Clean Energy Act gets a failing grade from energy experts

Friday, June 25, 2010

It's basically forcing BC Hydro to buy more power than it needs…and now it's going to be forced to buy power for export that the developers of that power themselves won't export on their own. It's a concern. It's a very, very expensive piece of legislation -- significant expenditures involved here.  Dr. Marvin Shaffer on Shaw’s Voice of the Province with Vaughn Palmer

Last night’s Voice of the Province TV show with Vaughn Palmer had two of BC’s best know energy experts tell why the Clean Energy Act is a very bad legislation.  
Full transcript of Marvin Shaffer and Doug McArthur below.


TRANSCRIPT -Marvin Shaffer and Doug McArthur on Voice of the Province SHAW June 24, 2010

"Growth in British Columbia shows about a 20 to 40 percent increase in electricity demand over the next 20 years, so we need to look and ensure that we are electricity self-sufficient, with firm power as well as a balance of new technologies."
VAUGHN PALMER: Good evening, and welcome to Voice of B.C. I'm Vaughn Palmer. During the recent session of the British Columbia Legislature -- as everyone who follows B.C. politics knows -- we were preoccupied with the HST and the running debate over that. The HST takes effect next week, so out of sheer perversity I'm not going to talk about the HST tonight. We're going to do something completely different. We're going to do the other big piece of legislation that went through the House during the session. It was overshadowed by the harmonized sales tax, overshadowed by the running controversy there, but it has implications that in some ways go well beyond the sales tax. That is the Clean Energy Act and everything that was related to it, from building power in B.C. for export to energy self-sufficiency, independent power projects, BC Hydro, the Utilities Commission, and Site C. A lot of ground to cover tonight, and I appreciate a couple of people from Vancouver coming over to the Island tonight to help me go through all this. First of all, from Simon Fraser University, a policy consultant on energy issues, Marvin Shaffer. Welcome to the show; I appreciate you being on. And -- been on the show before -- from Simon Fraser University as well, Doug McArthur. Thanks for being here. If you had to give people the one-minute overview of what this is all about -- this Clean Energy Act -- Marvin, what would you say?
Marvin Shaffer: It's basically forcing BC Hydro to buy more power than it needs, both in terms of its so-called domestic requirements, or defined domestic requirements, and now it's going to be forced to buy power for export that the developers of that power themselves won't export on their own. It's a concern. It's a very, very expensive piece of legislation -- significant expenditures involved here.
VAUGHN PALMER: The government, as I recall, said we were going to be self-sufficient in electricity production in British Columbia, and then they defined self-sufficiency as more power than simply self-sufficient; they've built a bonus clause into it.
MARVIN SHAFFER: They've added 3,000 gigawatt-hours [inaudible]. It's like one big dam -- about three-quarters of the size of Site C -- over and above a requirement that it itself isn't required to ensure a reliable system. What they're building in is a requirement for BC Hydro to buy power. It's going to be higher than the value of that power, because it will be resold in most years, causing customers to have to pay for it.
VAUGHN PALMER: Is that your overview of the legislation?
DOUG MCARTHUR: Well, it is. A lot of it is about BC Hydro and about our electrical system and the buying and selling of power. But we should remember: this is also a very political act, with the legislation and what they're trying to do.
VAUGHN PALMER: How political?
DOUG MCARTHUR: In the sense that the government is disappointed, obviously, that the HST took up so much attention -- not just because the HST took up so much attention, but they want to present themselves, they want to posture themselves, as being on the side of green energy. They want to position themselves as drawing upon renewable sources for energy and as making a contribution to the lowering of emissions not only in British Columbia but in North America. They're trying to sell this idea that, by pursuing this act and all the things that go with it, they're going to position themselves on the forefront of green energy. The question, of course, that comes up is: is it a convincing argument? That's one of the really challenging parts about this. The second thing is: will it work, and how are they going to do it? There are some very extraordinary measures within this act, including -- as we all know -- taking away substantially the powers of the B.C. Utilities Commission, which has been around for a very, very long time and has done a great job in ensuring that B.C. has low-cost power.
VAUGHN PALMER: The taking away the power -- they basically include in the legislation a menu of projects that they say the Utilities Commission has got no say over these. Some of them are expansions of existing hydro projects, but others include Site C.
DOUG MCARTHUR: That's right. Marvin can speak to this as well, but it's very difficult for the Utilities Commission to oversee and manage, in the sense of giving the overall approval to, the operation of the electrical system when you start taking apart pieces and breaking off export power, breaking off independent power producers and saying those will not be reviewed. How do they do a complete picture of both our needs -- which is one of the things we've always depended on them to do, to do an accurate estimate of our needs and not let the government play politics with BC Hydro and electricity -- and also what's the cost implications to the consumer. They've been very rigorous in ensuring that there aren't a lot of subsidies built in. This new approach that comes with taking away the Utilities Commission, putting in these private power producers into these largely hydro projects around the province, has a lot of -- it appears -- cross-subsidy features in it that are going to cost our consumers a lot of money.
VAUGHN PALMER: Do you see anything in the legislation you like, Marvin?
MARVIN SHAFFER: Obviously the emphasis on conservation is well-received. I have concerns at some of the pricing arrangements, some of the projects that they're building -- for example, the northern transmission line will exaggerate requirements -- but I think most people would say the best way to start with the requirements is through conservation, and there's quite an emphasis on that in the legislation. Just coming back to what Doug said, though, I've been at the last few rate hearings, representing or assisting different clients.
VAUGHN PALMER: This is in front of the Utilities Commission.
