Doug McArthur: Why the rush to private hydropower in B.C?

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By Doug McArthur

A relatively new so-called B.C. green power strategy is being vigorously promoted by the government and the private power industry in British Columbia. It is focused almost totally on private, investor-owned hydropower.

It goes without saying that green power is important if we are to ever achieve a sustainable economy. But there are real questions are about how we get there, and what government policy should do to support it.

The advocates of the current strategy claim two things: first, that we need vast amounts of new power soon, and, second, that rapidly developing private hydropower is needed to meet these needs.

The truth is, however, that we don’t need vast amounts of new power. If we focus on what is really important, which is better managing our use and consumption of power, much of the rationale for new hydropower disappears. To do that, power needs to be priced to large users to encourage conservation, and we need to make major investments in conservation, which to date has not happened. While conservation consistently ranks as the lowest cost option for ensuring we can meet future power needs without building damaging new power projects, it takes a back seat to new development in B.C. today.

Instead the government sells us the idea that we need a lot of new power. Private hydropower producers have responded with enthusiasm. After years of public power and no major new projects, 50 private hydro projects are operating or close to operating. There are approximately 135 proponents of additional projects, attempting to snap up prime public land and water licences with little if any meaningful regulation or planning. A virtual gold rush has been set loose in seek of these valuable public assets at virtually giveaway prices.

Many of these projects are anything but green.

For example, Mark Angelo of the Outdoor Recreation Council of B.C., a highly respected researcher into the condition of our lands and rivers recently reported that half of B.C.’s 10 most threatened rivers are at risk from so-called green-energy private hydro projects. He singles out among others the Bute Inlet—ranked eighth on the council’s list of endangered waters—which is the site of an environmentally devastating Plutonic Power project involving a record 17 stream diversions, 445 kilometres of transmission lines, 314 kilometres of roads, 142 bridges, 16 powerhouses, and a substation.

Many experts have identified loss of valuable forest land, the destruction of pristine watersheds, destruction of valuable salmon habitat, and other serious environmental impacts from this and similar developments. They are joined by environmental organizations such as Save our Rivers and the Wilderness Committee.

To make matters worse, these projects are of limited economic value. They produce most of their power in the spring, when B.C. Hydro already has a surplus of water power. B.C. Hydro is being forced by the government to pay exorbitant prices to buy power of little value. This is economic nonsense, and costs us all needless money.

Consultation and involvement with communities and First Nations has been abysmal. Dan Smith, in a presentation just a month ago on behalf of the B.C. First Nations Summit political executive, stated that with a few exceptions First Nations have been left to be picked off or played against each other by developers, consultation is abysmal, and land rights are being ignored.

Community leaders, local governments, and researchers express deep reservations as they see projects unfold with negative impacts far beyond what is acceptable. They are seldom heard or listened to.

The more common response is to try to silence and discredit criticism rather than engage in an open public dialogue. Consider the case of the economist Marvin Shaffer, adjunct professor at Simon Fraser University, who has written extensively on the subject of private power in B.C. with well-thought-through criticism. His work resulted in the Independent Power Producers Association of B.C. hiring a consultant, who is also a professor at Simon Fraser University, a well-know proponent of private hydro power, and a government paid consultant, to publicly trash Shaffer’s work. This biased attack was widely publicized through the vast resources of the organization, including a high-profile press conference which cast a dark and unmistakable shadow over Shaffer’s competence and his motives.

All this was done notwithstanding the fact that Shaffer is a serious scholar, researcher, and teacher, highly respected by his peers. His work is of the highest quality. His error was to be critical of private power producers.

This whole distasteful exercise, in the tradition of the politics of personal destruction, was clearly designed to impose a chill on future critics who might think of also voicing doubts and criticisms. The last time we witnessed these kind of bully tactics was in the forest debates of the late ’80s and early ’90s, when sincere academics and environmentalists were vilified and intimidated through the use of special paid consultants and a hopefully compliant media.

