The NDP government’s arithmetic on Site C cancellation costs is “deeply flawed,” has “no logic at all,” and is “appalling,” according to three project financing experts.

Eoin Finn, a retired partner of KPMG, one of the world’s largest auditing firms, said Premier John Horgan’s claim that terminating Site C would result in an almost immediate 12 per cent hydro rate hike is the “worst rationale I’ve heard since ‘the dog ate my homework’” excuse.  

“I expected better when the new government came in,” said Finn. “They’ve just continued what [former premier] Christy Clark did to hide the true costs of Site C and hope that they get re-elected before the next generation finds out.”

“This is the stupidest capital decision ever made by a B.C. premier. I don’t know who is giving them accounting advice.”

Rob Botterell, legal counsel for the Peace Valley Landowner Association, representing 70 landowners who will lose homes and property to the Site C dam, called on the NDP government to disclose who advised Cabinet on hydro rate increases in the event that Site C were terminated.

“We call on you and your colleagues in Cabinet and Caucus to publicly release the detailed, un-redacted, information and advice and analysis on which you based this finding,” Botterell wrote to Attorney General David Eby and Environment Minister George Heyman.

On Thursday, the landowner association and the Peace Valley Environment Association hand-delivered a letter to B.C. Auditor General Carol Bellringer, asking her to launch an “urgent examination” of the government’s Site C termination and completion cost figures.

The letter also asked Bellringer to verify the cash impact of both scenarios on British Columbians.

The Auditor General’s office was in the midst of investigating Site C’s finances last summer when the new NDP government asked the watchdog B.C. Utilities Commission to review the project, which will flood the traditional homeland of Treaty 8 First Nations, violate basic human rights, force farming and ranching families from their homes, and destroy critical habitat for rare and endangered species.

The BCUC review disclosed that Site C is over budget, behind schedule, beset with geotechnical issues and embroiled in legal and financial challenges with its main civil works contractor, which lost its Canadian partner earlier this year when Petrowest Corporation slid into receivership.

NDP Not Following Standard Accounting Practices, Experts Say

Horgan told reporters Monday that the only recourse if Site C were cancelled would be to hit BC Hydro customers almost immediately with a 12 per cent rate increase to cover the project’s $2.1 billion in sunk costs and $1.8 billion in reclamation costs.

But Finn, along with U.S. energy economist Robert McCullough and Harry Swain, a retired bank president with expertise in project financing, told DeSmog Canada that standard accounting practice for utilities like BC Hydro is to write off the costs of a discontinued project over many years.

“What’s appalling about this is that Cabinet has been advised by some people who simply don’t understand how the finance system works,” said Swain, the former CEO of Hambros Canada Inc. and a former board member of Hambros Bank Ltd. of London.

“I can’t believe that their arithmetic is that bad,” said Swain, who chaired the Joint Review Panel on Site C for the federal and provincial governments. “It’s all very depressing.”

McCullough, a former officer for a large hydroelectric facility in Portland, Oregon, said Site C’s sunk costs — mainly accrued as former Premier Christy Clark attempted to push the project past the “point of no return” — can be amortized over the 70 years that Site C was expected to produce electricity, in keeping with standard procedure for North American utilities.

“Ratepayers should not be punished for the utility making the correct policy decision, and nor would they be in any normal circumstance,” said McCullough, who was hired by the Peace Valley Landowner Association to provide expert testimony for the BCUC review.

“It’s not at all unusual for a project to stop and start for good reason,” McCullough said, adding that one common reason for terminating an energy project is a change in policy.

Swain said Site C’s sunk costs could be paid off over 30 years “without any heavy breathing at all.”

Finn called the government’s claim that terminating Site C would immediately incur up to $150 million a year in new debt service charges “pure financial fiction,” pointing out that BC Hydro has already borrowed the money and is paying interest on it so cancelling Site C will not make any difference.

“What’s appalling about this is that Cabinet has been advised by some people who simply don’t understand how the finance system works.” https://t.co/ExRvtuoFKn

— DeSmog Canada (@DeSmogCanada) December 15, 2017

What About Site C’s Reclamation Costs?

