By Roy L Hales
After a careful examination of BC Hydro’s analysis of the Site C Dam project, energy economist Robert McCullough concluded, “Nobody in their right mind would build anything today.” The 5,100 GW of electricity this facility would produce is not needed. It probably will not be needed before 2028. Ratepayers will save $200 million if construction of the Site C Dam is delayed for two years. In fact, “A longer delay will very likely generate higher net savings.” This was one of many factors that led McCullough, the economist who busted Enron, to conclude the Site C dam project needs to be delayed for two years.
Site C Dam Project Needs To Be Delayed For Two Years
He, and the other speakers at a one hour briefing the Peace Valley Landowner Association (PVLA) held today in Vancouver, said a “lot more homework is needed.”
Ken Boon, President of the PVLA, told the ECOreport, “This looks like a bad deal for all British Columbians, whether you are losing your homes or not. It is looking like a financial disaster.”
His home, and “best farmland,” will be submerged if the dam is built. Boon grows hay and cereal crops, but leases river bottom land out to a market garden operation.
This is the most fertile land in the Peace River country, and produces crops like cantaloupe, melons and corn, that cannot be grown elsewhere in the region. According to agrologist Wendy Holm, M. Sc., P. Ag., “The land to be flooded is capable of providing an annual, local, sustainably produced supply of fresh vegetables to over a million people.”
“The actual Peace River Valley, where they want to flood, has its’ own micro-climate and higher quality soils which results in class one and class two farmland. There is no other class one farmland in Northern BC, you have to go all the way to Quesnel to find comparable farmland,” said Boon.
Needs To Be Delayed for Two Years
The PVLA emailed Premier Christy Clark requesting that she “delay the Summer 2015 start of the Site C dam for at least two years.” This will give the province time to do a proper assessment, which includes a finance performance audit of the Site C final investment decision process.
They also issued a press release stating, “We now know that the Site C final investment decision for this $8.8 billion project contains fundamental flaws. We need a two year time-out to address the very disturbing findings of respected energy economist Robert McCullough regarding the Site C business case.”
McCullough’s figures contradict BC Hydro claims that delays could result in losses of up to $175 million deferred construction.
The Joint Review Panel predicted the project could lose $800 million by going online too soon and producing unwanted energy that would have to be sold at a loss.
Hydro One Of The Most Expensive Options
Far from being one of the most inexpensive energy sources available, McCullough believes BC Hydro is adopting one of the most expensive.
The least expensive option, a 500 MW combined project, and Site C is marked in red in the chart to the left. Site C, also in red, is in the middle and there are nine less expensive natural gas or landfill biogas projects between them.
The levelized real cost per megawatthour, for Site C, is $83/MWh, but Hydro is using $58 to $61/MWh. They are able to do this because the government of British Columbia expects taxpayers and ratepayers to pay the difference.
McCullough points out that Hydro also failed to factor “in project construction risk, uncertain water and weather risk, and stranded cost risk.” They are expressed in terms of the “discount rate,” which reflects “the market demand for, or opportunity cost of, the capital associated with projects of similar risk.” The risks for a major hydro project like Site C are much higher than natural gas, landfill gas, geothermal or wind energy. “When we take the table of the twenty lowest UECs and use a discount rate of 12% for Site C, while leaving in a 200 basis point higher discount rate for other resources, the order changes dramatically.” As you can see in the chart below, Site C becomes one of the most expensive options.
Comparing to the cost of to that of wind/natural gas portfolios elsewhere in North America, McCullough said, “Our analysis indicates that the Site C portfolio may well be twice as costly.”
In his report, McCullough wrote, “Adopting realistic changes from standard and well respected sources makes an enormous difference. Using BC Hydro’s assumptions, the difference in cost between the least expensive option and Site C is minimized. Using industry standard assumptions, Site Cis more than three times as costly as the least expensive option. In fact, Site C fares poorly when compared to cogeneration, wind, landfill, and coal gasification.”
Failure To Consider Alternatives
Boon reminded listeners that the Joint Panel Review had expressed concerns about BC Hydro’s perceived failure to consider alternate energy sources, particularly geothermal energy.
“The PVLA takes no position on what the preferred alternative is to Site C, but we do take a position that there should be more complete information on all the alternatives,” he said.
Harry Swain, Chair of the Joint Review Panel, recently told reporter Emma Gilchrist, “There’s a whole bunch of unanswered questions, some of which would be markedly advanced by waiting three or four years … And you’d still be within the period of time, even by Hydro’s bullish forecasts, when you’re going to need the juice.”
“The Joint Review Panel did not really agree with the numbers that BC Hydro put forward, but they couldn’t analyze them. What Robert McCullough has come up with further justifies the recommendations made by the Joint Review Panel. They were right, this needs to be reviewed more closely because it appears the government got it wrong,” said Boon.
Having To Do The Due Diligence
Several questions plagued him, “Why is a group of farmers, ranchers and landowners like the PVLA having to do the due diligence on Site C? Why did we have to get an energy economist expert to review what the government is supposed to be doing? And now that we have these shocking results, is the government going to ignore this?”
There are currently seven legal suits involving the Site C dam. If the BC Government proceeds with their plans to start construction on June 21, the PVLA or Treaty #8 First Nations will probably respond with an injunction.
If the PVLA’s present suit is successful, “that will likely cancel out the Site C dam’s environmental assessment certificate.” Construction would come to an abrupt stop.
Boone added that anyone who wanted to help should write their M.L.A., or the Energy Minister or Premier Christy Clark “and demand they do a proper review.”