MARVIN SHAFFER: In front of the Utilities Commission. As you know, rates over the next few years are scheduled to go up about 30 percent. Most of those drivers of the cost increases now are outside the scope of the commission to deal with. If you look at some of what are called "interrogatories" -- the questions that go to BC Hydro in the rate hearing -- Hydro writes back, "We don't have to answer this anymore," because it's dictated either in the Clean Energy Act or some of the previous measures the government took in relation to its policies there.
VAUGHN PALMER: Somebody said to me, "If you'd asked BC Hydro to design a piece of legislation that would get the Utilities Commission off its back once and for all, this is what it would have come up with."
MARVIN SHAFFER: We're talking about billions of dollars of projects. It isn't small matters here.
VAUGHN PALMER: There's been a tension between the commission and Hydro for a long time, going back to when you were in government.
DOUG MCARTHUR: And one would hope and expect there would be. Large utilities -- and BC Hydro's a very good utility -- but large utilities, which are essentially monopolies, you have to have some oversight, or they get fat, they get lazy, they get to start to develop their own momentum around their own favourite projects and that sort of thing. But the combination of the professionalism of BC Hydro and the rigorous assessments of the B.C. Utilities Commission has really, if you look over the years, provided us with a very effective low-cost, dependable supply of energy, very effective in terms of renewables and not contributing to the overall carbon emissions that other kinds of plants do. We've had very good results.
MARVIN SHAFFER: I think the tension, too, has been between the commission and the government, even more than Hydro, because if you talk to people inside BC Hydro, they're not pleased with a lot of the things they're being forced to do, as well. They can see the costs of a number of the measures that have been taken. Clearly the government wasn't happy with the last few decisions of the commission.
VAUGHN PALMER: To get through all the ground we've got to get through on the show tonight, I'm going to start running the clips a little early tonight, because we've got 20 of them, and I'd like to cover them all, because we've got some really good stuff near the end -- good stuff at the beginning, too. Let's start off with the head of the government, Premier Gordon Campbell, talking about what it is he thinks they were trying to do with this big energy plan.
Topic: Balancing Environment and Resources
Gordon Campbell: "We've been very clear what we're doing in British Columbia. In British Columbia we are setting standards for ourselves. We are actually encouraging, and we will be, electricity self-sufficient. Over 90 percent of our energy will be clean energy, as we pass this. We will actually make sure that we have a dramatic reduction in our greenhouse gases. "We're leading by example. There's still economic activity that's taking place. There are still demands for our mineral activity. We are actually expanding our clean energy and technology industries in this province. We've got, actually, one of the largest industry clusters with that regard. We're going to keep building the economy, we're going to lead by example, and I think that's good for all British Columbia."
VAUGHN PALMER: A member of the public hears, "We're going to be self-sufficient in energy," they say, "Well, that'd be a good thing." They hear it's going to be green -- mostly green -- they'll say, "That's a good thing." And they hear him say, "We're going to have the capacity to feed new industries and growth," they'd say, "That's a good thing." What's wrong with it?
DOUG MCARTHUR: Yeah, and it's legitimate that the government should set out these kinds of objectives. These are fair objectives to be setting out. I would add the additional one that they seem very much to be interested in using the investments in power projects to expand exports over the long term. They've got these objectives they've set out. I think the real problem is not so much.... At least, we could have a good debate about those objectives, but -- rather than have a public policy discussion about those objectives and then forming, say, an act or policy directives from the government that focus on those broad policy objectives and let the people who know how to make the system work without building in high costs and value-destroying investments and that sort of thing -- they've taken it upon themselves to give the direction to this system in detail, taken away the oversight and the planning capacity that comes with effective hydro work. We know that Hydro feels very, very disempowered around electricity planning in the province. The BCUC, of course, has taken these powers away. We've got things mixed up here. The government is in mucking around, using BC Hydro to do particular things -- steer things a certain way, steer projects a certain way -- rather than setting broad policy objectives, having a debate about that, putting that in legislation, and then letting the system pursue those in an efficient, effective way.
VAUGHN PALMER: You said, Marvin, that electricity rates are already scheduled to go up about 30 percent. Do you have any sense of how much this is going to add to the price of electricity? You said this will be even more expensive.
MARVIN SHAFFER: Well, BC Hydro's own studies suggest that what's wrapped up in this so-called self-sufficient policy is going to add over a billion dollars to its costs. That's because this policy is forcing BC Hydro to buy power that really it doesn't need, to have a reliable system. The commission understands that; the major energy consumers understand that; the consumer groups understand that. We have a hydroelectric system. We don't have a thermal system. It's not like we have to do things to replace thermal power in the province. Even the Burrard Thermal plant was there as a backup. That's a whole other discussion; I don't know if we'll have time for it tonight. The problem that I see with all of this is there's been no effort to be transparent, by the government, on what the costs of these measures are and what we're getting for it. We talked earlier about this extra 3,000 gigawatt-hours of insurance. Well, what are we insuring against? How much is it costing? What are we getting for it? There's no consideration of that trade-off in economic terms or even environmental terms, because....
VAUGHN PALMER: That's because we have cheap power on our doorstep from our neighbours, who have.... We have more flexibility, because we have a hydro system than, say, Alberta, which has coal.
MARVIN SHAFFER: Last week and the weeks before -- because of the runoff in the Columbia River system in the States -- power was selling for less than $10 a megawatt-hour. That's a tenth of the price we're paying for some of the new projects -- those different products. It's everything else. But it tells you we could be taking advantage.... There's nothing wrong to take advantage of that. That's why we have the reservoirs. We've got a system that's uniquely capable of managing drought conditions by importing not just coal-power that people like to point to, but surface hydro in the northwest, the surface wind that's going to be increasingly available from the northwest and Alberta.
VAUGHN PALMER: Let's see. We've got Sean Holman with a political question here.
Topic: Is B.C. Becoming a Green-Energy Powerhouse?
