Tuesday, January 8, 2013

The "Site C" dam does not make economic sense to me

On many levels building the "Site C" dam on the Peace River is attractive.   The Peace already has two dams on it so much of the damage has already been done and the Site C location would simply capture more power.   It will have some significant impacts on the Peace River valley but I think the bigger impact is the cost of the project.   I think the current estimate of $7,900,000,000 is likely way too low and the final cost will be much higher than that making this very expensive power to bring online, more expensive than buying power from independent power producers.

The Peace River power projects first came about in the 1950s with Axel Wenner-Gren's bold proposals for Northern BC.   From this evolved Premier WAC Bennett's Two Rivers policy for developing hydro power in BC - the Columbia system and the Peace River.   Two dams were completed on the Peace River and serious consideration was to have two more.   What there is left of this project now is the "Site C" location.

Peace Dams - built and proposed
  • The WAC Bennett Dam was finished in 1968 and created the very large Williston Reservoir and produces 13,100 GWh/yr.   It is located 18 kilometers west of Husdon's Hope
  • The Peace Canyon Dam was finished in 1980 and created the small Dinosaur Reservoir and produces 3,500 GWh/yr.  It is located 21 kilometers downstream from the WAC Bennett Dam and 7 kilometers upstream from Hudson's Hope
  • "Site A" dropped in favour of "Site C"
  • "Site B" dropped because of bad geology
  • "Site C" is located 83 kilometers downstream from the Peace Canyon Dam and 7 kilometers west of Fort St John.   It would produce about 5.100 GWh/yr
  • "Site D" dropped because of bad geolocy
  • "Site E" was proposed just to the west of the BC Alberta border on the Peace River.  It was dropped as an option in the 1980s

Locations that have been considered for dams on the Peace
BC Hydro has never let go of the idea of developing "Site C" even though it was dormant enough after 1991 that everyone thought the idea was dead.   It is now very seriously under consideration, in fact BC Hydro is acting as it is a done deal.   The one aspect of the project that concerns me more than any other is the cost to build the dam.

The early stage estimate in 2007 was for it to cost $6,600,000,000 to build the Site C dam on the Peace River.  In May 2011 this had been raised to $7,900,000,000.

Given the stage of the project and the nature of public sector capital project estimates, I see the real construction costs of this project being in the range of $10,000,000,000 to $20,000,000,000.   Amortized over 30 years the construction cost per KWh is $0.0654 to $0.118.   What this means is that the construction costs alone of this power will be likely be higher than what BC Hydro will be able to sell the power for.   To arrive at my numbers I simply took the project costs that I suspect it will be and divided it by 30 years of power production.

In the May 2011 BC Hydro estimated a project cost of $7,900,000,000.  BC Hydro estimates the cost of the power to be $0.087 to $0.095 per MWh.  Most of this cost is from the costs to build the project

Based on the likely costs of the "Site C" project and what it costs BC Hydro to produce power, it would seem that BC Hydro would have to sell the power for about $0.09 to $0.14 per KWh to break even in 2020 with this rising to $0.12 to $0.17 per KWh in 2040.   BC Hydro currently buys power from IPPs at an average of $0.068 per KWh and most of their purchase agreements are set up in such a way that this price is highly unlikely to reach $0.10 per KWh anytime soon.   Building "Site C" will cost BC Hydro more than relying on the private sector.

"Site C" only makes sense if the cost of power is affordable and if it is the best option for more power in this province.   What I have not seen is a good business case for why "Site C" is economically the best option for BC.  The 2007 feasibility study certainly does not make a strong case because it does not look at what the other options are out there.

At the moment BC Hydro's latest call for power is at roughly $0.10 per KWh which then rises at half the rate of inflation for the term of the contract which is anywhere from 20 to 40 years.   The latest call for power is only available for very small projects, the upper limit is a capacity of 15 MW which is why the rates  are higher than for previous IPPs.   Because BC Hydro will only cover half the rate of inflation, it means that over time the cost of the IPP electricity will fall in adjusted terms.  A purchase agreement now for $0.10 per KWh would be $0.135 in 20 years with 3% inflation.  If the full rate of inflation were applied it would be $0.181.  

With the latest call for very small scale power projects that is on offer BC Hydro, the company can be reasonably certain of new IPP power built now being available in 2040 for about $0.135 per KWh.   The cost of getting that power from "Site C" will be roughly the same cost but with BC Hydro taking all the risk.  A new larger scale call for green power in BC will very likely make power available to BC Hydro in the short term - less than five years - for significantly less than the cost of "Site C" power.

