Locking BC Hydro into decades-long contracts with private power producers (IPPs) was a colossal mistake that ignored the likelihood of market and technological changes. BC Hydro was forced to make deals lasting as long as 60 years for political, not business reasons.
Years ago, I expected too much of small nuclear reactors (SMRs) as a future energy source. In the past dozen years, there has been little progress in implementing SMRs. That’s not a bad thing. A recent study led by UBC and Stanford researchers reinforces that opinion:
The results show that most small modular reactor designs will increase the volume of nuclear waste in need of management and disposal, by factors of 2 to 30. The findings stand in sharp contrast to the cost and waste reduction benefits that advocates have claimed for advanced nuclear technologies.Nuclear waste from small modular reactors
While costs of utility-scale solar and wind power and electricity storage systems have dropped dramatically, BC Hydro cannot take advantage of these technologies. In addition to paying perhaps $20 billion for Site C, the utility will be paying tens of billions of dollars to IPPs enjoying inflation escalating prices already 3x to 5x the cost of non-destructive green renewables.
You may wonder if the business case for BC’s private power policy was bad, why did BC Liberals create it. The answers include cupidity, stupidity, and old fashioned political corruption. (These same factors are at play in British Columbia’s LNG and natural gas policies.)
About 700 potential entrepreneurs in British Columbia paid attention when Gordon Campbell’s government opened the province to private power. Many understood that political influence would be helpful. That is why there was a race to sign up BC Liberal insiders to help secure BC Hydro, a customer with very deep pockets. With guaranteed long-term supply contracts, risk disappeared and rewards skyrocketed.
BC Hydro is on the hook for Energy Purchase Agreements (EPAs) worth tens of billions of dollars, with details of inflation protected contracts kept secret. Some deals are take-or-pay, so BC Hydro is on the hook whether or not it needs the electricity. The utility can sell excess power but wholesale market prices are a fraction of what IPPs are paid. The only things private power deals guarantee are profits for IPPs and losses for BC Hydro.
I have looked at justifications for BC’s private power policy but I conclude the motivations were greed and right-wing ideology that wants no public enterprise to succeed. Why else were long-term secret contracts designed to be unbreakable.
Ordinary business arrangements are often structured to adjust or end when conditions change materially. Since electricity demand went flat in 2005, more than $15.5 billion has been paid to IPPs and $50 billion more is due to be paid because government decided EPAs would have no clauses for early cancellation.
Simple oversight or a devious strategy? The latter is the logical answer.
In 2009, I asked:
What if new or improved technologies emerge to make energy generation convenient, inexpensive and relatively innocuous? Will BC Hydro still be purchasing high priced private power?
The answer, as an infamous Alaskan politician said, “You betcha!”
It did not take unusual prescience to oppose private power schemes. Beyond the environmental effects, those of us paying attention knew that technology advances in multiple streams 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).The Law of Accelerating Returns
Because corrupt practices of the past are not easily resolved in court, it may be too late to save the billions of dollars that will flow to private power producers. But it is not too late for voters to punish political figures who originated or tolerated this grand scheme. They sit on both sides of the BC Legislature.