Is the Site C dam’s electricity destined for LNG Industry?

By Judith Lavoie
Writer, DeSmog Canada
Printed with permission of www.troymedia.com

Every day British Columbians flick on light switches, power up their computers and cook dinner, confidently expecting the power supply will not fail them.

The expectation that reliable electric power will be available is emphasized by BC Hydro as it touts benefits of the proposed Site C dam on the Peace River and the resulting “clean” energy that could theoretically power 450,000 homes each year.

“Our forecasts show the demand for electricity will increase by approximately 40 per cent during the next 20 years,” said Charles Reid, BC Hydro president.

“And an emerging liquefied natural gas sector could further increase the demand for electricity.”

But, looking into the future is an unreliable art and, while BC Hydro insists that the power will be needed by the time the $8-billion project is completed in 2024, opponents say that, especially at a time when the energy market is undergoing rapid change, the mega-dam will end up as a costly white elephant.
The unknowns include changes in demand because of economic development, the cost of electricity, public policy changes and development of alternative energy sources.

The joint review panel assessing the Site C dam concluded that, although there will be an increasing need for power in the future and Site C is likely to be the most cost-effective option, BC Hydro failed to prove that the new energy would be needed within the timeframe set out in the proposal.

“The panel concludes that the proponent has not fully demonstrated the need for the projects on the timetable set forth,” says the report submitted this month to the federal and provincial governments.

The panel makes it clear that federal and provincial government decision-makers need to be sure the power is needed before giving the go-ahead.

Justification for Site C “must rest on an unambiguous need for the power and analysis showing its financial costs being sufficiently attractive as to make tolerable the bearing of substantial social and other costs,” the report says.

The findings have sparked more questions about the need for Site C power, especially as annual figures show B.C. is usually a net exporter of energy.

“This opens the door for us to have conversations about alternatives – local projects with benefits for local people – projects like smaller hydro, wind, natural gas and even geothermal,” said Treaty 8 Tribal Chief Liz Logan.

Even the LNG argument – used by Premier Christy Clark in last year’s election campaign as a major reason for building Site C – is losing traction as most companies indicate that, for compression and liquefaction of the gas (which takes vast amounts of electricity), they will generate their own power by burning natural gas already flowing through their pipes.

In order to burn natural gas, the LNG industry has been handed a blanket exemption from the Clean Energy Act, raising concerns about the government’s commitment to cutting greenhouse gas emissions.

The Pembina Institute estimates that if five LNG facilities are built, the industry would more than double B.C.’s carbon pollution, single-handedly emitting nearly three-quarters as many greenhouse gases as Alberta’s oil sands.

However, even those who argue that LNG plants should be powered using renewable electricity don’t necessarily point to a need for the Site C dam. Clean Energy Canada, for instance, argues that the LNG industry can power itself on regionally produced clean electricity, mostly wind power on B.C.’s north coast.

Even under that scenario, LNG plants will need power from BC Hydro for ancillary needs, such as running the site, said Dave Conway, BC Hydro spokesman.

Initial estimates said increased capacity would be needed by 2027/28, but, with taking LNG plans into account, even a “low LNG load forecast” moves the need for energy up to 2024.
“Mining is also one of the big drivers so, with or without LNG, new capacity and new power is needed by 2024,” Conway said.

In B.C., about one-third of electricity is used by residential customers, another third is used by commercial customers and another third goes to industrial customers, he said.

“The need for this project comes from growing demand,” Conway said. “Economic development is the primary driver.”

That need continues despite residential customers reducing power use because of conservation and BC Hydro’s own documents showing it plans to meet 70 per cent of future demand growth through conservation. It is essential that BC Hydro is able to meet peak load requirements, Conway said, even though peak demand may come only one day a year.
However, retired federal economist Erik Andersen said BC Hydro has a chronic problem with over-estimating the demand for power.

“Over the course of the past four decades, the need for a Site C generation facility has been part of the larger and exaggerated demand narrative BC Hydro has been telling,” he said.

Andersen crunched the numbers and is questioning Hydro’s estimates of a population growth of one million people in the next 20 years, which he says doesn’t fit with B.C Statistics forecasts.

“There has been one heck of a rollback in population growth, but BC Hydro seems to want to ignore that,” he said.

Energy economics expert Marvin Shaffer, adjunct professor in the school of public policy at Simon Fraser University, said BC Hydro’s analysis of future demand is based on a “very serious market failure” in the pricing of electricity.

“The only reason Site C is ‘needed’ is because the government is preventing BC Hydro from using gas-fired thermal units to back up its hydro system when needed,” he said.

“If the project is built as planned, it will be surplus to forecast requirements for many years and sold in the export spot market at a significant financial loss.”

Even if some power was sold to LNG plants, which would otherwise use gas-fired thermal power to meet their energy needs, it wouldn’t be at a price that would begin to recover Site C’s full cost, Shaffer said.

It is unlikely that surplus power could be exported because energy produced at Site C would be too expensive, agreed NDP opposition leader John Horgan.

“With the advent of shale gas everywhere in North America, the price of electricity has plummeted because people can get gas and turn it into electricity at a relatively low price,” he told DeSmog Canada.

Government will decide this fall whether to proceed with Site C, but Energy Minister Bill Bennett already seems convinced of the need for more power.

“We don’t need the electricity today or tomorrow or the next year, but we are pretty darn sure we are going to need it 10 years from now,” he told reporters after the release of the joint review panel report.

However, Paul Kariya, executive director of Clean Energy BC–an industry trade association that represents independent power producers, including gas generators–pointed out that predicting power demand is a “mug’s game” and there is a way to meet power needs incrementally.

“Times have changed. We’ve been through an era of building big dams,” Kariya said. “When you build a dam, you get this one massive lump of power and that’s not the way that energy is planned for anymore. What we offer is a more incremental approach.”

Judith Lavoie is an award-winning journalist based in Victoria. Lavoie covered environment and First Nations stories for the Victoria Times Colonist for more than 20 years and is now working as a freelancer. She previously worked on newspapers in New Brunswick, Cyprus, England and the Middle East. Lavoie has won four Webster awards and has been nominated for a National Newspaper Award and a Michener Award.