Economic slump could herald infrastructure shortage, TransCanada Corp. boss says

Project delays caused by the current economic slump sow seeds of future energy supply shortages and price hikes

June 01, 2009

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“I didn’t say energy shortage,” says TransCanada Corp. chief executive officer Hal Kvisle, in the careful and deliberate way industry generals have of defining exactly what they want to communicate.

“Energy shortages are a combination of two things,” he explains: “a shortage of supply and the infrastructure to get energy from the point of production to point of consumption.”

While supply and delivery are always concerns, it is the shortage of infrastructure that worries the 35-year industry veteran. His steady hand on TransCanada’s helm has once again been commended, this time by the University of Alberta’s School of Business, which made him its 2009 Canadian Business Leader of the Year.

“In a period of financial turmoil, necessary investments in infrastructure are often deferred or don’t get made and that leads to a shortage of infrastructure,” Kvisle observes in an Alberta Oil interview.

Project cancellations, deferrals or delays could in turn lead to a shortage of supply and very high energy prices in the future, he ventures. He recites from an impressive list of statistics to back up his concern.

“North America runs with very skinny margins in terms of pipeline capacity or power line capacity. We have seen the spare capacity margin in every aspect of the energy value chain shrink dramatically over the past 25 years. It used to be 10 to 15 per cent spare capacity and we have seen that shrink down to maybe five per cent.”

To illustrate the dangers of being so close to full capacity, Kvisle uses the analogy of driving a car at full speed all the time, warning that “sooner or later something has got to give.” An example is the big blackout in the eastern United States and Central Canada about five years ago. The vast power failure was blamed on a lineman who failed to cut branches of a tree while working on a power line. The real issue was an electric transmission grid that was so overloaded it could be taken down by such a minor lapse.

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