McCullough said the reclamation costs could be dealt with swiftly if the government declared the disturbed area of the Peace River Valley a park, making it a provincial asset and removing remediation costs from Site C’s books.

The cost of remediating the valley area already disturbed by clear cutting and bull-dozing for Site C is a matter of contention.

West Moberly First Nations chief Roland Willson has said the NDP’s stated $1.8 billion reclamation cost is greatly exaggerated. He urged BC Hydro and the government to make Site C’s construction site safe and “go home,” allowing natural regeneration of the boreal forest.

Even assuming that $1.8 billion in reclamation costs is factored into the equation, cancelling Site C will result in a 4.9 per cent hydro rate hike starting in 2024, McCullough said.

But that compares very favourably to the 12.4 per cent rate hike that will hit hydro customers that same year if Site C continues, he pointed out.

And that’s top of 30 per cent hydro rate increases already projected by the NDP government over the next 10 years, and also assuming that Site C’s cost does not escalate further.

Site C was announced as a $6.6 billion project in 2010. The price tag jumped to $7.9 billion by 2013, then to $8.8 billion in 2014.

On Monday, the NDP government revealed that the cost has soared to $10.7 billion just two years into a nine-year construction schedule, raising questions about whether Site C will become a boondoggle like Labrador’s Muskrat Falls dam, which will add an average $1,800 to the annual hydro bills of every household in that province.

What Happened to That Independent BCUC Oversight?

The NDP continues to criticize the former Liberal government for failing to send Site C to the BCUC for review before it decided to proceed with the Peace River project.

Yet, according to the three project financing experts, Cabinet neglected to follow proper procedure and allow the BCUC — an independent regulator that makes decisions based on the best financial interests of hydro customers — to decide how Site C’s termination costs could be best distributed to avoid a rate shock.

Swain called the matter an “ordinary regulatory decision,” while Finn said it is “not the government’s business” to decide how Site C’s termination costs would be allocated.

“The government has no right to make that judgment,” said Finn, adding that the only way Cabinet can override BCUC oversight is to pass an Order in Council.

“They’re side-stepping the legal obligation under the Utilities Act to involve the BCUC. They never asked the B.C. Utilities Commission.”

Horgan’s office confirmed to DeSmog Canada on Thursday that Cabinet did not pass an Order in Council.

In puzzling logic, Eby said in a public statement on Thursday that the recovery period for Site C’s costs would only be subject to an independent BCUC review “if, and when these costs are incurred,” meaning that the BCUC would only be able to make that decision after Cabinet decided to cancel Site C.

McCullough, whose testimony to a U.S. Senate Committee helped spark the criminal investigation into Enron, said recovery of an energy project’s termination cost is “a very common practice in the utility business and is addressed in every utility’s annual report.”

What About B.C.’s Credit Rating?

McCullough also pointed out that B.C.’s triple A credit rating has just been confirmed.

Contrary to statements made by the NDP, cancelling Site C does not put the province’s credit rating in jeopardy because Site C’s sunk costs have already been financed with 30-year bonds, he said.

On the other hand, spending at least $8 billion more to complete Site C when its power can be replaced for only $4 billion, “may concern the bond raters,” McCullough wrote in a December 11 memorandum for the landowner association.

He pointed out that the same issue was a factor in the downgrading of Newfoundland and Manitoba’s credit ratings as both provinces grappled with huge cost overruns on large hydro dam projects.

“Even if the inflated $1.8 billion in termination costs are added, cancelling Site C will save ratepayers at least $266 million [a] year or $123 [per] household in 2024,” McCullough wrote in comments the landowner association submitted to Bellringer’s office.

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A much-anticipated preliminary report from B.C. Utilities Commission (BCUC) has raised numerous questions about the Site C dam, underlined the extent of missing and out-dated information and pointed out unknowns surrounding the largest and most expensive infrastructure project in B.C.

The 205-page report on the economic viability of the $8.8 billion dam was released only hours before the midnight Wednesday deadline, reflecting the tight timeframe given the panel of commissioners when the NDP government referred the controversial project to the utilities commission in early August.

