Big gambles on big hydro recently cost a couple of premiers their jobs, as huge cost overruns on massive hydro dams and collapsing prices for exported electricity combined to damn the projects said premiers had promised would generate carbon-free profits ad infinitum.
Will British Columbia Premier Christy Clark be the next provincial leader to be turfed for going too big?
B.C. Hydro's $9-billion (and counting) Site C project has always looked more like a fiscal stimulus and legacy initiative than an energy project that could withstand a rigorous cost-benefit analysis. Site C will generate electricity at several times current and projected market prices, while its claims to produce "green" power are undermined by the forests that will be flooded to build it.
Former Newfoundland premier Paul Davis and Manitoba's Greg Selinger paid the price for pushing ahead with ill-conceived hydro projects championed by their Crown-owned utilities. Building costs have spiralled endlessly higher while cheap natural gas and a North American electricity glut portend weak export prices for years to come. Not surprisingly, Muskrat Falls in Newfoundland and Manitoba's Keeyask/Bipole III project, both under construction, contributed in a big way to both leaders' respective electoral defeats.
Ms. Clark could join them next year unless she can successfully spin Site C as a better story, despite its dubious economics and entrenched opposition from First Nations, environmentalists and the provincial New Democrats. Hence, her bold "power for pipelines" proposition to Alberta.
Ms. Clark's proposal to sell Site C's 1,100 megawatts of electricity to Alberta in exchange for B.C. backing an oil pipeline to the West Coast is billed by her government as a potential win-win solution. It would fulfill one of B.C.'s five conditions for approving pipelines – specifically, a fair share of the fiscal and economic benefits – while enabling Alberta to meet its commitment to shuttering all of its dirty coal-fired electricity plants by 2030.
Alberta Premier Rachel Notley is less than enthusiastic about the idea. Any quid pro quo for pipeline approval would set a dangerous precedent and violate the spirit, if not the principle, of Canadian federalism. Energy infrastructure projects vital to the national interest, as pipelines to tidewater are deemed, must not be made subject to horse trading by parochial premiers.
Buying power from B.C. would also require 600 kilometres of expensive and environmentally contestable transmission lines while Site C's electricity would cost more than twice Ms. Notley's preferred option of supplementing cleaner-than-coal, natural-gas-fired generating stations with wind and solar power. Even with a hefty carbon tax, it's difficult for Alberta to make Site C's numbers work.
The Canadian Energy Research Institute estimated in a January study that importing power from Site C would cost Alberta between $140 and $162 per megawatt hour, compared with $57/MWh for natural-gas-fired cogeneration. Using hydroelectricity could cut greenhouse-gas emissions from the oil sands by up to 16 per cent, but at a very high price per tonne of carbon reduced, one several times higher than anything Alberta has announced or is contemplating.
Ms. Clark's case is further undermined by questions surrounding whether she could guarantee that the power B.C. proposes to sell to Alberta would actually come from Site C at all. She couldn't. That's not how the electricity market works. Researchers at the University of Victoria's Institute for Integrated Energy Systems project that "the majority" of the energy provided to Alberta through expanded transmission capacity would likely first be imported to B.C. from the United States and then exported to Alberta. "The potential emissions reduction … depends on the emissions from imported energy," the UVic researchers noted.
Big hydro operators such as B.C. Hydro and Hydro-Québec are expert "energy traders" that import power when spot-market electricity prices are low, allowing water to build up in their reservoirs. They unleash the water to run their turbines at full steam when demand and prices peak. Hence, the actual carbon profile of the electricity they sell to customers depends in part on the sources of their imported power.
If the "majority" of power Alberta were to buy from British Columbia came from coal- or natural-gas-fired plants in the United States, Ms. Clark's proposition could be a losing one for Alberta in both economic and environmental terms.
Still, Ms. Notley and Ms. Clark need each other. If promising to buy electricity from B.C. allows Ms. Clark to claim that one of her conditions for building pipelines has been satisfied and that Site C is a success, it might be a price Ms. Notley is willing to pay. It could save her, and Ms. Clark's, bacon.
Konrad Yakabuski