The Cost of Progress

We’ve had lots of queries on how we’re estimating costs for undergrounding in the Heartland Project.  First, let me say that we can only estimate costs based on what we have heard and seen but that better estimates should be forthcoming when the underground studies by AltaLink/EPCOR/AESO and Alberta Energy are completed.

Since these sorts of infrastructure projects are amortized over 40 years or so, we’re generally less interested in the absolute amount of capital expenditure and more interested in what it means to the average Albertan’s monthly electricity bill.  The AESO has said that the $8.1 billion capital expenditure they want to make to strengthen Alberta’s electric grid will cost the average household $8.00 per month on their bill, so, with this in mind, we can say that a capital expenditure of $1 billion amounts to an incremental $1/month/household.

What we do know is that the cost of the cable in the Nexans 500kV underground line in Shanghai worked out to $3M per kilometre. In this case the AESO wants to run 6,000MW of power which will require 4 of these circuits for a total cost of $12M per kilometre. (Incidentally, we certainly don’t need this out of the gate and could quite happily exist for a decade or two with half of this, but for now let’s assume that the whole 6,000MW capacity is being built).

On top of this cost there are installation costs and the cost of groundworks to bury the cable, plus a couple of devices known as shunt reactors etc., and we’re going to allow $5M per kilometre for this. (The actual undergrounding costs are likely to be pretty low as most of this line can be directly buried). So, now we’re at $17M per kilometre.

To calculate the incremental cost of going underground we need to subtract the cost of the above ground line which the AESO has estimated at around $4-$5M per kilometre. We’ll use $4.5M leaving an incremental cost of undergrounding of $17M – $4.5M = $12.5M per kilometre.

The entire distance from Ellerslie to the Heartland is about 40km, so if the entire line is to be undergrounded, the cost would be about $12.5M x 40 = $500M which would cost the average household 50 CENTS PER MONTH on their electricity bill. EPCOR has suggested that undergrounding 25km would cost $0.93 per kilometre but we feel that their estimate of 10x the cost of above ground is unrealistic. The real answer will be in soon but I suspect it will be closer to $0.50 per month which is good news as the recent Leger Marketing survey shows the average Albertan feels that spending between $3.50 and $4.00 for undergrounding is acceptable.

~ by RETA on November 7, 2009.

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