GreenPolicyProf

Premier Campbell with Brad Bennett, grandson of WAC Bennett

George Hoberg

The Government of British Columbia introduced its much anticipated Clean Energy Act today. The Act follows the government’s increasing assertions about it aspirations to become a “Clean Energy Powerhouse.” To lay the groundwork to pursue that mission, the government appointed a Green Energy Task Force (actually four related bodies) in the Fall of 2009. On April 19, the Government committed to moving the Site C Dam on the Peace River to the regulatory review and environmental assessment stage.

The two most important changes introduced in the Act are a substantial revision of the governance framework for energy policy and the articulation of new and revised objectives for BC energy policy. While these new objectives increase provincial commitments to conservation and clean energy, they also promote electricity exports and fuel-switching that could lead to significant new electricity generation projects . The most glaring gap in the new Act is its failure to explicitly create a regional planning process to address the cumulative effects of energy development.

New Governance Framework. The new governance framework involves two significant changes. First, the Act reunites BC Hydro with the British Columbia Transmission Corporation (BCTC). BCTC was separated from BC Hydro in the Campbell government’s 2002 Energy Plan as part of its effort to privatize new source generation. It was thought at the time that privately owned generating facilities needed access to transmission capacity that was not operated by the Crown utility. But that view has now changed. The effect is to increase the reach and capacity of BC Hydro. Critics of the Campbell government’s energy policies have denounced the creeping privatization of electricity in the province. The new Act does retain a big role for privately-owned independent power producers (IPPs), but reasserts the dominance of government ownership over the bulk of the electricity system.

The second significant change in governance is the substantial reduction in the regulatory jurisdiction of the British Columbia Utilities Commission (BCUC). Most importantly, the Act would remove the authority of the BCUC to approve BC Hydro’s long term plans (currently referred to at a Long Term Acquisition Plan). The Act would create a new planning process – an Integrated Resource Plan - that combines the existing functions of the Long Term Acquisition Plan with the objectives of the “Section 5 Transmission Inquiry.” The government had required the BCUC to conduct that inquiry, but then suspended it when the government decided to appoint the Green Energy Task Forces to recommend how to revise electricity governance. Instead of having the BCUC review and approve the plan, the plan is submitted to the Minister of Energy, Mines and Petroleum Resources, and then formally approved (or rejected) by the cabinet in the form of the Lieutenant Governor in Council (Sections 3 and 4 of the Act).

In addition to removing the BCUC from planning, the new Act would also remove the BCUC from the review and approval of major projects, including the proposed Site C dam, new export agreements, the Northwest Transmission Line, additions of new turbines to existing “heritage” dams, the 2008 Clean Power Call, and the new Smart Meter program. The BCUC would retain authority mainly over rate setting.

In July 2009, the BCUC took the controversial action of rejecting outright BC Hydro’s Long Term Acquisition Plan, including its proposal to reduce reliance on the Burrard Thermal natural gas plant that the government was trying to phase out. With the new Clean Energy Act, the BCUC won’t be acting as a referee any longer between BC Hydro and the government. This is a dramatic shift in the governance of electricity policy from regulation by an independent commission to direct government control.

New and Revised Objectives.  The Campbell government made substantial changes to energy policy with both its 2002 and 2007 Energy Plans, much of which was explicitly incorporated in legislation through the Utilities Commission Act. The new Clean Energy Act carries forward many of those objectives but also adds new objectives and strengthens some important existing objectives.

·         The most significant new objective is “to be a net exporter of electricity…with the intention of benefitting all British Columbians and reducing greenhouse gas emissions in regions in which British Columbia trades electricity.” Previously, the core objective had been self-sufficiency. This new export objective embodies BC’s aspiration to become a “Clean Energy Powerhouse,” and could lead to substantial new development of energy projects.

·         The new Act would also “encourage the switching of one kind of energy source or use to another that decreases  greenhouse gas emissions in British Columbia.” Fuel switching from gasoline to electricity in the transportation sector and from natural gas to electricity in the building sector could have substantial implications for BC’s future electricity demand.

·         The Act would strengthen the obligation to meet new electricity demand through conservation measures from 50% to 66%. In its most recent planning proposal BC Hydro wanted to rely on conservation for 72%, so this seems readily achievable.

·         The Act would increase the required percentage of electricity generated from clean or renewable sources from 90% to 93%

Glaring Omission. Perhaps the most glaring omission from the new Clean Energy Act is the absence of an explicit requirement for a regional planning process to address the cumulative effects of energy development. The environmental community has persistently criticized the BC government for its lack of effective planning for new energy developments. The province dealt reasonably effectively with forest land use issues through the Land and Resource Management Planning process, but those plans did not include energy for the most part. Recommendations to include energy in a similar planning process have been proposed by a broad coalition of environmental groups in a submission to the Green Energy Task Forces. The task force on “resource development” included very specific recommendations for a new process under its Outcome 3 “Achieve world-class environmental performance for clean energy

Projects”:

1. [omitted]

2. By September 30, 2010, and using existing data and information layers, develop a renewable energy zoning map for the Province that identifies where development of renewable energy and transmission is appropriate and inappropriate.

3. Complete the Section 5 inquiry as soon as possible, focusing on transmission planning and deferring all regional planning submissions to the regional planning process.

4. Using the outcomes of the provincial zoning map (recommendation 2) and Section 5 findings  (recommendation 3), undertake regional planning in areas that are appropriate for more intensive development, have potential for industry electrification, and have potential for low cost energy clusters.  An assessment of cumulative impacts of all projects within the planning area will also take place.

