During their tenure, BC Liberals declared increases in private power purchases and aggressive expansion of BC Hydro assets were needed to meet growing demands by consumers. After 2005, electricity sales mocked that claim.
So, the politicians asserted a need to serve North America by supplying clean energy. Others were better equipped to apply new technologies and didn’t believe BC’s river damaging energy was particularly green. The goal changed again, to powering a trillion dollar LNG industry that would add $9 billion a year to the public treasury. When that was revealed as fantasy, Liberals suggested BC could provide clean energy to enable Albertans to harvest dirty energy from bituminous sands.
Recently, Christy Clark said the Site C dam was needed to flood the Peace River valley as a measure to prevent flooding of the Peace River valley. The Premier needed a new justification for building the dam after it became clear that plans to sell to Alberta were as realistic as paying off provincial debt with natural gas revenue.
This is from the Alberta’s Market Surveillance Administrator’s most recent report:
The [electricity] pool price for the quarter averaged $15.00/MWh ($12.76/MWh ext. off-peak, $16.12/MWh ext. on-peak). Average prices were 74% lower than the same period last year, the lowest quarterly average since 2001. Since Q3 2015, each quarter set successively lower average prices. The first six months of 2016 have averaged $16.55/MWh, almost 75% lower than the January-June average over the last 15 years.
One person associated with BC Hydro told me this week the company was experiencing unprecedented growth in BC demand and was exporting as much power from the province as transmission capacity allowed.
I asked why this strong demand in BC was not reflected by sales statistics. He had no answer except to say that, under the deferral program, BC Hydro may have more large users not paying than customers who do pay. Since there is a glut in the Alberta market, I also asked where the exported power is going. He said to California.
However, the latest US Department of Energy reports show California wholesale prices in the $15 to $25 range. Again, I’m reminded that you cannot profit by selling more of a product for less than it costs.
The unfortunate reality is that Site C power will cost BC Hydro between $100 and $125 per MWh, not counting environmental damage, a factor seldom measured in Liberal calculations.
New private power facilities are being added with costs that bear no relation to market value. These are the unit energy prices offered to private power producers in the 2013 document Power Generation Options:
- Wood-based biomass, $122–$276/MWh,
- Biogas or landfill gas, $59–$154/MWh ,
- Municipal solid waste, $85–$184/MWh,
- Onshore wind, $90–$309/MWh,
- Offshore wind, $166–$605/MWh,
- Run of river, $93/MWh–$235,777/MWh,
- Natural gas-fired, $58–$180/MWh
How did British Columbia reach a point where the very survival of BC Hydro is at risk?
Part of the answer is that politicians should not operate business. People like Christy Clark get elected, and executives like Jessica McDonald get appointed, not for skill in managing complex issues, but for glibness and superficiality. They construct grand visions without much regard for practicality. Leaders are expected to have answers to all questions but their capabilities are soon stretched thinly. Surrounded by venerating servants and ambitious sycophants, untested ideas get treated as wisdom. Mistakes are seldom acknowledged.
Partisans who don’t care to admit error or weakness will blunder on without restraint or reconsideration. There is a betting strategy that suggests losses can be recovered by doubling down, which is following every losing bet with a larger subsequent bet. Wealth limitations prevent most people from testing the approach but leaders with access to billions of dollars are not so constrained.
In British Columbia, we appear to be experiencing the scenario just described. Whatever the troubled megaproject – fossil fuels, bridges and highways, electrical generation – flawed policies may be losing bets but they are to be fixed by doubling down.
Categories: BC Hydro