Renewable energy contracts slammed by NDP

British Columbians paying $16 billion for power it doesn’t need: report

The Meikle wind farm is one of five large wind farms in BC developed, along with run-of-river projects, under the Gordon Campbell Liberals' clean energy plan.

Making B.C. a climate change leader is costing the average British Columbian $200 a year more than he or she would be paying if Gordon Campbell’s Liberal government had not aggressively pushed for renewable energy adoption.

That is one way of reading a report released by Energy, Mines and Petroleum Resources Minister Michelle Mungall last night, February 14.

Mungall herself reads the report as proof that Gordon Campbell’s development of a clean power industry is a “booddoggle” that committed BC Hydro to buy $16 billion worth of power that it didn’t need from independent power producers (IPPs).

"This is a 16 billion dollar boondoggle with profits going to friends of the BC Liberals,” Mungall said in a press release.

“It's outrageous that these deals are costing B.C. families, including seniors on fixed incomes, $200 a year. Yet again, the BC Liberals gave billions to their rich friends and stuck British Columbians with the bill. People will be paying for that choice on every Hydro bill they get for the next two decades."

The report, Zapped, by Ken Davidson, was commissioned by Mungall as part of her ministry’s review of BC Hydro.

It says BC Hydro is locked into buying $16 billion worth of electricity from private power producers that it doesn’t need.

But there are other ways the report can be interpreted, depending on one’s politics and one’s view on energy.

On one hand, the report confirms what critics of private power have been saying for years: firm power from large-scale hydro is more valuable than intermittent power, and BC should never have signed up for long-term power purchase agreements with private power producers.

“Simply put, the value of a generator at a storage dam is marginally more than the value of a generator at a run-of-river project,” Davidson writes in his report. “With run-of-river, it is necessary to accept the power as it is generated and to sell it into the market prevailing at the moment.”

Marvin Shaffer, an adjunct professor at the School of Public Policy at the University of BC, says the report confirms what has said for years: The Gordon Campbell Liberals forced BC Hydro to pay too much for renewable power.

“And now, as a consequence, these unnecessary and uneconomic purchases are driving the need for increased rates,” he wrote in a blog in 2016.

Blair King, who blogs about energy issues and has been critical of Green Party Leader Andrew Weaver on a number of issues, found himself sharing some common ground with Weaver in defending the Gordon Campbell policies on climate change, which included investments in renewable energy – primarily run-of-river and wind power.

“These policy decisions were the provincial government putting their money where their mouth was when it came to fighting climate change and represents a sign of exactly what we should expect as we continue our fight against climate change,” King writes in his blog, A Chemist in Langley.

“To put it bluntly BC Hydro, in 2019, is suffering because they are ahead of the curve and got locked into intermittent renewables which is exactly what the environmental activists say we should be doing country-wide.”

Weaver also generally defended the Campbell government’s policies. Those policies required BC Hydro to issue clean power calls and agree to 20-year purchase agreements with independent power producers.

Those developers financed run-of-river and wind projects in return for long-term contracts – contracts that locked BC Hydro into paying steep prices for power over 20 years.

“I would agree that some of the contracts seem to be rather high,” Weaver said. “However, let’s go and ask what was the rationale at the time for it.”

Weaver said the Gordon Campbell government, as part of its climate change action policies, wanted to create a renewable energy industry by requiring BC Hydro to enter long-term power purchase agreements to renewable power developers.

“This was designed to kickstart this industry and it did just that, very effectively,” Weaver said.

“What we have to be very careful of, moving forward, is that we don’t throw out the baby with the bathwater. Because right now the clean energy industry in British Columbia has basically collapsed because of government’s focus on Site C.”

Davidson’s report points out the inherent weakness with intermittent power, and the inherent value of firm power from large-scale hydro. The challenge with intermittent power isn’t exclusive to B.C. Other jurisdictions have found that there are costs associated with renewable power’s intermittency.

Intermittent sources like wind and run-of-river often produce surpluses of power  when it’s not needed. If it is sold, it sometimes has to be sold at a steep discount. Davidson provides an example of how this works against BC Hydro.

He cites an example of 150 megawatts hours (MWh) of power generated by wind or run-of-river, 100 MWh of which can be “stored” by BC Hydro by cutting back on hydro power production. (Basically, it can simply store water and stop producing power at its dams.)

But if it has to sell 50 MWh of surplus power, it might get $5 MWh market value for that power, but still have to pay IPPs $100 MWh, because it is locked into those prices on a take-or-pay basis.

Had the Liberal government not handcuffed Powerex, BC Hydro’s power trading business, the discount might not be so bad.

Powerex traditionally made good profits buying power when it was cheap on the power market, and selling B.C.’s dispatchable hydro power at higher prices.

But as part of its energy policy changes, the Liberal government required that B.C. become energy self-sufficient, and also restricted the use of the Burrard thermal power plant.

That restricted Powerex’s ability to capitalize on both hydro and renewable energy resources.

Had Powerex not been restricted to a self-sufficiency policy, it might have had more flexibility to sell surplus power when it could get higher prices, and import power at lower prices.

Asked if he thought restricting Powerex in that way was a mistake, Weaver said: “Absolutely it was a mistake.”

Jae Mather, executive director for Clean Energy BC, which represents IPPs, said Davidson’s calculations on the value of the power from IPPS is flawed because it is based on a mechanism that no one in the power industry uses.

He agrees that the amount of power BC Hydro ended up buying from IPPs was excess to B.C.’s needs, but says everyone thought the predictions for B.C.’s power needs were higher than what they turned out to be.

“The reality is back then that’s what everybody thought the power demands were going to be,” Mather said. “Everybody. Not one sector – all sectors.”

As for Powerex and the requirement for self-sufficiency, Mather said liberalizing Powerex’s ability to buy power from other jurisdictions when it is cheap and sell high would run up against B.C.'s climate change policies, which requires that close to 100% of B.C. power come from clean, renewable sources.

“The reality is we would also blow our ability to ever meet our own climate targets because we’d be importing vast amounts of more fossil energy into our grid,” Mather said.