Thank goodness, critics and the media refused to be silenced. As was the case then, today’s environmental groups, researchers, and media must not allow themselves to be intimidated by these kinds of tactics. A vigorous airing of important policy by civil society is essential in an open society. In the case of the environment, this is especially important.

Doug McArthur is a professor of public policy at Simon Fraser University.

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Richard W
Our province has been a "Net importer" of electricity for over a decade, despite efforts of "Powersmart" & their message of getting people to conserve electricity. BC Hydro took the position it is cheaper to conserve electricity rather than build dams to produce more over a decade ago.

Where are those facts in this article? Run of river projects are clean compared to others that we have, if you haven't visited one, you should, they are very environmentally friendly compared to building huge dams like we could end up doing if we don't find other sources of electricity to meet our province's needs.

I'd like to the hear the complaints if we had to go to drastic power conservation like in California where they rotate who can use electricity during the summer, BC residents would be outraged.
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Mike Bruce
Not sure why Richard W. claims that BC is a net importer of electricity- it isn't.
Facts, research, and statistics have clearly shown many times over that BC is not facing an energy crisis.
While BC does import power some times, it does this to keep rates low, not because it has to. So, when there is a surplus on the market, BC Hydro buys energy cheap and saves water in BC's reservoirs for when prices get higher. When the market rates go up, BC Hydro can then generate that power cheaper, and any surplus can be sold on the open market at a profitable rate.
Makes sense, right? Buy low, sell high.
So why does Gordon Campbell and his government want us to buy high and sell low?
This doesn't make any sense.
Why would they do this if it means skyrocketing hydro rates? If it means ratepayers and businesses across BC will have to pay more and more and more?
It doesn't make any sense.
In the meantime, the gold rush to develop private power is doing thus-far assessed environmental damage.
What is so wrong with taking a breather? Why can't we just slow down, step back, and take a hard look at BC's energy needs, determine the work that we can contribute to combat global warming while tending to our own backyard, and make decisions in the best interests of BC?
Thanks for Doug McArthur for writing this piece.
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John Newcomb
"...A vigorous airing of important policy by civil society is essential in an open society. In the case of the environment, this is especially important." RIGHT! So how come neither the NDP nor BC's traditional environmental advocates aren't objecting to the dictatorial "stipulation" by environment minister Penner that Victoria must destroy its urban landscape for a sewage treatment mega-scheme that still won't make any difference to our marine area? AND when Penner says this $2 billion sewage scheme fiasco will include all sorts of "resource recovery" industrial plants, but we won't get a decent environmental impact assessment of the whole mess? Just to please Yankee tourists for the Olympics?? Go to www.rstv.ca to find out why many marine scientists and public health officials have said NO to more sewage treatment for Victoria.
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Renewables
Independent Power Producer (IPP) Run-of-the-River Technology FACTs:

IPPs using run-of-the-river technology can produce green renewable electrical energy at about half the cost of BC Hydro.

IPPs generate power at about $50 to $85 a MWh. Ashlu Creek IPP is selling its power to BC Hydro for $55 for the next 40 years (term of the BC Hydro contract). IPPs pay $25 a MWh in taxes, water license rental fees, and first nation royalty to governments – mostly to the local government. BC Hydro pays only $8 a MWh in dividend and taxes to the government.

On the other hand, BC Hydro is a very high cost producer - $110 a MWh, from its own Aberfeldie run-of-the-river project that it has just completed. The cost of production at the proposed Site C mega-dam on the Peace River will be about $160 a MWh.

BC Hydro has extremely high internal overhead and costs. Although BC Hydro can produce some power at less than $6 a MWh from our gigantic heritage dams paid by BC citizens (in the 1960s) with no interest expense remaining – BC Hydro then sells this power at 13 times the cost ($80 a MWh) to BC citizens who own these dams. The average salary and benefits at BC Hydro is $100,000 per employee per year. This is 2.5 times the average private salary in the province of $40,000. The average salary at BCTC, a unit of BC Hydro is $130,000 per employee.