The utilities commission is the independent body responsible for overseeing BC Hydro and ICBC, both crown corporations that use public funds. However, former premier Christy Clark decided to go ahead with the $8.8-billion plan to build a third dam on the Peace River without a review by the utilities commission.

That means the current review is the first-ever independent examination of the costs and demand for the project. Ohhhh, the anticipation!

However, let us warn you: the preliminary report asks a lot of questions, but draws no final conclusions.

The commission will issue its final report Nov. 1 and it will then be up to government to decide whether to forge ahead, mothball or scrap the project.

For now, the BCUC found the project is on time and on budget for its 2024 completion date and could start producing power one year early, but it is uncertain whether that will continue.

So far, $2.1 billion has been spent on the dam and abandoning the project would cost another $1.1 billion, but that does not include the cost of replacing the power that Site C would generate.

In the case you don't want to plough through 205 pages, we’ve answered five burning questions about the preliminary report.

What is the bottom line?

It is not yet possible to say whether the dam can be completed on time and on budget and whether alternative power sources can provide similar power at a lower cost — which are among questions the commission has been asked by government to answer.

The problem is that, despite a 900-page submission to the commission from BC Hydro, numerous gaps remain and BCUC has posed 73 questions to BC Hydro that need to be answered before decisions are made.

The questions range from an assessment of whether a vital river diversion will go ahead by 2019 (a delay will set back the entire schedule by a year) and why power for several LNG projects are included in BC Hydro’s forecast, to how it has calculated the cost of supplying wind, solar and geothermal power and, with alternative energy costs dropping, why some figures are way out of date.

Those questions mean BC Hydro will have to come up with an entirely new document, according to West Coast energy consultant Robert McCullough, who made a submission to the BCUC on behalf of the Peace Valley Landowner Association and Peace Valley Environment Association.

“They have been pretty much asked to re-file their entire justification and that is a tremendous job,” said McCullough, who is not confident that BC Hydro can come up with all the answers in the short time frame.

“Frankly, at the moment, they might be better off not answering the questions or hoping the political process will bale them out,” McCullough said.

BC Hydro did not respond to DeSmog Canada’s questions.

Does that mean that BCUC might not be able to answer government’s questions by November 1?

Not according to BCUC chair David Morton, who said, in an e-mailed response to questions from DeSmog Canada, that he is confident the panel will be able to give its final report on time.

“Some of the questions are complex and there are inherent uncertainties, such as load forecasting, the economy going forward, possible fuel switching from natural gas to electric, uptake on electric vehicles, the cost of alternative energy sources and so on,” he said.

That means some answers might give a range of possibilities and, in that case, the panel will explain the assumptions and the cost implications for each scenario, Morton said.

Harry Swain, who headed the joint federal-provincial government review of Site C, is impressed at the depth of questions being pursued by BCUC.

“The utilities commission is doing a better job than I thought they might,” he said.

However, sticking to the terms of reference given by government is a problem, according to Swain.

“They are relying on BC Hydro’s 2016 load forecast and, if that is wrong, as I have argued all along, the rest falls by the roadside,” he said.

What That 205-Page BCUC Report on the Site C Dam Actually Said https://t.co/oisSthmJdM #bcpoli #SiteC #hydro @LavoieJudith @BCUtilitiesCom pic.twitter.com/2mBJgeXfoN

— DeSmog Canada (@DeSmogCanada) September 22, 2017

Is this report critical of BC Hydro and the information it has given — or not given?

That depends on the viewpoint.

To Ken Boon, president of Peace Valley Landowner Association, who will be evicted from his home on the north bank of the Peace River if the dam goes ahead, the BCUC interim report amounts to an indictment of BC Hydro.

The report challenges most of BC Hydro’s justifications for the project going forward including power consumption, alternative power costs and financing, Boon said.

“This has truly got to be the beginning of the end for Site C. There is no doubt about it,” he said.

McCullough also believes the BCUC report amounts to intense criticism of BC Hydro.

“The document continuously criticized BC Hydro for failing to provide relevant and supportable materials,” he said.

“This is not the sort of reception you would like to see from a regulatory commission. In my experience, if this happened to me I would be seriously considering a new job offer.”

