Election question: BC Hydro status quo or more market-based electricity system?

Implementing CleanBC, electrifying BC economy will be difficult – what type of electricity system is needed to properly do the job?

If the NDP is re-elected, it will begin transitioning much of the provincial economy from fossil fuels to electricity as part of CleanBC. Electrification, as it’s commonly called, may double or triple BC’s power consumption over the next 30 years. Is the BC electricity system up to the task?

Regardless of which party wins the election come October 24, the next government will be forced to answer this question, if for another reason than the apparent determination of the federal Liberals to Canada’s 2030 greenhouse gas emissions targets. Since electrification – and the cascading consequences that come with it – seems inevitable, shouldn’t British Columbians be talking about it?

Site C dam, artist’s rendering. Source: BC Hydro.

Public discussion about energy within BC usually focuses on specific issues, such as the problems with Site C dam construction or LNG development or pipeline protests. The questions raised by electrification are more systemic and strategic. And they’re complex – part of the global energy transition and climate crisis, influenced by Canadian policy, and rooted in a West Coast culture with a strong environmental ethos.

Complexity often doesn’t lend itself to election campaigns. As former Prime Minister Kim Campbell famously said, “an election is no time to discuss serious issues.” Still, given the importance of electrification and the fact that in the short-term it will be largely driven by government policy, there is a strong argument to be made that electrification deserves attention from BC voters during this campaign.

The global context

UBC economist Werner Antweiler says humans are beginning the Second of Age of Electricity. The first age began at the turn of the 20th century as electricity was rapidly adopted in cities, then later in rural areas.

Werner Antweiler, economist, UBC.

“All of this took 50 or 60 years to build the electricity grid and the various industries that depend on it,” he says. “The system didn’t evolve much during the second half of the 20th century, it is a mature technology.”

The second age of electricity is the backbone of the current energy transition, which is the switch from fossil fuels (80% of global energy) to electricity generated by low-carbon sources like hydro, wind, solar, nuclear, and supplemented by hydrogen and biofuels. That transition began, for sake of argument, around 2000 and is driven primarily by thousands of new energy technologies that now make electricity competitive with oil, gas, and coal for fueling transportation, buildings, and industry.

Energy transitions are disruptive and messy, usually taking 50 to 100 years. This one is especially disruptive and messy because of the scale and complexity of the global energy system. Climate policy such as CleanBC and Ottawa’s suite of climate regulations, carbon pricing, and subsidies adds another layer of complexity.

In The Energi Declaration, I describe technology change as the bus and climate policy as the accelerator pedal. Want to transition faster? Press harder on the policy accelerator.

The Horgan government’s climate policies press pretty hard on the policy accelerator.


Source: 2020 Climate Change Accountability Report, BC Government.

As of 2017, BC produced 64.5 megatonnes of CO2 equivalent. The CleanBC target is to reduce that by 80 per cent by 2050. Electrification will be the primary means to lower emissions.

“By moving to clean, renewable energy – like our abundant supply of BC electricity – we can power our growing economy and make life better and more affordable for British Columbians,” Premier Horgan said when the plan was introduced in 2018.

BC may have an abundant supply of electricity now – not all experts interviewed by Energi Media agree on this point – but will it have enough in 2030 or 2050 to electrify the economy?

Electrification requirements

The province consumes about 55,000 gigawatt-hours (GWh) per year. BC Hydro had forecast consumption to be 70,000 to 80,000 GWh by 2020, but the Great Recession of 2008 caused so many large industrial users like pulp mills and sawmills to close that electricity use flatlined over the past decade.

Source: Electrification, by Clean Energy BC, 2018.

There is no exhaustive study that estimates how much electricity will be needed to implement CleanBC.

The office of energy minister Bruce Ralston tells Energi Media that electrification will require another 7,000 to 11,000 GWh (equivalent to the output of 1.5 to 2 Site C dams) by 2040 as compared to BC Hydro’s 2020 load forecast. A 2018 Clean Energy BC study estimates the number will be closer to 26,000 GWh (5 Site C dams) by 2030. A University of Victoria study estimates that electrifying transportation alone will require 55,000 GWh (11 Site C dams) by 2055. And in a 2017 submission to the BC Utilities Commission, energy consultants Davis Swan estimated that converting provincial consumption of gasoline (diesel was not included) and natural gas to electricity would require just over 90,000 GWh (18 Site C dams).

Where will all that electricity come from?

BC Hydro is not building another dam after Site C. Ralston has suggested importing significant quantities of cheap solar energy from California, but that strategy is fraught with risk according to experts interviewed by Energi Media. Private power companies (independent power producers) could build wind and solar farms, but IPPs are hugely controversial thanks to the BC government’s 2019 Zapped report and its aborted Bill 17. First Nations want to play a more prominent role in power generation, but it’s not clear they have access to the capital, expertise, and experience for large-scale development without private sector partners.

No easy answers, no obvious solution. Then there’s the 800-pound gorilla in the conversation, BC Hydro.

The publicly-owned utility’s finances are a mess. The hugely controversial Site C dam is over-budget and running into serious technical issues. Industrial customers complain about poor service, like connecting to the grid taking far longer than in other jurisdictions, in some cases (such as LNG) endangering the electrification promoted by Victoria. Finally, BC Hydro is not a paragon of transparency and accountability.

BC Hydro is also under pressure from the rapid technological change that is transforming the business model of North American utilities.

Is it time for a new electricity system model?

Alberta and Ontario have already moved to a more market-oriented approach, with a single independent system operator and multiple utilities. That approach has some significant advantages. For example, if new generation capacity is needed, a request for proposals is issued, and the lowest bid is accepted. Private investors bear the risk, which has value during a time of volatility and uncertainty.

Two years ago, Alberta’s winning bid (a wind farm) was $37 per megawatt-hour. Compare that price to Site C, which is almost double according to BC Hydro and triple or more according to independent analyses.

With renewable energy now the lowest-cost form of electricity generation, wind and solar would appear to be the answer to future requirements, but who should develop them and how should they be integrated into the power grid?

“We need a pricing system in BC that is market-based,” says economist Antweiler.

But does that mean the system is entirely market-based or only partially, some form of hybrid? Perhaps BC Hydro could still manage the power grid, but the rules would be changed to facilitate more private generation? Or, maybe the transmission system should be run by an independent system operator, like Alberta?

The lesson from the American experience is that every utility and every jurisdiction is different. There is no one-size-fits-all solution.

Framing the debate for the election

Therefore, the conversation should start with the basic question of whether the status quo is the best option for an electric future or if BC Hydro and the provincial electrical system need to be significantly reformed.

This question is not unique to BC. The issue is less pressing in Canada because two large provinces (Alberta, Ontario) have already re-designed their systems, while two provinces with major hydro-based utilities (Manitoba, Quebec) are able to build enough new generating capacity to make their existing utility models work.

BC Hydro still uses the 125-year old “cost of service” business model created by Thomas Edison that Alberta and Ontario abandoned over a decade ago, but unlike Manitoba Hydro and Quebec Hydro, it cannot build its way out of the electrification challenge.

Despite the BC system being neither fish nor fowl, there has been no appetite to discuss changing the current system, whether by a little or by a lot. Maybe there should be.

What better time to start the conversation than during an election, Prime Minister Campbell’s opinion be damned, when voters are paying attention? Watch for Energi Media’s multi-part deep analysis of electrification and BC Hydro, which we hope will provide the basis for that conversation.

Full disclosure: Energi Media provides occasional contract communications consulting and video production services to Clean Energy BC, the trade association of independent power providers.

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