Tuesday, December 16, 2014

Quick thoughts on Site C half an hour before the annoucement

My hope is that the government passes on the project

Give the track record of large dam projects in the last decade, it would see that cost overruns seem to be almost inevitable.    The Muskrat Falls project in Labrador looks like it will come in at $10.5 billion instead of the initial $6.9 billion.   Recent Manitoba Hydro dam projects have risen dramatically in capital costs  

I have very little faith the cost of Site C will remain at $8.5 billion, I think it would be prudent to assume the final capital cost will be more like $11 to $13 billion.   Using BC Hydro's math, this higher capital cost would result in a cost of around $100/MWh for Site C power.  

When it comes to the price of Site C power, I am not very comfortable with how BC Hydro has amortized the costs of the project.   They have chosen to consider it over a very long time, 70 years.    I think it is not right to look at the cost of the project of 70 years and should limit it to 25 or 30 years.  Doing this dramatically increases the cost of power.  

It is realistic to expect significant capital costs for the Site C dam in 40 to 50 years for replacement and upgrades to the dam.   Currently BC Hydro is suggesting $10 million a year would be enough to meet these costs.   That seems low to me and should be more like $25 million a year, doing this would add around $3/MWh to the cost of the power.

BC Hydro has suggested an annual operations and maintenance cost of $7.5 million.   This seems very low and out sync with other similar projects.   The Muskrat Falls project in Labrador is projected to have an annual operations cost of $32 million or so.    I do not have access to any good figures to what it should be, but if it were $20 million a year, this would add an extra $3/MWh to the cost of the power.

I think a more realistic cost of power from Site C will be $110 to $140/MWh.   This higher cost for power makes a number of other power sources look like better choices for BC.

Do We Even Need Site C?

Forecasting power use more than a decade into the future is no easy task at all.  We have seen power use in BC stagnate for the last five or more years, the assumed 1.5% to 2.0% forecast annual increases has not been happening.   We are getting the near term wrong, getting the long term right is going to be very hard.

With more demand side management BC Hydro can keep the increased power demand down.   The higher rates for electricity in BC is changing the habits of the public and people are acting to reduce power use.  Finally, once the smart grid is fully in operation, BC Hydro will have less line loss.   At the moment around 10% of the power generated is lost.  The smart grid will allow BC Hydro to know where the loss is and to better control the flow of power.  

We have other sources of power possible.  

According to BC Hydro's own work, there is significant affordable wind power resources in the Peace and run of the river hydro on Vancouver Island.   I mention both because the flow of power from each compliments the other very nicely - when there is little wind there is a lot of water on the Island, when the water flows drop the winds the in Peace rise.    Using a price of around $100/MWh these two sources provide the same amount of power as Site C would.

BC Hydro is currently building Units 5 and 6 on the Mica dam and could build Unit 6 on the Revelstoke dam.   These additions to existing dams would add 1,500 MW generating capacity for BC Hydro, though they can not provide the same scale of firm power that Site C can.   I do not see how the Mica Units 5 and 6 are currently captured in BC Hydro's forecasts.

There are a couple of other significant power sources that are competitive at $100 to $120/MW/h - geothermal on the south coast and biomass burning in the interior.  

I do not think we need Site C.   The risk is too high for BC.


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