BC Hydro will add about 8,500 GWh/yr of power from new IPPs coming online over the next few years.   The cost of all of this power will be cheaper than constructing "Site C".  BC Hydro is already getting over 1,000 GWh/yr from projects that were part of the 2010 integrated power call.

The economics of "Site C" simply make it a bad risk for BC Hydro and the province.   For that reason alone I do not think we should go ahead with the project.

5 comments:

Aaron Hill said...

I don't dispute your argument that Site C doesn't make economic sense. The environmental impacts are quite severe, especially for the people who live in and and care about the land that would be flooded. But the impact per gigawatt hour per year could very well be less than river diversion (aka "run of river") generation. What doesn't quite compute for me is why you, Bernard, would make such an argument when you have previously been such a strong proponent of the development private river diversion projects, which are likely far more of an economic liability for BC Hydro and ratepayers, and do not produce firm power. Also, if river diversion projects are to be built on a large scale in BC---something I thought you were in favour of---it is my understanding that additional power firming capacity will be required on the provincial grid.

Bernard von Schulmann said...

Everything I have seen indicates to me that run of the river projects have a much lower impact on the environment that "Site C" would. A good comparison to "Site C" is Alterra's Bute Inlet project. There are total of 17 sites all accessed through existing disturbances (logging roads) and a total head pond area of about 200 hectares. They will produce about 2,900 GWh, about 57% of "Site C". They would do this on a lot less land and provincial capital risk.

IPPs can and do produce firm power other than wind projects. BC Hydro has structured their purchase agreements to reward firm power over spot power.

I do not see long term firm contracts for power that are at rates lower than what BC Hydro could build new power generation for as a liability.

Also, as there are more IPP projects of various types, the whole grid becomes more reliable because no one location is crucial.

Hugh said...

It looks to me now that BC Hydro can supply all or most of the power demand in BC. This means that the $52 billion owed to IPPs is for un-needed power that BC Hydro cannot export at a profit.

If they go ahead with the idiotic LNG export idea, there will be more demand, well above the capacity of Site C or other projects.

Mr B F said...

I was a member of the Engineering team at the time of SIGN OFF on site C feasibility!
There was NO feasibility of Site C Dam and at the time of Sign off the BC HYDRO Board of Directors told Patterson P.Eng ( head of HGPD) to write a FALSE REPORT stating that Site C was FEASIBLE!
THAT WAS A DESIGNED FALSE REPORT that had to be written UNDER THREAT to the 3 Engineers in charge of this Project!
The Engineers were Mr. Patterson P.Eng, Mr Taylor P. Eng, and Mr Sampson P.Eng.!
These 3 Engineers had done and OUTSTANDING job of thoroughly Examining this Project ( in EXCESS) and all the Engineers who worked on this project under these three Engineers know that they were the most honest and trustworthy Senior Engineers on site C Project!
None of the reports and summary analysis for this site C Project came in with anything positive to contribute to a Project status of Feasible!!!
THE BUILDING OF SITE 'C' iS BASED ON A POLITICAL L I E !!!
I made a promise to one of those SENIOR ENGINEERS that I would expose this BC GOVERNMENT CORRUPTION that is centred on a FALSE REPORT!!!
BY THIS POSTING I AM KEEPING MY PROMISE !!!
I am prpared to make this statement of affirmation before any JUDICIAL body in CANADA!

WHY!
Briefly, there are multipe well known factors that must be present within and circumventing area of a Dam Axis location - before and during an engineering study.
At the top of the list is 'Ground Stability', which must be able to support the entire Dam wieght at that axis chosen for review - along with a larger area around such an AXIS.
The Site C (was and is still the original axis) showed No ground stability for any such design of Dam Structure!
After 3 seperate reviews spending millions of dollrs 'POLITICALLY', over more than 3 years, all the sub-surface drilling came up with an extremely dangerous lack of compaction - or complete lack of it deep below the river bed.
The finding showed no trace of hard bedrock sufficient enough to support such a DAM weight, but also found large depths of SLIP PLANE GROUPINGS that were as small as 1/8" thick! These slip planes , in the hundreds, were mainly composed of Uncompacted SILTS, of the kind that would quickly turn into muds when introduced to water.
This was found to be to dangerous for any required stability of such a magnitude of wieght for any DAM DESIGN.
This is only the beinning of a multitude of proplems that are inherent to this region of Tundra/Taiga instability that is constantly changing through every month of every year.
There is much more that relates to the ENVIRONMENT that has only been touched on up until now!
I have been attempting to expose this POLITICAL SCANDAL, , in respect for my S. Engineer boss, and have only, in the last year, beginning to find those who have an interest, and more so, are committed to exposing this SCANDAL - quite common to BC Government deathly practices!
I am hoping to expose this to the Interested local and regional Native Tribes who are not connected to this scandal!
Apply for the original report of 1984, under F of A to I, signed off on by Mr Patterson, remembering it was done under threat(extreme duress) and you will find reluctance or simply denial of access to this report!
The report was assignd to a known lacky of an engineer, who's work was and had to be constantly reviewed and redone!
The 3 engineers chose him because none of the devoted enginners on this site review would do the report and further the Senior Engineers would never force any of these trusted engineers to do something that they knew was WRONG - lying about thier work!!!
I suddenly find that a few people like yourself are willing to go the extra mile and maybe this a beginning to re-introduce Public Awareness to yet another BC Government Scandal that has begun from dusting off a long forgotten BC HYDRO/Government expensive ISSUE!

