Site C power: we buy, we sell

On March 31, 2004, BC Hydro published their 2004 Integrated Electricity Plan. In it, is discussion of Site C, a third dam proposal for the Peace River. It has provoked a lot of discussion on a number of email list serves, especially gsxlist and landwatch.

One comment, “use of power all night long does not really cut into the generation”, propelled me into a frenzy of keyboard activity, and this bulletin emerged.

I’m not taking exception to the comment above, but do want to add to the conversation.

If we had limitless water, and no other reasons to manipulate water levels in rivers and reservoirs, then we could produce electricity at night and not worry about its inefficient use.

However, as you all know, those conditions don’t apply. In at least one year of this millenium, we have come perilously close to running short of hydro-generated power because of low water, and this year the forecast is not auspicious.

Nevertheless, in BC we use the hydro resource as an electricity battery, and Hydro regularly turns down the flows at night and increases them during the day. This is done to manage the resource for domestic load, and more pointedly, to generate power during peak pricing periods in the markets the western grid connects us to.

It’s a fine way to make money for BC, and to make use of capacity surplus to domestic needs.

In recent years, the need for money in Victoria appears to have become paramount. Managing the resource for revenue generation, which used to be a slam-dunk from the 1960s to the 1990s, is now a key driver in government economic policy making. Does it trump or distort Hydro’s role as provider of power to British Columbians? Maybe.

Our analysis during the hearings into GSX and the Vancouver Island Generation Project (VIGP), was that BC still has lots of power, but the gas-fired policy decisions for Vancouver Island were to create displacement generation on-island, freeing up mainland power for sale into markets.

he Columbia River Treaty Downstream Benefits (DSBs), which are 1200-1400 MW hydro capacity, or up to 4500 GWh energy, generated in Washington on the Columbia River, are sold directly into the market, and the revenue goes straight into the provincial treasury. Powerex brokers the sales for a fee, but Hydro does not have that power in its inventory.

I digress a bit.

So, we’ve got this night-time/low demand/low price and day-time/higher demand/higher price thing going on, and working quite well for us. Over in Alberta, they’ve got a whack of coal-fired generators running around the clock. Those things don’t wind down at the turn of a capstan, so they are producing power all night. That power can be purchased cheaply.

At night, then, Hydro can turn down the flows on the Peace and Columbia systems even lower than they might otherwise, and buys big blocks of cheap coal-fired power from Alberta. When you see those offices lit up all night in Vancouver, that may well be coal-fired power you’re seeing. Greenhouse gas and acid rain and mercury producing power.

We buy lots, cheap. We sell lots, dear. At times, the power we buy cheap may cost us less than electricity from Site C would cost us, or power from VIGP or any coal-fired generation plant.

In those trades, we come out ahead on the net revenue side.

Take an extreme example: in January 2001 when the California crisis was in full frenzy, BC Hydro paid $173.50/MW for electricity. It sold power for $597.67. A year later, the purchase price had dropped to $16.73 and the selling price was back to a more sedate $30.17.

Compare those numbers to the $24/MW average cost to BC Hydro for hydro-generation and the VIGP costs of power, as determined by the BC Utilities Commission ranging from $68.70 to $102.70/MW. Interesting, eh? Or insane.

But we don’t always come out ahead on the quantity side in these trades.

Follow closely here: in those bulk purchases, we sometimes buy more power than anyone on the grid can use, so the unused surplus gets spilled. This may be the power you see burning in Vancouver’s office towers at night.

In this way, in some recent years, we have become, a “net importer” of power.

You will by now have heard everyone from Gordon Campbell, Richard Neufeld, the electricity branch policy makers in Energy & Mines, all the Liberal MLA chorus line, as well as a whole bunch of people in BC Hydro say this. We are a “net importer” of power.

Yes, but we come out ahead on the bottom line, and if we weren’t trading electricity so aggressively, we would not be a net importer. We don’t need those imports to meet domestic demand – which is what Neufeld & Co. imply when they trundle out the “net importer” decoy.

This is not to say that electricity generation for revenue generation is a bad thing. British Columbia makes money trading power. We buy, we sell. It’s good business.

Implicit in their “net importer” line is the notion that we should not be buying, that British Columbia should have the capacity to generate all the power it can sell. There’s room for a great classroom discussion in this, but perhaps not a set of hugely expensive and environmentally destructive megaprojects.

But the government and Hydro both mis-state circumstances, and are manipulative with facts. A serious student of energy in BC soon mistrusts everything, and has to go back to a zero-based examination of the material.

Another comment about Site C. BC Hydro has an application before the BC Utilities Commission for a rate increase. As part of the material they were required to file as evidence to support the rate increase, was a new integrated electricity plan (IEP). An IEP contains forecasts for power demand some years into the future, as well as a number of scenarios as to how Hydro might meet those demand forecasts. Site C has been included in BC Hydro’s long term scenarios in the 1995 IEP, the 2000 IEP, and this one, the 2004 IEP. Hydro has undertaken to have the Site C planning materials dusted off and updated (costs, timelines, technologies). So far, that’s it. It is only a planning contingency, and may be as far from being a project on countdown today as it was in 1995 or 2000 – dates of the last two IEPs from Hydro. I’m not naive about the possibility of undisclosed agendas on the part of government or BC Hydro. But in the absence of other evidence, I don’t think the IEP supports arguments that Site C is being spiffed up for reintroduction. Site C will, of course, never go away as an option until and if we ever adopt a provincial no-more-large-dams policy, or we build the thing.

Arthur

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