The “Environmental Impact Statement Executive Summary” on Site C released this past week indicates the price that we British Columbians will be paying per Megawatt-hour in 2013 dollars coming from the Site C project. It is identified at $110/ Mwh. Keep in mind that the present spot market electricity price is $37.00/Mwh. We would be in serious trouble given that BC Hydro’s Site C customer price is almost 3X higher than what the market place is willing to pay.
The other document released simultaneously last week was the “Business Case Summary” for Site C with a conflicting Mwh price of $95.00/Mwh in 2011 dollars. This $95 unit price, according to Mr. Dave Conway would reflect the “low operational cost” of the Site C project. Under this Unit price , the Operating Cost was listed at a mere $1.50 of the $95.00. However, the Capital Cost portion of the $95.00 is $83.25, a whopping 88% of the actual total costs incurred. Clearly, the major cost on our electricity bill will come from this capital cost on $7.9 Billion for the Site C project. The Operational cost is clearly negligible, but it wouldn’t matter anyway when factored in with the total bill. Why is there such a lack of transparency and omission of specifics on the part of BC Hydro on its true pricing scheme?
Mr. Dave Conway, repeatedly claims that the Site C option will have “the lowest operational costs” when compared to other electricity proposals, especially natural gas. Energy Minister Rich Coleman, reading from the same hymnal as Mr. Conway stated in a letter dated Jan 13/13 that (Site C),”at a cost per megawatt ranging from $87-95, would be among the most cost effective resource options”.
When it comes to the “most cost effective resource options” no one could argue the fact that at $7.9 Billion capital cost for Site C versus the natural gas Shepard facility is a bargain at $1.3 Billion. For the same Megawatt outcome, the Site C project will be a minimum of six times(6X) more expensive to construct. Shepard will produce more energy than Site C with a mere 60 acre footprint.
The Shepard will begin selling electricity to its Calgary customers starting in 2015 at the rate of 8 cents/kWh (or $80.00/Mwh,) on a 5 year contract. It can manage this rate in large part because their capital cost will be $1.3 Billion, or 1/6 the cost of Site C. Proportionately, their overall “operational cost” balance sheet will be on the order of 1/6 that of Site C. Even with the additional natural gas price thrown in, the Shepard is capable of producing electricity for $30.00/Mwh. At current spot market prices of $37.00, they are clearly able to make a reasonable, healthy profit return on their investment.
One final related thought is the argument Minister Coleman makes about the “instability” of natural gas pricing over time. His claim is that British Columbians cannot rely on volatile natural gas prices. There is however, a concept of a “Royalty-in-Kind” program which is also central to the natural gas model. Royalty-in-Kind is being used in other provinces with resources, but NOT in BC. The idea is that the province would take a cut in the actual resource, like natural gas, in lieu of money (called a Royalty). This percentage cut would act as a “hedge” against inflationary future pricing on gas and could be used in a Shepard type facility. This would alleviate any fluctuations in long term gas prices, assuring ratepayers a secure pricing regime. A question to ask our government about the use of Royalty-in-kind is: Why not?
Our present day Hydro dams have flooded the remnants of dinosaur bones of long ago, along with tens of thousands of hectares of valuable land resources. Apparently, we still have dinosaurs walking the halls of BC Hydro’s project planning department, promoting the loss of an additional 25,000 acres of precious land through the Site C proposal. Isn’t it time to put these archaic ideas to rest once and for all? From a financial and environmental point of view, Site C is truly wasteful and unaffordable.