BC Hydro

Site C – Uncertain costs, ambiguous benefits

161d8-andersenMost readers will be familiar with Erik Andersen, an expert commentator about economic matters in BC.  This is the original text he submitted to the Vancouver Sun after the newspaper published an article about BC Hydro’s Site C project.

He sets out a reason – one that had not occurred to me – for large businesses supporting expansion of the province’s electricity supply.

Missing in the Site C discussion is what I believe is the correct motivation for building Site C, other than the obvious short-term employment of a few people moving dirt around.

A fundamental driver for the price of a service or commodity is found in the answer to the question; is the prevailing and future market a buyers or a sellers market?

For the past decade or more  North America has been in energy surplus for a host of reasons, but mostly because we are in transition from 20th century economies to the 21st century ones thus making knowing the future almost impossible.

Back to the fundamental driver for building Site C.

Users and buyers want a buyers market (like Japan wanted for coal in the 1980s) for electricity and the tried and true way of getting this is to deliberately and maliciously promote over-supply.

In this case it is an over-supply condition that comes with the financing monkey on the backs of BC citizens.

It is no mystery why BC Hydro has been selling its surplus electricity for very little money, they are desperate for added cash flow and as always it is the seller who takes the price lower.

BC has been managed into a financial corner by the “buy” side of the North American electricity market because we haven’t been smart enough to have learned the coal days lesson.

Going ahead with Site C at this time is more than irresponsible.

Erik Andersen; Economist Retired

One of Erik’s readers responded with another important point that has not been discussed. Given the unstable ground Site C is to be built upon, eventual costs to decomission should not be left out of the examination. This is the reader’s comment:

george 480Another worthwhile comment from Erik Andersen:

I believe in electricity, depending on how it is produced.

One reason for the wholesale prices dropping is that more and more people are finding ways of getting what they need from other than the protected monopoly minded, traditional producers.

People, especially politicians, who are in control of natural monopolies like BC Hydro will at some time abuse their customers. That happened in BC but also in other provinces.

There is always reason justifying fiascos like they have in Newfoundland and Manitoba. Politics is invariably involved.

Market dynamics for electricity producers are like they were for horse owners early in the 20th century. Then it was not that the need for transport that vanished, it was how the transport was to be provided that changed…

The BC Liberal Government motivations to build Site C have never been clear. Present market conditions do not explain the project. I suspect the decision to proceed has a mixture of reasons, including the one mentioned by Mr. Andersen.

  • Institutional inertia – BC Hydro, a rather large organization, directly employs platoons of designers and builders. Without continuous expansion their jobs disappear and most folks in bureaucracies are looking to expand the empire, not contract it.

Gareth Kane, a sustainability expert, wrote:

…whereas animals like ants have communities which exhibit intelligence way beyond that of the sum of the individuals, the more humans you group together, the more stupid the combined behaviour. As an optimist, I like to think of this phenomenon as “institutional inertia” rather than group stupidity.

  • Economic rewards for unions – When billions of dollars spill from the public treasury, rewards flow wide and deep. Recently we’ve seen labour leaders – a now more influential band of brothers in BC – arguing for continuation of Site C. Were I in a senior union position, I’d do the same. Solidarity is a vital principle so even if one local has little to gain, it supports others that do. The job of union leaders is to protect its members and the movement. The job of Treasury Board is to protect taxpayers, a quite different task.
  • Economic rewards for businessDermod Travis of Integrity BC collated financial data regarding the Port Mann project. Ordinary people will be astonished at how broad and diverse government spending can be on a road and bridge addition. Millions of dollars fall into the hands of importers, lawyers, accountants, engineers, video makers, headhunters, spin doctors, numbered companies, caterers, hotels, real estate agents and a host of other expert and faux-expert consultants. When the public vault is opened, many people stand with pockets open.
  • Natural gas production, transport and liquefaction – The volume of electricity needed by gas companies is uncertain but, since they are not asked to pay for construction of generating or transmission facilities or the real cost of any power used, they’re more than happy to see supplies expanded, even if future needs are remote. For gas producers, it’s a zero risk game to support Site  C. For citizens regularly paying carbon tax, providing further subsidies to fossil fuel producers is  cruel punishment.

Nevertheless, I believe John Horgan’s Government will cancel Site C within the next few weeks.

The weight of evidence is apparent to those of us who don’t have a direct stake in the project but it is the Cabinet’s responsibility to listen to all sides and weigh uncertain costs against ambiguous benefits. In the opinion of many, risks are too great to proceed and rewards too likely to be non-existent.