Sean Holman: "When it comes to future visions for British Columbia, I actually think that Premier Gordon Campbell's idea of turning the province into a green-energy powerhouse is a good one. I'm wondering, then: why do you think that vision hasn't sold with British Columbians, with even pundits? It just doesn't seem to be catching on fire, even though other provinces are doing the exact same thing, and successfully."
MARVIN SHAFFER: Well, first of all, we talk about all of these projects being green and being a green powerhouse. Most environmental groups that I'm familiar with are not particularly happy about this, because you're building a lot of projects in pristine areas -- a lot of small projects that require roads, that require transmission lines, that interfere with natural watercourses and nearby habitat. They're green only in one sense: that they're not thermal. But they're not particularly attractive if you don't have to do it. The other thing I'd say is: well, "green powerhouse" sounds great -- but not if you have to subsidize it. And that's what we're doing -- in the billions of dollars, not just a little bit, but excessively. Sure, let's pursue those projects that are environmentally benign, that pay for themselves, that make sense. But let's not force BC Hydro and BC Hydro's customers to pay for a lot of projects we don't need that will have impacts.
VAUGHN PALMER: Have you looked at the export question a little bit? I've got a question coming up on exports; I won't go with that yet.
DOUG MCARTHUR: I was just going to make a comment about Sean Holman's question. I think you need to think a little bit about the history of this. There's been something a little bit tacky about what's happened with respect to the building up of this so-called private power, IPPs, private-power producers into the system. It's almost like the green excuse, or the green explanation, came along later and that first of all the government wanted to use BC Hydro to deliver favours to people that they felt, for one reason or another, would participate in this thing and bring some investment capital into the province. It was only later that the government started to build this story of, "Oh, this fits with a green strategy." Then we had expert studies -- Marvin and other people -- who came along, and then the B.C. Utilities Commission themselves, questioning this very strategy and wondering whether it was really contributing value to the province. I think another part of this is that there's been so many questions about whether what they're doing is value-creating for the province. There's no point in looking at a vision economically if it isn't going to be value-creating. If it's value-destroying or value-eroding -- which cross-subsidies from power consumers to subsidized electrical producers would be -- then it's very hard to get people to take hold of that and get excited about it. I think there are a number of reasons why this hasn't really worked for them in the way they hoped.
VAUGHN PALMER: A direct question for Doug McArthur from John Winter.
Topic: Run-of-the-River and the Private Sector
John Winter: "I attended an economic summit in Vancouver last week, at which time a paper written by Mr. Doug McArthur was used as the discussion guide for economic transitioning in British Columbia. In the paper Mr. McArthur outlined three areas of opportunity for this transition: first, the creation of a low-carbon economy; secondly, the clustering of green industry; and thirdly, working more closely with first nations in terms of economic development. "I understand the members of your panel tonight are opposed to private sector involvement in run-of-the-river projects and other hydro projects, and because the private sector epitomizes those three principles so well I'm curious to know how that circle gets squared."
DOUG MCARTHUR: Good question. Let me say, first of all: I am not in any way opposed to private-sector participation and investment in any of those things we've talked about. I think good, solid, value-creating private-sector investment and public-private sector arrangements are going to be very important if we're going to build clusters around high technology, participating in research and development, building a true technologically-advanced knowledge-based green energy kind of economy in B.C. Not a problem at all with private sector money being involved in that. The same with partnerships with first nations -- absolutely, I agree entirely. The whole question is really one of how you're going to do it. If you are, in effect, subsidizing developments -- which there is a lot of evidence that a lot of what's happening here has been done with objectives in mind which are really questionable, such as the kind of questions Marvin's raised -- then you're not doing any favours to anyone, including to the private sector, because these will be non-sustainable. They won't sustain themselves. They'll start loading costs into the system. Yes, they can capture the Hydro system to make them pay for it, but this is not the principle of private enterprise, as I understand it. I understand the success of private enterprise is to take advantage of real value-creating opportunities and go out there and make it happen.
MARVIN SHAFFER: If I could just add to that, I'd say the same thing about the public-private. An interesting political and to some degree economic question, but the issue here is: should we be building these projects at the cost that they are? They are relatively low in value because of the time of the year they deliver most of their energy.
VAUGHN PALMER: I want to get your take on exports, too. We've got a question leading into that from Andrew Weaver.
Topic: Benefits of Exporting Green Power
Andrew Weaver: "Unlike many areas or many parts of the world, B.C. is blessed with renewable resources like nowhere else. We have wind, we have solar, we have tidal, we have hydro -- we have all of the above. What people need to recognize is that when we produce and export clean power, what we're doing is displacing dirty power somewhere else. "For example, about half of the electricity produced in the U.S. comes from coal power. If we can displace coal power, that's a good thing, because we're displacing the emissions that coal power produces."
VAUGHN PALMER: Is that a good reason for doing this?
MARVIN SHAFFER: It would be a good reason if it was true, but when we export run-of-river energy, which is actually bundled up by BC Hydro, we're not going to be displacing coal power. What we're most likely going to be doing is helping the States to the south of us meet their greenhouse gas targets -- which they have, and they're renewable targets. We'll be subsidizing those projects instead of the Americans themselves. It's not at all clear that these projects, when we build for export, are going to be reducing greenhouse gases in the States. The greenhouse gas emissions in the States will be determined by the caps that they put on their industries, and then they'll seek out the best way of meeting those caps.
VAUGHN PALMER: Is part of the problem with exporting south of the border that the Americans are subsidizing their own renewables at such a high level that the only way we can compete with them on price is to subsidize ours?
