B.C. Business Community Slams ‘Astronomical’ Cost of Building Site C Dam

Major industrial power users in British Columbia fear that if the proposed Site C dam becomes a reality, rate hikes could put mills and mines out of business while saddling taxpayers with a costly white elephant and ballooning BC Hydro debt.

A decision on the $7.9 billion plan to build a third hydroelectric dam on the Peace River will be made by the federal and provincial governments this fall.

Economic questions about the mega-project were raised by last month’s joint review panel report, which noted the dam would likely be “the largest provincial public expenditure of the next 20 years.”

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The panel, which did not come out for or against the project, found that, based on cost comparisons provided by BC Hydro, Site C would be the most economical way to provide new power — but said it could not measure the true cost or need and recommended the B.C. Utilities Commission should look at it, an idea immediately dismissed by Energy Minister Bill Bennett. (The commission turned down the Site C project in the early ’80s.)

Strong opposition to Site C is now coming from the unlikely direction of the Association of Major Power Customers of B.C., an organization representing about 20 of the largest employers and industrial customers in the province.

“We have absolutely no confidence that this is the least cost plan,” association executive director Richard Stout told DeSmog Canada.

“It’s not the right project right now”

Major industrial power users in B.C. have seen a 50 per cent increase in rates over the last five years and are looking at another 50 per cent over the next five years, he said.

“It is unusual for us to criticize a government of this stripe, but BC Hydro has been out of control for a good 10 years,” Stout said, pointing to almost $5-billion in deferred accounts.

“Any other business would have been declared bankrupt by now,” he said.

Site C will take a decade to build and, with changing markets and a burgeoning natural gas industry causing a surplus of generating capacity in North America, it is almost impossible to accurately predict demand and prices, Stout said.

“All we know is the original load forecasts are going to be wrong,” he said. “It’s not the right project right now.”

Craig Thomson, energy and environment supervisor at Canfor Taylor pulp mill told DeSmog Canada that industry in B.C. was built with a foundation of low power rates, but in the last five years that has changed and Site C would be the final straw.

“I think the cost of hydro-electric dam construction is so astronomical that no one will ever do it again and we’re going to have this huge white elephant,” he said.

“Potentially it’s going to drive our industry out of business.”

B.C.’s natural gas hypocrisy

Doubts are growing about cost comparisons made by BC Hydro, which didn’t include the use of gas power because the 2010 Clean Energy Act demands that 93 per cent of the province’s energy needs be met by clean, renewable power.

The act effectively eliminated the use of gas turbines and sent the gas-fired Burrard Thermal generating station into early retirement.

But the province has now handed a Clean Energy Act exemption to the liquefied natural gas (LNG) industry, a move that allows gas plants to meet their massive power needs with natural gas. Meantime, BC Hydro is prevented from using natural gas even as a backup to renewables.

“It’s really hypocritical to allow them [LNG facilities] to burn gas,” Merran Smith at Clean Energy Canada told DeSmog Canada. “The carbon emissions, as well as the air pollution, are inconsistent with the province’s goals.”

“Gas is a fossil fuel. It may be cleaner than coal or oil, but it still has a heavy carbon footprint.”

Should gas turbines be allowed for backup power?

Like many others, Stout believes alternatives to Site C should be considered, including the use of gas turbines as an intermittent source of power — something that would first need the government to change the Clean Energy Act.

Thomson is looking at new technologies coming on stream and, in the meantime, Burrard Thermal, with a similar capacity to Site C, could provide sufficient intermittent power, he suggested.

“Electricity is 32 per cent of our operating cost and, if it goes up and up, someone is going to say the business is not viable and the doors will close,” he warned.

Energy economics expert Marvin Shaffer, adjunct professor at Simon Fraser University, believes Burrard Thermal should never have been eliminated as a source of backup energy.

“I’m not suggesting that an old, relatively inefficient plant like Burrard should be used as a base load facility. What Burrard can do is provide a very cost-effective backup to the hydro system as well as back-up peak capacity exactly where it might be required,” Shaffer said.

