BC needs a short power nap – or at least a time-out in the corner bedroom to get things straight on energy generation in the province.
Site C, for example, warrants a serious rethink.
I know, I know: construction of the third dam on the Peace River is going to generate a lot of jobs – an estimated 35,000 direct and indirect – and a lot of renewable energy. Hard to pull the plug on that.
But there are a growing number of hard questions needing more than softball answers.
Public Offerings’ resident megaproject financials enthusiast (Syd C) has compiled a lengthy list. They’re not all going to fit into this stick of type, but here are some key points.
First: the project is going to be very expensive.
Syd C is big on numbers, and Site C is a big number, whichever way you slice it. Around $8 billion according to press release estimates, but it will be closer to $11 billion when all is said and done.
Not to worry, says Hydro. Power rates “are not affected by projects in the development stage.”
Phew! A free ride for a few years, until construction starts, and then someone has to pay all of those short-term jobs with long-term debt. Assuming an $8 billion cost with an 80/20 debt-equity ratio, consumers will be on the hook for around $6.4 billion in debt and interest to service Site C.
Must be worth the investment, though, aside from all those government jobs created. Right, Syd?
Apparently not.
Hydro estimates Site C will add roughly 5,100 gigawatt hours (gWh), or 9%, to the grid of around 55,000 gWh. Syd’s not impressed. The gain, says he, “is dwarfed by the project’s 50% impact on Hydro’s balance sheet.” And because the dam is downstream from the Peace River’s other generating systems, its ability to provide power year-round to meet peak demands (capacity) is a scant 53%.
Site C is also distant from customers. That means roughly 6% to 10% of its power will be lost on its way to market, and, compared with what’s available elsewhere, it will be pricey. According to Hydro, at between $87 and $95 per megawatt hour (mW/h) it’s “among the most cost-effective options available for BC Hydro for a new electricity generation project.”
But, as Syd points out, power from across the border and elsewhere is available at $30 to $41 per mW/h. It’s not just residential consumers who will be saddled with Site C’s higher energy costs. The province’s mining and industrial customers will also have to bear them, which eliminates another competitive edge in the global market.
Meanwhile, as Syd suggests, the natural gas-fired Burrard thermal power generation plant, which has roughly 70% more effective capacity than Site C, could be refurbished to deliver a 100% capacity year-round at a fraction of Site C’s cost and take advantage of B.C.’s abundant natural gas resource. It’s also near the area of most demand, “thus avoiding distribution losses and a flooded valley.”
Syd’s also interested in knowing why Hydro maintains that population growth of roughly 1.2 million (27%) over the next 20 years will increase electricity needs 40% over 2012’s estimated demand when a population increase of 1.1 million (33%) in the previous 20 years increased demand by only 22%.
Good questions that await good answers. In the meantime, they warrant sober second thoughts on a major undertaking that could saddle the province with an energy white elephant it can ill afford.