DOUG MCARTHUR: I don't think that's a huge problem. I think energy demand -- electricity demand -- is going to be such that there's an ability, with good supply projects, to produce those and produce them without having to depend upon subsidies. I don't think the U.S. system is undermining our ability to engage. I think the real question here is one about if.... We do need to have more exports from B.C. We're lagging far behind. The government promised ten years ago that they were going to cut taxes and we'd build new investment and we'd have an increase in exports, and that would drive the economy. Exports have been completely flat. We're way behind most of the other provinces in Canada in terms of exports. We need to have exports, but what are we going to call upon in terms of...? What sectors are we going to call upon? If there are subsidies, then why are we making subsidies for this sector? In addition to that, if we're looking at these hydro projects, we're causing tremendous environmental damage that's not being counted in and taken into account.
VAUGHN PALMER: I'm going to stop both of you here, and we're going to take a brief break on Voice of B.C. We will be back, with Marvin Shaffer and Doug McArthur. Stay with us.
David Schreck: "Run-of-river projects that replace community diesel-generated electricity are good things. Run-of-river projects that are built purely for export and that damage the environment in the process are very bad things."
Bill Tieleman: "Back in 1961, former Social Credit Premier W.A.C. Bennett nationalized, or bought out, B.C. Electric and created BC Hydro as a publicly owned Crown corporation. It helped open up all of British Columbia by making the two-dams policy a reality -- something no private company would ever do. It appears that Premier Gordon Campbell, this day and age, is reversing completely the BC Hydro legacy and bringing privatization back into the production of energy in British Columbia."
VAUGHN PALMER: Welcome back to Voice of B.C. In the first segment, a fair amount of criticism of what is happening here. What should we be doing in British Columbia, in terms of power generation? Are there projects, like wind farms, that we should be building? If not, what should we be doing for export?
MARVIN SHAFFER: I think what we should be doing is taking advantage of our best assets. Our best assets are reservoirs -- our ability to store energy to meet peak requirements. That's going to be increasingly valuable in the States, as they turn to more intermittent renewable resources. Projects like the addition of generation capacity at Mica and Revelstoke are good projects. We're probably going to talk about Site C. There are a lot of issues around that, but if the environmental and social issues can be resolved, a project like that is better than the projects we're building, because it adds to our ability to provide the services that will be valued highly in the marketplace.
VAUGHN PALMER: Wind farms?
DOUG MCARTHUR: Yes. I agree with Marvin, by the way: reservoir-based systems are something we really should be looking at instead of these so-called run-of-the-river -- some small ones. Wind farms have some of the.... One of the things about investments in our electrical system is you're trying to balance the system so as to get the right balance within the system. Wind farms have some of the same kind of problems, but not the same kind of problems exactly, because they're not necessarily seasonal, so with the right mix they can add to the balance. I have no problem with considering wind farms, if they're going to work -- if they're going to be reasonably effective at producing electricity. However, this obsession with electricity as a basis for which we're going to build our export economy I think is a bit odd. I think that in terms of the modern economy, we're going to have to turn to high-value kinds of technologies. We're going to have to turn to knowledge-based industries. We're going to have to return to some real high-value developments in our forest sector. We have to diversify this economy. We have to get away from this -- tied to these few resources. I'm all for increasing exports. I'm all for pursuing exports as part of our province's development. But I've got some real questions, when it's done in the way this is being done and with the amount of very hands-on direction of the economy and the use of BC Hydro to do that.
VAUGHN PALMER: This economic paper that John Winter referred to -- is it available on that website of yours that we put up on the screen today --
VAUGHN PALMER: People might want to read that. It's a broader discussion of the provincial economy that Doug McArthur did for the New Democrats, but there are a lot of interesting issues in there, and you may enjoy the read. Let's go back to some more questions on this, because we've got a lot of them. Here is green power versus brown power -- Ben Parfitt.
Topic: Using Green Energy for Brown Energy
Ben Parfitt: "I think the public can easily be misled on the issue of green power. For example, a lot of new power that's proposed for northeast British Columbia is going to go to servicing the natural gas industry in the province, which is a major greenhouse gas emitter. I think we need to think very carefully when we talk about the need for new clean power in the province. If all we're doing is producing clean power to provide to a dirty industry, what have we really achieved in terms of environmental protection?"
VAUGHN PALMER: That would include that northeast power line that you talked about.
MARVIN SHAFFER: Actually, the northwest power line. This is a major concern in energy policy in B.C. -- and it's not just this government; this goes back to previous governments, as well. Because we have such low-cost power historically, we sell to new industry at an average price of less than $40 a megawatt-hour -- and yet we're out buying at over $100 a megawatt-hour. Do we really want to be out there soliciting power at $100 a megawatt-hour so we can supply new electric-intensive loads, like the northeast gas industry or some of the mines in the north, the northwest transmission line, who are paying $60 a megawatt-hour less than the cost of the electricity that they need? I think this is a very serious problem. It's a problem that the energy taskforce that this government commissioned in 2002 said you have to deal with -- and we haven't done it. A very difficult political issue; a very important economic one.
VAUGHN PALMER: I want to hear Doug McArthur's answer to this one. Bill Tieleman -- the NDP and IPPs.
Topic: The NDP's Support for Private Power
Bill Tieleman: "Why did the previous NDP government open the door to independent power producers in its term, when it was so committed -- apparently -- to public power? Why did it do that?"
VAUGHN PALMER: You were around then. Do you remember why?
DOUG MCARTHUR: I was around. [Laughter.] I'm not going to speak for the NDP on this, but I was around, in a senior position -- obviously a very senior position -- of the government. I think the reason this all started was there was an interest in true small-scale run-of-the-river projects -- community-based projects. I think there is and has been room for those kinds of projects. The position, as I recall it -- and I may not be fully informed -- was that these should not be done on the back of other power users, other electricity users; there should not be a subsidy that's built into the development of these projects. There were no projects that I know of like the Bute Inlet project -- thousand-megawatt projects. One thing we should remember is that these projects that are going into [inaudible] -- some of them are fine, but some of them are immense. They have no reservoirs associated with them, so you can't draw the value out of them that Marvin's talking about. They're going to require, from all the calculations, very substantial subsidies. They're causing significant environmental damage. Those weren't -- as I recall -- in the government's program at that time, and I don't think they should have been.
