At first glance, the response of the forest sector and other large energy users to the province’s Clean Energy Act was surprising. Here is an Act that will force BC Hydro to waste literally billions of dollars to create an artificial demand for private power. It will without question drive up BC Hydro’s rates far more than necessary.
The Act enshrines a costly requirement for self-sufficiency that isn’t needed to ensure a reliable supply. It exacerbates the costs of this by forcing BC Hydro to ignore B.C. resources, including the emission-free downstream power benefits under the Columbia River Treaty, that BC Hydro could in fact use if ever needed to meet domestic demand for power. It adds a mindless and even more expensive requirement for insurance, which there is no reasonable prospect of ever needing. Then, the coup de grace, it forces BC Hydro to buy private power for export, taking on risks and costs the private producers themselves refuse to assume — almost certainly ensuring the implicit subsidy of these export-driven private power developments.
The government has provided no analysis of the purported benefits, and it clearly has not identified or, one must assume, even considered the costs, environmental as well as economic.
The joint industry association representing large energy users in the province understands all this. They were publicly complaining about even less costly versions of this plan only a few months ago. So why is their response to the bill so muted?
It could be the timely announcement of power smart subsidies for large industrial energy users. BC Hydro is going to give large forest sector and other firms $80 million, in some cases paying the entire cost of the measures to reduce their electricity requirements. One can only speculate why industry isn’t paying these costs, or at least the majority of them, itself since it will greatly benefit from whatever savings are realized.
But that is old stuff — industry expects BC Hydro to pay for its conservation of power. More likely is a little discussed or explained provision in the Clean Energy Act — the requirement for BC Hydro, and the power for Cabinet to set the terms, of long term domestic sales contracts. It seems that forest, mining and other large energy users will soon be able to lock in their power costs on terms Cabinet can decide.
That is how you deal with industry concerns about all of the provisions in the Clean Energy Act that will drive up rates. You give them money in the name of Power Smart, and more importantly give them an out from the rapidly escalating rates government is forcing on Hydro. It is all so tidy, especially with an impotent Commission and mostly disinterested press.
John Calvert // May 27, 2010 at 12:59 pm
Marvin is right,
There has always been tension between the goals of the private power developers who want high prices for their energy and the goals of most of the large industrial customers who want cheap electricity. The establishment of the Heritage Contract provided an initial step by the government towards accommodating the conflicting interests of these to groups of its supporters. It provided to industrial customers a guarantee that they would continue to enjoy access to the low cost public electricity generated from BC Hydro’s reservoirs. But it did not guarantee to them that they would avoid some of the incremental cost increases associated with BC Hydro’s high cost energy purchase agreements with private power developers. The inclusion of the new provisions in the Clean Energy Act suggests, as Marvin rightly notes, that the major industrial customers will be receiving a guarantee of long term low cost electricity regardless of the impact of additional purchases from private power developers or the impact of the major new infrastructure investments BC Hydro will be making to provide transmission access to new mines and to accommodate the need to build new transmission lines for its purchases from private small hydro and wind projects. Aside from the potential for such a change to result in a huge and ongoing subsidy to mines and pulp mills, it will also take away a major policy tool from future governments. For they will not be able to raise industrial power rates as a means to stimulate conservation. Subsidizing mines and pulp mills with low cost energy makes no sense as an industrial strategy, given the small number of jobs it will create. And it will have major negative environmental consequences as well. Citizens and residential ratepayers in BC have every reason to be extremely worried about this provision in the new Act.
Aldyen Donnelly // Jun 14, 2010 at 10:54 am
Marvin,
Enjoyed your June 14 article in the Vancouver Sun, too. Could not agree with you more.
I think it is also important to note the critical issue the “Clean Energy Act” fails to address or even aggravates.
Four large corporate entities directly or indirectly own over 70% of the renewable power supply in place or under construction in Canada today. None of these four leading renewable energy financial leaders has or plans (as far as I know) to BC, and the Clean Energy Act makes our province even less attractive to them.
The net result? In addition to financing the new power supply, BC Hydro is going to have to finance the weaker relative balance sheets of the TSX stock and CRCA depreciation credit hustlers who dominate the BC green power market at this time. All this to say that we will pay more for each unit of green power than would be required, had BC’s government introduced more appropriate power market legislation.
From the perspective of the larger, well-financed leading developers of renewable power, the Clean Energy Act simply formalizes the role of King Campbell in project and proponent selection. As long as the project selection process lacks transparency and predicability, BC looks like any other banana republic and big legitimate financiers will avoid our attempts at building a clean energy hub like the plague.
A Clean Energy Act that introduces a legally binding renewable energy standard, including energy efficiency projects as credit-earning (so “negawatt-hours” would be treated the same as new 0-emission supply), and which maintained the independence and power of the BCUC is just what BC needs. But that is not what we got. We got legislation that consolidates ever more power in the Premier’s office.
Aldyen Donnelly // Jun 14, 2010 at 11:09 am
Marvin,
I should have added that not all Renewable Power mandates are created equal.
Between 1999 and 2006, Minnesota, Spain and Texas succeeded in incenting the private sector to develop more new wind, solar, PV, biomass and waste-based power (as a % of total supply and on a per capita basis) than Germany, California or Denmark. And each of the first three achieved this superior outcome at 1/3 to 1/2 the incremental power price increase we have seen in the latter three nations/state.
At the 1,000-foot level, the 6 nations/states have implemented similar policies/strategies. At the ground level, however, their policy packages could not have been more different–at least through 2006.
We should be studying the differences between these regions’ renewable power implementation strategies and have that learning inform BC policy development.
I find the Spanish case study most interesting. Through the end of 2006, Spain’s combination of renewable power mandate and feed in tariffs achieved a higher per capita renewable power market penetration than Germany’s at 1/3 the incremental cost to its rate-base. Then, in 2007, aggressive industry lobbyists got the Spanish government to adopt a German-style renewable power regulatory package. By mid-2009 this proved a disaster and the Spanish renewable power movement has been a shambles ever since.
In the meantime, most BC academics advocate for German-style policy here (it having been introduced in Ontario recently).
The most significant net result of German-style policy? As of the end of 2009, the average German household pays over CAD$0.45/kWh for electricity (taxes, transmission and distribution costs included). In 2008, the German parliament approved applications by utilities to build up to 26 traditional coal-fired power plants. If all of the plants were to be built to their permit approvals, they would add 68 MM TCO2e/year to Germany’s national GHG inventory (according to Parliament’s own estimate).
I rather doubt all 26 new coal plants will actually be built. But 8 of the approved traditional coal plant have already been commissioned or are in the last stages of construction. These 8 plants add significantly more coal-fired (high GHG) power generation capacity than Germany has added in renewable form since 1990. In other words, all of the net gains Germany has accomplished in renewable power (at very high cost), have been wiped out by the determination that more coal-fired capacity is essential.
Apparently, this outcome is acceptable to certain other BC academics…at least it would seem this way because they (knowingly or unknowlingly) advocate for German-style policy daily.
Marvin, thank you for offering a different view.