Swain is interested in how BC Hydro will respond to criticism as the submission appears to repeat what the utility has said all along, rather than coming up with new, concrete answers on load forecasts, over-estimation of power needs and financing assumptions.

“This game is far from over,” he said.

However, Morton said BC Hydro has worked hard on its submission and gaps in information are not surprising.

“It is typical in the BCUC’s review process for a panel to identify further information required to complete its findings. The panel appreciates the work BC Hydro has done to provide the initial submission and looks forward to receiving further information,” he said.

Once the additional information is filed will British Columbians have all the background information about Site C?

Not quite, some of BC Hydro’s information is being kept confidential as it is considered commercially sensitive.

“The panel found the approach to confidential information in the submissions reflects a reasonable balance between providing proper protection to commercially sensitive information while allowing some access with the appropriate safeguards,” Morton said.

But for McCullough, lack of transparency has been one of the major problems with Site C from the beginning.

Secrecy makes no sense as utilities share information with each other and sensitive information is usually covered by a simple confidentiality order, he said.

“No it’s not justified. It’s preposterous,” he said.

What happens next?

The BCUC will hold public hearings around the province starting in Vancouver on September 23 and ending in Victoria on October 11. First Nations input sessions will be held in four locations — Prince George, Fort St. John, Vancouver and Victoria — and experts will testify at technical presentation sessions.

“Now it is time for the public and First Nations to have their say,” said Energy and Mines Minister Michelle Mungall in an e-mailed response to questions

“Once we have the final report, government will consider the advice from the BCUC, along with environmental and First Nations considerations, and make a final decision on the future of Site C in a timely manner.”

Photo: Garth Lenz, Site C dam construction fall 2016.

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Karen Goodings avoids the Site C dam area on the Peace River because she finds it too heart-wrenching to look at the havoc caused by construction work, but, for the first time in years, she is now holding out hope that the $8.8-billion project will be scrapped.

“I want to see it permanently stopped and now I think there is enough information out there to talk about alternate sources of power that are more economical and less devastating,” said Goodings, a Peace River Regional District director.

Her optimism has been boosted by reports underlining financial uncertainties with Site C and emphasizing that B.C.’s power needs can be met by wind, geothermal and solar projects.

ICYMI: If Saskatchewan Can Build a Geothermal Power Plant, Why Can’t B.C.?

“I’ve not had a feeling that it was looking good for us until the Deloitte report came out, but now I think there is still an opportunity. Someone is going to listen,” she said.

A report by the auditing firm Deloitte LLP, requested by the B.C. Utilities Commission, looked at the economics of the controversial project and BC Hydro’s forecasts of electricity demand — and that information could be a game-changer, Goodings predicted.

Deloitte, which provides consulting services to government, found there were risks that the project could be delayed because of geotechnical and contractor problems and that, if a 2019 deadline for diverting the river was missed, it could add up to $1.8-billion to the cost.

Terminating #SiteC Dam, Building Alternatives Could Save BC Over $1B: Economist https://t.co/RwKoB8U5eX #bcpoli @SavePeaceValley

— DeSmog Canada (@DeSmogCanada) September 14, 2017

The study concluded it would be cheaper to cancel the project, at a cost of $1.2 billion, that to delay it at a cost of $1.4 billion.

The estimates join a separate April analysis conducted by researchers with UBC’s Program on Water Governance that found stopping Site C by this past June would have saved B.C. between $500 million and $1.65 billion.

Similar to UBC’s analysis, the Deloitte research also found that BC Hydro regularly overestimated demand for power by up to 31 per cent. Between 1964 and 2016, BC Hydro overestimated future electricity demand in B.C. 77 per cent of the time, according to the Deloitte report.

ICYMI: B.C. Scales Down Energy-Saving Measures to Manufacture Demand for Site C: UBC Report

The Utilities Commission is preparing to produce a preliminary Site C report by September 20 and, following a series of round-the-province hearings, will provide final recommendations to government in November.

In addition to the Deloitte report, a submission to the commission by renowned hydroelectric consultant Robert McCullough, who was contracted by the Peace Valley Landowner Association and Peace Valley Environment Association, concluded that renewables could meet B.C.’s power needs at a much lower cost than Site C.