VAUGHN PALMER: A defender of run-of-the-river power, cabinet minister for the environment Barry Penner.
Topic: Is B.C. Still in Control of the Rivers?
Barry Penner: "Since 2003, our government amended the Water Act so that there's now a 40-year maximum term for a water licence. At the end of that term, the proponent is entitled to reapply -- but there are no guarantees. A future government can add additional conditions or requirements as they see fit and either choose to renew the licence with more conditions and limitations attached, or not renew the water licence."
VAUGHN PALMER: Is that how you read the agreement?
MARVIN SHAFFER: Well, I think that's technically true, but the fact of the matter is a private company is going to own the asset, and it's the only one that can take best advantage of the water -- so basically they're in the first position to get a continuation of the water licence when the 40-year contract expires.
VAUGHN PALMER: I think one of the other levers the government has used to persuade people -- and I think it's been effective -- that IPPs are a good thing is the partnerships with first nations, because in many cases you're having first nations getting jobs in development in their own traditional territory. Here we have a fan of first-nations power development -- at least on a smaller scale -- Judith Sayers.
Topic: China Creek Run-of-the-River Project
Judith Sayers: "When you find the right project, like we did in the Hupacasath run-of-the-river project at China Creek -- there was little if any impact on the environment -- where you take water out at one point, and 4.5 kilometres later you put the water back in, so not consumptive, no change in temperature, not affecting fish populations; it's very minor."
VAUGHN PALMER: But this is the scale issue that you've both mentioned.
MARVIN SHAFFER: That's right. There are some good projects out there -- no doubt. What we're talking about is: should you have a policy, and now an act, that requires BC Hydro to buy way more than it needs -- and in the process take in some of these Bute Inlet types of projects?
VAUGHN PALMER: Bute Inlet is now on hold, right?
MARVIN SHAFFER: On hold, but I mean projects like that...
VAUGHN PALMER: That's a big one.
MARVIN SHAFFER: ...that really don't relate to the small community-based initiatives.
VAUGHN PALMER: I said we were going to get to Site C, so here we go. We've got two or three points to make on it. First of all, when he said this he was still British Columbia's Minister of Energy; he's since resigned in protest over the HST -- there, I went and mentioned it, and I said I wouldn't. [Laughter.] But in any event, here he is on Site C -- Blair Lekstrom.
Topic: Do We Need Site C?
Blair Lekstrom: "You have to look for firm energy, whether it be wind or run-of-the-river, most of which is freshet in the spring. Yeah, you need to have firm energy to make sure that we can turn our lights on, utilize the electricity we need to be self-sufficient in British Columbia."
VAUGHN PALMER: You said that if you can sort the environmental issues out with Site C, it might be a good project.
MARVIN SHAFFER: Exactly for that reason. It might be a good project as a substitute for the low-value power -- the intermittent power -- that we're buying. Not to firm up that power for export -- effectively subsidizing it, because it can't go on its own. It is interesting. None of these private projects for export are going on their own. They're not out there buying the shaping services, the transportation services, the backup services -- which they could buy to have an effective product -- because they couldn't sell it.
VAUGHN PALMER: Do you think the market's going to be there for Site C export?
DOUG MCARTHUR: This is a good question, although they're obviously on the hope that the export market will be there. For instance, if there really were big investments -- real, significant investments -- in conservation, we know that this is by far the best alternative, compared to building any of these things. Even though, as Marvin said, there's been good work done, if you really wanted to put public money -- that is to say, taxpayer money -- into doing something for the electrical system and contributing to the global warming situation, you would put a lot more investment into that. That's the first thing. The second thing: he made the point [laughter] that we've been making. Freshets are the characterization of these private hydro projects. They contribute a lot of power when there's a lot of water around -- everybody's got lots of water. The Site C contributes -- because it has a reservoir -- firm power. I have an open mind to that. I have an open mind, if there's any real reason why we should be doing this. I need to be convinced that this is going to be a value-producing project.
VAUGHN PALMER: Here is one of the big environmental questions with Site C.
Topic: Site C's Impact on the ALR
Bernard von Schulmann: "BC Hydro has decided to go ahead with the Site C project lately, and it'll soon go into the B.C. environmental assessment process. Given that the B.C. environmental assessment process is looking for how you mitigate environmental damage, do you see any way that BC Hydro can mitigate the loss of 15,000 acres of ALR land when the flooding happens? If not, is there any way that this project could possibly get environmental assessment approval?"
VAUGHN PALMER: I think if it's going ahead you're going to lose the agricultural land. I don't see any way around that.
MARVIN SHAFFER: When the Utilities Commission looked at this in 1980 or '81, they felt that the environmental issues could be dealt with. Now, I think in reality there will have to be a major Columbia Basin Trust type model -- an agreement in the region to say, "Look, we're taking away an important resource. We can help you enhance other resources." It may or may not be in agriculture, but it'll be in the region, for the benefit of the region. You're going to have to put in hundreds of millions of dollars to that.
VAUGHN PALMER: And I think you're going to have a partnership with the first nation in the area, or it's not going to happen.
MARVIN SHAFFER: And a partnership with the first nations, as in Manitoba.
