Cheap power and economic development

Manitoba was the only Canadian province that was competing with New Brunswick to attract call centres in the early 1990s. By the mid to late 1990s every province in Canada was trying to attract them.

Manitoba is now out front its the data centre attraction efforts.

A number of large data center operators are evaluating Manitoba, Canada as a possible location for major projects. Why? Cheap, renewable energy, and tons of it. With power costs driving many data center site location processes, and corporate mandates for “green” facilities, the central Canadian province’s ample supply of affordable hydro and wind power is attractive. Large power customers in Winnipeg paid an average of 3.6 cents per kilowatt hour in 2007, cheaper than the average rate in virtually every state in the U.S. except Idaho, as seen in our chart of state-by-state energy prices. That’s all clean, green power from Manitoba Hydro, which generates power from 14 hydroelectric generating stations throughout the province. Not green enough? Manitoba Hydro also purchases the output of a 99-megawatt wind farm in St. Leon, Manitoba to augment its hydro generation capabilities.

New Brunswick cannot compete with Manitoba with its power rates. I don’t know what the exact cents per kilowatt hour are in New Brunswick but suffice it to say it is at least 50% or more higher than Manitoba for large industrial users.

And that would translate into possibly several million a year in savings in Manitoba for a large data centre.

It would seem to me that peripheral places like New Brunswick should make every effort to be a low cost power location. It should be relatively easy way to generate competitive advantage (no pun intended).

That is why I must reiterate my concern over the strategy to generate power for the export market. The real strategy should be to find a way to develop competitive power rates here and market that advantage to data centres, large manufacturers, forestry firms, etc.

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0 Responses to Cheap power and economic development

  1. nbt says:

    Manitoba? I don’t know David. As I see it Manitoba severely under prices its electricity but still collects close to $1.8 billion in equalization annually. Some experts argue that the below-market price electricity subsidy is worth a skyrocketing $1.2 billion so therefore they suggest it’s only fair that this subsidy be returned to “have provinces” by way of deducting from Manitoba’s equalization bottom line.

    In other words, it would mean that they would get a lot less equalization a year (after the deduction). But again, as I see it, it’s the right thing to do since the burden falls on taxpayers all across Canada, especially those in Ontario (largest population density).

    I mean, is it fair to suggest that Albertans and Ontarioans pay Manitoba [via higher transfers] to subsidize its price for hydro electricity? I don’t think so, especially since Alberta charges the real price for its oil.

  2. mikel says:

    Alberta! Hell, when’s the last time NB farmers got a multibillion dollar subsidy when ‘mad potato’ struck? They barely got a nickel when they were stuck with a GM crop when McCain announced they would only buy non-GM spuds. And it was the feds and McCain who pushed the GM product in the first place. YOU helped give billions to Alberta processors, in a deal that if Canada had any functioning media would have been far more scandalous than the Gomery silliness (the province refused to audit it and there was evidence it was all going to american processors who kept chicken and pork prices artificially high).

    As we’ve said numerous times, Alberta has benefitted more from one R&D tax break than NB gets in equalization. Harper said he was going to cut it, but I haven’t heard whether he has. Besides that, it was the feds that propped up exploration and development back when oil prices made it an investment pariah.

    And again, NBT has such a limited view of ‘subsidies’ that its his own particular view. By far the biggest subsidy ANYONE can get is to have the feds GIVE you land that courts are increasingly stating doesn’t belong to them. Canada has been censured by the UN over human rights abuses of the Lakota natives, which puts us in the fine company of China and Myanmar. The only defense given is usually ‘well, there aren’t as many natives to be genocidal on so its not as bad’.

    And of course YOU also still contribute TEN PERCENT of Alberta’s budget, fully ONE THIRD even the percentage of New Brunswick’s.

    Fortunately, I haven’t heard ANYONE making the claims that NBT is making (except the usual garbage from fraser). It’s ironic that the ‘logic’ of subsidies from right wing dumbtanks extend to renewable energy, but corporate welfare never extends to things like those mentioned above. I’ve got news, that LNG terminal still ‘costs’ new brunswickers, even though the province didn’t technically write Irving a cheque (which seems to be the only ‘version’ of corporate welfare espoused here).

  3. mikel says:

    But Dave, you do far too good a job. I hate to say it but maybe you need an editor. You are SO truthful that your blog consistently undermines your main policy theme. OK, so it was me that mentioned that data centres hardly employ anybody, but here we see that there is NO WAY the province can compete with Manitoba or Quebec.

    Ironically, AREAS of the province could have benefitted if there weren’t a ‘one size pays all’ view of energy prices. Contrary to what NBT says, there is a reason non renewables are different from renewables. There is a capital cost to build them which can be amortized, but essentially after that there are few jobs from resources, big risks, and an unpredictable result-particularly in places like NB where they are cutting down all the trees.

    However, for Manitoba, we can look at NBT’s own source for news, the Frontier Centre for deranged market studies (yes, I’m crabby this morning), which ADMITS that Manitoba has the lowest private capital investment in the country. So IF low energy prices were all it took, Manitoba would be burgeoning. It’s not, so I suspect suffers from the same problems as Atlantic Canada.

    But this is a very relevant argument, though not for the reasons given, just ask any Manitoban energy consumer and compare his bill to yours. Again, the fight comes down to using public resources for the public, for for ‘special interests’-ie. the market. That’s a big debate, but one that isn’t actually going on in your legislature.