Recommendation number 3 seems to have been included in the new Integrated Resource Plan, but the other two recommendations have not been explicitly incorporated into the new Clean Energy Act . The section on planning does contain a reference to a requirement to consider, as part of its transmission planning, “an assessment of the potential for developing…grouped by geographic area, electricity generation from clean or renewable resources in British Columbia.” This provision does require the sort of regional supply planning envisioned the Section 5 Transmission Inquiry Terms of Reference. But it does not explicitly address the issue of cumulative effects from multiple energy projects that has been the prime concern of the environmental community and that was clearly recommended by the Green Energy Task Force on Resource Development.

The Act does make homage to cumulative effects by amending the Environmental Assessment Act to allow the consideration of “potential cumulative environmental effects.” This is not actually a significant change because the Environmental Assessment Office had already committed (p. 26) to considering cumulative effects. More importantly, tweaking the environmental assessment process does not get at the root of the problem of moving beyond project-level assessment to considering integrated regional planning.

As debate over the new Act begins, it will be important to hear the government’s response to the strong Green Energy Task Force recommendations on regional planning. Given that a shift to an export focus and fuel-switching will increase the pressure for new energy projects, it is imperative that we get the review and approval process right.

Other Notable Changes. If enacted the new Clean Energy Act would also do the following:

·         Create a new feed-in tariff

·         Create a First Nations Clean Energy Business Fund

·         Formally legislative a “Two Rivers Policy” which precludes any new major dams in the province after Site C.

George Hoberg (with research assistance by Lisa Jung)
August 1, 2009 (updated below on September 24, 2009)

On July 27, 2009, the British Columbia Utilities Commission stunned the BC energy sector by rejecting the Long Term Acquisition Plan (LTAP) of BC Hydro. The LTAP forecasts future electricity demand growth and details how BC Hydro plans to meet its future electricity needs.

The Commission made six major determinations. It approved two major parts of the LTAP – BC Hydro’s “load forecast” for future electricity demand, and the reliance on the Burrard Thermal natural gas generating plant for 900 MW of dependable capacity. But the commission rejected four parts of the LTAP: 

1. The Commission ruled that BC Hydro “has not adequately addressed the self‐sufficiency obligation established” by the BC government.
2. The Commission rejected BC Hydro’s plan for “Demand-Side Measures” – the efforts to reduce demand by increasing efficiency – because they were not adequately supported by analysis.
3. The Commission rejected BC Hydro’s plan to reduce its reliance on energy from the Burrard Thermal unit for planning purposes.
4. The Commission did not endorse a specific target amount of electricity for the “2008 Clean Power Call,” the process through which BC Hydro acquires new power from private producers.

Because the four issues were so fundamental to the overall plan, the Commission rejected the LTAP as a whole.

The BCUC decision has provoked significant reaction from interest groups and the media. Critics of private power projects, including the BC New Democratic Party, have declared victory, claiming the decision is a rejection of the BC government’s plan to rely on private power for future electricity supply. Climate activists have blasted the recommendation to increase reliance on the fossil fuel fired Burrard Thermal plant, calling it “a serious blow to the clean energy transition and climate leadership in British Columbia.” First Nations denounced the Commission for creating roadblocks to their ability to use green power projects to promote economic development.

A closer look at the details of the decision suggests quite a different interpretation, however. For the most part, the Commission is critical of the lack of evidence or analysis underlying BC Hydro’s plan. The decision is best viewed not as a challenge to government policy, but as a criticism of BC Hydro for not providing sufficient evidence that it was complying with government policy. The one exception to this conclusion is the refusal to endorse BC Hydro’s desire to reduce reliance on Burrard Thermal. That decision is harder to understand and seems more at odds with government policy.

Failure to adequately address self-sufficiency obligation

Arguably the most important part of the Commission’s ruling is that BC Hydro did not adequately address the self-sufficiency obligation described in law. All the other negative decisions can be linked to this core finding.

The self-sufficiency requirements arise from the BC Government’s 2007 Energy Plan, and are legally articulated in Special Direction 10 (SD 10) under the Utilities Commission Act. The policy requires that the province achieve energy and capacity self-sufficiency by 2016. In addition, the government also requires “insurance” by requiring BC Hydro to become capable of “exceeding, as soon as practicable but no later than 2026, the electricity supply obligations by at least 3,000 gigawatt hours per year and by the capacity required to integrate that energy in the most cost‐effective manner.”  BC Hydro’s LTAP did not address how this additional 3,000 GWhr/yr would be acquired, claiming that it was too early to plan for that. The Commission disagreed with what it referred to as BC Hydro’s “just in time” approach. It ruled that BC Hydro had not adequately addressed this requirement, and requested that BC Hydro focus on developing a phased in approach to meeting the requirement for self sufficiency with insurance in its next submission (p. 45). This is a clear case of the Commission applying government policy to BC Hydro’s LTAP and finding the utility’s rationale insufficient.

Inadequately supported demand-side measures plan

The 2007 Energy Plan requires that BC Hydro “acquire 50 per cent of BC Hydro’s incremental resource needs through conservation by 2020.” In its LTAP, BC Hydro proposed to go well beyond this target – it proposed to meet 72% of the increased demand through demand-side measures (DSM) (p. 74). But the Commission rejected the DSM plan because “it cannot determine whether BC Hydro’s DSM Plan complies with section 44.1 of the Act.” The relevant part of section 44.1 of the Utilities Commission Act states that the LTAP needs to contain ”a plan of how the public utility intends to reduce the demand… by taking cost‐effective demand‐side measures.”

