ECONOMICS TOP OF MIND IN DAM PROJECT REVIEW

Any alternatives will have to align with Clean Energy Act’s objectives

When the New Democrats pushed for quick answers on Site C this week, they put significant restrictions on what the B.C. Utilities Commission can and cannot do in terms of a review.

The cabinet directed the commission to identify alternatives that could provide “similar benefits” at “similar or lower cost” to the 100year supply of hydroelectric power from the dam now under construction at Site C on the Peace River.

But those options must conform to the “energy objectives set out in the Clean Energy Act,” the very piece of legislation enacted by the B.C. Liberals that excluded Site C from review by the commission in the first place.

The act objectives narrow the alternatives to electricity generated from “clean or renewable resources” including “biomass, geothermal, solar, ocean or wind” and excluding any source that would increase green house gas emissions.

Doomed by that reference is the option of building a state-of-the-art natural gas-fired generating station — which could be done for several billion dollars less than the upfront cost of Site C. Ditto reactivating Burrard Thermal, B.C. Hydro’s idled (and aging) gas-fired generating station near Port Moody.

By aligning the review with the objectives of the act, the cabinet excluded the option of repatriating B.C.’s share of the electricity generated in the United States under the terms of the Columbia River Treaty.

The downstream benefits have sometimes been mentioned by New Democrats as a source that could reduce the long-term need for Site C. But another of the guiding principles is “electricity selfsufficiency,” defined as power coming “solely from electricity generating facilities within the province.”

The cabinet directive further says that any alternative to Site C power would have to include “similar benefits” in terms of “firming, shaping, storage and grid reliability” to the electricity supply.

Those technical considerations would appear to put wind and solar power at a comparative disadvantage to hydro power, for the reasons identified this week by Marc Jaccard, who once headed the BCUC for the NDP.

“In its rush review of Site C, the B.C. Utilities Commission must address the widespread assumption that the dam’s economic value has declined relative to its renewable competitors, especially wind and solar,” wrote the Simon Fraser University energy economist in an opinion piece published in The Vancouver Sun on Friday.

“As I frequently hear and read,” Jaccard continued, “the falling cost of wind and solar is eroding the economic justification for Site C. This sounds logical. But it isn’t.”

Here’s why: “Renewable electricity generated by wind or solar or run-of-river hydro (no reservoir) is produced only when there is wind or sunshine or high run-off in the spring. On a winter afternoon, when Hydro’s electricity demand peaks, these non-dispatchable sources may produce nothing.”

Whereas with the combination of a hydroelectric dam and reservoir, the power can be stored and dispatched at times of greatest need and therefore greatest value.

“I have frequently seen wind and solar compared to Site C in terms of cents-perkilowatt hour — the ratio of annual costs to annual generation. But this ratio completely ignores the value dispatchability,” wrote Jaccard.

“Dispatchable electricity sources can be 10 times or more the value, per kilowatt hour generated, of nondispatchable sources. Comments that wind and solar are getting cheaper than Site C because their costs are falling are nonsensical. These costs must be compared to the value of the electricity.”

That analysis could still leave biomass, geothermal and tidal generating plants as alternatives to Site C.

But those are relatively unproven options here in B.C. The cabinet directive obliges the commission to focus on “commercially feasible generating projects” within the six weeks allowed for a preliminary report.

The tight time frame also explains why the cabinet directed the commission to rely on B.C. Hydro’s own forecasts of energy and capacity demand in the review of Site C.

Those forecasts have been in front of the commission since last year as part of a longer review of Hydro rates, and there simply wasn’t enough time to send the exercise back to square one.

The commission was granted some leeway to identify factors that could change last year’s forecasts in the “short, medium and longer terms.” But again, the starting point for getting those would be Hydro itself.

Lastly, the cabinet chose to remind the commission that “in carrying out its inquiry, it must be guided by the understanding that the inquiry is not a reconsideration of decisions made in the environmental assessment process or by statutory decisionmakers or the courts.”

So no revisiting the controversy over flooding agricultural land (the amount is “not significant” according to the joint environmental review) or the First Nations concerns that the courts have so far resolved mostly in favour of B.C. Hydro.

Rather the commission’s job is to answer a narrow set of mostly economic questions and report back to cabinet with final answers by Nov. 1. Then, as BCUC chair and CEO David Morton put it this week, “it is the government’s decision at the end of the day.”

Once armed with the answers from the commission, the cabinet can take up any other non-economic considerations about the project as it sees fit.

But by the time the New Democrats turn their minds to the fate of Site C, construction will have been proceeding at the current pace of $2 million worth of work a day for another three months and counting.

In its rush review of Site C, the B.C. Utilities Commission must address the widespread assumption that the dam’s economic value has declined relative to its renewable competitors.