A 2019 report prepared for the government of British Columbia makes a number of unsupported claims and unfairly criticizes contracts that underpin most of the province’s independent power production, experts say. Under the eye-catching title “Zapped,” the paper, written by Ken Davidson, purports to show that BC consumers are paying too much for power from IPPs, and suggests that the previous government signed the contracts without properly considering their cost.
A central problem with the ‘Zapped’ report is the fact that IPP power was judged against spot market prices, which is comparable to suggesting that hospitals could save money by continually hiring temporary staff. Spot market power might not be available when you need it, and should in fact be priced well below the average cost of system power.
The Clean Energy Association of BC (CEBC) says that “Zapped was a political document designed to make news headlines by alleging an over spending of $16 billion dollars over 20 years; however it was based on inaccurate information.”
The CEBC released a thirty-page report of its own on March 21 that debunks Zapped’s allegations mainly by using statements and statistics from BC Hydro. The report counters the three primary allegations made in the Zapped paper, which claimed that, starting in 2007:
• BC Hydro bought too much energy
• BC Hydro paid too much for the energy it bought
• BC Hydro undertook these actions at the direction of the Government.
With respect to the province’s current energy surplus, CEBC’s analysis finds that, “For the 20 years upon which Zapped bases its $16 billion overspend allegation, the surplus energy from IPPs is 23,500 GWh, or only one-eighth of the 190,000 GWh estimated by Zapped.”
Addressing the cost of power from the contracts, CEBC said, “Zapped’s misinformed assertion that the ‘value of all energy is Mid-C’ (the spot market price of importing energy from the USA) is not used by energy experts procuring new electricity supply. … at the time the (power contracts) were awarded to IPPs, BC Hydro’s own reports stated that the price of energy was cost-effective.”
Although government policy permitted BC Hydro to enter into contracts with IPPs, the government did not push the utility to mischaracterize system needs in order to justify signing contracts. CEBC notes that, “The previous government did not force BC Hydro to sign IPP contracts after the decrease in energy demand from the financial crisis was known.” Responding to the suggestion that government had interfered in BC Hydro’s analysis of need before signing the contracts, CEBC observed that, “Senior BC Hydro executives’ testimonies in 2006 supported the Government’s policy directions in 2007 to end importing from the spot market and to reduce the use of Burrard. They said import levels were too high and the prices too volatile. Burrard’s high level of inefficiency made its fuel costs and carbon taxes very expensive and its CO2 emissions excessive. BC Hydro Load forecasts remained bullish up to 2011. By that time BC Hydro had already signed EPAs with IPPs for the majority of the 9,500 GWh/year that Zapped claimed could have been avoided.”
In addition, it is possible that the province’s decision to proceed with development of a major hydroelectric project known as Site C, despite indications that it might be more expensive than readily available alternatives, could represent a greater risk to BC consumers than power from IPPs. Analysis by the firm of London Economics, published by the CD Howe Institute, was summarized in “Large hydro projects facing intense scrutiny,” IPPSO FACTO, February 2019. AJ Goulding, the primary author of the study, said “Several large-scale Canadian hydro projects now under construction face significant cost overruns and will potentially be uneconomic for decades if completed.”