The Commission was not satisfied with the level of analysis behind the DSM plan for two reasons. First, the Commission criticized BC Hydro for not having a plan for DSM after 2020, raising additional concerns about how the self-sufficiency requirement would be met. Second, the Commission criticized the way that BC Hydro assessed the cost-effectiveness of DSM. BC Hydro justified its choice to go as far as 72% by arguing that anything less would forego substantial cost savings. It justified the choice not to go beyond 72%, even though there would be cost savings over new supply sources, because it considers the deliverability of DSM at that level to be too uncertain to rely upon (p. 73). The Commission found this style of analysis insufficient. The Commission argues that to be consistent with the cost-effectiveness test in the Act, BC Hydro needs to compare the relative cost-effectiveness of DSM by calculating the unit energy costs of DSM programs on a program‐by-program basis, and then compare those to “supply‐side alternatives on an equivalent basis” (p. 85). Here again, the Commission is requiring more thorough analysis in order to make a determination about whether the LTAP is consistent with government policy.

Rejecting the proposal to reduce reliance on Burrard Thermal

BC Hydro uses the natural gas-fired Burrard Thermal plant only when needed to meet peak demand. The plant is old and expensive to run, and the air pollution impacts on the Lower Mainland of BC are significant. The LTAP proposed to continue to rely on the plant for 900 MW of dependable capacity, and to reduce its reliance on Burrard Thermal to 3,000 GWh/year of energy for planning purposes, less than half of the 6,100 GWh/yr it had relied on previously.

The Commission agreed with the plan to rely on 900 MW of capacity, but rejected BC Hydro’s proposal to reduce reliance on Burrard to 3,000 GWh/yr. Again, the Commission was very critical of the type of analysis BC Hydro presented:  “BC Hydro acknowledges that this conclusion was not derived from simple factual analysis and includes its professional judgment and careful consideration of context.” A big part of that professional judgment was an analysis of “social license” – BC Hydro argued that relying on the plant for more than the 3,000 GWh/yr would provoke so much public opposition that it would be unsustainable. The Commission rejected this argument, and recommended BC Hydro improve its “stakeholder engagement management” (p. 115). The Commission recommended BC Hydro plan for 5,000 GWh/yr, less than the 6,100 in the previous plan, but significantly more than the 3,000 proposed by BC Hydro.

The logic for this part of the Commission’s decision is more elusive than in the other areas in which it rejected BC Hydro’s proposals. However, it is consistent with the core finding that BC Hydro has not adequately provided for self-sufficiency (with insurance) as required by law, and that it might be premature to wind down Burrard Thermal as quickly as BC Hydro proposed. If that was the Commission’s rationale, it did not state it very clearly. This is also a case where the Commission decision seems to fly directly in the face of government policy. The 2007 BC Energy Plan, policy action 22, states the Government supports BC Hydro plans to phase out Burrard Thermal. The Commission maintains, and BC Hydro concurs (p. 105) that the language in this policy action is non-legislated and advisory, and lacks the force of law.

Refusal to endorse specific target for 2008 Clean Power Call

Given its forecast of future demand, its proposal for demand-side measures, and its assessment of existing and committed resources, BC Hydro argued there was a supply gap that needed to be addressed, and that it should do so in part by soliciting proposals for clean energy from private power producers. While there was some fluctuation in numbers throughout the process, BC Hydro’s formal request was that the Commission endorse a Clean Power Call target of 3,000 GWh/yr (p. 122). The Commission refuses to endorse any specific target for the Clean Power Call. It bases this decision on the fact that the other parts of the plan that provide the basis for the amount of new resources needed are so flawed — the failure to provide for self-sufficiency, the inadequate demonstration of cost-effectiveness of the DSM plan, and the lack of evidence for the reduction in Burrard Thermal – that it has no basis to decide what the amount of new resource should be.

While the Commission rejects a specific magnitude for the call for new power, its decision should not be read as a rejection of the government’s policy to rely on private power producers, whether for run of the river or other sources, for new electricity generation. The entire analysis by the Commission is done within the framework of the government’s 2007 Energy Plan, and the Commission makes clear that BC Hydro continues to have the authority to enter into energy purchase agreements with private power producers (p. 127).

Concluding Thoughts

As this analysis suggests, the Commission’s rejection of the LTAP is best viewed not as a challenge to government policy, but as a criticism of BC Hydro for not providing sufficient evidence that it was complying with government policy. In most cases, the logic of the Commission argument seems quite clear. In one important case, the rejection of BC Hydro’s proposal to reduce reliance on Burrard Thermal, the Commission’s logic is harder to follow. Indeed, it is surprising that the Commission was so harsh on BC Hydro’s reasoning in many areas, yet so weak in its own supporting analysis on such a critical issue before it.

It is possible that the Commission’s insistence of more rigorous analysis is merely a cloak for policy disagreements with the government. While I doubt this is the case, even if it is, the government has the opportunity and the means to clarify policy by issuing more specific direction to the Commission. Indeed, the government has already signaled that it has no intention of increasing reliance on the Burrard Thermal plant.

While the decision certainly creates short term confusion, it may have valuable benefits in the medium and long term. BC Hydro will be forced to provide more rigorous and transparent justification for its decisions – the Commission requires that a new LTAP be submitted by June 30, 2010 (p. 151).

In my view, one lesson of the decision, and the controversy over it, is the illustration of the limitations of using quasi-judicial proceedings to make public policy decisions so crucial to the province. Perhaps the BC government will take this opportunity to engage in a more open, public dialogue about BC’s energy future, an argument this blog has promoted several times before.

