A $600M solution: Holyrood thermal plant can back up Muskrat Falls for another 8 years

An independent assessment of the generating station at Holyrood reveals that the aging and polluting oil-fired plant in Newfoundland's Conception Bay can operate until the end of the decade as a backup to Muskrat Falls, but it won't be cheap — and it could further affect power rates.

Newfoundland and Labrador Hydro hired Hatch, an international engineering company, to conduct the assessment of the fuel-burning Holyrood generation station, which will be decommissioned when the costly Muskrat Falls hydroelectric project finally comes on stream. 

Under one scenario, the report  determined that Holyrood could provide "recall power" — the term used to describe the time between the call for power and synchronization with the grid — on four hours' notice in the event of a major Muskrat outage.

However, such a scenario would cost more than $600 million between 2022 and 2030, with fuel and capital upgrades accounting for most of that amount, the report says.

The roughly $65-million annual cost to maintain Holyrood is the equivalent to adding one cent per kilowatt-hour to power rates, according to previous disclosures by Hydro.

It's a cost that wasn't anticipated — or included in cost estimates — when the Muskrat Falls project was sanctioned a decade ago, since part of the justification for building Muskrat Falls was being able to close Holyrood.

But there are concerns about the reliability of the power line that will transmit Labrador electricity to the Avalon Peninsula, prompting a reliability and resource adequacy review of the province's power grid to determine what, if any, backup generation will be required when the Muskrat Falls project is fully commissioned.

The Hatch report considers several other options with longer startup times for Holyrood, but with only marginal savings over the four-hour scenario.

The assessment also determined that continued operation of Holyrood beyond 2030 may be viable.

"The plant, given its age, is generally in good running condition," the report reads. 

The report into the potential long-term viability of the Holyrood station was received by N.L. Hydro on March 31.

The Crown-owned utility is scheduled to deliver its recommendation on whether to maintain Holyrood, or invest in other forms of backup power, to the Public Utilities Board this summer.

"The analysis performed by Hatch will serve as an input to us as we work to ensure the long-term reliability of the provincial power system," a Hydro spokesperson wrote in a statement to CBC News. "The Hatch condition assessment provides additional clarity to Hydro as we consider all options for reliable and least cost system operations."

Hatch recommends that a cleaner burning diesel auxiliary boiler be installed at Holyrood to keep the plant in warm idle mode, which would still incur annual fuel costs of roughly $25 million and require a staffing complement of 58 people.