By Vaughn Palmer, Vancouver Sun, June 5, 2012
Two years after the B.C. Liberals pushed BC Hydro to develop clean energy for export, the drive is all but dead, a victim of the changing economics of the North American electricity market.
"BC Hydro's analysis shows that current market conditions are not conducive to selling clean electricity into export markets," says the latest iteration of the utility's integrated resource plan, released last week for public comment.
"There are no suitable opportunities for the export of electricity from clean or renewable B.C. resources for the foreseeable future," continues the chapter in the plan dealing with electricity exports. "Consequently, BC Hydro does not perceive, at this time, any value in continuing to investigate and develop potential market opportunities for export sales in excess of self-sufficiency requirements."
All this by way of a legislated requirement for Hydro to report periodically on the progress made in meeting one objective in the Clean Energy Act of 2010, namely to make B.C. "a net exporter of electricity from clean or renewable resources."
The idea, touted by then-premier Gordon Campbell, was to go beyond the long-standing practice of Hydro's selling over-night and seasonal surpluses of electricity at short-term prices in the spot market.
Instead, the government-owned corporation would develop power strictly for the long export market, mainly in the United States, taking advantage of shortages elsewhere as well as the emerging demand for clean power, generated from renewable sources such as wind and water.
"If we act with clear vision and concerted effort now, in 2030, people will look back to this decade as we look back to the 1960s today," declared Campbell, inviting comparison to the visionary era of premier W.A.C. Bennett.
But the Campbell vision was not long in running afoul of economic and regulatory reality. Indeed, as the integrated resource plan recounts, the first serious initiative of the power-for-export drive proved to be a complete non-starter.
The idea was to construct a major transmission line, the Canada-Northwest-California or CNC line, from the existing Selkirk interchange near Castlegar, via the delightfully named Devils Gap near Spokane, to Northern California, with a view to supplying clean B.C. power to San Francisco and environs.
The line was guesstimated to cost as much as $7 billion and take up to 10 years to complete. In order to "anchor" the project, Hydro also entered into preliminary talks with Pacific Gas and Electric to supply 4,000 GWh a year of renewable energy from B.C. But Bonneville Power, the major utility in Washington and Oregon, refused to participate in the transmission line. PG&E concluded it could get the power it needed closer to home. And the whole project has now been abandoned, "for the foreseeable future."
What went wrong? Everything, it seems.
"Made-in-B.C. power faces some relative disadvantages, including longer distances to market and challenging terrain," Hydro concedes. "Also, the U.S. tax credits for renewable energy, decreased interest in advancing greenhouse gas emissions regulations, and low natural gas prices create an unfavourable environment for made-in-B.C. power."
Those tax credits, covering everything from capital expenditure, to a straight subsidy on power, to accelerated depreciation, give U.S. producers of renewable power a 25-per-cent advantage over their Canadian counterparts, never mind the added distance involved in delivering the electrons to the (mainly) California market.
Plus there's the clash of cultures over what is and isn't renewable clean power. Californians, because of the ugly history of dam construction in the U.S. (well chronicled in Mark Reisner's classic Cadillac Desert), are loath to consider hydro-electric power green.
"California remains by far the largest market for renew-able resources," as the Hydro report notes. "However, California utilities are constrained in procuring certain B.C.-based resources such as run-of-river hydro which are not recognized as 'renewable.'" Not helping the prospects on the economic side is the glut of natural gas, brought on by the revolution in production from shale deposits. Gas-fired generation is increasingly the preferred option - cheap, efficient and (compared with coal and oil) clean - in jurisdictions south of the border.
Then there's the growing preference in U.S. states for home-grown solutions to energy needs and the near-impossibility of contemplating any kind of long-term agreement with California, given that state's near- permanent political crisis.
What's left? Not much.
The resource plan calls for Hydro to continue to exploit the market for short-term sales, which have brought in $1.7 billion via its Powerex subsidiary over the past decade.
It is also lobbying the California Energy Commission to reconsider the view of run-of-river hydro as "non-renewable." Otherwise Hydro intends to do little more than keep a watching brief on the prospects of building power for export. "Current market conditions do not warrant expenditures for export, and no expenditures are planned as part of the 10-year action plan." And given the volatility of energy markets, 10 years is an eternity.
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