September 24, 2009 update by Lisa Jung:

Despite the BCUC decision on the 2008 LTAP it was ‘full steam ahead’ for the plan according to Energy Minister Blair Lekstrom, and that regardless of the decision, or any decision, “the BC government has no plans to increase the use of Burrard”. Lekstrom’s reaction to the Commission directives was that it was ‘surprising’ and increasing reliance on Burrard was ‘not in the cards’ for the government, which they would be making clear. And it did become clear that the government did not accept the BCUC decision, particularly on Burrard and its impact on the government’s plans for private power (see also The Province, The Globe and Mail). At the time, all that the government would divulge was that there are some parts of the decision that need to be clarified, to both the industry and the Commission.

In its 2009 Throne Speech the BC government clarified that the BCUC “will receive specific direction.”  This statement was directly followed in the speech by an emphasis on the importance of phasing out Burrard and the government’s green energy goals. In other words, Burrard will be phased out and the BCUC will have to comply with all parts of the Energy Plan, at least eventually.

This statement has created mixed reactions: those that represent IPP interests and environmentalists who support them have been reassured that they will have a place in BC’s future for new sources of clean and renewable electricity. However those that oppose new private power generation are disappointed to say the least. Groups like Western Canada Wilderness Committee (WCWC) are critical of the speech, arguing it is ‘green-washing’ and therefore misleading. The BC Citizens for Public Power criticized the throne speech for being a ‘flagrant disregard’ for the BCUC’s decision and that there will be economic hardships imposed for some British Columbians by adopting more expensive private power alternatives.

The tensions are still high and differences remain, but all of this raises more questions: whether the BC Liberal Government has violated the BCUC’s independence by acting after the fact, and how independence will be maintained in the future if the BCUC does not endorse all of which the government wants to do.

George Hoberg

Talk delivered to PowerUp Canada Green Economy Dialogue, April 7, 2009

Controversy over renewable energy in British Columbia has been swelling over the past year, particularly over “run of the river power” projects being developed by independent power producers. This conflict has been magnified by a complex, overlapping set of issues whose character and interrelations are poorly understood. My objective here is to attempt to contribute to a more constructive dialogue by untangling the nest of issues fueling controversy, and promote a focus on the most critical issues.

I come from the perspective of an academic political scientist and policy analyst, but one trying to make a contribution to real policy discourse. I teach a course in Sustainable Energy Policy and Governance jointly offered by the Department of Political Science and the Conservation Program in the Faculty of Forestry at UBC.

I’m pretty sure that at an abstract level, all stakeholders could agree on an overarching objective:  Acquiring the energy we need at the least economic, social, and environmental cost. But as I describe below, this grand objective obscures a number of crucial disagreements about a number of concepts embedded in this statement, in large part because of different worldviews on a complex set of issues.

To start with, who “we” is, is surprisingly complicated. What “we need “ is contested and value laden. And we have very conflicting views of economic, social, and environmental costs.

In my mind, there are eight related issues underlying this controversy.

1.       Conflicting interests.  There are competing economic and political interests at stake in the dispute. Some of these clashes of interests are economic, such as profits from private energy vs. the loss union jobs. Others involve recreational interests, such as kayakers’ access to free flowing rivers, or even non-material interests, such a strong affinity with wild, free flowing rivers.

2.       How much energy do we need? Future energy needs are uncertain because of what Yogi Berra noted years ago:  “It’s tough to make predictions, especially about the future.” Demand forecasting and the efficacy of demand side management (DSM) are both highly complex. But it’s more than just the inherent uncertainties of forecasting. This issue becomes so hotly contested because it also embodies value differences about what kinds of lives we should be living, i.e., whether we should be enabling “high impact” lifestyles or promoting greater frugality. What seems surprisingly absent from this part of the debate is a collective mobilization to reduce electricity use. If only we could find a way to channel a fraction of the cognitive and political energy spent on the IPP controversy to unleashing innovative demand side management initiatives. BC Hydro has become the province’s visionary voice on DSM. We need a stronger non-governmental champion of demand-side management

3.       Self sufficiency or clean energy exporter? One of the primary drivers behind future energy demand is what our provincial objective is. The BC Energy Plan commits us to provincial self-sufficiency with a reserve. But we also have the potential to be a clean energy export economy for either provincial income or the displacement of fossil fuels use in other jurisdictions. This issue becomes highly controversial because it opens the question of what is the appropriate jurisdictional scale to use as the unit of analysis. Is it the province, or some larger regional entity representing western North America? When this question gets opened, raw value differences enter about the relative merits of localism, nationalism, and globalism.

4.       Private vs. public. Perhaps the most divisive issue in the green energy controversy in BC has been the appropriate role of government and private firms in the various functions of delivering electricity. The Campbell government’s decision in 2002 to rely on private independent power producers for new sources of electricity has provoked a vehement backlash by a coalition of environmental  and labour groups.

5.       Community jurisdiction. The controversy over Ashlu Creek and the provincial government’s decision with Bill 30 to remove the ability of local government to block new power projects, has certainly fueled the controversy. In addition to removing a venue for place-based groups to be represented in the process, this aspect of the controversy has tapped into strong ideological differences on the appropriate scale of governance for resource decision making. This issue is certainly not distinct to BC – the conflict between local and higher level governments over the siting of new energy facilities is part of the emerging new politics of renewable energy across this country and throughout the developed world.

6.       Price. Part of the critique of independent power projects in BC is that they are too expensive and will lead to unnecessarily high electricity rate. But all new sources of power are going to be more expensive. We need to adopt an ethic that, because of the need to reflect their true environmental costs, energy prices will need to go up, and go up significantly. This fact creates a profound tension with the incentives of reelection-minded politicians to avoid imposing costs on potential supporters.