Burrard Thermal generating station was sent into early retirement with the introduction of the 2010 Clean Energy Act. Credit: Niall Williams via Flickr.

With Burrard in place, B.C. would have no shortfall of energy until 2033 and, even without Burrard, strategically placed gas thermal plants could supply low cost energy as needed, he said.

Faced with Site C as the alternative to intermittently using gas turbines, even Joe Foy of the Wilderness Committee comes down on the side of occasional gas use.

“It seems a better solution than drowning 100 kilometres of farmland when you don’t even need that power for 300 days of the year,” he said.

Oxford study: Dams routinely come in 90% over budget

Many also have concerns that, when costs such as transmission lines are factored in, Site C’s cost will soar above $7.9 billion.

Fears that costs will run amuck are backed by an Oxford University study of power dams that found construction costs of large dams are, on average, more than 90 per cent higher than their budgets.

Mark Winfield, associate professor in the environmental studies faculty at York University, sees parallels between Site C and costly nuclear power plant plans in Ontario.

“Large hydro projects like Site C and nuclear power plant construction or refurbishment reflect a focus on large, centralized, high-cost, high-risk, high-environmental impact, long-lived generating infrastructure,” he said.

That limits opportunities for the system to adapt to market changes and sets the focus on only one path, Winfield said.

“In both cases there are significant uncertainties about future demand and, therefore, substantial risk of making major investments in projects which may turn out not to be needed or which are overtaken by newer, better technologies,” he said.

Site C’s legacy: cheap power or wealth destruction?

Dan Potts, former executive director of the Association of Major Power Customers of B.C., believes the lasting legacy of Site C would be wealth destruction.

“The huge cost will rob the province of valuable resources that could be used to deliver other needed government services as well as burden the B.C. economy with debt and high electric power rates that will sap our competitiveness,” he said.

Times have changed from when previous dams were built on the Peace and Columbia Rivers, said Potts, who has calculated that gas prices would have to almost quadruple before power from Site C would be economically viable for export.

“B.C. Hydro has filed information that the cost of electric power from Site C will be in the range of $100 per megawatt hour. Current market prices are in the range of $30 per megawatt hour. If Site C were now operational, the market value of the power produced would be $350 million per year less than the cost,” Potts said.

Site C will lose $800 million in first four years: report

The possibility of exporting excess power to help fund the dam was discounted by the joint review panel, which predicted that, unless prices changed radically, B.C. Hydro operations would lose $800-million in the first four years of operations:

These losses would come home to B.C. ratepayers in one way or another. B.C. Hydro’s expectation is that it might sell Site C surpluses for only about one-third of costs, leaving B.C. ratepayers to pay for the rest.

But the panel also says that Site C, after an initial burst of expenditure, would lock in low rates for decades and produce fewer greenhouse gas emissions than other sources.

Ignoring the Clean Energy Act is not an option for BC Hydro and there is no doubt Site C compares favourably to other clean energy costs, said Hydro spokesman Dave Conway. In comparison to Site C power at $100 per megawatt hour, new generation from wind or micro-hydro comes in at $128 per megawatt hour, he said.

However, the panel noted that geothermal energy would cost about the same as Site C power — and as a firm source of power could present a viable alternative to the dam. Geothermal could be built incrementally to meet demand, eliminating the early-year losses of Site C, the panel noted.

Even without Site C, customers are looking at a 28 per cent increase in rates over the next five years, but British Columbians should bear in mind that they are paying one of the four lowest energy rates in North America, Conway said.

However, Foy would like all British Columbians to consider what else could be done with almost $8-billion.

“Maybe better education for kids or health care?” he asked.

“If we spend $8-billion on Site C, what community doesn’t get a health care facility?”

Image Credit: An area of the Peace River Valley threatened by Site C. Photo by tuchodi via Flickr.