Here is an item published here nearly seven years ago. In it, I suggested that locking BC Hydro into decades-long contracts (as much as 60 years, we’ve since learned) was a colossal mistake that ignored the likelihood of technological change. In these past few years, there has been little progress in development of small modular reactors but work continues. In addition, the cost of utility scale solar and wind power has dropped dramatically. As a result, BC Hydro will be paying tens of billions of dollars extra to private producers enjoying inflation protected prices far higher than alternative options.
You may wonder if the business case for private power contracts was so obviously bad, why did it proceed. The answers include stupidity, decision making inertia and, sadly, old fashioned political corruption. These same factors are at play in British Columbia’s LNG and natural gas policies.
For unknown terms, but measured in decades, BC Hydro is forced to buy all the private power contracted on a “take or pay basis” for a multiple of its likely value, regardless of whether needed or not. Hydro will sell surplus power into the export market at fractions of cost during non-peak times.
Is this prudent management? Has the plan been considered and vetted by experts? Has the legislature or the general public been consulted and given consent?
Or, is this carefully constructed fraud, designed to survive the next ten Parliaments of the Province of British Columbia? Some laws can be undone with immediate effect but, when government gives away an asset or commits to a payment stream for near eternity, the damage can not be mitigated.
What if some new technology emerged in, say 2030, that made power generation convenient, inexpensive and innocuous? Would BC Hydro still be purchasing and selling high priced privately generated power? As that Alaskan GOP wannabe President says, “You betcha!”
Logically, when a company such as Naikun Wind Energy Group announces a $2 billion project with $14.6 million of shareholders’ equity and an accumulated deficit of $35 million (Sept 2009 audited financials), something strange is happening. Naikun Wind by the way has been known by other names during its history (check your old penny-dreadful stock certificates, you might be a shareholder):
- Silver Butte Resources Ltd.
- Silver Butte Mines Ltd. (Npl)
- Uniterre Resources Ltd.
- Consolidated Silver Butte Mines Ltd. (N.P.L.)
Naikun’s equity ratio is a little like you, dear reader, purchasing a million dollar home with no down payment, barely the cash to pay legal fees and no job or income. Well, not exactly that because Paul Taylor, Gordon Campbell’s former associate, may have the power of the provincial purse standing behind Naikun, ready to guarantee promoters a lucrative return for whatever power they generate.
Please someone, explain to me how the core of the BC Liberal coalition continues to believe that Gordon Campbell is an able manager of anything, other than an affair and a scandal. Pollsters tell us the Liberal Party core is wealthy, well educated and mature. How can they be so easily befuddled? Mmm, maybe advancing age is involved here.
Perhaps the future creation of a new energy supply seems improbable. The Sunday Times, indicates that alternatives may be closer than expected, reporting about reactors that are tiny, about the size of a shed. They will be buried 6ft underground, can run virtually unmanned for a decade and provide enough power for 20,000 people.
At least a dozen companies, from giants such as Toshiba-Westinghouse and General Atomics to start-ups such as Hyperion are working on plans to make mini reactors a reality. They vary from ones so small they could be put in the basement of a house to larger models that can be put into clusters of a dozen or so to give the output of a conventional power station.
Technology advances at an ever-quickening pace. According to Ray Kurzweil:
An analysis of the history of technology shows that technological change is exponential, contrary to the common-sense “intuitive linear” view. So we won’t experience 100 years of progress in the 21st century — it will be more like 20,000 years of progress (at today’s rate).
Although nuclear power generation might be unacceptable to British Columbians, it is not rejected by our neighbors of western America. In fact, Oregon State University is a research leader in development of small, passively cooled, light water nuclear systems. Nuclear is already a certainty in the Pacific Northwest, California and beyond.
Power entrepreneurs in British Columbia, such as Naikun, Plutonic, Renaissance, Cloudworks and the other 700 or so applicants, know that future markets cannot be forecast over decades. The risk is too large for private capital. That is why there has been a race to sign up BC Liberal insiders, the people who can deliver BC Hydro as a customer with deep pockets. With a guaranteed, take or pay, long term supply contract, risk disappears, reward skyrockets.