Google and energy

I don’t want to beat this one to death but on the heals of this editorial, I thought I would make explicit a key point (IMO).

The government can’t lose millions from subsidizing electricity rates for Google to generate less than a million in new tax revenue. 

What I mean by that is simple.  I don’t know the exact rate now but let’s say the blended average rate for a large industrial user is $55/mwh.    A large Google data centre might end up using $7-8 million worth of electricity from NB Power.  If the government came along and decided to give Google an incentive rate of $35/mwh, it would lose about upwards of $2.8 million per year in revenue to NB Power.

For that $2.8 million in perpetuity, the government would receive slightly less than one million in incremental tax revenue per year (estimated based on 70 jobs @ $75k per year).

But, of course, energy policy is not that simple.  If NB Power changed New Brunswick residents what NS Power changes Nova Scotia residents for electricity, that would raise millions in new revenue for the government. 

The cost to produce hydroelectric power is much lower than coal-based power or oil based power.  Wind power is still the most costly of the mix in New Brunswick by a margin.  Nuclear, hydro and wind have huge capital costs and very low operating costs (relatively) while oil and coal fired electricity have moderate capital costs but high operating costs.

If Google was allowed to set up near a river and fed hydro power (like their recent takeover of an old paper mill in Finland), that might be a model that made sense. 

However, there was a mill in Bathurst that had onsite hydroelectricity generation capacity and when the mill closed, the government gave the generation capacity back to NB Power instead of viewing it as an economic asset to be packaged with the mill for redevelopment.

I don’t claim to be an expert in electricity or energy policy so I will end with this.  It seems to me that the government could look to find ways to generate or source electricity such that it could be offered to industry not as a ‘subsidy’ but as a lower rate for economic development.

No one talks about NB Power ‘subsidizing’ residents with cheap power but by offering it at a lower rate than the ‘competition’ for residents (i.e. Nova Scotia, PEI, etc.) you could make that argument.

I think the same thing exists with industry.  If you can develop a generation mix and allocation model that leads to the ability to offer $40/mwh electricity to large industrial users in return for high paying jobs and economic activity, then it is not a ‘subsidy’, it is an energy policy that is based on low cost power as an economic development driver.

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One Response to Google and energy

  1. Smalltown says:

    A Google Data Centre would be a great tie in with a Green Energy Park. A park that could produce energy through wind or biomass, and maybe use Natural Gas Co-generation for a backup. (I noticed you didn’t mention gas above even though its price is still really low compare to other energy sources)

    Most of the energy could then come from energy sources that were at least essentially ‘off the grid’.

    Even just plain Natural gas co-generation would make sense if this government wasn’t all tie up in how they can help their cronies, vs what is actually good for the citizens of NB.

    This provincial government needs to use the ingenuity that is found all over this province as a lever. The focus on old style business models is not going to work. When looking at attracting a company like Google you need to be innovative and think ‘outside the box’.

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