DOUG MCARTHUR: Absolutely. None of these projects are going to happen anymore in B.C. -- let's be clear about this -- unless there are effective working relationships and partnerships with first nations. The other thing is cost-benefit. If a high enough value comes out of this -- which I'm still sceptical, but I'm willing to listen and see -- of course, on cost-benefit terms, you can compensate for the loss of farmland. As long as it creates more value than the loss of the farmland, on a cost-benefit approach it works. I, for the last 20 years, believed that there would never be another major reservoir-based electrical power production project in western Canada, after Manitoba was finished with its projects. But I'm now becoming convinced that the public attitudes have changed. The feeling that these can be acceptable under certain conditions seems to be moving in that direction. So we'll have to wait and see; there are lots of problems with it, that's for sure.
VAUGHN PALMER: Here's somebody to raise the jobs issue with the project. It's an interesting argument. Gary -- Kroeker? Yes, sorry, I've forgotten it. No, it is Gary Kroeker.
Topic: First-Nation Workers and Site C
Gary Kroeker: "Workers of first-nations descent and workers with disabilities and non-traditional should have an opportunity to work on a project of this magnitude and size. It will give them the skills and trades that they'll be able to take forward in the building of B.C. into the future, and that's so important in today's world."
VAUGHN PALMER: It's about a billion dollars a year for six or seven years, as I recall -- the price-tag on this project, right?
MARVIN SHAFFER: Right. If you look at what Manitoba Hydro's been doing, they set up schools in northern Manitoba -- training programs. There's a lot of challenges there, because you're trying to bring people into the labour force that don't necessarily have the grade 12, don't have the basic requirements even to move on to some of the more skilled positions. You have to make a major effort at it -- but as Doug says, if you've got enough value there and you're committed to it, you certainly can make the attempt. That certainly happened in Quebec; it's happening in Manitoba. It's happening on a lot of major resource projects.
VAUGHN PALMER: We will take a brief break on Voice of B.C. with Doug McArthur and Marvin Shaffer. Stay with us.
Judith Sayers: "The need for electricity is just growing and growing. People need to ask the hard questions -- how do we want to produce power? -- have those conversations, and look clearly at all the different options that are available. I think that a lot of people will consider these green projects, clean projects, as a preferable option to some of the others that are out there."
Jane Sterk: "The first thing we need to do is diversify away from hydro. We need to get into geothermal -- there's lots of geothermal hot spots in British Columbia. We need to get into wind and solar. BC Hydro is doing some minor things toward wind but very little in solar. As long as we're committed to hydro, that's all we'll get -- and we believe that that's a mistake for the future."
VAUGHN PALMER: Welcome back to Voice of B.C. We're talking about a range of issues that came out of British Columbia's Clean Energy Act this year, and government energy policy in general. We're trying to cover as much as we can, with Marvin Shaffer and Doug McArthur. I'm going to go straight back in. Another thing that was mentioned in that massive piece of legislation that went through the House this spring was BC Hydro and smart metering. Here with a question on it is David Schreck.
Topic: Are Smart Meters Good Value?
David Schreck: "The Utilities Commission assessed one smart-meter project, rejecting it saying that it cost more than it was worth. Do you think it's worthwhile, spending $1 billion on smart meters?"
VAUGHN PALMER: And smart grid, we hear, too. Is this a good thing to be doing?
MARVIN SHAFFER: There's certainly no evidence it's a good thing to be doing. Really the question is: we'll be moving towards a smart-meter technology; how should we do it? Should we be doing it in a graduated way, or should we be doing it in a billion-dollar investment by 2012? At the commission, time and again Hydro's been asked for a business case for it. There is no business case for it -- and now, as you know, with the Clean Energy Act there doesn't have to be a business case for it.
VAUGHN PALMER: The idea is that your meter has some kind of a feedback system in it so that it helps you to ration your usage, so you buy power away from peak times when it's most expensive to produce.
MARVIN SHAFFER: Right. In systems that are thermal-based, where you have peaking problems -- like in Ontario, for example, or California, when they had peaking problems, it's obviously an important part of the toolkit to meet your peak requirements. That isn't the same here, where we've got a lot of generating capacity to meet peak needs. Our issue is: do we have enough energy through the course of the year, in a cost-effective and environmentally responsible way, to meet our annual requirements?
VAUGHN PALMER: And a billion dollars is about the price-tag, Doug McArthur, as I recall.
DOUG MCARTHUR: Yes, apparently a billion dollars. It's a lot of money.
VAUGHN PALMER: Almost everything costs a billion dollars [laughter]. [Crosstalk.] You name it, right?
DOUG MCARTHUR: [Laughter.] What's a billion?] I think that one of the things that really need to be looked at is: what are the various conservation-driven kinds of approaches? A billion dollars invested into smart conservation approaches -- many of them....
MARVIN SHAFFER: Space-heating.
DOUG MCARTHUR: Managing the utilization of electricity for space-heating, as well as natural gas, of course, is important. And in terms of how to balance your requirements in the system -- there's a lot can be done with smart buildings, for instance, which is a different kind of way of going about this. I think we've got to, again, get off this.... For some reason they get hooked on these very particular things they want to do, and they ride them. I think the problem is there hasn't been a step back to plan this.
VAUGHN PALMER: When you ask the government about taking these projects out of the Utilities Commission, they come back and they say, "Well, they're still subject to environmental assessment." Here with a comment on our environmental assessment process is Business Council's Jock Finlayson.
Topic: Does B.C. have a Strong Environmental Assessment Process?
Jock Finlayson: "I think generally the province has got a good environmental assessment regime. It's recognized across the country as one of the best. Obviously any time you're undertaking a project on the land base that's going to impact water and water use, you need to have a rigorous environmental process to ensure that environmental values are protected. I think we do a pretty good job on that in B.C. today."
VAUGHN PALMER: Do you agree?
