Does the Site C dam make economic sense for BC?

Today CCPC-BC senior economist Marc Lee submitted an analysis to the BC Utilities Commission in response to their consultation on the economics of the Site C dam. You can read it here.

In short, the submission discussses how the economic case for Site C assumes that industrial demand for electricity—in particular for natural gas extraction and processing—will grow significantly. However, as Marc noted when Petronas decided to stand down on its Pacific Northwest project, liquefied natural gas (LNG) projects are based on some pretty abysmal economics, and most are unlikely to materialize.

BC Hydro has consistently overestimated future electricity demand—and, as my submission shows, they substantially ramped up their projections while decisions about the Site C dam were being made.

Even in the absence of Site C, BC Hydro will have an electricity surplus until at least the early 2030s. This surplus could be extended much further in time if more aggressive conservation measures are taken and if fossil fuel sectors (and their electricity demand) are steadily wound down in a manner consistent with climate action.

As things stand, based on fee schedules published by the government, the Site C dam’s power would be sold at a loss after the project is completed. That means higher debt for BC Hydro—and higher rates for all BC Hydro customers.

This is particularly problematic for BC’s low-income households, which spend a greater share of their income on energy and are the most constrained in terms of changing their behaviour. Our 2011 report on energy poverty found that between 17 and 18% of British Columbians are estimated to live in energy poverty—and since Hydro rate increases have outpaced increases in provincial income, disability assistance rates, welfare rates, and the minimum wage, that share of energy-poor British Columbians has likely increased. 

Rather than move ahead with Site C, BC should undertake a more fulsome process of evaluation of future supply and demand—which must include conservation, alternative supply options and BC Hydro’s role in facilitating greenhouse gas emission reductions. It should also expand the scope of its inquiry to consider Site C’s “significant adverse environmental effects” (as acknowledged by the Government of Canada), as well as the implications for First Nations in northeastern BC.

It’s crucial that Site C is evaluated transparently, accurately, and in consideration of BC’s climate action planning and our need for climate justice.