As the British Columbia government mulls its energy future, self-sufficiency remains a goal.
But the goal posts could move.
Current provisions call for B.C. to be energy-sufficient by 2016, with minimum thresholds set at critical water levels – based on a low-water scenario last recorded in the 1940s.
To meet that requirement, B.C. Hydro would have to boosts its electricity supply by building new power projects or by buying hundreds of millions of dollars worth of long-term power from independent power producers.
Tweaking the requirement to suit average water levels, with some extra energy built in for insurance, would be one way the province could revamp the policy and reduce anticipated costs for ratepayers, says Energy Minister Rich Coleman.
“If you moved it to average water, with a bit of insurance in megawatt power, that’s one option,” Mr. Coleman said Wednesday.
But such a change won’t happen overnight. In the meantime, B.C. Hydro is obligated to look to other areas – including staffing levels and procurement policies – for $800-million in savings to keep rates down over the next three years, he said.
Those savings were outlined in a report, released Aug. 11, that concluded B.C. Hydro should halve a proposed rate increase through measures that include deferring capital projects. The report also zeroed in on the province’s self-sufficiency requirement, saying it was a “significant planning constraint” on the utility.
If the definition were changed to average water, B.C. Hydro would not need to obtain additional clean energy until 2016 or beyond, compared with as early as January 2012, based on the current definition, the report said.
“There’s been no decision inside government one way or the another,” related to self-sufficiency, Mr. Coleman said. “But our responsibility in the ministry is to take anything that’s ministry-related in the report and bring forward options.”
Questions around self-sufficiency grew louder last week, when a media report quoted B.C. Hydro president Dave Cobb as saying he was “confident” the province would change how it defines the concept.
Mr. Cobb declined to be interviewed for this story.
The uncertainty over self-sufficiency has rattled the independent power sector, which has raced to bid on and build projects to meet anticipated future demand from B.C. Hydro – and with an eye on potential exports to jurisdictions such as California.
The recent B.C. Hydro report noted that clean energy is generally more expensive than other forms of energy and highlighted other potential pitfalls, such as Ontario’s experience of being locked into long-term fixed-price contracts with independent power producers and being forced to sell excess power at a loss.
If the province relaxes its self-sufficiency requirements and relies more on the spot market, that would likely result in fewer opportunities for IPPs.
But while the spot market is awash in cheap energy now, that could change down the road, said Paul Kariya, executive director Clean Energy B.C., which represents IPPs.
And on the cost front, he maintains private power is fairly priced.
“You’re going through a competitive process – private-sector driven, one company against another company. Hydro is taking the lowest price,” Mr. Kariya said. “B.C. Hydro can’t build it for cheaper – nobody can. The fact that you have that high attrition rate is because people have submitted bids cut to the bone. These are not gold-plated jobs.”
The attrition, or failure, rate for IPPs in the province is 37 per cent. Projects typically founder over issues around permitting, partnerships with first nations, construction costs or financial backing.
In 2010, IPPs produced 16 per cent of B.C.’s total domestic electricity requirements and accounted for 49 per cent of total costs, the recent report said.
But energy costs associated with B.C. Hydro’s system are from depreciated assets built in the 1960s and 1970s and don’t include operating and maintenance costs, the report added.
B.C.’s electricity demand is expected to increase by up to 40 per cent over the next 20 years.