Manitoba Hydro CEO Kelvin Shepherd talks about Minnesota's hydro needs

Canada is a rare country that generates the majority of its electricity from hydro power. And there's plenty to spare. Winnipeg-based Manitoba Hydro gets more than 30 percent of its revenue from exports, with Minnesota its largest export destination. Hydro power looks particularly good these days, as U.S. utilities seek to add more "clean" energy to their resource base. Earlier this year, Minnesota regulators approved a new route for Manitoba-generated power, a 225 mile-long high-voltage line that will cross five northern counties. The Great Northern Transmission Line is expected to cost $560 million to $710 million and take three years to build. The line, one of several that cross the U.S. border from Canada, will help address the intermittent nature of wind power for its majority owner, Duluth-based Minnesota Power. With wind power on the increase, stable sources of electricity like hydro are needed to fill in production gaps. Manitoba Hydro, a partner in Great Northern, will also get a new route for electricity imports from the U.S. during Canada's peak power season. The company has more than $2 billion in annual sales and operates several dams, particularly on the Nelson River, which runs from Lake Winnipeg to Hudson Bay. The Star Tribune recently talked with Manitoba Hydro's CEO, Kelvin Shepherd, at a hydro power conference in Minneapolis.

Q: How do export sales from Manitoba Hydro compare to five to 10 years ago?

A: They're relatively stable, accounting for about 30 to 40 percent of our generation or revenue, depending on how you want to measure it. As a hydro producer, the amount of energy you can generate depends on your water flow.

Q: Of the company's total power exports, how much is to Minnesota?

A: It's in the order of about 60 percent. Really, Minnesota is far and away the biggest single market, followed by North Dakota and Wisconsin. We probably supply about 10 percent of the electricity consumed in Minnesota. Xcel is our single largest customer there, but Minnesota Power is a very important customer, as well as Great River Energy (power supplier for most of the state's electric co-ops).

Q: What is Manitoba Hydro's role in the Great Northern Line?

A: The line will ultimately be owned by Minnesota Power. We have a commercial arrangement with them to help fund construction, and we will own some of the transmission rights as a result. We don't need a physical asset in the U.S., but we do need transmission rights. We need to use the line to both export and import power.

If you look at our profile of our power usage in Manitoba, we are a winter peaking utility. So, we need a lot more power in the winter than in the summer, which is exactly the opposite of the market down here in Minnesota, where summer is peaking. We import power during our winter peak, and then essentially swap it, exporting in the summer. So, utilities on both sides of the border get to share capacity effectively and avoid building capacity that is underutilized.

Q: How much more demand are you seeing from the U.S. due to clean power mandates, given that hydro is seen as clean energy?

A: U.S. utilities have to take coal out, so the question is what are you going to replace it with? You can replace it with a combined cycle natural gas plant, which is still going to produce greenhouse gas, though obviously at a much lower level than a coal plant. Hydro has the advantage that once it's built, the emissions are really zero. A U.S. utility could import some nice dependable, renewable hydro energy, or build a gas plant. Gas has been cheap lately, so when you look at short-term decisionmaking, a gas plant can be pretty attractive.

Q: There are environmental criticisms of hydro due to potential problems with dams, from silting up rivers to damaging fish populations. Could you address that?

A: Environmental regulation on dams is significant. And as a power producer, one of the things you do, you pick the location of the dam to minimize flooding and the impact on the environment. Then we do a lot of environmental mitigation around fish. For example, we run our own fish hatchery for sturgeon. When we built the coffer dams for Keeyask (a $5 billion project in northeastern Manitoba) to drain the area for construction, we captured and protected all of the fish and reintroduced them later. We had to capture silt to keep it from going back into the water. Erosion is a concern, too, so we do a lot of shoreline protection.

You also have things like debris in the water. We engage with local communities and pay them to help with removal and recovery. Increasingly as we are going into these projects we are engaging with local communities, first with the project and then with ongoing activities to mitigate any impacts.

Q: Can you discuss how Cree First Nations are a partner on the massive Keeyask dam project?

A: We have four Cree nations that are partners. They had referendums in their communities, and basically when the project is finished, they have the opportunity to acquire up to 25 percent of the asset. They have the option to buy in as equity holders or bond holders. They are going to get a return. We have also entered into a development agreement so that indigenous businesses have opportunities to do a significant amount of services and construction work on the project. So far, just under 50 percent of the employment on the project has been with indigenous people.

Mike Hughlett • 612-673-7003