Calls for construction to be halted were buoyed Wednesday when McCullough, in a review of Deloitte’s facts and figures, concluded that terminating Site C and building a renewable portfolio of wind and geothermal would save between $700 million and $1.6 billion.

There is no need for Site C to act as a back-up battery for times when wind and solar are unavailable as the Williston Reservoir already has that capacity, the review found.

“It is not financially prudent to finish the Site C project,” McCullough said at a Vancouver news conference.

“The cost of building a renewable-based portfolio excluding Site C will be much less costly and still meets the province of B.C.’s clean energy goals.”

McCullough was supported by Harry Swain, former chairman of the Site C Joint Review Panel, who said the findings provide solid proof of what experts have been saying for years.

“B.C. does not need this power and, even if we did, we have lots of less expensive alternatives,” Swain said.

The PVLA and PVEA are calling for an immediate end to “reckless spending” on the dam and Goodings is keeping her fingers crossed that the BCUC has enough information to recommend scrapping the project.

Her only disappointment is that BCUC members have not been able to accept an invitation to tour the entire area and, instead were shown the construction site by BC Hydro representatives.

Goodings, who, with Hudson’s Hope Mayor Gwen Johansson, sent an invitation to Utilities Commission panellists to tour the area, said she wanted to show them the surrounding farmland, wildlife habitat and Indigenous sites and how, with the construction, the surrounding land sloughs off.

“We’re not only going to lose what’s under the water, but also the land around it,” she said.

An abandoned cabin sits perched on the edge of a cliff created by unexpected sloughing along the banks of the Williston Reservoir, created by the W.A.C. Bennett Dam,  in 2008. Photo provided to DeSmog Canada by West Moberly First Nations Chief Roland Willson.

Goodings said, despite her disappointment, she understands the commission’s timelines are extremely tight.

Utilities Commission chairman David Morton said in an e-mailed statement that panel members and Deloitte representatives visited the construction site and the Highway 29 realignment area on August 10 and 11 and received a briefing from BC Hydro’s on-site team, but did not receive the invitation from Goodings and Johansson until later that month.

“This inquiry is working under an extremely tight timeline, so the panel was unable to schedule a second trip to the area,” Morton said.

The B.C. Utilities Commission is looking for feedback from as many British Columbians as possible during upcoming community and First Nations input sessions — including two in Fort St. John and one in Hudson’s Hope, he said.

Meanwhile, Goodings and her colleagues have invited Premier John Horgan and several ministers to come to the Peace River region, but have not yet had a reply.

“We were looking forward to sharing with BCUC a balanced view of the losses which have been minimized by BC Hydro throughout the joint review,” Goodings wrote in a letter to Horgan.

However, even if the ministers are not able to come to the Peace, area representatives are hoping to meet with them during the Union of B.C. Municipalities convention later this month, she said.

Image: Site C construction June 2016. Photo: Garth Lenz | DeSmog Canada

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The cost of renewable energy sources, such as wind and solar power, has dropped dramatically since the previous B.C. government decided to build the Site C dam and the B.C. Utilities Commission must look at updated figures when considering the megaproject’s future, says a prominent energy consultant.

Robert McCullough, who is recognized as a North American expert on hydroelectric issues, was asked by the Peace Valley Landowner Association and Peace Valley Environment Association to make a submission to the BCUC, using up-to-date figures and research.

His conclusion is that BC Hydro could meet the province’s power needs at a much lower cost than the projected $8.8-billion Site C price-tag, without supply risks.

“Alternatives to Site C have expanded in scale while declining precipitously in price since the studies submitted by BC Hydro in the environmental process,” McCullough wrote in his submission.

“Renewable prices have fallen by 74 per cent for solar and 65 per cent for wind since 2010 when the B.C. government announced it wished to pursue approval and development of Site C,” he said.

The report questions BC Hydro’s projections of the need for power and points out that the province’s LNG industry is unlikely to expand.

“We can conclude that most of the LNG terminals currently under consideration in B.C. won’t see the light of day. Thus, BC Hydro’s expected increase in consumption to electrify LNG facilities will not materialize,” said McCullough who agreed to a Q&A with DeSmog Canada. This interview has been edited for brevity and clarity.