7.       Resource and size. What energy resource technology should we be using? Should we be building big facilities, small facilities, or both? It is noteworthy that despite its obvious centrality to sustainable energy decision making, this issue has not been part of the current controversy.

8.       Location and siting process. Assuming we need new sources of energy supply, where should new facilities go, and how do we decide? At present, the province lacks a coordinated, integrated process of energy facility decision making. The government’s decision to rely on IPPs for new sources of power aggravates this problem. Like the previous issue of resource and size, despite its centrality to sustainable energy decision making, this issue has not been an important part of the political controversy.

In my view, the dynamics of our green energy policy controversy have generated a tremendous amount of heat, but not enough light to allow us to focus on the most important issues.

We need to be respectful that there are a variety of interests at stake, but also mindful of how those interests might motivate different arguments. But we also need to rise above the cacophony of special interest arguments in the search of a broader public interest.

We need to project how much energy we need after aggressive, cost-effect conservation measures are adopted, and in order to do so we need a vision for the provincial electricity sector. The issue of public vs. private has dominated the dispute, yet it is arguably the least important. Private business can be compatible with societal objectives, given the right governance framework.

We need to find a governance framework that effectively represents place-based interests without having them unjustifiably veto projects that are in the provincial interest.

We need to get the price right, but in a way that acknowledge the need for energy prices to rise, and insulates progressive politicians from electoral backlash.

We’ve been paying so much attention to ideologically charged issues that we aren’t even thinking systematically about the most important ingredients to a sustainable energy policy:

·         After a concerted effort at demand side management, what are our energy needs?

·         What kinds of new supply should we have?

·         What governance framework do we need to effectively site and regulate new facilities?

George Hoberg

As part of a course on Sustainable Energy Policy and Governance, students participate in a simulated multistakeholder consultation about topical policy issues. Half of this year’s students simulated a debate about how to fill the forecasted electricity supply gap in British Columbia.

The scenario was presented as follows. The BC government forecasts a substantial future shortfall in electricity supply. After a series of site-by-site conflicts, Premier Campbell announced a new multistakeholder planning process to establish a province-wide strategy for developing new sources of electricity.

The learning objectives of this exercise are to develop practical skills — teamwork, research, and communication — necessary for constructive participation in policy development, while simultaneously developing a deep understanding of one crucial component of energy policy. While I feel confident that these simulations perform this educational purpose, I often wonder whether they might provide insights into real-world policy dynamics.  I’m reporting on the process and results here in the event that others inside or outside the ivory tower might benefit from our experience. In this case, it felt a bit like we are acting like a focus group for the province.

NOTE:  None of the statements in this blog refer to any actual positions or statements of real people or real groups, unless explicitly referenced. The views below are only those of UBC students pretending to be actors in the BC electricity supply controversy.

Participating students were randomly divided into nine groups reflecting different stakeholders involved in the process: BC Ministry of Energy, Mines, and Petroleum Resources; BC Ministry of Environment; Department of Fisheries and Oceans; BC Hydro; Independent Power Producers Associations; Joint Industry Electricity Steering Committee; BC Sustainable Energy Association; Save our Rivers Society; and the First Nations Summit. The groups submit 2000 word briefs designed to articulate the position of the group. We then meet for a 4 hour session to try to develop a consensus. I act as facilitator of the process.

The session began with each group giving a 5 minute presentation outlining their initial position. The student groups very accurately reflected the positions of their real-world counterparts. The IPPBC spoke about the merits of green energy and the benefits of having the private sector take the lead in proposing, building, and operating new sources of electricity generation. Representing large industrial consumers, the Joint Industry Electricity Steering Committee (JIESC) focused on the financial risks of building new sources of power, the relative merits of demand-side management, and the critical need to maintain low electricity prices. The First Nations Summit spoke to the importance of having any new facilities respect the emerging New Relationship between the Crown and First Nations. The BC Ministry of Energy, Mines and Petroleum resources lauded the merits of the government Energy Plan. BC Hydro outlined its plans as articulated in the 2008 Long Term Acquisition Plan currently under review at the BC Utilities Commission. The BC Ministry of Environment expressed some concerns about strengthening the environmental assessment process being applied to independent power projects. The federal Department of Fisheries and Oceans expressed its concerns about protecting fish habitat and stressed the need to strengthen the environmental assessment process. The BC Sustainable Energy Association delegate (arriving late due to a cycling incident) emphasized the importance of conservation first, and the desirability of pricing reform to promote conservation. The representative from Save of Rivers Society made an impassioned plea to cancel the BC Energy Plan and its privatization of new sources of generation, to avoid the need for new dams by taking advantage of existing sources of electricity, and restore a strong community voice.

After the initial presentations, a heated debate erupted between representatives of the IPPBC and Save our Rivers Society, and the facilitator had a difficult time steering discussion in a productive manner towards the issue at hand and creating the space for other delegates to make their case. Eventually, the group was able to agree on a list of eleven issues at dispute.

·         Should new sources be public or private?

·         Should the price of electricity be increased to encourage conservation and renewable?

·         Should IPPs under 50 MW be exempted from BC Environmental Assessment processs?

·         Should the Canadian Entitlement to downstream benefits of the Columbia River Treaty be taken as electricity rather than revenue?

·         Should the assessment of cumulative effects of projects be increased?

·         What types of new sources of electrical power should be built?

·         What role should First Nations play?

·         What role should communities play?

·         Should self sufficiency on an annual basis be the provincial objective?

·         What is the actual size of the BC electricity supply gap?

·         Should the province continue to rely on the gas-fired Burrard Thermal plant?

