BC Hydro

Liberal estimates and guesstimates

This article first published here in October 2014 is even more significant today.

BC’s Minister of Energy and Mines says the $7.9 billion budget for Site C is “reliable” and the estimate of “direct construction costs” of $3.8 billion has “an 18% contingency.” Bill Bennett’s words are imprecise but if $3.8 billion includes the contingency, the allowance for known unknowns and unknown unknowns would be $580 million, 8% of the entire project cost. Compare that to two much smaller Liberal projects that are $2¼ billion, or 98% over budget.

In 2006, Vancouver Sun’s Miro Cernetig wrote $3-billion plan to end gridlock:

“VICTORIA — A $3-billion plan aimed at staving off gridlock in the Lower Mainland will be revealed today, with plans for more and bigger bridges, wider and longer highways and more green-friendly bicycle lanes for the next decade and beyond…”

The plan included $1.5 billion for a new Port Mann Bridge and two additional lanes on Highway 1 as well as $800 million for the South Fraser River Perimeter road. According to the Transportation Investment Corporation Annual Report 2014, the final cost of the first project is $3.319 billion. The truck highway from Roberts Bank to Port Mann cost $1.235 billion. The cost overrun for the two recent capital works is 98% of original estimates.

.
budgetIn his public statement last week, Bennett assured listeners $7.9 billion cost estimate for the Peace River project was accurate because they were reviewed by external engineers, including SNC-Lavalin, a company that Liberals enjoy working with but one that has admitted winning contracts through corruption. Even when the participants are not ethically challenged and/or incompetent, processes to establish budgets for large capital projects are problematic.

Scientists associated with Oxford University conducted a study of 245 dam construction projects across five continents. From the abstract of their paper:¹

A brisk building boom of hydropower mega-dams is underway from China to Brazil. Whether benefits of new dams will outweigh costs remains unresolved despite contentious debates. …We find overwhelming evidence that budgets are systematically biased below actual costs of large hydropower dams — excluding inflation, substantial debt servicing, environmental, and social costs. …The outside view suggests that in most countries large hydropower dams will be too costly in absolute terms and take too long to build to deliver a positive risk-adjusted return unless suitable risk management measures outlined in this paper can be affordably provided. Policymakers, particularly in developing countries, are advised to prefer agile energy alternatives that can be built over shorter time horizons to energy megaprojects.

Commenting about the paper in The Guardian, two of the paper’s authors said,

With an average cost overrun of over 90%, large dams have one of the highest cost overruns among all infrastructure asset classes. This result is before accounting for negative impacts on human society and environment, and without including the effects of inflation and debt servicing.

What’s worse, planners do not seem to learn. Forecasts are likely to be as wrong as they were between 1934-2007. Dam budgets today are as wrong as at any time during the 70 years for which data exist.

Another paper worth noting is Cost Underestimation in Public Works Projects: Error or Lie? It:

found with overwhelming statistical significance that the cost estimates used to decide whether such projects should be built are highly and systematically misleading. Underestimation cannot be explained by error and is best explained by strategic misrepresentation, that is, lying. The policy implications are clear: legislators, administrators, investors, media representatives, and members of the public who value honest numbers should not trust cost estimates and cost-benefit analyses produced by project promoters and their analysts.

_________________________________________________________

¹Full reference: Ansar, Atif, Bent Flyvbjerg, Alexander Budzier, and Daniel Lunn, 2014,
“Should We Build More Large Dams? The Actual Costs of Hydropower Megaproject Development,”
Energy Policy, March, pp. 1-14,
DOI: 10.1016/j.enpol.2013.10.069

17 replies »

  1. And Chrispy intends to twin the Trans Canada from Kamloops to the Alberta border for $600 million. So far she has got from Monte Creek to Pritchard (well almost), a distance of about 10 km, for somewhere around $100 million. Doesn't leave much for the remaining 3 – 400 km. I think it'll cost about $600 million just to get out of Golden!

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  2. Noarm, must say I very much appreciate your research that clarifies so much of the BC Libs flim flammery when it comes to costing and accounting for projects. My husband and I are both retirees from BC Government service and are aghast at what current politicians get away with. As well, thought I would pass on that our last little “infotainment” from the Pension Management folks was gleefully advising us on how well the BCIMC was investing our pension funds. Of course, after reading the true status of how well these 'investors' do for us as well as other taxpayers funds, I read it with more interest. Found to my horror that Timberwest is a recipient (you know the company that has Rich Coleman's brother as an executive) as well as partnering with SNC Lavalin (admitted crooks as well as having Gwyn Morgan advising ms. Photo-op. Other proud investments are commercial towers in Toronto and Vancouver. No wonder I get pennies on the dollar as my annual “cost of living increase”. I shudder when I hear my neighbours caterwauling about as retired government employees we are the recipients of this gold-plated pension paid for (in full is inferred) by the poor taxpayer. I'm having a difficult time even trying to talk myself into staying in this province.

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  3. My wife and I are seriously looking at doing just that. selling our property and moving back east somewhere. It is still in the planning stage, but I see very little positive for BC in the bleak future ahead. Living in British Columbia is now becoming exceedingly expensive and as senior citizens, we have to make do with our pensions and retirement funds.
    Good old conservatism at work eh !!! – and no, the BC Liberals are anything but liberals.
    Thanks

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  4. Having been retired for the last year I can't believe how we are nickled and dimed ( msp,ect).And because we refused a smart meter we get to pay and extra $400 a year to”read ” our meter.Yes you can work and pay taxes for 40 years but just try and live on the crumbs when you retire.

