Docs reveal how much BC Hydro power new LNG and mining projects want. Who will pay for it?

It’s no secret that electrifying B.C.’s economy, from homes to heavy industry, will require significantly boosting the amount of power the province produces. Now, documents obtained by The Narwhal under freedom of information legislation reveal just how much electricity emissions-heavy industries like liquefied natural gas (LNG) and mines estimate they need to meet B.C.’s carbon emissions targets.

The documents outline the potential for an unprecedented increase in industrial electricity demand, raising questions about where the power will come from, who will pay for it and how it will impact both taxpayers and electricity rates for consumers. 

Ten mining, oil and gas and hydrogen projects were seeking almost 33,000 gigawatt hours of electricity from BC Hydro, according to a briefing note prepared for Premier David Eby in March 2024. That’s more than twice the amount of power BC Hydro sold to all large industrial customers in 2024.

In an interview, Energy Minister Adrian Dix acknowledged B.C. is facing a “massive increase” in demand for electricity from non-industrial sources as well. He framed electrification as both a challenge and an opportunity B.C. is well-poised to seize due to its baseload of hydro power.

“This is a huge opportunity for us, we can’t miss it,” Dix said. “This is one of our economic advantages over other jurisdictions and we have to drive.”

Briefing note lays out specific electricity needs of B.C. megaprojects

The briefing note shows three liquefied natural gas export projects — LNG Canada Phase 2, Ksi Lisims LNG and Cedar LNG — would require a total of 1,400 megawatts of power to run on electricity instead of gas. That much energy would power about 600,000 average homes. The B.C. government requires all new LNG projects to be net zero by 2030, meaning they must reduce their emissions as much as possible and offset emissions that cannot be eliminated “through high-quality, verified carbon offset projects.”

LNG Canada Phase 2 requested 585 megawatts — about half the electricity the $16-billion Site C dam will produce — while Cedar LNG, a floating liquefaction and export terminal in Kitimat, B.C., would need 214 megawatts, according to the documents.

Ksi Lisims, a floating LNG plant at the north end of Pearse Island near the Alaska border that is currently undergoing an environmental assessment, has requested 600 megawatts of power from BC Hydro if it proceeds. 

Megawatts are used to measure amounts of electricity used or generated in an instant, while gigawatt hours measure volumes of power used or generated over time. It’s difficult to accurately convert one measure to the other. 

Expanded electricity need fuelled by mining, LNG: docs

The documents also show Teck Resources requested 460 megawatts of power to electrify coal-hauling and drying operations in the Elk Valley, at mines now owned by Swiss mining giant Glencore. (BC Hydro later suspended work on the electrification project because the company decided to reassess its options.)

Teck also wants 307 megawatts for its proposed Galore Creek Mine on Tahltan Nation territory in B.C.’s northwest, while Seabridge Gold is seeking 220 megawatts for the proposed Kerr-Sulpherets-Mitchell mine near the border with Alaska. Natural gas projects in B.C.’s northeast — which will largely supply LNG export projects — would require an estimated 615 megawatts to electrify their operations, the documents say.

Projected energy needs of major B.C. projects

Dix declined to comment on the estimates provided by project proponents and total demand estimates outlined in the documents. Neither the Energy Ministry nor BC Hydro responded to questions asking if there have been any changes in power requests from the LNG, mining and other industries listed in the documents.

In the interview, Dix emphasized that not all of the projects mentioned in the documents will proceed. Still, he said he expects the province will be seeking more new energy projects “sooner than expected.”

“I strongly argue it’s the economically right decision for the province,” he said. “We are awash in clean energy potential.”

BC Hydro recently announced nine new wind projects and one new solar project that will provide about the same amount of power as the publicly funded Site C dam for a fraction of the cost.

Increasing electricity supply could put pressure on hydro rates: B.C. Energy Minister Adrian Dix 

But some observers are more cautious about the cost of electrifying large industries, warning the drive to secure more electricity could unfairly put BC Hydro customers and taxpayers on the hook to help cover costs.

Richard Mason, a former commissioner with the BC Utilities Commission, said electricity is still relatively cheap in the province, in part because most of B.C.’s large hydro dams were built decades ago when the cost of materials and labour was much lower than today. 

But that could change as BC Hydro invests in new electricity generation and transmission infrastructure, Mason cautioned.

“If the cost of new energy is going up, then BC Hydro’s average cost of energy is going to go up,  you can be fairly confident with that,” Mason, who analyzes B.C.’s energy policy on his website, told The Narwhal.

Dix acknowledged that B.C.’s need to increase the supply of electricity is going to put “pressure on hydro rates.”

