Another energy milestone, a quiet revolution of sorts, happened recently and it has major implications for all us across North America as consumers of electricity.
On March 11, the State of California (one of BC Hydro’s largest customers in the past) met nearly half of its electricity demands through solar energy alone. The other half of California’s electricity typically comes from the use of natural gas.
All of this might simply be no more than an interesting fact for us here in B.C., considering that we rely primarily on the use of hydroelectric power. So, what exactly is the connection between us and California?
Turns out that California’s solar power electricity production will have severe financial impacts for us here in B.C. Karen Graham of Digital Journal reported on April 12 that this new supply of power has driven the wholesale prices of electricity to near zero or into the negative values in recent weeks. This happened between the high time hours of 8 a.m. to 2 p.m. Consider this: just two short years ago during March, wholesale electricity prices were ranging from $14/megawatt hour to about $45/megawatt hour. This might not seem like an issue, considering the success of solar power is in a relatively small pocket such as California. Yet, BC Hydro, and by implication the ratepayers, need to be very concerned. Here’s why.
This recent milestone of using solar energy in conjunction with new technology investments, governments and energy companies are now having to rethink the way we manage and charge for electricity across North America.
Consider that California is the second-largest producer and consumer of electricity in the United States today. Only Texas has a higher demand. Just 15 years ago, California barely used any power produced by the sun. The recent mix of renewable energy sources such as solar is now beginning to shift a transition into a new arena. This is a game changer for traditional sources of electricity such as hydroelectric power. Wholesale pricing regimes of electricity have suddenly become more fluid and unpredictable. There is major potential for further decreases both in demand and in wholesale pricing.
BC Hydro is connected to the Western Interconnection grid system, which includes California. While California, and other states such as Texas, continues to develop their renewables, British Columbia has decided to put $8.8 billion into a very expensive, old, and last century technology such as dam building. If the intention is to make this dam a money maker, or by implication to pay for itself, the odds have been severely diminished with this latest California solar game changer. By BC Hydro’s own figures, the cost of producing electricity from Site C will come in between $83/MWh to $110/MWh. The abundance of more and more solar coming on line, will mean that electricity grid managers will have an additional task on their hands. They will be dealing with an ever-increasing abundance of electricity at continually dropping wholesale prices. Site C simply can’t compete in pricing.
Does this translate to cheap electricity for you and me? The simple answer is no. The retail price, the one that you pay on your bill, will continue to rise due to the massive debt load presently being carried by BC Hydro. By Hydro’s own numbers, that deferred and contractual debt load is now a staggering $76 billion and climbing. The figure does not include Site C. This government has committed us to long-term continuous price increases. At the same time, there is an ever increasing over abundance of electricity on the grid. Does this even make sense? Demand goes down, prices go up?
By 2024, when the BC Liberals claim the Site C project will be producing its first megawatt of power, the government of the day will need to deal with an even more compelling problem: how to sell electricity on the market, when wholesale prices may at times be near zero.
It is not a question of if but rather when we will see direct fallout here in B.C. from the new and burgeoning solar technology being used south of the border.
Perhaps Madam Clark was right when she stated that her party was “busting out into a bright new future.” She may have misunderstood the part about the “bright” coming from new technologies using the sun instead of last century’s dams.
Mike Kroecher is a long time retired resident of the Peace, expressing his deep roots in the land through his artistic bent. Rick Koechl is a recently retired (almost as long a resident) teacher of the Peace with an enthusiasm for politics and energy.