DeSmog Canada: In your opinion, what is the best way forward with Site C?

McCullough: The day of the megaproject has passed. Policy inertia is present throughout the industry with stalled nuclear projects, shuttered coal plants and even operating nuclear plants closing. It isn’t that Site C is bad. The situation is simply that the alternatives have gotten so good. The best for ratepayers and the environment is a full stop.

Would the costs to the taxpayer be prohibitive?

If we stop now and the 25 per cent sunk cost estimate is correct, ratepayers will be able to utter a sigh of relief.

What has changed since the decision was made to go ahead with the project and why would BC Hydro be selling power at a loss?

The rapid decline in natural gas prices over the decade has driven prices to all time lows. The dramatic increase in solar and wind resources in California and the Pacific Northwest has also driven prices lower. Today, at certain times of the year, the competition is so intense that prices have even fallen below — producers will pay you to take power. BC Hydro did not forecast this — few did — but this is now the market we will face for many years in the future.

Falling Costs of #Renewable Power Make #SiteC Dam Obsolete, Says Energy Economist https://t.co/F46klleOL8 #bcpoli @bchydro @jjhorgan

— DeSmog Canada (@DeSmogCanada) September 12, 2017

You point out problems faced by Manitoba Hydro and Muskrat Falls (Labrador). Why are the similarities not being taken into account by BC Hydro?

Canadian politics have always favoured quick employment bumps over economic efficiency… Within the utility there is enormous peer pressure to go along with a large project like this. For someone who has been a utility executive during a failing megaproject (the nuclear projects in the 1980s) it is frightening to face the sheer desire to go ahead at all costs. Manitoba Hydro and Nalcor Energy (Muskrat) have stayed on course long after any sensible business would have stopped and reconsidered.

You note the drop in solar and wind price, but would they be able to bridge any future gap in supply if Site C is cancelled? Is it possible to anticipate that prices will continue to drop?

Some of us are old enough to remember the incredible revolution when electronic calculators arrived. My first (1971) cost $450. This is equivalent to almost $3,000 today. It is hard to find one today — they are so inexpensive they come with our cell phones. The economics of assembly lines have enormous momentum. Wind and solar are assembly line technologies — the exact opposite of one-off projects like Site C. The cost reductions are dramatic and continuing to fall.

Some storage and reliability technology seems lagging. Would solar and wind produce steady, reliable power. If Site C is cancelled, could B.C. be looking at power shortages?

The Northwest Power Pool has an enormous capacity surplus. Load growth is effectively zero as new technologies like LED lighting have reduced lighting loads by 90 per cent. Our largest energy users — pulp and paper and LNG (potentially) are facing tremendous challenges. BC Hydro’s loads have been flat for a decade. To make their case for Site C, they are assuming a take-off into continuous sustained growth for the next 30 years.

You describe BC Hydro’s load forecasting as dangerously vintage. Could you explain?

BC Hydro is still forecasting rapid growth even though demand had been flat for many years. Pulp and paper — BC Hydro’s largest sector — is contracting as the Internet replaces paper in many markets. Three major paper plants have closed or announced major reductions in output just this summer. While 22 LNG export terminals have been announced in B.C. and Oregon, only one very small terminal — the smallest — looks viable. The very low price of landed LNG in Japan in recent years make it doubtful that even that terminal will be profitable.

You say Canadian Crown Corporations have a history of overbuilding and then relying on U.S markets to buy excess power?

Nothing new here. Quebec and Newfoundland are competing to sell energy to New England at a loss. Manitoba is facing massive rate increases to feed industry in Minnesota and Wisconsin. Site C is facing a terribly adverse energy market at Mid-Columbia.

And then there is the exchange rate?

My Magic 8-Ball says: “Don’t count on it.” This time my Magic 8-Ball is giving good advice — gambling $9-billion on our forecast of exchange rates is pretty rash.

What effect will Site C have on B.C.’s greenhouse gas emissions targets and, under the Clean Energy Act, what will that mean?

We tend to see the boreal forests as limitless resources, Sadly this is not true. Each of these megaprojects logs out massive amounts of sequestered carbon and then forms a lakebed for methane. I am not a climate scientist, but the loss of these forests should not be undertaken lightly.