“That means you’ve got to make good decisions,” he told The Narwhal.

B.C. needs to “aggressively double down on renewable energy,” according to Dix, to ensure BC Hydro can meet future demand while remaining thoughtful about the cost of new electricity supply.

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“As you’re dealing with the costs of incremental power, the ability to make good decisions and relatively transparent decisions that people understand with those things will be really important,” he said.

Earlier this year, the B.C. government announced it will fast-track the North Coast transmission line, a 450-kilometre high-voltage line to serve industrial customers in northwest B.C., including mining and LNG projects. The $3-billion line — which the B.C. government wants federal taxpayers to help pay for — is expected to deliver 2,200 megawatts of electricity, according to Eby’s briefing documents.

In March, Dix announced BC Hydro rates will increase by 3.75 per cent in each of the next two years, saying higher rates will help “ensure BC Hydro can continue to build the critical local and provincial renewable energy infrastructure and supply needed to bolster B.C.’s economy.” The increases will help cover the cost of the Site C dam, inflationary pressures and “the critical work required to significantly invest in B.C.’s energy supply and infrastructure,” Dix said in a statement at the time. 

Massive projects could overwhelm B.C.’s grid, even as province tries to plan in advance: clean energy expert

Mark Zacharias, executive director of Clean Energy Canada, credits the B.C. government for taking action to address the expected increase in electricity demand. Zacharias said B.C.’s new wind and solar projects, combined with BC Hydro’s plans to invest in upgrading its existing infrastructure, should give the province flexibility to provide power to some industrial customers.

But he said the scale of the industrial demand for power outlined in the briefing note could overwhelm those efforts.

“B.C. can definitely generate more power for domestic, residential and business use at a reasonable rate,” Zacharias said in an interview. “Where that calculus potentially breaks down is if any of these massive projects get to a final investment decision position.”

Final investment decisions are the point at which project proponents commit to financially supporting the project. They are sometimes made after projects have already been approved by governments. LNG Canada Phase 2 was approved by the B.C. government, but the consortium of companies that owns the project, including Shell Canada, has not yet made a final investment decision. 

In 2023, LNG Canada CEO Jason Klein told Reuters the consortium was in discussion with Eby and BC Hydro about finding ways to address future hydropower needs. Klein said electrifying Phase 2 would require “significant capital investment across the value chain,” including building large-scale transmission lines.

Dix said the B.C. government is serious about continuing to build on the current energy supply.

“We can’t just rest on our laurels. We have this engine of economic activity, which is BC Hydro, owned by the people of B.C. and we have an opportunity, if we make good decisions,” Dix said. 

“These aren’t easy decisions, but we’ve got to also look for the upside for people in B.C., which is clean jobs, which is ensuring more wealth for the province, more wealth that supports all the things that make B.C. great.”

Zacharias said the rising wave of electricity demand means B.C. will have to wrestle with big questions about who bears the costs and who gets connected.

“If we do get something that requires a gigawatt of power, whether it’s LNG or green hydrogen, there’s going to need to be a really kind of thoughtful rethink around where does the power come from and can B.C. actually power this project,” he said. A gigawatt of power is the equivalent of 1,000 megawatts.

At least two projects listed in the documents have been shelved. Last fall, Fortescue suspended its plans to build a hydrogen production facility, known as Project Coyote, in Prince George, B.C., citing a desire for “more favourable power pricing and availability.” The facility was seeking 1,000 megawatts from BC Hydro — almost as much power as the Site C dam will produce.

Another hydrogen project, proposed by Shell Canada, was shelved as of September 2024, according to a separate briefing note prepared for B.C.’s former energy minister Josie Osborne that was included in the documents. The company had requested 170 megawatts of power.

B.C. government may lower cost for industries to connect to the grid 

The documents also show Eby’s government is considering changing the rules so industrial customers don’t have to pay the full charge currently levied for connecting to the power grid.

BC Hydro requires new industrial customers seeking more than about 150 megawatts of power to pay the incremental costs of generating and transmitting the power that exceeds that threshold. The rule — known as tariff supplement 6 — was introduced in 1991 and based on the “cost of adding a new gas-fired generation plant” to BC Hydro’s roster.

That threshold is meant to protect other BC Hydro customers from being hit with higher electricity prices as a result of investments to serve large industrial customers. However, the briefing note for Eby says requiring LNG, mining and other companies to pay those costs “could be prohibitive.”

In the three decades since the rule was implemented, not a single project has exceeded the threshold. But Eby’s briefing note says new approaches are needed “to balance industrial competitiveness with electrification in other sectors of the economy, all while keeping rates affordable.” 

