Werner's Blog — Opinion, Analysis, Commentary
Site C Dam goes ahead

Yesterday, premier Christy Clark and energy minister Bill Bennett gave the go-ahead for the construction of the Site C Dam, at an estimated cost of $8.8 billion. It is not a surprising decision given that Site C Dam has been in the works since the 1950s. However, important questions remain about the project: Will it indeed be the least costly source of energy for the province? Will it have a lesser or greater environmental impact than alternatives? Why were alternatives dismissed prematurely? What are the pitfalls of the project as it moves forward? How can the project be made better if it goes ahead as planned? I will try to give some tentative answers, adding to my previous discussion of Clean energy and the Site C Dam.

Will Site C be the least costly form of generating electricity for British Columbia?

This is quite literally a billion dollar question. The government in Victoria has increased its budget for the project already from $7.9 billion to $8.8 billion, as we can fully expect court challenges that may delay the project, and additional funds may be needed to accommodate First Nations through benefit sharing agreements.

The business model for Site C Dam could rest on three pillars: (1) increased electricity demand due to population growth; (2) demand for electricity to power LNG plants; or (3) exports of clean low-cost electricity to Alberta as they still rely too heavily on coal plants.

The provincial government only stresses the first business case. Arguably, a sequence of smaller project (wind, geothermal) could deliver the increase in power that we need at a cheaper cost and along with actual growth rather than as one large chunk of capacity. There are some economies of scale in having one large project, namely transmission costs, but it is not clear that these outweigh the cost advantage from smaller projects. In particular, energy projects from independent power producers (IPPs) do not require large capital borrowing from the province—they can do their own borrowing.

All the major LNG projects that have been announced will not use electric drives for compression and liquefaction of natural gas, and thus Site C Dam will not reduce the greenhouse gas emissions from these LNG projects in a major way. I think it is unlikely that these projects will switch to electric drives unless the electricity was offered to them at rate steeply discounted. And doing that would defeat the business model for Site C Dam.

The option to export electricity to Alberta remains largely overlooked. BC and Alberta, although part of the same Western Interconnection, are still more like islands in the sea. The existing intertie is even curtailed due to "overhead" requirements. Here would be a compelling business model. Fort St. John is not that far from the Alberta border, and on the right side of the Rocky Mountains. Why not build a compelling case for the dam on delivering clean hydropower to replace polluting coal plants in Alberta?

Site C Dam map

Map from BC Hydro's Site C Dam project web site.

Will Site C Dam have a lesser or greater environmental impact than alternatives?

Site C Dam is different from other dams, as the map above shows. The reservoir is very long, and is not in the typical shape of a reservoir lake. Essentially, the reservoir is the river valley upstream from the dam. The environmental issues are not unmanageable, but they are quite different from those of a lake. I cannot claim to be an expert on matters of biology or zoology, but from what I understand, the length of the reservoir creates novel environmental challenges. What is clear to me, however, is that a sequence of smaller geothermal and wind projects would have a much more benign impact on the environment. Site C Dam delivers electricity without greenhouse gas emissions, but so do wind and geothermal.

Why were alternatives dismissed prematurely?

What's the rush to a decision? I find it puzzling that the government did not seek further input from the BC Utilities Commission. A review of the alternatives could have provided greater assurance whether claims from supporters of alternative sources (geothermal, wind) would hold up to scrutiny. It seems to me that the government in Victoria relied heavily on studies provided by BC Hydro rather than additional input from independent sources. BC Hydro has a lot of institutional inertia in championing Site C Dam, and thus BC Hydro had little interest in given greater attention (and additional research) to alternatives. BC has undoubtedly great geothermal potential, and technological innovations have made this alternative (especially from hot sedimentary aquifers) cheaper to harvest. I for one would have liked to see a more careful review of these proposals. The compelling rationale for geothermal energy is that it provides 24-7 baseload, which is what is needed for reliability. Dismissing geothermal energy is a missed opportunity for British Columbia. California does it, why can't we? Germany can do it, why can't we?

What are the pitfalls of the project as it moves forward?

The greatest challenge comes at the legal front. Already, First Nations have filed suit against the Site C dam project. Among them are two bands in Northern Alberta who ask a federal court to overturn the federal approval of the project because, they assert, the environmental impact assessment did not properly consult them and consider pertinent downstream issues in the Peace Athabasca Delta. These two First Nations from Alberta are joining four other First Nations in British Columbia in pursuing court action, as well as the Peace Valley Landowners Association. With the changed legal landscape due to the recent rulings on aboriginal rights by the Supreme Court of Canada it is difficult to predict how these cases will turn out. We will have to wait for new legal precedents to be set. Whatever the outcome, we can expect legal maneuvering and possibly injunctions—and this cause delays and will add to the cost of the project. We can also expect some of the communities to drive a hard bargain for compensation, another cost factor. The government's decision to allow for these eventualities, by adding almost a billion dollars of padding to the budget, is revealing. It also makes Site C dam less attractive financially compared to its alternatives.

How can the project be made better if it goes ahead as planned?

Once a train has left the station and has gathered speed, it is difficult to stop it. I for one will not begrudge the decision that the government in Victoria has made, but instead focus on how the project can be improved as it goes ahead. I think there are several agenda items.

  1. Improve the business case. The province still embraces electricity self-sufficiency as the raison d'être. It misses on opportunities to think outside the box and embrace greater integration with the Alberta grid. Why not build a new HVDC intertie with Alberta? They need clean electricity—we have it.
  2. Accommodate communities generously. The greatest challenge to the project is delays and related cost overruns. The province must secure the support of the communities that are still opposed. Don't leave the decisions to the court, but sweeten the deal through generous terms in the benefit-sharing agreements. Compensate over market value if you need to. It's the better deal economically because delays will eventually cost more.
  3. Embrace geothermal energy. Despite the green light for Site C Dam, do not ignore the vast potential that we are sitting on. BC is fortunate to have this resource, which remains completely untapped. Imagine the possibility of exporting this clean base-load electricity to the US, or Alberta. Don't put all your eggs in one basket (LNG). Geothermal energy would generate significant long-term economic benefits that will be as important as Site C Dam, and quite arguably larger.
Posted on Wednesday, December 17, 2014 at 11:00 — #Energy | #BC
[print]
© 2018  Prof. Werner Antweiler, University of British Columbia. Contact me at: werner.antweiler@ubc.ca | valid HTML | Home
[Sauder School of Business] [The University of British Columbia]