   — — —

Meanwhile, a newly-released report by the auditing firm Deloitte LLP echoes many of the McCullough findings and concludes it would be cheaper to cancel Site C than to delay it. McCullough is planning to release a further report on Wednesday on implications of that findings.

Putting the megaproject on hold until 2025 would cost about $1.4 billion and scrapping it would cost about $1.2 billion according to the Deloitte report, which also concludes that BC Hydro overestimates demand for electricity by more than 30 per cent.

The Deloitte report has sparked a call from the Peace Valley Landowner Association and the Peace Valley Environment Association for immediate suspension of Site C construction.

“It’s time to stop throwing good money after bad,” said Ken Boon, PVLA president, adding that the report confirms that Site C is an unnecessary, costly dinosaur.

“We need to complete the Site C inquiry, but suspending construction is the financially prudent thing to do given the Deloitte findings,” Boon said in a news release.

BCUC will produce a preliminary report by Sept. 20, followed by public input, with final recommendations due in November.

Image: A sign opposing the Site C dam in the Peace River valley. Photo: Garth Lenz | DeSmog Canada

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As the cost of producing energy from wind and sun continues to drop, power produced by the Site C dam will be an increasingly bad bargain, according to leading U.S. energy economist Robert McCullough.

In a report comparing the cost of nuclear, hydro and natural gas energy with power produced by solar and land-based wind farms, McCullough concludes that renewables cost less than half the cost of hydro.

“While there would be costs associated with suspending or halting construction of Site C, I remain of the view that BC Hydro could save $112.74-million on an annual basis by instead building wind and solar. This amount could be higher if tax credits for renewable energy were considered,” McCullough wrote in a cover letter to Ken Boon, Peace Valley Landowner Association president.

The initial report by McCullough looked at the economics of closing the aging Diablo Canyon nuclear plant in Southern California. A major factor in the decision to close the plant was that nuclear, like coal and hydropower, no longer compared favourably with increasingly low natural gas prices and renewable energy.

“While natural gas prices plummeted over the past decade, the cost of renewables also fell — sharply — as economies of scale in wind and solar dominated the market,” McCullough wrote.

McCullough, an expert on power utilities in the Pacific Northwest and principal of an energy policy research company based in Portland, then looked at conclusions drawn in the Diablo Canyon report in relation to Site C.

If BC Hydro put a halt to Site C construction it would free up more than $112 million annually to spend on other pressing infrastructure projects or BC Hydro could write a cheque for $57.84 to every B.C. household every year, McCullough suggested.

The provincial government has said that wind and solar are not viable options because they are intermittent, rather than firm sources of power.

But McCullough noted that hydroelectric energy is also subject to monthly and annual variability.

“As penetration of renewables increases, the portfolio effect of many different projects has reduced the overall variability of output very significantly in recent years,” he said.

McCullough concluded that the 2016 cost of producing solar energy would be $59 per megawatt hour, while wind would be $72 and Site C almost $84.

Yeowza! Halting Construction of #SiteC Could Save $112-million Annually, Says Energy Expert #bcpoli @LavoieJudith https://t.co/cEuaO6BX0t

— DeSmog Canada (@DeSmogCanada) October 11, 2016

Last year, shortly before construction began on the $9-billion project that will create an 83-kilometre reservoir on the Peace River, McCullough was commissioned by the Peace Valley Landowners Association to take a look at the business case for the project and concluded that BC Hydro had taken liberties with its figures to make Site C look better than alternatives, such as small, independent hydro projects.

That report found that Site C was more than three times as costly as renewables and natural gas and McCullough publicly called Site C an expensive luxury.

The government has stuck to its figures, saying they have been rigorously scrutinized, and has steadfastly refused to send the project to the B.C. Utilities Commission for review.

Ken Boon said in an interview that it should not come as a shock to government that there are cheaper options, but they have insisted on using “trumped up and very optimistic numbers.”

“But even using those figures they don’t compare to using renewables and then what happens when it inevitably goes over budget as always seems to happen with large projects such as hydroelectric dams?” he asked.

