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IPPs an even worse rip-off than Site C Dam, SFU economist warns

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Posted November 21, 2014 by Common Sense Canadian in Economics
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IPPs instead of Site C Dam? Don't go there, says SFU economist

Construction of a private power project on the Ashlu River (Photo: Range Life)

The following article by renknowned energy expert and SFU economist Dr. Marvin Shaffer is republished from the Canadian Centre for Policy Alternatives’ Policy Note

You would think that the fiasco of the government forcing BC Hydro in recent years to buy run-of-river and other IPP supply that it didn’t need, resulting in losses of hundreds of millions of dollars per year, would have put that unfortunate policy on the back burner for a long time.

Not so. Clean Energy BC, the lobby group very ably representing IPPs in the province, has released a report claiming that BC Hydro could save $750 million to $1 billion if it were to buy a basket of run-of-river, wind, biomass and other IPP supply instead of building Site C. And apparently Minister Bennett is looking at that option as an alternative to Site C.

No reason to believe private power lobby

There is, of course, little reason to believe IPP supply would provide cost savings of $750 million to $1 billion relative to Site C. The estimates of such cost savings assume that IPP supply can be secured by BC Hydro at an average cost of $74/MWh, some 40% less than the average $125/MWh price BC Hydro contracted to pay after its last call for new supply.

The estimated cost savings also ignore the relatively low value of run-of-river and wind supply, run-of-river because of the disproportionate amount of energy produced in the springtime and wind because of the intermittent nature of the supply and consequent need for constant back-up. And, the estimated savings ignore differences in the cost of capital between publicly financed and private supply, and differences in the contractual rights to the projects at the end of initial contract periods.

From bad to worse

One can only hope that Minister Bennett does not jump from one bad idea (building Site C even though BC Hydro does not need that supply in the foreseeable future) to an even worse idea (acquiring high cost, low value IPP supply that we equally don’t need).

There is a far better strategy that BC Hydro should pursue.

What Hydro really needs

What BC Hydro really needs in the short to medium term is back-up for its hydro-electric system — assurance it will be able to meet all of its requirements even in drought conditions when hydro production is constrained. As well it will need more peak generating capacity — the ability to meet requirements in very heavy load hours periods.

The most cost-effective way to meet those needs is with the installation of additional generating capacity at BC Hydro’s existing hydroelectric plants — the so-called Resource Smart projects — and with strategically located natural gas turbines — available if needed but otherwise not run. The IPP run-of-river and wind projects don’t provide what BC Hydro needs and while Site C could, it would provide far in excess of what is required.

Minister Bennett would do well by deferring the development of Site C. Maybe one day it will be needed and a case could then be made that it is in the broader public interest notwithstanding the very legitimate objections of those most directly impacted by the flooding it entails. But it isn’t needed right now.

And nor is a return to the forced purchase of IPP supply. Been there. Done that. Don’t need to do it again.

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3 Comments


  1.  
    Randal Hadland

    That is a good comparison of the IPP vs gas plant vs megadam options. BC does have additional opportunities to meet its future electricity needs. The single most important one, the one that will avoid all the environmental damage, put off expensive financial investments, and make us all a little more aware of the different impacts of our energy use, is a serious government and industry conservation program.

    Many developed nations use 1/3 to 1/2 of the power/person that we use. This means that we currently have twice the electricity production capacity that we need. Anyone who thinks we should be flood destroying river valleys because of ‘want’ rather than need should reconsider.




  2.  
    nonconfidencevote

    I cringe everytime I see another one of these “run of river ” projects. Regardless of the infrastructure involved to deliver the sporadic power to the BC Hydro grid. This must have a debilitating affect on salmon runs.
    I was in Quebec and the Maritimes last summer and they have really jump into Wind Power in a huge way. My cousin works on building commercial wind towers and then maintaining them. They are very heavily govt regulated . ie Lands and Forests. They actually have “bat software” to slow the blades down at sunset and sunrise when bats are their most active.
    These windmills are technically complicated, expensive units. He wasnt too happy with me when I asked him what their efficiency was compared to solar. Ah well, Devil’s advocate…;)




  3.  
    Cam

    You can guarantee that Minister Bennett will choose the worst possible option for the citizens and the best possible option for the IPP corporations. These crooks are looking to turn over a fast buck by forcing the politicians they have bought and paid for to purchase their inefficient operations at about double what they put into it, thus making huge profits and making the taxpayer pick up the tab. This is exactly the type of deal the Lieberals specialize in.





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