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The Wrong Long-Term Plan for BC Hydro: What Government Should Have Done

 

For the past three years, BC Hydro has been working to develop an updated plan to estimate the loads it will need to serve in the next twenty years and to determine what resources (including conservation and efficiency) should be acquired. In September 2013, BC Hydro workshopped this plan – the 2013 Integrated Resource Plan (“IRP”) – with interested parties, prior to submitting it to the government for final approval.

BCSEA participated in the September workshop and subsequently called on the B.C. government to reject the IRP and to send the plan to the Utilities Commission for an independent public inquiry.

On November 26, Minister Bennett announced the government’s approval of BC Hydro’s IRP.  BCSEA thinks that was the wrong decision. This is why:

 

Previous BC Hydro long-term plans were scrutinized by the B.C. Utilities Commission, under provincial law. The law was changed in 2010, when the Clean Energy Act decreed that Hydro’s IRP would henceforth be approved by Cabinet, not by the commission. BCSEA criticized this removal of independent scrutiny, noting that the government would be reviewing and approving the same long-term plan that the government, in its role as BC Hydro’s shareholder, had told BC Hydro to prepare in the first place.

As anticipated, BC Hydro’s 2013 IRP directly follows the government’s present energy priorities:

  • approving construction of the Site C hydroelectric project on the Peace River,
  • reducing DSM spending in the medium term, and
  • powering LNG exports mostly by natural gas not by GHG-free electricity.

In response, BCSEA sent a brief to the minister which emphasized:

1. The need for an independent, objective review of BC Hydro’s in-house cost estimate for the Site C project,

2. The inadequacy of Hydro’s energy conservation and efficiency proposals, and

3. The urgency of a detailed action plan for B.C. to meet its legislated GHG reduction targets. 

The Site C Dam

The Site C project is currently undergoing a joint federal-provincial environmental assessment. Oral hearings are expected to begin in December, and the joint review panel could issue recommendations as soon as mid-2014. Under current law, the next step would be a go/no go decision by the BC Cabinet, as the Clean Energy Act removed the requirement for utilities commission approval of this $7.9 billion energy project. If Cabinet gives the go-ahead, Site C could be in service by 2023 – ten years from now.

By 2023, Hydro’s 2013 IRP predicts that demand for electricity will exceed supply and there will then be a “need” for additional generation. (Interestingly, the IRP forecasts a need for additional generation by 2023 even if electrical load for LNG exports does not materialize.)

What type of electrical generation should be used to meet this predicted shortfall in 2023? No surprise: the IRP says ‘Site C.’ Why Site C instead of wind or solar power? Because the cost estimate for power from Site C – prepared by BC Hydro itself – is substantially lower than Hydro’s cost estimates for power from wind or other non-fossil fuel generation sources. And who confirms the Site C cost estimate? No one, except perhaps the government that has already expressed a political desire to see Site C proceed.

This is where BCSEA steps in to call for an independent, objective review of BC Hydro’s in-house cost estimate for the Site C project. Whatever one thinks about the environmental and social impact of Site C, or how much confidence one has in the joint review panel, it is clear that if the joint review panel recommends that Site C would be acceptable if various conditions are met then the B.C. government will be eager to give Site C the green light.

The crucial gap in the analysis is the absence of an open, independent examination of the cost of Site C compared to clean alternatives in the context of the predicted ‘need’ for power by 2023. The Utilities Commission is the right body for this task. It provides a high degree of expertise and objectivity within a structured procedure guaranteeing fairness to all the interested parties.

Energy conservation and efficiency

BC Hydro’s 2013 IRP proposes to cut DSM spending and energy savings by some 22% during the next three years, primarily on the grounds that BC Hydro will have a surplus of energy during this period. BCSEA is very concerned that this does not capture ‘all cost-effective DSM opportunities’ and that it may be difficult to ramp conservation and efficiency savings back up again after several years of cutbacks. 

The government’s November 26 announcement included the announcement of a ten-year plan to spend $1.6 billion on energy conservation. This appears to be about 20% less than what BC Hydro has been investing in conservation programs. No details have been announced to explain this spending envelope, but BCSEA believes that BC Hydro should be increasing, not decreasing, its spending on conservation, in order to maximize value to ratepayers and minimize the need for expensive acquisitions of supply-side infrastructure.

 Meeting BC’s GHG targets versus LNG exports

The B.C. GHG Reduction Targets Act requires 33% GHG reductions by 2020 and 80% reductions by 2050 (from 2007 levels). However, the unacceptable fact is that B.C. has no public action plan to meet these ambitious GHG targets. At the same time, the B.C. is touting development of a massive LNG export industry in the Province, which the government says would be the world’s cleanest in terms of carbon pollution. 

 The electric load forecast in the 2013 IRP includes a “placeholder” for a modest amount of increased electrical load due to the possible development of LNG export facilities in B.C.Whatever one thinks about the desirability or likelihood of LNG exports it is clear that BC Hydro must include the possibility of LNG export facilities in its long-term planning. What is notable, however, is that Hydro’s electrical load estimate for LNG exports is based on the assumption – apparently obtained from the government – that most of the power requirements for LNG export will be met with natural gas, not with clean electricity.

This starkly contradicts the government’s statement that an LNG export industry in B.C. would have lower life-cycle GHG emissions than anywhere else. It implies that the government has told the LNG export proponents – behind closed doors – that they would be allowed to use natural gas, instead of electricity, to power the energy-intensive liquefaction process. 

If so, then development of LNG exports in B.C. would appear to exacerbate the challenge of meet the GHG targets. Consequently, BCSEA’s brief to the minster urged the government to initiate a strong, detailed action plan for B.C. to meet the legislated GHG targets, as a necessary complement to BC Hydro’s IRP.

Background

 For more information, see:

{C}{C}·      {C}{C}Tom Hackney’s September 2013 report on BC Hydro’s IRP (http://www.bcsea.org/blog/tom-hackney/2013/09/24/bc-hydro%E2%80%99s-integrated-resource-plan-big-hydro-and-less-energy-conservation)

{C}{C}·      {C}{C}BC Hydro’s IRP (http://www.bchydro.com/energy-in-bc/meeting_demand_growth/irp.html)

{C}{C}·      {C}{C}B.C. Greenhouse Gas Reduction Targets Act (http://www.bclaws.ca/EPLibraries/bclaws_new/document/ID/freeside/00_07042_01#section2)