BC Hydro’s latest call for clean power is being trumpeted as a success. But the energy is going to be expensive, and there are concerns it won’t be available soon enough.
Introduction
In 2019, the BC government released the “Zapped” report commissioned by the minister of energy to look into purchases of energy under the prior administration. The report was critical of BC Hydro’s earlier purchases from independent power producers, concluding that it had bought too much energy at too high a price.
BC Hydro again needs more energy. It forecasts a deficit of 1,000 gigawatt hours (GWh) in the 2028/29 fiscal year, growing to 3,200 GWh by F2033, even with the new Site C dam coming onstream. But these figures may be an understatement if the drought continues (we’re currently forced to rely on imports). And they don’t account for the electricity needed to meet the government’s climate goals or to electrify new natural resource projects.
To meet this shortfall, BC Hydro issued the 2024 “power call” seeking private sector investments in new clean energy projects. This was apparently successful, and nine new wind projects were announced in December last year (the list of successful bidders now shows a solar project as well). The press release included the following statement:
“When adjusted to today’s dollars, the average price from the successful projects in this call is about 40% lower than BC Hydro’s last call for clean power in 2010, reducing rate impacts and keeping electricity bills affordable for people and businesses.”
Do these claims stand up to scrutiny?
Blowin’ in the wind
The press release doesn’t say how much the new energy will cost, and BC Hydro’s media team has not responded to my request for the information. But we can estimate the cost.
The Zapped report helpfully provides the average cost of the 2010 power call: $124 per megawatt hour (MWh) in 2009 dollars, which works out to be $174 per MWh in 2024 dollars. Since the press release tells us the new wind energy is 40 percent cheaper, this means BC Hydro’s cost to buy the new wind energy is around $104.5 per MWh.
Before this power call, BC Hydro had forecast its cost of energy in 2025 to be $58.7 per MWh. This includes everything from the cheaper electricity from BC Hydro’s older “heritage” facilities to energy from independent power producers.
Since the 2024 power call energy is so much more expensive than its current average cost, BC Hydro’s energy costs are bound to rise. I estimate the utility’s cost of energy will increase by around 5.8 percent as a result of this power call.
What’s surprising is that BC Hydro’s new wind energy might cost even more than the electricity from its new Site C dam. The BCUC estimated that Site C electricity would cost $44 per MWh if the project came in on its $8.3 billion budget, or $54 per MWh if the project cost $12 billion (2017 dollars). With the final project cost likely be at least $16 billion, a very rough estimate is that the Site C energy will cost $80 per MWh in 2025 dollars.
It’s important to remember that the Site C dam provides firm energy; it’s available even when the wind doesn’t blow and the sun doesn’t shine. Paying more for intermittent wind energy doesn’t look like a great deal, and is a worrying sign for the future power calls we’ve been promised.
All this makes the government’s claims that the new energy contracts are “reducing rate impacts” and “keeping electricity bills affordable” look a bit disingenuous. It’s true that BC Hydro’s energy costs won’t rise as much as if the new power cost the same as it did in 2010, but they will still rise.
Against the wind
The government’s statement that “The cost of wind has dropped significantly over the past decade” might be true (although it provided no supporting numbers), but the cost has not gone down since BC Hydro last published its forecasts.
In its 2021 integrated resource plan, BC Hydro estimated that 10,000 GWh of energy would be available from onshore wind at between $50 and $60 per MWh. Assuming these prices were in 2022 dollars, the top end of the range would be about $69 per MWh today. The bids BC Hydro accepted were way higher than that.
Why did these bids come in so much higher than it forecast just a few years ago? Certainly, costs to build energy facilities have increased in recent years, not least because of the weakening Canadian dollar. But perhaps bidders realized how much BC Hydro needed the power and made no attempt to keep their bids competitive.
Interestingly, Fortis electric was closer with their 2021 estimate that onshore wind would cost $68 to $91 per MWh, or $80 to $107 per MWh in today’s dollars.
On the bright side, it appears BC Hydro has learned at least one lesson from the Zapped report. While it is still guaranteeing to pay for all the energy from the new independent power producers, it is at least trying to avoid paying too much for power of the wrong “profile”, i.e. when it’s not needed because our river flows are at their peak.
The draft contract shows that BC Hydro intends to pay the new energy providers as little as 19 percent of their quoted price in the spring, when it doesn’t need the energy, and as much as 118 percent of the quoted price in the winter, when it does.
Candle in the wind
Even if we end up with higher electricity bills as a result of these new contracts, at least we’ll have the energy to plug the gaps in 2028/29, right? There are some worrying signs that we might not.
As a recent analysis by the Business Council of BC shows, there’s about 2,200 gigawatt hours (GWh) per year of wind power in BC today, which took almost two decades to build. BC Hydro is now looking at adding projects that will produce 5,000 GWh per year, more then trebling the current output, in five years or less. The siting, engineering and construction challenges will be immense, never mind getting the sites connected to the transmission grid.
Initially, BC Hydro expected new wind projects would take approximately five years to complete, suggesting that energy could flow by the end of 2029. BC Hydro noted rather optimistically that several of these projects “may have lead times as short as three years due to early investments in resource evaluation and permitting” giving us electricity by the end of 2027.
However, in an update to its integrated resource plan issued June 15, 2023, BC Hydro took a more cautious line. Apparently, there is now “uncertainty regarding the number of projects that could be available at the lower end of that range.” This sounds like code for “we won’t have any new wind power for at least five years.”
At least the projects won’t be slowed down by the environmental review process, as the government intends to exempt the projects from review. Another example of the benefits of being the state-owned utility; your shareholder can clear the legislative hurdles for you. Whether this is good for the environment is another matter.
Another potential holdup would be approval from the BC Utilities Commission (BCUC), which must review utility investments. The BCUC has pre-emptively found that BC Hydro has a need for 3,000 GWh of new clean energy, but the utility now plans to buy some 5,000 GWh per year. In addition, the BCUC still has to decide whether BC Hydro’s choices are in the public interest, considering factors such as what other alternatives were available and whether the public and First Nations consultation was adequate.
The previous energy minister promised the legislature that the BCUC would review these projects to ensure that they would be “in the best interests of the developers and B.C. Hydro and, ultimately, the ratepayers as well.”
Will the new energy minister keep that promise?