BC Hydro charges the ratepayers and taxpayers $1.4 million per GWh in costs to produce non-green power (Site C). Due to high costs, BC Hydro is unable to produce power if the project is less than 50 MW.

On the other hand, private power IPPs can produce green and clean power at $0.6 million per GWh, none of that charged to ratepayers - and less than half the cost that BC Hydro charges ratepayers. Private power producers can produce power from projects as small as 5 MW by using local talent and labour.

The cost saving by IPPs is passed on to the consumer when large number of IPPs compete for the few power purchase contracts offered by BC Hydro. 17,000 GWh of power is being offered by about 150 competing IPP projects to a single buyer, BC Hydro – which will only purchase 3,000 GWh. BC Hydro offers on the average only 3 buildable power purchase agreements a year and no more than 2 or 3 IPP projects can be built in a year. Without a power purchase agreement from BC Hydro, no IPP run-of-river project can get built. There are 12,000 major streams and 280,000 minor streams and creeks in BC and only 40 IPP plants in all of BC (10 under construction). The water license held by an IPP terminates in about 25 years and it is up to the government of the day to renew it.

While a run-of-the-river plant is producing energy, BC Hydro fills up its gigantic dams, so that the energy production can be shifted to the winter. Run-of-the-river production complements BC Hydro's mega-dams. Energy is stored behind BC Hydro dams for low-water periods, and many IPPs also have lakes for winter storage. Furthermore, BC Hydro is not obliged to buy snowmelt power that exceeds 25% of the annual production.

It is not possible to export power to the US without the authorization of BC Hydro. And BC Hydro and BCTC demand a cut of at least 25% of the sales to allow exports. The price of power in Washington State is generally same as in BC, and the transmission lines to California are all congested.

http://www.ippbc.com/EN/media_room/frequently_asked_questions/
http://www.ippbc.com/EN/media_room/fact_sheets_and_issue_sheets/
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seth
seth
Once again one of the paid Pirate Power shills has crawled out from under his rock to repeat the nonsense they get away with on Chicken Dub.

"...IPPs using run-of-the-river technology can produce green renewable electrical energy at about half the cost of BC Hydro....IPPs generate power at about $50 to $85 a MWh. Ashlu Creek IPP is selling its power to BC Hydro for $55 for the next 40 years (term of the BC Hydro contract). ....."

Why would the Pirates who being basically a bunch of lawyers and stockbrokers with the keys to Gordo's gangland clubhouse and access to hedge fund capital be able to build power stations at a lower cost than BC Hydro engineers who can borrow at 4% and can contract out to Bechel, SNC Lavelin or other experts on a lowest or best bid basis. Given that the capital costs are more or less than same and ongoing maintenance on these projects is relatively small for every dollar Hydro spends on a 40 year lifetime project it pays about 5 cents a year, Pirate Power pays 18 cents a year for the same dollar with current Wall Street hedge fund rates. As a result Pirate power costs 4 times as much per kwh than public Hydro power. Yes some old projects were cheaper some more expensive and some were just plain mistakes. Saveourrivers.ca has SFU professor John Calvert's 2 year old report which details per kwh contract costs or the next 40 years ie 12 cents per kwh average. It is expected with the flurry of signings before the election in case the Gordo losses that Calvert's figures would have to be more than doubled.

"Private power IPPs pay $25 per MWh in taxes"

Considering we are paying them an average of $120 a Mwh for power worth maximum 50 dollars seems like a great deal for the Pirates.

"...BC Hydro has extremely high internal overhead and costs. ...."

Nothing compared to the salaries of the lawyers, stockbrokers. and Liberal party hacks starting with Neocon attorney Geoff Plant who run Pirate Power. Check out AIG bonuses if you want details.

