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BC Hydro’s Integrated Resource Plan: Big Hydro and Less Energy Conservation

Early this past August, BC Hydro submitted its Integrated Resource Plan (“IRP”) to the government for approval. The main themes are: a commitment to build the Site C dam; a retreat from energy conservation; the continuing uncertainties about liquefied natural gas (LNG) export projects and how much electricity they would require; cuts to renewable energy resources; and an increased reliance on gas-fired generation. The public and interested parties now have a modest – and inadequate – opportunity to provide comments. More....

The IRP is BC Hydro’s governing planning document. It sets out a twenty-year forecast of how much energy and capacity Hydro’s customers will require, and it assesses the optimum volumes and timing of resource acquisitions – energy conservation and new generation – that BC Hydro needs in order to meet its legislated mandate to “keep the lights on.” The IRP’s “Base Resource Plan” is supplemented by assessments of uncertainties and risk factors, with several  “Contingency Resource Plans” being provided to address the main alternative possibilities.

Reduced energy conservation:

The 2013 IRP retreats from energy conservation. The 2012 draft IRP planned to achieve all conservation savings that were estimated to be cost-effective, but the current plan targets 5% to 10% less than this. This is disappointing and surprising, given that energy conservation resources are estimated to cost around $40 to $50/MWh, compared to supply-side resources costing $60/MWh and up (Site C’s Unit Energy Cost is estimated to be $88/MWh). BC Hydro claims that conservation is subject to “deliverability risk,” but conservation programs and incentives can be ramped up as needed to maintain energy savings targets, so this risk should not be used to justify program cuts.

BC Hydro also proposes a reduction in conservation spending and savings over the next five or six years. This is to help reduce the electricity surplus that Hydro forecasts in that time-frame and to contribute modest cost savings that will slightly reduce the current, strong upward pressure on BC Hydro’s rates. (So great is Hydro’s concern with rate pressures and losses incurred when selling its surplus into the spot market, that it proposes to seek short-term opportunities to encourage more electricity consumption.)

In fairness, the conservation plan still meets the target in the Clean Energy Act that BC Hydro should meet at least 66% of new load with energy conservation. Even so, BCSEA opposes BC Hydro’s retreat from cost-effective energy conservation measures and its apparent willingness to cut conservation investments to achieve short-term cost savings.

Key IRP recommendation: build Site C

BC Hydro’s most decisive recommendation in the 2013 IRP is that the Site C dam and generating station on the Peace River should be built for their earliest in-service date (2023) under all contingencies. This would move the controversial project one large step closer to a final decision to build it (subject, of course, to the environmental review and consultations and accommodations with first nations).

BC Hydro argues that Site C’s generating capacity will be needed by the time it can be built and that Site C is the most cost-effective energy resource available. Site C would augment Hydro’s current energy and capacity resources by about 9 %.

BCSEA is not convinced that BC Hydro has proven the need for or cost-effectiveness of Site C. The cost estimate is particularly open to question.

Meeting loads from industry and LNG export projects:

The single biggest change in circumstance since BC Hydro’s last major plan (the 2008 Long-Term Resource Acquisition Plan) is the forecast of strong growth in industrial loads, driven by mining and natural gas production. While residential and commercial loads are forecast to grow at 2% and 2.2% per year, the industrial forecast is for 2.5% per year, or 4% in a contingent forecast that includes load from some of the potential liquefied natural gas (LNG) export proposals.

BC Hydro acknowledges that, if called on, it will serve LNG customers. But the IRP is neutral on whether those loads will actually materialize. Hydro plans for only a modest 3,000 GWh/y of possible LNG load (Hydro expects mostly to serve ancillary loads, not liquefaction loads), and the plan to meet this load consists mainly of accepting a larger reduction in the current surplus and making a few market purchases.

The biggest driver of BC Hydro’s contingency planning is the scenario that combines extra-high electricity demand with extra-low customer uptake of energy conservation measures.

To meet that case, Hydro would deploy a combination of measures: advancing the Revelstoke 6 capacity project (488 MW); procuring power from single-cycle gas-fired peaking generators; procuring modest amounts of clean energy; and in the short term, buying up to 4,500 GWh/y of electricity in the spot market. Notably absent are contingency plans to increase the acquisition of cost-effective energy conservation.

While BCSEA does not advocate LNG development, if it is allowed, it should be powered by green energy sources, not fossil fuel generation. The low LNG electricity loads addressed in the IRP may represent an unannounced decision by the government to allow gas-powered liquefaction for LNG projects. This should not be allowed, as it could cause BC to exceed its legislated greenhouse gas emissions targets.

Renewable energy cut-backs:

Several non-performing supply contracts with independent producers of renewable energy have been cut, and Hydro will renew fewer than previously planned of renewable energy contracts that will expire in the next five years. The Standing Offer Program will be scaled back to accept fewer projects. In the short and mid term, BC Hydro will only seek to procure new renewable resources in the event of the high-demand/low-conservation contingency.

BCSEA acknowledges the strong upward rate pressures that BC Hydro and its customers now face, and the consequent pressure to reduce costs. We agree that non-performing contracts should be appropriately disposed of. However, we have not seen enough information on BC Hydro’s proposed reductions of renewals of existing contracts and cut-backs of the Standing Offer Program to be able to assess whether the cost savings are appropriately balanced against BC Hydro’s mandate to support first nations and rural communities through clean energy development.

Gas-fired peaking generation:

BC Hydro plans to acquire substantial amounts of gas-fired peaking generation from single cycle plants, while remaining within the 93% “clean or renewable” target in the Clean Energy Act.

BCSEA appreciates the effort BC Hydro has taken to stay within the 93% limit. BC Hydro and the government should do all they can to avoid fossil fuel based generation and reduce greenhouse gas emissions. The next step should be for government to show how BC Hydro’s planning fits within a provincial energy and climate change plan that would meet BC’s legislated greenhouse gas reduction targets (but that is not part of the IRP).

Conclusion:

BCSEA will make its submissions on the IRP to BC Hydro and the government. We encourage people to look at BC Hydro’s plan and submit your comments by the October 18th deadline .

But allowing for comments is not enough to test the IRP as thoroughly as needed. The government should refer the IRP to the Utilities Commission for review, so that the public and interested parties can have significant input, including the ability to require detailed, meaningful answers to their questions, and the Commission itself can apply its due diligence.