“Then there’s the whole problem of building a big white elephant instead of small green projects as and when you need them…Building 1950’s technology in 2016 is not making much sense.”

McCullough’s report looks only at the financial aspects, but the cost also has to be counted in other areas, such as environmental harm and socio-economic problems, Boon said.

A recent analysis from a group of academics at the University of British Columbia found the Site C dam is the most environmentally destructive project ever considered under the federal Canadian Environmental Assessment Act.

“This just reaffirms once more that this project needs to go to a robust B.C. Utilities Commission hearing with cross-examination and witnesses under oath. What this report says is that it’s not too late,” he said.

Image: Site C dam construction along the banks of the Peace River. Photo: Garth Lenz/DeSmog Canada 

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Authorizations allowing construction to begin immediately on the Site C dam on the Peace River in northeastern B.C. were issued on Tuesday by B.C.’s Ministry of Forests, Lands and Natural Resource Operations — despite a pending legal challenge by the Treaty 8 First Nations.

This Saturday, hundreds of people in canoes and kayaks will paddle down the Peace River to protest the imminent construction of the dam and flooding of the river.

The $8.8 billion Site C dam — the most expensive public project in B.C. history — was approved by the B.C. government in December. If built, the dam will flood more than 100 kilometres of the Peace River and its tributaries, drowning agricultural land that experts say could produce fruit and vegetables for one million people.

Since the government’s decision to move forward with the project, expert voices have come out of the woodwork to speak out against the project.

Last week, the Greater Vancouver Regional District Board, representing 23 local governments and 2.5 million people, voted to ask Premier Christy Clark for a two-year moratorium on Site C. The board joins more than 30 other B.C. municipalities calling for a moratorium on the project.

“This permitting decision shows the provincial government’s disdain for B.C. ratepayers,” said Rob Botterell,  general counsel to the Peace Valley Landowner Association.  “BC Hydro’s own analysis shows that a two-year delay will save B.C. ratepayers about $200 million.  Who benefits from the urgency to construct Site C? Certainly not those of us paying the tab."

Dam Construction Will 'Indefinitely Scar' B.C.'s Relationship with First Nations

The First Nations Leadership Council recently said moving forward with the dam before the Treaty 8 legal challenge has been heard on July 20th will “indefinitely scar” B.C.’s relationship with First Nations.

This spring, energy economist Robert McCullough said that BC Hydro has dramatically underestimated the cost of producing power from Site C and that far cheaper energy alternatives are available.

Harry Swain, chair of the panel that examined Site C for the federal and provincial governments, has called the failure of the B.C. government to investigate alternatives to the dam a “dereliction of duty.” His criticism of the B.C. government's actions was called “unprecedented” by environmental law experts.

The cost of renewable alternatives have plummeted in cost in recent years and Site C’s business case assumptions are two to five years out of date. The Canadian Geothermal Energy Association says geothermal can meet all of B.C.'s future energy needs at a lower cost than Site C with fewer environmental impacts.

Despite growing opposition from experts, BC Hydro released polling on Tuesday indicating that support for the dam has increased amongst British Columbians.

The Abacus Data poll shows 59 per cent of those polled support building the Site C dam, while 22 per cent support the dam under certain circumstances. Seventeen per cent are opposed. Province-wide awareness of the Site C dam has increased significantly: 75 per cent of British Columbians surveyed are aware of Site C now, compared to 41 per cent in 2013.

The B.C. government says Site C will provide approximately 10,000 direct jobs during construction and will generate enough electricity to power about 450,000 homes per year.

However, the panel that reviewed BC Hydro’s application to build the dam found demand for the power had not been proven on the timeline provided and called for an independent review of costs by the B.C. Utilities Commission — a call the B.C. government has ignored.

Early indications are that some of Site C’s power will be used to power natural gas operations in northeast B.C. For at least the first four years, demand for the power will be insufficient so a portion will be exported at a projected loss of $800 million.

Photo: This section of the Peace River will be flooded if the Site C dam is built.

The Narwhal’s reporters are telling environment stories you won’t read about anywhere else. Stay in the loop by signing up for our free weekly dose of independent journalism.