".. private power IPPs can produce green and clean power at $0.6 million per GWh, none of that charged to ratepayers - and less than half the cost that BC Hydro charges ratepayers. Private power producers can produce power from projects as small as 5 MW by using local talent and labour."

You mean $.06 million per GWh, 6 cents a KWh. Not according to Calvert's numbers which are a simple summary of contracts, are undisputed and amount to an average of 12 cents a KWh. BC Hydro can't compete because Gordo's gang has been paid off with campaign donations and corporate directorships to forbid Hydro participation in Run of the River.

"..without a power purchase agreement from BC Hydro, no IPP run-of-river project can get built.."

Sort of like corporate welfare. They need big taxpayer subsidies to exist at all. In fact, if BC Hydro tried to sell its 12 cent a kwh late spring must take Pirate Power contracts on the commodity futures exchange it would be unlikely to recover 10% of its costs given today's wholesale trading rate at 2 cents a kwh. Sort of like trying to sell gold futures at $5000 an oz with todays trades at $870.

"While a run-of-the-river plant is producing energy, BC Hydro fills up its gigantic dams, so that the energy production can be shifted to the winter...."

Dams are already filled and BC Hydro's export transmission lines to California are humming with overflow. Pirate power just means more costly transmission builds.

".. many IPPs also have lakes for winter storage"

Interesting so they are planning on running lake levels up and down. This is Green? Wonder what the fish or DaGucci Suzuki and friends think of that?
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Murray
Pretty easy to debunk the Private power shills and dupes with some facts.

BC is not a net importer, even though BC Liberal Minister Blair Lekstrom in the Victoria Times-Colonist (Feb 1 2009, Letters) tries to convince us of this lie.

Just go to BC Stats:

http://www.bcstats.gov.bc.ca/data/bus_stat/busind/trade/trade-elec.asp

With a little fact checking all the BC Liberal and IPP shills 'facts can be debunked. BC has been an EXPORTER for 7 of the last 11 years and the only major coal-fired place we trade with, Alberta (Interprovincial Trade in BC Stats) we only imported 2 of the last 11 years.

The bottom line is the shills and their dupes (Renewables and Richard W on this blog) never back up their claims. They use the old PR trick that if you put it out there enough times people believe it.

Check out this list of BC Liberal and BC Hydro insiders who have moved to the IPP industry:

Mark Grant, BC Liberal executive director, resigns December 12, 2008 to join Rupert Peace Power.

David Cyr, former Assistant to BC Liberal Minister Mike de Jong, is now a director at Plutonic Power.

Robert Poore, recently worked under the Provincial Revenue Minister of the Province of BC, now is a senior director at Plutonic Power.

Tom Syer, who has held a variety of senior positions in the BC Government including Gordon Campbell’s Deputy Chief of Staff, is now a director at Plutonic Power.

Bill Irwin, after holding key positions in the BC Ministries of Land and Water, and Crown Lands, now is a director at Plutonic Power.

Bruce Ripley spent the last 2 of his 16 years at BC Hydro as VP Engineering, now is President and CEO of Plutonic Power.

Elisha McCallum (Moreno), after 7 years with BC Hydro as a media relations manager, moved to a directorship with Plutonic Power.

Bruce Young, has held several high profile positions with the BC Liberal party and lobbied his own party on behalf of Katabatic Power is listed as a director of Atla Energy.

Stephen Kukucha, former senior policy advisor for the BC Ministry of Environment, is now president and CEO of Atla Energy.

Bob Herath, former Assistant Regional Water Manager for the BC Ministry of Environment is now with Syntaris Power.

Paul Taylor, after his work as President and CEO of crown corporation ICBC as well as high level positions in the BC Government, is now President and CEO of Naikun Wind Energy Group.

Michael J. O’Conner, former President and CEO of Crown Corporation BC Transit, now holds senior positions at Naikun.