Premier Horgan demonstrates a style that we never saw under Christy Clark. Important decisions will be taken after gathering and carefully analyzing information. Rashly made choices often end in disaster and a minority government would probably not survive.

I surmise there are other shoes to drop beyond the pending go, no-go announcement for Site C. The government cannot stop the project without a plan for remediation and a plan for expanding power generation when demand eventually increases. That means providing specific strategies for implementation of the program announced before the NDP formed government. It made sense then; it makes sense now.

horgan 480Horgan dropped a hint in a speech to the recent NDP convention. He talked about potential for production of solar power in BC’s interior. News that bids to supply utility-scale solar elsewhere have dropped below 1.8 cents a kilowatt-hour (perhaps 15% of the Site C cost) and a desire for development partnerships with First Nations means a real alternative to the dam is available. Because BC has a surplus of electricity that it cannot profitably sell, there is time to create the right projects for the future.

The BC Government is also working on a strategy to encourage consumption of locally grown food, yet we’ve seen massive loss of agricultural lands in the lower mainland. The fertile Peace River valley, without Site C, provides a way to expand our farming communities. There may be no better place for a brand new agricultural college than Fort St. John.

Accommodations built for contractors can easily be converted to students. Local people with generations of farming experience are there to teach students and vast areas of publicly owned agricultural lands can be made available for food production. Hothouse produce operators could be supplied with cheap local energy. With some modifications, many of the road and ground works attached to the present dam project could support agriculture and  CN Rail already serves the area. There are many machinery and other support businesses now established in the region.

All that is needed for a positive outcome after the grand mistake by Clark’s Liberal Government and BC Hydro is a little nerve, imagination and dedication. I trust the new Government is up to the challenge.

Categories: BC Hydro, Horgan, John, Site C

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14 replies »

  1. All the more reason to put billions of public money into infrastructure of roads, sewers, water systems etc.
    The mega project we need and that makes sense is sitting right in front of us. Good paying, high producing, fundamentally necessary production.

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  2. Brilliant, thanks. SITE C fiasco makes perfect sense now – Hydro needs to keep their people employed and they want to keep a surplus. It translates to a much higher energy bill. Where is the demand when (like you said) enregy consumption has remained the same. Their final price can’t compete. Renewables are coming on line. Times change, we all have to adapt lots of people out there with 2nd and 3rd careers. Bloody mismanagement of all our resources, starting to feel a little raped and pillaged. Longing for a Cascadia Utopiia with intelligent people at the helm that respects our ecosystems and economy.
    You may have seen the petition going around re:Richmond ALR gaining signatures. I think I saw it on Change.org
    Thanks again for your posts

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  3. Good points, thanks for sending it out. I like the ag dev ideas but they can and should be done regardless of site c yes or no. BC Ag does not depend on Peace valley land. Solar is not viable as a major energy source in BC, it’s at best a local adjunct. Likewise wind. But micro hydro would be great. If I was Horgan I would neither cancel nor continue Site C but instead defer, delay and prolong construction until demand arrives – and meanwhile get the graft and corruption out. Find ways to save and make money eg by selling water where it is surplus eg Hydro’s water licence in Campbell River and many other sites. BC has great potential but the trick seems to be to prevent the wealth from flowing only to a cadre of friends and insiders. So far Horgan is listening only to his own cronies. Kutgw eh! J

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    • Thanks John, but you’re wrong about the ability of solar and wind to be material providers of electricity in the future. The current prices of utility-scale wind and solar projects have declined steadily and immensely. I’ve looked at some of the work underway in alternative energy laboratories that will have efficiencies continue rising substantially while capital and operating costs keep declining.

      For decades to come, existing hydro acilities will be the mainstay of BC electrical energy but those assets allow us to make efficient use of intermittant power in ways that produce envy at utilities elsewhere in the world .

      Liked by 1 person

  4. The notion of re-purposing the site, as Norm touches on here, is of course a no brainer, however you will note that to date it is nowhere in the rhetoric surrounding the go-no go decision.

    Picking up on the notion of an educational institute, Norm’s right, a temporary workers facility could easily become a dormitory. Sell the site for a buck to Elon Musk to create the ” New energy institute” and start us on the path of restoring BC Hydro with a proper vision for the future of BC’s energy needs. It could lead the world in R&D and energy innovation.