With such a daunting list, the facilitator sought to identify an area of potential commonality first. We began to debate issues around the environmental assessment process. Environmental groups, DFO, and the BC Ministry of Environment were all strongly committed to eliminating the 50 MW threshold for reviewingprojects in Section 10 of the Reviewable Projects Regulation. The representative of the IPPBC was strongly opposed to the proposed change, claiming that IPP projects already had to get 50 permits, licenses, approvals and reviews from over a dozen provincial and federal agencies. A compromise was struck on this issue that received unanimous approval: 

The <50 MW exemption was eliminated, and replaced by a screening process like that existing under the Canadian Environmental Assessment Act that provided for a preliminary review of all projects, and allowed those with no significant environmental impact to be exempted from further assessment. In exchange for agreeing to this change, government officials committed to streamlining the overall approval to reduce its complexity.

Concerned about losing focus on the question of the day, the facilitator (assisted by TA Tom Berkhout) attempted to directly tackle filling in the forecasted supply gap. We put a simple excel spreadsheet up on the screen, using figures from the mammoth table on p. 6-54 of the most recent BC Hydro LTAP. We agreed to use 2026 as the end date. Existing and committed supply for 2026 is projected to be 56,000 GWh/year. Depending on whether you use the mid or high-range demand forecast, the forecasted supply gap is between 21,700 and 27,700 GWh/yr.

The group then went to work nominating candidates to fill the gap. BC Hydro suggested a demand-side management figure of 13,800 GWh/yr, a somewhat conservative figure given the utility’s current thinking, but the figure was not challenged by the other groups. Once DSM is included, the projected gap was reduced to between 6,300 and 12,300 GWh/yr.

Everyone was in favour of BC Hydro’s Resource Smart upgrades to existing Revelstoke and Mica dams, yielding a modest 210 GWh/yr. The Save our Rivers Society urged the inclusion of existing large sources of electrical power in the province or to which the province has access:  Rio Tinto Alcan’s surplus power from its Kitimat operation that is sold to BC Hydro, the power exported by the Teck Cominco smelter operation in Trail, and the Canadian Entitlement to the downstream benefits of the Columbia River Treaty. Neither Alcan nor Teck Cominco were represented by groups in the room, and no one objected to including them in the proposal. However, the Ministry of Energy, Mines, and Petroleum Resources objected to including the Canadian Entitlement, noting that the provincial budget was reliant on those revenues. After discussion, the Ministry softened its position and allowed the CE to be included. Plugging these numbers (7110 GWh/hr) into the spreadsheet, the group was elated to see that we had already closed the gap for the mid-range demand forecast, and were within 5200 GWh/hr for the high demand forecast.

But things got more heated again when we began to discuss next steps. BC Hydro made an eloquent plea for the Site C dam on the Peace River, which would add an additional 4600 GWh/yr. The delegate from the First Nations Summit raised concerns about Site C in light of BC Hydro’s history with First Nations, and the representatives from the BC government worked hard to convince the First Nations group that the project would be pursued in the spirit of the province’s New Relationship through some form of shared management. The representative from IPPBC was strongly opposed, arguing that the project was uneconomical compared to independent power projects. IPPBC put forward a proposal to include 3000 GWh/yr of IPP power, as in BC Hydro’s Clean Power Call. Before other delegates even got a chance to consider the proposal, the representative from Save our Rivers Society jumped in to oppose IPPBC’s proposal, arguing that it was wrong to be damming BC’s rivers for private profit. We got stuck in finding the next increment, with IPPBC strongly opposing Site C unless the Clean Power Call was included as well, and Save our Rivers Society strongly opposing the 3000 GWh/yr call for private power.

With time running out, however, the Save our Rivers Society offered a concession. Stressing the need to keep as much of BC’s electricity supply in public hands as possible, he expressed a willingness to allow the IPPBC proposal to go forward as long as Site C was also built by BC Hydro. Everyone agreed. The gap was closed, with virtually enough to spare to phase out the natural gas fired Burrard Thermal unit (3200 GWh/yr), and make BC’s electricity production virtually carbon-free. The final numbers are represented in the table below.

After the formal meeting adjourned, there was a lot of discussion about whether the concession by Save our Rivers Society could happen in real life, or whether it was just an effort by a thirsty student to allow the group to come to an agreement. Most felt it was unrealistic; that there was little evidence of willingness to compromise in the group’s current positions and rhetoric. A minority felt it was not necessarily unrealistic. While more rivers would be put at risk, the solution of repatriating the Canadian Entitlement and pursuing a new government project at Site C allowed the group’s interests in maximizing public control over electrical power to be satisfied in part.

While this class exercise is obviously a terribly simplified version of reality, it did leave me somewhat more optimistic about the province’s ability to address the looming electricity supply gap. It also strengthened my view that BC Hydro and the BC government should find better ways to involve stakeholders and the public in a deliberative process on solutions to addressing BC’s electricity needs. While some of these questions are addressed in BC Utility Commission proceedings, the overly formal, quasi-judicial nature of those proceedings is not conducive to building public understanding and legitimacy about electricity supply choices and consequences.

This exercise, and the one earlier this week on oil sands, also greatly strengthened my impression of the creativity of university students and the value of these sorts of simulations in teaching public policy.

By George Hoberg and Christopher Mallon
March 17, 2009

PDF here for printing and better graphics

The conflict

Electricity policy in British Columbia has become increasingly controversial over the past several years. The conflict has focused on new hydroelectricity projects being developed by private sector “independent power producers” (IPPs). Environmentalists and unions have been highly critical of the Campbell government’s decision to rely on IPPs for new sources of electricity. The critics have raised concerns about losing public control over water resources as well as the cost-effectiveness and environmental consequences of multiple, small, privately operated hydro facilities. IPP advocates emphasize the environmental advantages of hydropower compared to other, especially fossil fuel sources of energy, and the complex review and approval process required.