Mr B F said...

I was a member of the Engineering team at the time of SIGN OFF on site C feasibility!
There was NO feasibility of Site C Dam and at the time of Sign off the BC HYDRO Board of Directors told Patterson P.Eng ( head of HGPD) to write a FALSE REPORT stating that Site C was FEASIBLE!
THAT WAS A DESIGNED FALSE REPORT that had to be written UNDER THREAT to the 3 Engineers in charge of this Project!
The Engineers were Mr. Patterson P.Eng, Mr Taylor P. Eng, and Mr Sampson P.Eng.!
These 3 Engineers had done and OUTSTANDING job of thoroughly Examining this Project ( in EXCESS) and all the Engineers who worked on this project under these three Engineers know that they were the most honest and trustworthy Senior Engineers on site C Project!
None of the reports and summary analysis for this site C Project came in with anything positive to contribute to a Project status of Feasible!!!
THE BUILDING OF SITE 'C' iS BASED ON A POLITICAL L I E !!!
I made a promise to one of those SENIOR ENGINEERS that I would expose this BC GOVERNMENT CORRUPTION that is centred on a FALSE REPORT!!!
BY THIS POSTING I AM KEEPING MY PROMISE !!!
I am prpared to make this statement of affirmation before any JUDICIAL body in CANADA!

WHY!
Briefly, there are multipe well known factors that must be present within and circumventing area of a Dam Axis location - before and during an engineering study.
At the top of the list is 'Ground Stability', which must be able to support the entire Dam wieght at that axis chosen for review - along with a larger area around such an AXIS.
The Site C (was and is still the original axis) showed No ground stability for any such design of Dam Structure!
After 3 seperate reviews spending millions of dollrs 'POLITICALLY', over more than 3 years, all the sub-surface drilling came up with an extremely dangerous lack of compaction - or complete lack of it deep below the river bed.
The finding showed no trace of hard bedrock sufficient enough to support such a DAM weight, but also found large depths of SLIP PLANE GROUPINGS that were as small as 1/8" thick! These slip planes , in the hundreds, were mainly composed of Uncompacted SILTS, of the kind that would quickly turn into muds when introduced to water.
This was found to be to dangerous for any required stability of such a magnitude of wieght for any DAM DESIGN.
This is only the beinning of a multitude of proplems that are inherent to this region of Tundra/Taiga instability that is constantly changing through every month of every year.
There is much more that relates to the ENVIRONMENT that has only been touched on up until now!
I have been attempting to expose this POLITICAL SCANDAL, , in respect for my S. Engineer boss, and have only, in the last year, beginning to find those who have an interest, and more so, are committed to exposing this SCANDAL - quite common to BC Government deathly practices!
I am hoping to expose this to the Interested local and regional Native Tribes who are not connected to this scandal!
Apply for the original report of 1984, under F of A to I, signed off on by Mr Patterson, remembering it was done under threat(extreme duress) and you will find reluctance or simply denial of access to this report!
The report was assignd to a known lacky of an engineer, who's work was and had to be constantly reviewed and redone!
The 3 engineers chose him because none of the devoted enginners on this site review would do the report and further the Senior Engineers would never force any of these trusted engineers to do something that they knew was WRONG - lying about thier work!!!
I suddenly find that a few people like yourself are willing to go the extra mile and maybe this a beginning to re-introduce Public Awareness to yet another BC Government Scandal that has begun from dusting off a long forgotten BC HYDRO/Government expensive ISSUE!