MARVIN SHAFFER: Well, the problem is.... On the environmental side itself, I wouldn't necessarily say it quite that strongly, but I think there's a reasonable process in place. But at the end of the day you're always stuck with a trade-off. There are environmental impacts with all of these projects. The question is: are they justified by the benefits they offer? That's never looked at in the environmental assessment process, and that's what's been taken away here. There's no process, there's no transparency, there's no requirement to demonstrate that, on balance, these environmental impact are justified because of the values, the requirements, the alternatives -- everything else that you normally look at in a broader test of public interest. It just doesn't look at that.
VAUGHN PALMER: This process was put in place -- the assessment process -- by the previous government. Does it still function as it was designed?
DOUG MCARTHUR: There have been some changes. I think that it's true that it now has within it less ability to actually provide a definitive No. Perhaps that was implicitly a weakness in the whole system, whereby the reports go to the approving departments and ministries, so perhaps it's a criticism of the old system as well. What you really need is.... Some people say that they can't stop a project. I don't think that's what's so important. You need a B.C. Utilities Commission; you need an environmental assessment process that will say to the government, "No, we do not believe this project should proceed." To do that, they have to do the full assessment, and that doesn't seem to be happening. I don't understand why full assessments, including a determination of overall whether or not the project, given all the things, should not proceed -- why that's not happening. I think any good environmental assessment process should clearly be able to state that. Then the government can make a policy decision whether it proceeds or not -- but at least, with an environmental assessment process that speaks clearly and can say no to some projects because they're bad projects.... Let me tell you, governments pursue bad projects. You need a check and balance. We've had a pretty good system. The Utilities Commission, the environmental assessment process -- and the government feels like they're just pulling these apart.
MARVIN SHAFFER: Back on smart meters, the environmental assessment process won't even begin to look at the environmental issues there. There are none, in the same way that there is in a power project -- and yet there's a very significant investment, and there are significant questions about what's the best way to introduce emerging technology here.
VAUGHN PALMER: Feed-in tariffs -- the leader of the Green Party with a question on that.
Topic: Value of Feed-in Tariffs
Jane Sterk: "Europe has used feed-in tariffs to diversify their energy supply into geothermal, solar, and wind, and Ontario is moving in that direction. I'm wondering what you think of that as a strategy for British Columbia."
VAUGHN PALMER: A feed-in tariff -- a big company like Hydro says, "We'll take power from anybody if you can produce it at this price," and somebody puts a solar generator on their roof or whatever they do and feeds it into the system. That's the idea.
MARVIN SHAFFER: Right. There's obvious advantages to that, because you reduce the requirements for transmission lines for distribution. Your reduce the problems associated with various forced outages when a line goes down. And there are environmental advantages as well. It just comes back to balance. In Ontario they're paying an extraordinary price, and you're seeing people put solar panels up on their houses. It probably doesn't make any sense, from a broader point of view. But certainly there's a role for feed-in tariffs; the question is at what price you attract this power.
DOUG MCARTHUR: The way they're usually done, as I understand it, is feed-in tariffs are not the basis on which these private power producers are going in. These are for smaller-scale -- for individuals, small businesses, or households, or so on -- to know that they can connect into the system and if they have some ability to generate some surplus electricity, the system will take it and pay for it at a predetermined price. You know, one of the things about that is they don't have all these problems of scale. They're smaller-scale; I think they're fine. I think they're a good idea. They support people taking some initiative, and all of that is good. A lot of them don't seem to, by what I've seen, stand up to a good cost-benefit analysis, but there are other reasons why you might want to do them.
VAUGHN PALMER: Just hope that if your neighbour decides to do this and there's a good feed-in tariff, that it's not one of these power plants that generate electricity through the use of, say, pig manure. Just hope it's solar, right? [Laughter.] That's my advice. We've heard several times during this show that British Columbia enjoys very unusually low power rates -- some of the lowest in North America -- and our large-scale industrial users enjoy those rates. Here with a question about the attitude of large-scale industrial users, from the Canadian Centre for Policy Alternatives, is Seth Klein.
Topic: Rising Energy Costs and Large Industrial Users
Seth Klein: "Given the extra costs of IPPs -- the additional premiums that we're going to have to pay, embedded in higher rates -- why do you think we haven't heard more of an outcry from the large industrial consumers?"
VAUGHN PALMER: You sit in these Utilities Commission hearings next to their representatives.
MARVIN SHAFFER: You may recall that they were very concerned about all these aspects in the energy plan. They're pretty quiet now. I think there are a couple of reasons. One is that it could have been worse. There is an effort to try to separate out the export side of BC Hydro's business from the domestic side -- not sure how successful that will be, but there's....
VAUGHN PALMER: There is an objective in the act.
MARVIN SHAFFER: But more importantly, there's a little clause in the act that says BC Hydro has to offer long-term domestic sales contracts, and the cabinet can actually set the terms and conditions around that. I think what they're setting up is a regime where the large energy-intensive users will be able to protect themselves from the rate increases that we're all going to face here.
VAUGHN PALMER: So a pulp mill will be able to buy power for 20 years.
MARVIN SHAFFER: Twenty years -- lock it in at.... Maybe going up with inflation, but certainly not 30 percent -- 10 percent a year over the next few years.
VAUGHN PALMER: We mentioned Burrard Thermal. Let's see if we can deal with that in the time we have left. This is the big gas-fired generating plant outside the city of Vancouver. I think Port Moody, isn't it? Near Port Moody. It's sort of a backup battery for the system -- it's there; it's used occasionally, not very often. Here's a comment on it -- B.C.'s Environment Minister Barry Penner.
Topic: Should We Close Burrard Thermal?
Barry Penner: "The previous government ramped up Burrard Thermal in the year 2000. Fraser Valley residents paid the price, in terms of decreased air quality, because Burrard Thermal, although it is a natural gas-powered plant, is almost 50 years old. It's old technology. It's inefficient, which means it has to burn more gas per megawatt-hour of electricity produced than a modern plant -- probably twice as much. So you get twice as much air pollution as you would from a modern plant for the same amount of energy produced."
