Recession prompts utility to backtrack -- Mistaken revision of green power plans, says wind lobby

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BC Hydro, the utility serving the Canadian province of British Columbia, is looking for regulatory approval to slash by 40% the volume of energy it will buy under its recent request for proposals for new clean power generation, citing the likely impact on load growth of the global economic slowdown as the reason for its unexpected request. A ray of light for disappointed wind project developers lies in the utility's wish to reserve the right to buy more energy than it has requested if the price is right.

The bad news for wind power filtered out last month after the utility quietly filed a 101-page amendment to its 2008 Long-Term Acquisition Plan with the BC Utilities Commission a few days before Christmas. In it, BC Hydro says it wants the regulator's blessing for a plan to cut its clean power purchase target from 5000 GWh of firm energy a year to 3000 GWh. It also expects attrition among successful bids to cut the amount of power ultimately available to 2100 GWh a year.

"This does come as a bit of a surprise, particularly when you look at the justification that BC Hydro is using for pulling back," says David Huggill, western policy manager for the Canadian Wind Energy Association (CanWEA). In its filing, the utility forecasts a slowdown in economic activity over the next 24 months "due to a decline in the global and domestic demand for commodities and materials and the impacts of the financial and credit crisis."

Falling demand

The utility cites tumbling demand in the forestry sector and the potential for a slowdown in the mining sector as factors in dampening load growth. Slower forecast growth in retail sales and an expected drop in housing starts will also lead to lower forecast sales to commercial and residential customers. Total demand is now expected to be about 2117 GWh a year less than originally forecast by 2017, says the utility, leaving a supply gap of about 3000 GWh a year to be filled.

At the same time, though, BC Hydro says it does not believe the downturn will be structural. "That is, after the current slowdown, the rate of economic growth is expected to resume," states the utility.

BC Hydro, battered by critics who questioned whether the utility was being short sighted in its planning, told the provincial utilities commission last month that it could still find itself buying up to or even more than the original 5000 GWh target once it has a chance to evaluate the projects. With all the uncertainties inherent in load forecasting, explained BC Hydro, the utility "does not want to limit its opportunities to acquire cost-effective renewable power through competitive processes with independent power producers."

One of Huggill's concerns with the proposed cut is that the economic recovery is expected to take hold before any of the power to be purchased through the clean power call is expected to come online. The utility says it expects deliveries from projects in the clean power call to begin in 2014, with most achieving commercial operation in 2015-2017 timeframe.

"We will be on the upside by the time this stuff hits market. So we don't really see that as a strong argument to decrease the call right now. The in-service dates are off in the distance a bit and certainly on the other side of when the economic recovery, we're hoping, is in place," says Huggill. "And certainly those projects, the full 5000 GWh, would be playing a role in that economic recovery. So to not advance that, I think, is a bit of a missed opportunity."

Huggill also points out that the BC government has been moving aggressively on greenhouse gas emission reduction and energy self-sufficiency, with clean or renewable resources targeted to make up 90% of total generation. The decision to request less power by BC Hydro, which is owned by the province, "does seem to be moving in a direction that is different from where we thought the government was going," says Huggill.

It also seems to run counter to the broader market fundamentals, he says. The inauguration of President Barack Obama in the US and the scheduled tabling of the Canadian federal 2009 budget late last month is going to usher in a "new world" for renewable power, Huggill argues.

Counter to the trend

"Now is not the time to be cutting back," he says. "I think we will see some very focussed effort on renewable power, secure energy sources and addressing greenhouse gases in a very tangible and meaningful way.

"And certainly that's where our industry is well placed. So this sort of decrease in the procurement process in a jurisdiction that has been waiting a long time to have a real opportunity to come to the table and play is quite concerning," concludes Huggill.

British Columbia is the only Canadian province without a completed wind power project on its grid. The developer of its most advanced project received court protection from creditors in November, leaving the future of the partially built 144 MW Dokie 1 project in limbo (Windpower Monthly, December 2008). Turbine delivery for the 100 MW Bear Mountain project, owned by Calgary-based Altagas Income Trust, is scheduled for this spring.

Monopoly customer

The wind industry's pent up interest in the province, where BC Hydro is the only customer for independent power producers, left the utility awash in bids into the clean power call. It received proposals from 43 companies for 69 projects with a combined capacity of about 7000 MW and a total firm energy output of more than 17,000 GWh a year. Nineteen of the proposals are for wind farms with a total firm energy output of about 8000 GWh a year, while 45 are hydro projects with firm energy of about 8700 GWh a year. The remaining four bids include two waste heat, one biogas and one biomass project. The deadline for submissions was November 25 and winning bidders are to be announced in June.

The BC utilities commission has scheduled a public hearing into BC Hydro's request for approval of its long term plan for power acquisition that will begin on February 19.

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