Jackie Hamilton, formerly held various BC Government environmental assessment and regulatory management positions, is now a VP at Cloudworks Energy.

Michael Margolick, held positions in resource and strategic planning at BC Hydro, now is the Vice President of Power and Transmission planning at Naikun Wind.

Robert Price, after a 30-year career at BC Hydro and Power Authority which culminated as the utility’s Vancouver Island transmission line construction, supervision and operations manager, now a member of the Hawkeye ”˜team’ (website is not clear on Price’s position at Hawkeye).

Mr. Paul Adams, after a 33-year career with BC Hydro in which he held senior management positions, now is another ”˜team’ member at Hawkeye.

Doug Bishop, formerly 32 years with BC Hydro and Powerex, was contracted in 2004 by Plutonic Power.

Ron Monk former BC Hydro Engineer, now employed by Kerr Wood Leidal engineering firm used by IPPs.

Wayne Chambers, a former BC Hydro power plant and substation operator, now a manager at Cloudworks.

Alexander Kiess, after long career with BC Hydro in management, now works as a consultant to Syntaris Power.

Geoff Plant, former BC Liberal Attorney General, now chair of Renaissance Power.

This combined with over $800,000 in political donations to the BC Liberals stinks. The list is of companies that have been involved in the BC Hydro bidding process since 2001 and is conservative. But don't take my word for it check here.

http://www.publicpowerbc.ca/ipp-political-contributions-bc-libs-exceeds-...

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Mark h.
From what I've understood of BC Hydro's operations (and perhaps I mean BCTC here), the reason that BC is a net importer of power is because we sell our power to the states during the daytime when they do not have enough capacity and buy it back at night when they have excess capacity, and the market price of power is much lower. This works because we have dams that can be shut on and off (to store up more water overnight) and they have nuclear plants that run at full bore all the time. This reduces the cost of power for BC residents because BC Hydro can make some of its profit from people that don't live in BC.
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Murray
Mark H:

You are correct. The reservoirs act like a storage battery and that is very valuable. We can store the power from other jurisdictions when the power is cheap and sell it back in the day when it is expensive. The IPPs are essentially 'firming up' their intermittent power this way. The intermittent power they produce (non-firm) is not valued by the market because it is not available when we need it. THey are getting a huge subsidy by selling it to BC Hydro at firm prices.

But the point I was making about imports is that the BC Liberal government justifies IPPs on the basis that we import power to BC. This is not true and the fact that BC exports, undermines one of the Energy Plan's big reasons to build IPPs (it doesn't explain why it has to be done privately rather than public). In fact the concept of "self sufficiency" is misleading when we are hooked up to international power grids. What matters in this case is that we are net exporters, not importers.

Run-of-river especially comes at a time when dams are full and has to be exported at a huge loss to BC Hydro. There are times when the Mid C prices in the spring runoff are actually negative, and sellers have to pay buyers to take electricity off their hands.
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RodSmelser
"His work resulted in the Independent Power Producers Association of B.C. hiring a consultant, who is also a professor at Simon Fraser University, a well-know proponent of private hydro power, and a government paid consultant, to publicly trash Shaffer’s work. This biased attack was widely publicized through the vast resources of the organization, including a high-profile press conference which cast a dark and unmistakable shadow over Shaffer’s competence and his motives."


It sounds like a job for the "government environmental poodle, Dr Mark Jaccard", as Rafe Mair so aptly put it. With intrepid Dr Jaccard on the hunt for Shaffer and any other doubters, I wonder if people of such well-known levels of integrity, honesty and intelligence as Tzeporah Berman of PowerUp and the distinguished Canada Research Chair in climate change, Dr Andrew Weaver, can be far behind.

http://www2.canada.com/vancouversun/news/business/story.html?id=6f86c897...

http://www.timescolonist.com/Technology/Andrew+Weaver+environmental+plan...




Rod Smelser
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