A government review of BC Hydro that could dramatically reduce the amount of renewable power the utility buys has raised investment uncertainty among B.C. First Nation communities, small clean energy proponents and their financial backers.
At risk are tens of millions of dollars in potential investment – and the hopes of aboriginal communities of creating wealth and economic opportunities through small-scale energy projects. As the two-day Generate 2011 clean energy conference wrapped up in Vancouver last week, delegates said investors look elsewhere if the provincial government review kills Hydro’s standing offer program, which gives proponents of viable hydro projects of under 10 megawatts a guaranteed purchase procurement agreement.
According to Cindy Stern, CEO of Port Alberni’s Tseshaht First Nation, the review “is being seen by many First Nations who are trying to get involved or are involved as being a risk, and there’s concern about the standing offer program or potential changes.”
“And it’s perceived that your policies are starting to bump into each other.”
Stern, who was addressing a panel that included Jobs, Tourism and Innovation Minister Pat Bell, wanted assurances that the provincial government was not jeopardizing positive developments in the clean-energy sector.
The Clean Energy Act and the 2007 BC Energy Plan require that Hydro:
•be energy self-sufficient by 2016 at critical water levels; and
•acquire a surplus of 3,000 GWh of “insurance energy” at critical water levels by 2020.
According to the review, the self-sufficiency policy significantly constrains Hydro’s ability to deliver cost-effective energy solutions. The financial burden of meeting this government direction, it adds, would be passed on to ratepayers via rate increases.
According to the government, if the definition of self-sufficiency were based on average rather than critically low water levels, BC Hydro would be close to being self-sufficient now.
Stern told Business in Vancouver that the standing offer program provides an opportunity to develop small hydro projects like the ones that many First Nations bands are planning because a guaranteed purchase agreement gives bands the certainty they need for financing and the security for taking the risk with their community to develop the projects.
“So any risk to or pullback on the standing offer program could have a real impact on First Nations’ involvement in this sector.” The Tseshaht community is developing a $9 million run-of-river project on the West Coast’s Alberni canal.
“This is our first one,” Stern said. “We hope it’s not our only one.”
Bell was also told that many companies had come to B.C. on the basis of the self-sufficiency definition, and that reviewing it could negatively affect them.
“A lot of the investment that’s coming here is because there’s this certainty around the target for being self-sufficient,” Stern told BIV. “That self-sufficiency really drives a lot of the momentum, and it creates opportunity where, if you’re into development, you can get financing and you can get partners because they see a real opportunity.”
Bell confirmed that a change in the definition would change the amount of energy Hydro would have to buy to achieve self-sufficiency.
But Bell stressed that the government is finding ways to support First Nation communities’ economic development objectives “and I know that clearly one of those areas is around energy and energy production.”
Speaking on the sidelines of the same conference, McLeod Lake Indian Band Chief Derek Orr extolled the virtues of independent power producers (IPPs).
“They provide jobs for our members, contracts for our companies and revenue-sharing through MOUs [memorandums of understanding] that we develop with these companies.”
The band is working with several companies, including Finavera Wind Energy Inc. (TSX-V:FVR) and Alterra Power Corp. (TSX:AXY).
“We want to urge the government to [recognize] that these are important opportunities for First Nations,” said Orr. “If there’s not the IPPs, there’s not a lot of opportunity.”
Don Roberts, vice-chairman and managing director of CIBC World Markets Inc., said the worst-case scenario for IPPs is that no decisions are made.
But Roberts said there’s a future for the industry in B.C.
“You’ve got some competent developers here, a good wind resource, a good water resource, a great biomass resource. You do have the carbon tax that does matter in terms of it does send the right price signal, but you can’t have analysis/paralysis. You’ve got to move ahead.” •
