 $360,000,000Increased Electricity Sales Dependent on Rate Design

Normal Buses 1200 $300,000 $360,000,000Increased Electricity Sales Dependent on Rate Design

EV Car Incentive 588000 $2,000 $1,176,000,000Increased Electricity Sales Dependent on Rate Design

On Bill Financing Solar Lease-Efficiency Loans $500,000,000

Interest Rate = Used to assure no cross subsidization

Average Return 5.6%

DSM Total Investment $2,516,000,000 $1,822,602,066

• No Cross Subsidization

• Fair to Everyone

• Efficiency Pays for Efficiency

• No Upfront Costs=Better Access

NB Power IRP Rate Projections 20

• Deferral Will Cause Huge Rate Increase

• Almost 300% Rate Increase

• Intergenerational Inequity

-

0.05

0.10

0.15

0.20

0.25

0.30

Ave

rate

Rat

es C

en

ts/K

wh

Year

NB Power IRP Average Rates

So

urc

e N

B P

ow

er

Peer Review

UNBSJ Professor of Economics, Dr. Rob Moir:

“The concept of reinvesting in environmentally-friendlier energy production and energy efficiency to create a compound interest effect is founded economic theory. As such this policy should be considered by all provinces and not only New Brunswick.”

NB Power System Planning Engineer Darren Clark:

“We reviewed Mr. Rouse's model and functionally I believe the majority of what he is setting out to do, the model is accomplishing.”

21

Peer Review 22

• Displaced Cost is the Most Important Part

• Comparison of NB Power Model VS NCFS Model

• Results are Essentially Identical

$0$100,000,000$200,000,000$300,000,000$400,000,000$500,000,000$600,000,000

2019

2020

2021

2022

2023

2024

202

520

2620

2720

2820

2920

3020

3120

3220

3320

3420

3520

3620

3720

3820

3920

40

204

1

Dis

pla

ced

Co

st

Year

NB Power Model VS NCFS Model Displaced Cost

NB Power Model New Clear Free Solutions Model

Timeline23

• Goals are Always Achieved

• Only the Time Changes-Goal Is Always Achieved

• Due to Compounding Nature of Policy

0

20000000

40000000

60000000

MW

h

Best Worst Case

Base Best Case Worst Case Stage 1 RPS

24

Conclusions24

• No technical or economic barriers

• Provides all capital by pricing carbon and reinvesting

• Mitigates financial risks

• Keeps power rates low and stable

• Pay down NB Power debt

• Reduces carbon emissions significantly

• Creates many jobs - huge construction boom

• Pays huge dividends to the province benefiting all New Brunswickers

Call To Action25

• Sign our letter

• Write to public officials

• Talk to Your Friends

• Share on Social Media

• Attend Events/Protests

A made in New Brunswick Green New Deal

www.newclearfreesolutions.com