    Liked by 1 person

    • I’ve tried for the last hour to ‘like’ this but have had very little success. The reason I’m so persistent is that someday I may have something important to add, and won’t have the time to research it. Anyway, good points, especially about Elon Musk, if he’s not too busy.

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  5. “I think there is a world market for maybe five computers.” Thomas Watson, president of IBM, 1943.

    “Who the hell wants to hear actors talk ?” – Harry M. Warner, Warner Bros, 1927.

    “The view that the sun stands motionless at the center of the universe is foolish, philosophically false, utterly heretical, because it is contrary to Holy Scripture. The view that the earth is not the center of the universe and even has a daily rotation is philosophically false, and at least an erroneous belief.” – Holy Office, Roman Catholic Church, ridiculing the scientific analysis that the Earth orbited the Sun in edict of March 5, 1616

    “So many centuries after the Creation, it is unlikely that anyone could find hitherto unknown lands of any value.” – Committee advising King Ferdinand and Queen Isabella of Spain regarding a proposal by Christopher Columbus, 1486.

    “The concept of global warming was created by and for the Chinese in order to make U.S. manufacturing non-competitive.” – Donald Trump 2012.

    Even in the U.S. where the Trump administration is doing its best to denigrate the idea of human-caused global warming and tear down environmental protection in general, many states and organizations are forming alliances to chart a different course. This is being mirrored across the planet, where alliances are being formed to fill the vacuum left by the U.S. withdrawal. One result is exponential advancement and adoption of solar power technology and there is every reason to believe that will continue beyond anything we can currently envision. Overwhelming evidence demonstrates its promise.

    Proponents of Site C like to use the argument that it will provide British Columbia with the most affordable, reliable clean power for over 100 years.

    The sun will be a potential resource for five billion years, and we have the technology to utilize it now at an increasingly efficient rate. The time is right to focus on that.

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  6. Good quotes, Lew!

    What snow packs will be like in 20, 50 or 100 years is anyone’s guess — but a look at the shrinking of the world’s glaciers over the past century would indicate that dams may well have less reliable sources of water in the future.

    The sun is the initial source of fossil, bio, wind and hydro energy. Now that we have a cheap way to harness it (with further advances coming, as well as in storage), it should be THE way forward.

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    • I don’t buy into the water use theory. If the USA wanted ‘free’ water for irrigation or civil use, they could stick a pipe in the Columbia near Astoria and pump it.)

      The water is soon going to hit the ocean, so there would be minimal environmental impact.

      As well, there’d be less piping and no international treaty hassles. There are many bad motivations behind Site C but I can’t buy the water use theory (other than for local fracking — and they don’t need that much water for fracking.)

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  7. Any thinking person should know that all propaganda about alternate energy sources being the cheap fuel of the future is generated to sell us on the idea that carbon taxes administered by an ever expanding and greedy bureaucracy that is funneling money into its own pockets and the pockets of their friends is a bunch of BS.

    Here’s the stats on energy production for Canada from their Natural Resources Canada website:

    Canada’s production of “primary” energy – i.e. energy found in nature before conversion or transformation – totalled 16 494.5 petajoules (PJ) in 2010. Fossil fuels accounted for the greatest share of this production, with crude oil representing 41.4 percent; natural gas, 36.5 percent; and coal, 9.2 percent. Renewable energy sources were also important, with hydroelectricity representing 7.5 percent; biomass, 3.5 percent; and emerging forms (e.g. wind, tidal and solar), 0.1 percent. Nuclear energy (generated from the primary source of uranium) accounted for 1.9 percent.Footnote1

    So does it really make sense to tax every litre of fuel to prop up a fledgling sector on so grand a scale? Where is most of this money going?

    All right, so maybe this sounds like an argument for more hydro development, so why not the Peace. Because the wildland values in the river bottoms are the highest and, hydro is the dirtiest form of energy production yet, if you count what is lost, forever.

    So if Canada is the lowest producer of GHG’s among industrialized countries, why are we not burning more LNG? (Should be able to acquires some cheap leases from the Chinese.)

    The solution to “the energy problem” is to conserve and become efficient. No more jacked up trucks running around with one ego behind the wheel at 5 miles per gallon, no more 6000 square foot homes heated for 2 people, less debt, less greed, no more bringing 275000 immigrants a year to provide cheap labour, (help them but in their own country), no more living way beyond our means, etc, etc …. but hey that will never happen???

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