One option Eby’s briefing note mentions is to encourage large industrial customers to generate their own electricity or find ways to reduce their demand, although the document concludes those tweaks would only work in limited circumstances. Projects that need only slightly more than 150 megawatts of power might be able to reduce their electricity demand below the threshold, but they would have to be located in places where it would be feasible to get additional power from renewable sources, the document states. 

The document also says B.C. could abandon its current model for connecting new industrial customers in favour of a new one. It references Quebec’s model, which requires requests for more than five megawatts to be approved by a cabinet minister on Hydro-Québec’s recommendation.

A government briefing binder, prepared for Dix when he became energy minister last November, suggests B.C. could implement a similar model “with criteria designed to align with government priorities,” such as economic growth, affordability and the environment. 

If the province changes the way it provides power to large industrial customers, the new system “should balance the needs of industrial customers, while prioritizing projects that provide the greatest benefits to British Columbians and protect existing BC Hydro customers from rate increases,” according to the briefing document prepared for Dix.

Dix told The Narwhal the government is still wrestling with how to proceed.

“I have a pretty clear mandate from the premier to address those issues,” he added.

Mason has reservations about using BC Hydro as a vehicle to deliver on government policies. He said this can be less equitable than funding government priorities with tax revenue. Unlike income taxes, BC Hydro’s rates are paid based on customer usage, regardless of household income. 

“Some of those government policy costs are incurred by BC Hydro and BC Hydro increases rates to pay for them,” Mason said, explaining that “lower-income people who are paying exactly the same electricity rate as anybody else will actually pay proportionately more for these government programs.”

Sven Biggs, oil and gas program director for the non-profit group Stand.earth, argues industrial customers should pay for their full electricity costs, saying anything less is a subsidy. He also worries that prioritizing power for large projects like LNG facilities could hamper broader electrification efforts in B.C. 

“We are actually going to be competing with these new fossil fuel projects for that electricity, in some cases,” Biggs said. “That’s going to make those kinds of other climate solutions — which are longer term and more durable — more expensive.”

Rapidly increasing B.C.’s power supply could be costly, observers say

While BC Hydro is tasked with determining how much electricity it will need to supply all of its customers, the proponents of big industrial projects want to know if they will be able to access the power they require to meet B.C.’s emissions standards before making final investment decisions.

Mason explained both BC Hydro and project proponents want certainty about commitment, either to provide electricity or to build a project that justifies building more capacity.

“You have the chicken-and-egg problem where the investors, if they don’t know what their costs will be, can’t make an investment decision, but the government and BC Hydro want them to make the investment decision so they can figure out what the costs are going to be,” he said. 

“And of course, BC Hydro doesn’t want to invest in new transmission or generation infrastructure it doesn’t need because that would be expensive for somebody, either ratepayers or taxpayers.”

BC Hydro has estimated about 3,700 megawatts of power need to be added to the grid by 2029 to avoid an electricity deficit, recommending new power sources be built to address it. 

Even with new electricity projects in development, the province could still experience an electricity crunch as early as 2026 if emissions-intensive industries like mining and LNG are electrified, BC Hydro estimated in its “North Coast scenario.” 

“If the North Coast transmission line is not built, and built quickly, major critical minerals, future port expansions and LNG, hydrogen and other important resource projects may not proceed,” Dix said in January when he announced the line would be fast-tracked and the BC Energy Regulator, largely funded by the oil and gas industry, would be put in charge of issuing permits for it. 

It’s unclear how many of the industrial projects listed in Eby’s briefing documents were included in BC Hydro’s forecasting, but rapidly scaling up the power supply could be difficult and costly.

Gradually adding to the electricity supply helps BC Hydro smooth the process of recouping costs, Mason explained — something that is tougher to do when new supply is brought online more quickly.

“Where you have a big, chunky load like this, it can increase BC Hydro’s costs very sharply,” Mason said. If those costs are passed on to ratepayers, they would “notice the increase,” he said.

Biggs said big spending on increasing B.C.’s power supply should be for the benefit of all British Columbians, not just BC Hydro’s biggest customers.

“If we had that political will and momentum toward electrifying the rest of our economy, it would be a really bold move in the right direction,” he said. “But that always seems to come second to the demands of these big, giant international corporations.”

Dix takes a different view.

“If the concern is we shouldn’t build clean energy because it might be used for something we don’t like, well, I understand that and that’s part of the public debate, but clean energy is good for jobs, good for the economy, good for the environment,” he said. “Let’s go.”