Damn the torpedoes or torpedo the dam?

BC Utilities Commission final report forecasts dam project will be nearly $2 billion over budget and a year behind schedule

Site preparation work for the Site C dam project in northern B.C. | submitted

Faced with a no-win situation over Site C dam – kill it or finish it – Premier John Horgan may have thought he could buy his government time on a tough decision when he gave the BC Utilities Commission (BCUC) a third option to consider as part of a review of the mega-project: suspend it.

But in a final report issued last week, the BCUC determined that mothballing Site C would be the worst of all possible options – one that would add $3.6 billion to the project’s costs, which are already expected to be nearly $2 billion over budget.

Horgan and his cabinet are now faced with a dilemma that could have steep financial and political consequences, no matter what they decide. The premier has promised a decision on Site C’s fate by the end of this year.

His choices are to either complete the project, which the BCUC forecasts is more likely to come in at $10 billion, not $8.3 billion, and one year behind schedule, or lay off more than 2,000 workers in the Fort St. John region and explain to taxpayers how his government plans to pay for $3.9 billion worth of work on something that will not add a single electron to B.C.’s power grid.

He will also have to explain whether his government plans to invest in any new wind or geothermal projects – by no means a given – or will simply meet any peak power demand with other options recommended by the BCUC.

Throughout the BCUC’s 12-week review, work continued on the dam. It is 20% complete, and by the end of this year, $2.1 billion will have been spent on the project.

The BCUC says it will cost an additional $1.8 billion in termination fees and remediation costs if the project is cancelled, which would mean sunk costs of $3.9 billion.

On the other hand, the BCUC estimates BC Hydro still needs to spend another $8 billion to finish Site C because it is likely to come in about $1.7 billion over its original budget of $8.3 billion.

“I don’t see how the project could proceed, given the findings of the BCUC,” said David Austin, a lawyer for Clark Wilson LLP who represented the Clean Energy Association of BC during the BCUC hearings.

“I think what they’ve done is make the decision a heck of a lot simpler for the provincial cabinet,” said Harry Swain, the former chairman of the joint review panel that originally reviewed the project. “There really is only one sensible alternative standing.”

“Cancelling Site C will take real leadership,” said BC Green Party Leader Andrew Weaver. “I hope that the BC NDP will seize the incredible opportunity before us to develop a 21st-century vision for the future of energy in this province.”

But the political calculus of cancelling the project might be just as difficult as completion.

“To me, it’s a lot of taxpayers’ money squandered, and so I think at the end of the day cancellation is not going to save us that much money,” said Werner Antweiler, an associate professor at the University of British Columbia’s Sauder School of Business.

“The right decision would have been made before this project got started, looking at the alternatives. Now that we are down the road, they have created this train that’s virtually impossible to stop without wasting a lot of money and squandering it.”

The independent power sector has viewed Site C’s cancellation as an opportunity to revitalize an industry that has stalled in B.C.

The geothermal sector in particular might take some hope from the BCUC’s final report. Unlike the BCUC’s preliminary report, which suggested wind power only as part of alternative energy options, the final report also mentions geothermal energy as an option.

But a careful reading of the BCUC report offers the independent power sector no guarantee that it would be back in the game following Site C’s cancellation. That may be especially true given Horgan’s disdain for what he once criticized as overpriced “junk power.”

The BCUC also casts serious doubt on BC Hydro’s load forecasts. Declining industrial demand and conservation measures suggest B.C. might not need as much power as BC Hydro forecasts, which could mean no need for new wind or geothermal power.

The BCUC does offer the wind and geothermal sector some hope in stating that “increasingly viable alternative energy sources such as wind, geothermal and industrial curtailment could provide similar benefits to ratepayers as the Site C project, with an equal or lower unit energy cost.”

But it suggests that those alternatives also come with risks. The report notes there “may actually be no geothermal potential” in B.C. and that the cost of wind power might be higher than estimated. It also suggests three other sources of power to meet peak demand – especially in the winter – that could preclude the need for any new power generation from alternative renewables:

•“remobilize” the Burrard thermal power plant;

•repatriate some or all of the power that B.C. is entitled to under the Columbia River Treaty; and

•buy power from other jurisdictions when needed.

All of those options would likely require an amendment to the Clean Energy Act.

The BCUC report also details various demand-side management options. Industrial load curtailment is one. This approach offers incentives to industry to cut power consumption during peak periods.

During its hearings, the BCUC also heard that there are conservation measures BC Hydro could rely on to reduce power consumption in B.C.

For example, there are 600,000 electric water heaters in B.C. homes, all of which now have smart meters. Switches could be installed that use smart meters to determine when hot water is not needed in the home (between midnight and 5 a.m., for example) and turn water heaters off or down during those periods.

According to a Canadian Wind Energy Association presentation to the BCUC, that alone would result in a 500-megawatt peak load reduction, for a cost of just US$36 million (US$60 per switch).

The NDP has so far held its cards close to its vest, and has given little indication which way it might lean on Site C.

“This will be an extremely difficult decision,” Michelle Mungall, B.C.’s minister of energy, mines and petroleum resources, said last week following the release of the BCUC’s final report.

“We inherited a project that was advanced by the previous government without proper regulatory oversight, is now more than two years into construction, employs more than 2,000 people, and on which about $2 billion has already been spent.”

See related story: "B.C. might not need any additional wind power either"

nbennett@biv.com

@nbennett_biv