Most 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:
Another 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.
…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 business – Dermod 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 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.