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New Industrial Rates for Low Carbon Electrification

Tom Hackney, BCSEA Policy Advisor
Monday, February 22, 2021

BC Hydro now offers two new discounted rates to attract new large industrial loads, as described in a Government of BC media release of 28 January 2021 and a posting on BC Hydro’s website. 

The Clean Industry and Innovation Rate (Rate Schedule 1894) is for new “clean industry customers” that produce renewable or low carbon fuels like hydrogen or biomethane, or that remove greenhouse gases from the atmosphere, and for new “innovation customers” that handle high volumes of data (but not cryptocurrency operations).

The Fuel Switching Rate (Rate Schedule 1895) is aimed at new and existing industrial customers that use electricity for their operations instead of using fossil fuels.

The Fuel Switching Rate is especially relevant to the gas fields of north-eastern BC. Electrifying these is an important part of BC’s CleanBC climate action plan, which relies on “provid[ing] clean electricity to planned  natural gas production in the Peace region.” BC and Canada have signed a memorandum of understanding to support electrifying BC’s gas sector, and the federal government contributed $83.6 million for two new BC Hydro transmission lines into this region.

The federal government is now providing an additional $84.4 million from the Investing in Canada Infrastructure Program to cover some of the costs for new industrial customers to connect to BC Hydro’s grid.

The BC government hopes the Fuel Switching Rate will also attract customers besides gas operations, such as mines, public transit agencies and neighbourhood energy systems. However the rate is not available to oil transportation pipelines, oil refineries, methanol production or natural gas liquefaction facilities.

The two rates give qualifying customers a seven year discount in their energy rates and demand charges, starting at 20% in the first year and declining to 7% in the seventh year.

As in the CleanBC plan, the government is trying to link GHG reducing measures with economic development. Bruce Ralston, Minister of Energy, Mines and Low Carbon Innovation says, “We’re making it easier and more affordable for mines, clean technology companies and other sectors to use more of B.C.’s clean, reliable hydroelectricity instead of fossil fuels. Fast-tracking electrification across our economy will support economic recovery and cleaner public transportation, create jobs for British Columbians and attract new investment to our province.” The 28 January  media release includes supportive quotations from the Mining Association of BC, the Canadian Hydrogen and Fuel Cell Association and Advanced Biofuels Canada.

Commentary:

BCSEA welcomes the new electricity rates as signs that the BC government continues to work on achieving the targets of the CleanBC climate plan, in particular by switching energy use in BC from fossil fuels to low carbon electricity supplied by BC Hydro.

Much more needs to be done, and we look forward to seeing much more. The government estimates more than one million tonnes of GHGs per year would be reduced or avoided if the new electricity rates are fully subscribed. This compares to the 68 million tonnes per year of inventoried GHG emissions in BC in 2018. This must be reduced to 14 million tonnes per year by 2050 under the current legislation, or to zero to meet the government’s new net-zero commitment.

Getting mining operations and public transit off diesel fuel and onto clean electricity is a clear win for GHG reductions. However, electrifying natural gas production may be a “mixed blessing.” It results in less GHG emissions in BC, but it may also increase natural gas exports, the combustion of which isn’t included in BC’s inventory of GHG emissions. It is questionable whether exported BC natural gas displaces higher-carbon fuels abroad. And, in any case, the need is for global reductions in GHG emissions, not just reductions in BC.

Meanwhile, the government has still not finalized and issued the Phase 2 Final Report of its Comprehensive Review of BC Hydro. This Report is supposed to guide BC Hydro’s development of its Integrated Resource Plan due to be filed for review by the BC Utilities Commission in December 2021. BCSEA says the Phase 2 Report should direct BC Hydro to include in the IRP long term plans for proactively achieving low carbon electrification to meet BC’s GHG emission reduction targets. BC’s main natural gas utility, FortisBC, has produced its vision for BC’s energy future. It’s time for BC Hydro to produce its own vision for its role in achieving a net-zero carbon future for BC.