VAUGHN PALMER: This is a massive thing, right? It can do about the output of Site C, is my recollection -- if you ran it flat-out, which we almost never do.
DOUG MCARTHUR: If you ran it flat-out, which you don't. You just use it during periods when reservoirs are low and you need backup power. It provides that balance to the system so that you've got level capacity. Marvin can explain this better than I, probably, but you draw upon it during these times when you need to get some extra power -- which these other hydro projects can't do, either; they can't supply it. Without access to this system we'll have to go to the States or somewhere to fill that gap and probably buy dirty power -- probably a lot dirtier than what Burrard would ever be. In addition to that, the Burrard gas that's being saved.... It's not being put back in the ground. The gas that Burrard would burn is going to be shipped off and burnt in North America, so it's not going to do anything in terms of reducing greenhouse gases.
MARVIN SHAFFER: Under the act, BC Hydro has to pretend the Burrard plant doesn't exist. It can't rely on it at all. It was never operated, in recent years, as a base-load plant. It was, exactly as Doug said, a backup to drought conditions. If we have drought conditions, it's there. Even then you would only use it if you couldn't acquire other sources of power more economically that were environmentally acceptable. It was an extraordinarily costly mistake, I would argue, to force BC Hydro to ignore the capability of the Burrard Thermal plant. They're not shutting it down; they need the plant there. It does provide backup, and all hydroelectric systems like B.C.'s are looking for a thermal plant to be there in the event of drought, to back them up -- and it would only be used under those circumstances. If you were concerned about air-quality conditions, you could prevent them from operating it in the summer or on air-quality event days. In fact, BC Hydro doesn't operate it, never has operated it, a lot -- certainly nowhere near capacity.
VAUGHN PALMER: There are two more things I wanted to get to in the show, and I think we've got time to do them both. First of all, a question from the Allied Hydro Council, Chris Feller, on campaign donations -- IPPs and the B.C. Liberals.
Topic: Is a Black Cloud Forming over IPPs?
Chris Feller: "Many ex-Liberals are now sitting on the board for several of these IPPs, who have received or are waiting for their permits. Given that substantial political donations have been made to the Liberal Party, a rather large black cloud is forming over these IPPs. How is this in the best interests of the province?"
VAUGHN PALMER: Well, I guess I would say if you ran an IPP, you'd have to be nuts to give money to the NDP [laughter], since they'd run you out of the province. But nevertheless, the donations are a matter of record, and there are a lot of them.
DOUG MCARTHUR: There are a lot of them, and it has caused a lot of people to wonder about. Given all these extraordinary measures that are being put in place to favour them, it's caused a lot of people to wonder if there isn't -- in a sense, if you shouldn't follow the money here. It doesn't create a very good environment. You know, we talk about these kinds of projects -- you don't hear it quite so much now under this government -- there being a kind of a social contract. They have to be clean in so many different ways. This organization that the independent power producers have has been a very, very determined group. They've been very, very partisan in many of their activities, and I think they really have thrown the credibility of some of these projects into doubt, fairly or not. Some of the political contributions -- they carry a little bit of an odour. It's not what I would.... If I were developing a forward-looking industry that wanted to have a bright future, it's certainly not a practice I would endorse.
VAUGHN PALMER: I wonder if we won't see some of these projects.... We've seen some of them put on hold anyway, but I wonder if we won't, with the changing political climate in the province, start to see some of these companies look elsewhere and put their money elsewhere, because of the likelihood of a change of government.
MARVIN SHAFFER: It's possible -- but right now they're looking at the contracts they can secure, and they'll continue to do that as long as BC Hydro is out there buying their power.
VAUGHN PALMER: And the New Democrats have indicated that they do not want to repeat what the Liberals did and tear up contracts when they come to office. One last question. This is more on climate, but it's what's happening with climate change and climate action in the government. Andrew Weaver from the University of Victoria.
Topic: Has the Climate-Change Plan Faltered?
Andrew Weaver: "It's a good question: has the climate-change plan faltered or not? I would argue that the climate-change plan has not faltered. The policies that were discussed and outlined in the climate-change plan are still being looked forward. However, there are some inconsistencies. It's quite clear, for example, that the province of British Columbia will not meet its targets unless it gets a handle on the oil and gas sector in northern British Columbia and the emissions that are rising from that particular sector."
VAUGHN PALMER: We've got a minute or two left. What do you think?
DOUG MCARTHUR: Well, it is inconvenient, isn't it, that there's so much hope -- and has been so much in the past three or four years of our prosperity -- drawn from particularly gas, and gas sales and gas development. Governments have these conflicting things going on, but there has been a substantial talking out of two sides of the mouth going on here. The other thing is that subsidies going into this industry -- sure, other provinces subsidize this industry for development, but if you were really committed to the kind of program that Mr. Weaver is talking about, I don't think you would be doing that sort of thing. There are some real questions to ask here.
VAUGHN PALMER: A closing comment, Marvin? Less than a minute.
MARVIN SHAFFER: Well, just back on the climate change -- we don't have a lot of thermal power in British Columbia. This isn't a problem. We should be looking at developing our industry in the way that makes most sense for British Columbia and not try to solve the greenhouse gas problems in California with subsidized power.
VAUGHN PALMER: I want to thank Marvin Shaffer and Doug McArthur for coming on the show tonight and for helping us navigate through some pretty complicated stuff. I wanted to do a whole show on the criticisms, in particular, of the Clean Energy Act that the government put through and the implications of it. Thanks to both of you for being on the show; I really appreciate it. We'll put that website up again; you can see Doug's paper on the B.C. economy. Thank you for watching Voice of B.C., bring the Legislature, B.C. politics, B.C. public policy into your living room. Good night.

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