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Power Struggle

Site C fact-check: Will B.C.'s $8.8-billion dam power the province or be sold for cheap?

The fate of the most expensive public infrastructure project in B.C. history is in voters’ hands. We looked at what champions and critics are saying.

The ruling Liberals claim British Columbia needs to produce more electricity to keep up with the province’s growth. It’s one of the reasons why they’re committed to seeing through construction of one of the most expensive public-infrastructure projects in B.C. history: Site C.  

But we fact-checked their claims and found that electricity from the dam will likely be sold as cheap exports. What’s more, some experts say British Columbians might not need this energy until 10 years after Site C is complete.

As they vie for votes in next week’s provincial election, the big three parties are taking different stands on whether B.C. should continue construction on Site C. So, we decided to probe claims made by both champions and critics of the project to uncover where their facts fell short.

We're building [Site C] based on [a] StatsCan projection of a population growth of more than a million people in the next 20 years.

- David Conway, BC Hydro spokesperson on CBC’s The Current in August 2016

Is this true?

Misleading. A growing population doesn’t mean the province will need more electricity.

Here's why:

B.C.’s population is indeed growing. Over the next 20 years, Statistics Canada estimates that our current population of 4.8 million will see an additional 1 million people — that’s a 22 per cent increase in growth.

B.C.'s population is expected to grow more than 1 million people in the next 20 years

But, an increase in population doesn’t necessarily translate into an increase in demand for electricity. B.C.’s population grew by more than half a million people since 2005, while demand for electricity remained more or less flat.

Eoin FinnEoin Finn has conducted a high-level cost-benefit analysis of Site C and made several presentations based on his research. He is a retired KPMG partner and now describes himself as an “accidental activist.” He is also the director of research at My Sea to Sky, a citizen group formed in response to concerns about the proposed Woodfibre LNG project. Finn holds a B.Sc from University College Cork, as well as a PhD in Chemistry and MBA, both from McMaster., a retired KPMG partner, ran the numbers on Site C and electricity demand. He tells us that even though B.C.’s population is growing, “savings from energy efficiency and using appliances that are less energy consuming” have slowed demand.

B.C.’s electricity use has remained fairly constant over the years

Price also affects demand, as people tend to turn off the lights when the rates go up — something BC Hydro knows. Its stepped rate structure, which was set up as “a price incentive to encourage conservation,” charges customers more if they use more electricity. The utility company describes it as “the cleanest, cheapest and simplest way to meet growing electricity demand.”

 

"This province is actually expanding. We have the strongest economy in the country, we lead Canada in employment growth, and we’re going to need Site C."

-Bill Bennett, Minister of Energy and Mines in a legislative debate on March 1, 2016

Is this true?

Misleading. A growing economy doesn’t mean the province will need more electricity.

Here’s why:

The banks agree: B.C. had a good year economically in 2016, and led Canadian GDP growth for the last two years. But 2017 projections vary widely. RBC predicts that B.C. will fall below the national average in real GDP growth, while other banks, including TD and BMO, say the province will remain at or above the national average.

B.C.’s economy is growing in terms of GDP

However, like population, an increase in GDP doesn’t translate into an increase in energy use. Blake ShafferBlake Shaffer is a PhD economics student at the University of Calgary. He holds an M.Phil in economics from Cambridge University and a BSc (Honours) in environmental sciences from Queen’s University. He is currently a fellow-in-residence at the C.D. Howe Institute, an independent not-for-profit research institute. Before entering academia, Shaffer worked in the energy industry for 15 years., an energy expert at nonprofit research group C.D. Howe Institute, tells us, “It used to be electricity demand and GDP went in tandem; increasing electricity use was certainly a sign your economy was growing — they went together.”.

But over the last 10 years, electricity and GDP growth have separated, Shaffer says. One reason is energy efficiencies. “If you look at U.S. data, even though you see GDP growth, you've seen a lot of regions where electricity demand has been rather stable,” he explains. “In B.C., similarly, we've seen modest — if not flat — electricity demand despite an increasing GDP.”

In other words, a growing economy doesn’t necessarily lead to more demand for electricity. That could change, however, as we electrify more of our economy and move away from fossil fuels, instead opting to use things like electric vehicles, Shaffer says.

 

The Site C Dam is being built to fuel a LNG industry that is economically unviable...”

-BC Green Party platform, here, on April 21, 2017

Is this true?

Yes. BC Hydro and the Liberals have said Site C will help fuel LNG. But whether or not the dam will actually power the LNG industry remains uncertain.

Here’s why:

The LNG industry has yet to take off the way the Liberals had hoped. There are 19 proposed LNG projects, according to the B.C. government’s LNG website. Most are still waiting various provincial, federal and investment approvals .

“The LNG industry is not viable at the moment, nor is it likely to be for at least 10 years,” says Eoin Finn, who’s also the research director for My Sea to Sky, a volunteer group launched in response to the proposed Woodfibre LNG project. “By that stage, we will have translated to better, cleaner forms of energy anyway — the renewables.”

Paul KariyaPaul Kariya is the executive director of Clean Energy BC, an industry association representing private energy producers. He describes BC Hydro as both Clean Energy BC’s biggest competitor and biggest customer. Kariya has worked in the public sector both provincially and federally as CEO of Fisheries Renewal BC, a provincial Crown corporation, and executive director of the BC Treaty Commission. is the executive director of Clean Energy BC, an industry association partly made up of renewable power producers. From Kariya’s perspective, there’s a clean and renewable private sector industry that “can meet [the LNG industry’s] power needs if Site C doesn’t go forward.”

If LNG and the northeast gas industry develop as the Liberals hope, Kariya says there may be a possibility that some of the power from Site C “could be needed and could be seen as cost-effective.” But even then, he points out that most of the major LNG projects currently plan “to use natural gas to produce the power they need on site.” This means they may not need as much hydro electricity from BC Hydro’s grid.

 

"In the real world, for at least Site C’s first four years, it will be built entirely for export at a $1.2 billion loss."

-Adrian Dix, BC NDP MLA and official opposition spokesperson for BC Hydro during a March 2016 legislative debate

Is this true?

Yes. For the first few years, experts say Site C’s electricity will be sold as cheap exports.

Here’s why:

Most experts agree that BC Hydro would be exporting Site C electricity for the first few years at a loss.

The C.D. Howe Institute's Shaffer says BC Hydro’s forecasts have overestimated demand, so it’ll need to sell the surplus. BC Hydro has been “gung ho” to get Site C built, he adds, and is realizing “quite clearly” that it’ll have a surplus of energy. Before entering academia, Shaffer worked at Powerex, BC Hydro’s trading arm and was also the director of energy trading at Transalta Corporation in Calgary.  

When asked about the potential value of Site C exports, Shaffer estimates, “It is going to be a loss in all likelihood relative to the cost of Site C.”

Karen BakkerKaren Bakker is the director of UBC’s Program on Water Governance, which prepared a series of reports on the Site C project. The publications cover a range of issues, including the regulatory process and economics of Site C. She is also the Canada Research Chair in Political Ecology., a University of British Columbia researcher who studied Site C extensively, agrees. In a recent report, she found that “under some of the most likely forecasts, losses from these exports will total $1 billion or more.”

Bakker and her team recommend that construction be suspended on Site C, pending a full review by the BC Utilities Commission, which can look at the costs and benefits of fully cancelling the project or delaying it until demand grows.