Part of the conflict over IPPs stems from differences about how much new electrical power we need in BC. IPP advocates point to economic and population growth, and BC Hydro forecasts electricity demand will increase by 32% over the next 20 years (from 59,000 GWh/yr to 78,000 GWh/yr).  They also note that BC Hydro has become a net importer of electricity over the past decade. IPP critics question the need for so much new power. They emphasize the potential for conservation, but also claim that BC has been a net exporter of electricity.

Whether the province is a net importer or exporter of electricity has thus become an important part of the dispute. For example, Western Canada Wilderness Committee’s Gwen Barlee claims. “According to B.C. Stats, the province has been a net exporter of electricity for seven out of the last 11 years.” Steve Davis, President of the Independent Power Producers Association of BC, claims “Prior to fiscal 2008, BC Hydro was a net importer of electricity for seven consecutive years.” At first glance, it is hard to imagine that both claims can be true, and it seems counterproductive to have a dispute about what would seem to be a question easily resolved by examining official statistics.

Our objective

We’ve tried to address this factual issue by digging into the sources and numbers. The situation is indeed complex, but not so complex that it needs to be mystifying or an unresolvable conflict. We believe a somewhat more nuanced approach produces a clear picture of the situation. We’ve provided a detailed analysis below in the hopes that it will help resolve some of the factual conflicts and make way for a more productive dialogue on the real issues at dispute in the controversy over private power in BC.

Analytical challenges

There are several confounding factors which contribute to this difficulty, including having several different power producing entities in British Columbia, an international agreement that includes power transmission, the fact that BC imports and exports power for profit, and multiple sources of data. Despite these confounding factors, Statistics Canada has collected data on BC’s electricity generation and trade for over three decades, and some clear patterns emerge from this data.

Context Fact #1:  BC Hydro electricity trade is not the same thing as BC electricity trade. BC Hydro is not the only source of generation in the province – Fortis BC operates in the Kootenays, and large industrial generators also provide power to the grid, most notably Alcan in Kitimat, and Teck Cominco in Trail. Last year, the industrial producers contributed 20% of total BC electricity generation – the figure has fluctuated only slightly between 19 and 22% over the past 5 years. Despite how it dominates our thinking about electricity in BC, BC Hydro only generates less than 80% of the province’s electricity (we were unable to find figures separating out BC Hydro from other BC utilities). This critical fact allows the apparently competing statements by Barlee and Davis above to both be correct. Barlee is correct because BC Stats uses Statistics Canada and National Energy Board figures which include all sources of generation (see below). Steve Davis is correct because he’s only referring to BC Hydro (that data is shown at the bottom of this post).

 Context Fact #2:  Through the Columbia River Treaty, BC is entitled to power generated in the US — this is the so-called “Canadian entitlement to downstream benefits.” BC agreed to build dams on the Canadian portion of the Columbia to help the US with flood control, and our dams also increase the amount of power the US can get from their dams. In exchange, we received an entitlement of about 1200 MW of power, compared to BC Hydro’s total capacity of about 11,280 MW. While the US officially delivers this power to BC, we don’t take it as power to be used in the province. Instead, Powerex, the BC Hydro subsidiary that handles cross-border trades, sells it in the US market, and BC gets revenue without ever importing the power (The most recent budget (p. 142) reports this amount as $255 million for fiscal year 08/09). IPP critics argue that the so-called CE – the Canadian entitlement – should be considered part of domestic power resource. If we did, the net trade balance would look more favourable.

Context Fact #3:  BC Hydro does a lot of electricity trading to take advantage of the market to raise revenues, not to address changing power needs to BC customers. As a result, the trades flows in the Statistics Canada data are higher than they “need to be” to serve BC power customers. Unfortunately, it is hard to separate out these flows designed to take advantage of fluctuating prices from those designed to address actual power needs. However, these revenue-oriented exports and imports are likely to balance each other out, so while they may inflate the magnitude of total trade flows, they shouldn’t affect the net flows significantly.

Context Fact #4. There are multiple sources of data. BC Hydro has its own data, but it does not address imports and exports outside the BC Hydro system. The National Energy Board reports monthly statistics for BC, but they only measure flows across the Canada-US border, not interprovincial flows. Statistics Canada data reports trading from all BC entities, and includes international trade from the NEB as well as interprovincial trading. The basis for the Statistics Canada data is provided here. These are complex issues, and if you disagree with our interpretation, please comment below or email.

What the data say

1.       Historically, BC has been a net exporter of electricity.  As Figure 1 below shows, in the past 32 years, there have only been five years in which BC has imported more power than it has exported. One thing apparent from the long-term data is a significant amount of fluctuation in imports and exports. These fluctuations result from changing environmental conditions that affect supply and demand, such as the amount of precipitation filling BC reservoirs and weather impacts on demand for heating and cooling.

 2.       BC’s trade surplus in electricity is declining, and over the past five years a small trade deficit has emerged.  BC was in a deficit 4 of the last 10 years. Three of the past 5 years have been deficit years. Over the past 5 years (2004-08), BC imports exceeded exports by 4,807 GWh, 1.5% of the 327,271 GWh generated in BC over that 5 year period. Figure 2 shows the electricity trade balance of the last 10 years. Figure 3 puts these trade flows in perspective of total BC generation.