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  5. Hope some is keeping tabs on all the contracts that will have to be rescinded. The taxpayer, should not have to pay due to the “con job” of a government that obviously does not serve the public interest…in any way. This nonsense has to end and soon.

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  6. In addition to rising BC hydro rates, we get this, which I presume is still going on:

    “In 2012 the British Columbia government took $5.7 million from health authorities, $4.5 million from school districts and $3.8 million from colleges and universities to buy carbon offsets.”

    From:
    http://thetyee.ca/Blogs/TheHook/2013/06/28/CarbonPurchase/

    BC Hydro in 2012 spent $720,300 on dubious carbon offsets, even though it is about 95% clean hydro power.

    The former BC Auditor General criticized the carbon offset program as not credible.

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  7. And who do you think is one of the biggest beneficiaries of these carbon offsets? TIMBERWEST. Yet they don't appear to be putting anything aside in the Comox Lake drainage from there carbon bootie. The clearcutting in this drainage is directly affecting the drinking water for thousands of residents in the Comox Valley. Water shortages and boil water advisories plus flooding are the new norm in the valley….wonder where they are applying these funds? Certainly not where they should be.

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  8. Let us not forget that the original cost for the Canada line was $1.3 billion, it’s final cost cannot be revealed because the F.O.I. about this has been heavily redacted, due to proprietary concerns of the P-3.

    Today the cost of the Canada Line is said to be between $2.2 billion to $2.4 billion, with documents in the Susan Heyes lawsuit against TransLink claiming he cost was in excess of $2.7 billion.

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  9. There is a Site C column (“Site C is ideal clean-energy option for BC”) on the editorial page in this morning’s T.C. that appears to be nothing more than Liberal press release. I hope someone more eloquent than I will take this one apart with a letter to the editor.

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  10. Hello Norm: I’ve included some quotes from the Times Colonist editorial in this morning’s newspaper that R. L. Evans made in support of the Site C Dam.
    It appears as if Christy Clark wrote this nonsense.
    It should be entitled: Dams For Dummies.
    The writing is juvenile and does not rely on facts, just opinions. I hope you will write a rebuttle.
    Thank you. Art.

    Comment: Site C is ideal clean-energy option for B.C.
    ROBERT L. EVANS / TIMES COLONIST

    Edited quotes:

    “Both wind and solar power are intermittent sources of generation that can be relied upon only when the wind blows or the sun shines.
    With the Site C development, the small reservoir behind the dam will provide a modest addition to the overall Peace River energy storage.

    However, one of the real strengths of the Site C proposal is that it can rely on the large energy storage already in place in Williston Lake upstream of the W.A.C. Bennett Dam, and the small reservoir behind the Peace Canyon dam.

    They therefore usually have a surplus of power at night when demand is low, and Powerex can buy this at very low rates. B.C. Hydro then reduces hydro-power generation overnight, keeping large reserves of energy stored behind its hydro dams.

    The next day, at peak power-demand times in the morning and early evening, it uses this stored energy to generate electricity in excess of B.C. needs. The surplus power can be sold to California at peak rates, which is often many times the overnight purchase cost.

    It is this pure arbitrage that enables Powerex to contribute millions of dollars each year in profit to B.C. Hydro’s bottom line. According to the National Energy Board, for the first nine months of 2015, the net revenue to the province from buying low and selling high in this way was more than $200 million. This is primarily due to the large energy-storage capacity in the water reservoirs on the B.C. Hydro system.

    Critics sometimes argue that the power from Site C is not yet needed in B.C., but this is really irrelevant. In the near term, once the new source of power is built, it can be used to increase the net profit generated by B.C. Hydro, which is then returned to the province as a dividend. Then, as domestic demand increases, more of the new power capacity can be used in B.C.”

    – See more at: http://www.timescolonist.com/opinion/columnists/comment-site-c-is-ideal-clean-energy-option-for-b-c-1.11104346#sthash.yQkR51D6.dpuf

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    • Laurie, it’s sad that the Times Colonist gave up on its Facebook comments option (in early 2016, I believe.) The writing might be good but if readers cannot respond via the internet — as they can with most other sites — they will not draw as much readership. I, for one, rarely read the TC, due to its anti-Facebook-feedback stance.

      Letters to the editor are useful… but liable to being edited or not even printed.

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  11. Hello Norm: It is satisfying to read other newspapers that allow comments. The Province newspaper allows its readers to hurl the wrath at Christy Clark and her rich invisible gang.

    When it comes to defending the Site C Dam she should understand that California Dams will now be coming back online with full power production due to the heavy rain. BC hydro demand will drop along with the price for exported hydro power.

    Innovation and our milder BC west coast weather will continue to see decrease and the need for electricity The excuse that the power is needed to support natural gas production is foolish, as natural gas is fossil fuel whcih produces carbon dioxide, with an indication that it is aiding in climate change. So much for the notion that Christy is saving the Planet.

    It appears that Justin Trudeau is now kissing the feet of Trump. US will crank up their own hydro and natural gas production with total disregard to environmental damage. We will also endure an export tax to aid in the American economy.

    Canada, being best buddies forever with kinky Mr. Trump … indicates we are joined at the hips. In other words … Canada will paying dearly while we are being screwed. Trump is preparing to rain on Christy’s Parade.

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