3.       The Canadian Entitlement to the downstream benefits of the Columbia River Treaty is not included in current trade statistics. If it were included as a BC generation resource, BC would have access to 1,200 MW of capacity. Table 1 compares that figure to other BC projects. Essentially, it is somewhat larger than one very large new dam project.

The CE would provide an additional 4,300 GWh/year of electrical energy to BC. If we had been using that energy, it would have eliminated the trade deficit for all put one of the past 5 years. Pooling the past 5 years together, if we’d used the CE it would have turned a 5 year deficit of 1.5% into a 5 year surplus of 5.1%. That compares to BC Hydro’s forecasted increase in demand of 32% over 20 years, or a 16% increase in electricity generation if the province meets the BC government requirements that half that increase in demand be met with conservation. BC Hydro’s current planning assumes even higher potential for conservation – they believe 72% of future demand growth can be offset through conservation, meaning that demand could be met with only a 9% increase in new sources of electricity. Including the downstream benefits of the Columbia River Treaty doesn’t eliminate the forecasted gap in BC electricity supply, but it does narrow it.

Whether or not BC should take the Canadian entitlement as power is a complex policy question that should consider, among other things, that at present that power is currently displacing fossil and nuclear sources of generation in the US. Our purpose here is merely to put the magnitude of the CE in perspective.

Some other notable patterns in the data

The following two figures show the sources of BC import and the destination of BC exports. They reveal that trade across the 49^th parallel is far more important than trade across the Rocky Mountains. We also include a table of BC Hydro trading statistics for the record.

By Greg Gowe and George Hoberg, Originally published in the Vancouver Sun February 13, 2009

The fundamental public policy problem associated with clean energy development in British Columbia is the lack of an integrated provincial or regional planning process for this new electricity supply.

This glaring gap in energy governance is leading to bitter “river by river” conflicts over each proposed “run-of-river” hydroelectric project.

The public outcry reached its zenith last year over a proposal to install run-of-river projects on eight tributaries of the Upper Pitt River, with the associated transmission lines to snake through Pinecone Burke Provincial Park. The project was derailed, at least temporarily, when Environment Minister Barry Penner refused to sign off on the needed adjustment to the park’s boundaries.

Vociferous opposition to poorly planned wind projects, which are now being developed, and ocean projects, which will soon be developed, will surely follow.

This lack of energy planning is rem-iniscent of B.C.’s approach to forest land use planning in the 1980s, where bitter valley-by-valley conflicts were waged in what came to be known as the “war in the woods.” As many will recall, it was not until the province initiated an integrated land use planning process in the 1990s, that calm was restored in our forests.

Until now, this gap in energy governance has been overshadowed by other controversies surrounding the development of renewable energy in B.C. The most notable of these is the vocal opposition to the government’s policy decision to rely solely on private “independent power projects” (IPPs) to harness B.C.’s rivers, ocean and wind resources.

Other IPP opponents have called into question the amount of new generating capacity B.C. actually needs, pointing to ways we could limit the projected increase in demand, or cost-effectively import power from neighboring jurisdictions. Most recently, BC Hydro has been lambasted for its flip-flop (and flip again) on the amount of new electricity it intends to purchase from IPPs under the current “Clean Power Call.”

While these issues are all worthy of public debate, they have diverted attention from the poorly planned approach that B.C. is taking to energy development. Embedded in the project-by-project approach are two significant shortcomings: 1) unnecessary environmental degradation; and 2) unnecessary roadblocks to the development of a robust clean energy economy in B.C., which is needed given the predicted consequences of climate change.

While there are existing natural resource planning and assessment policies and programs, they do not offer a solution when it comes to energy development. B.C.’s Strategic Land and Resource Plans were initiated in the 1990s primarily to quell forest use conflicts, and generally do not address energy issues. Furthermore, the provincial government has shown little appetite to reopen the plans, which were completed after years of intense negotiations with stakeholders.

Many new IPP projects are subject to federal and provincial environmental assessment processes. However, these processes are by definition site specific, and so do not adequately address the cumulative effects of multiple projects in a given area, nor provide an integrated planning perspective. BC Hydro is the sole purchaser of electricity produced by IPPs. But it is seemingly reluctant or unable to influence — either through its long-term power acquisition planning process or through the criteria it develops to assess which IPP projects will be awarded supply contracts — where generation projects get built.

Embracing the axiom “it’s better late than never,” the provincial government has, however, recently announced a new integrated electricity planning initiative that could inch this aspect of the IPP debate forward in a constructive manner. Specifically, it has ordered the province’s energy regulator, the B.C. Utilities Commission (BCUC), to conduct an “inquiry related to British Columbia’s electricity transmission infrastructure and capacity needs for the next 30 years.” The inquiry process must commence by March 31 and the BCUC has been told to invite and consider submissions from a broad range of stakeholders. While the stated focus of this initiative is on power transmission infrastructure and capacity, not power generation, the inquiry’s terms of reference appear broad enough to allow for an in depth assessment of the type of IPPs that should be built in B.C., and in what regions.

If this is the case, and if enough stakeholders participate, the inquiry could also be the start of a “wider conversation” that many experts have suggested that B.C. needs to determine what type of energy development we want, and what economic, environmental and lifestyle tradeoffs we are prepared to make to have that energy.

Given the increasing conflict in B.C. over IPPs, the importance of ensuring the province has a sufficient electricity supply, and the environmental consequences of any new electricity development, we are calling on the government to adopt an integrated provincial or regional planning process for new electricity supply.

The status quo is not good enough.

Greg Gowe is staff lawyer with West Coast Environmental Law; George Hoberg is a professor in the faculty of forestry at the University of British Columbia.

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