How much electricity are we buying from private sources?
Posted January 7th, 2008
Three tender calls for private energy have been issued since 2001 when the Liberal government was elected. The first "green" call in 2001/2002, resulted in the approval of 15 new private energy projects with a total capacity of 172 MWh. The "Green Power Generation Call", issued the following year, added 16 new substantially larger energy projects, which represented around 3% of the province's energy consumption. By 2003, BC Hydro was purchasing 10% of its energy from private sources. This may seem like a small fraction of the province's energy, but its price almost equaled the cost of producing the remaining 90% through BC Hydro facilities.
The 2006 tender call resulted in the astounding commitment by BC Hydro to purchase 7,125 GWh each year from 38 new private energy projects. This figure is significantly greater than the 2,700 GWh the government quoted as its intention (approximately 4% of BC energy consumption). This increased capacity, however, does not yield economies of scale because each private power plant is relatively small. Instead, the market price of energy also swelled from $55 MWh in 2005 to an average rate of $74 MWh in 2006, which BC Hydro accepted from bidders.
Energy produced by BC Hydro, comparatively, is priced at $5.81 MWh, almost 13 times lower than energy bought from private producers. While this price takes into account investments made during the 1970s, it demonstrates the rewards associated with ownership, something BC Hydro is forfeiting by purchasing from independent power providers.
These energy deals, called Energy Purchase Agreements (EPAs), are binding for 20 and 30 years; this means that BC Hydro has committed to pay the private sector between $400 and $500 million every year from 2021 to 2039. The most disturbing aspect of these agreements is that after billions of dollars of investment, BC Hydro will acquire no assets. The ratepayers will have almost entirely funded private energy projects with no commitment that suppliers will continue to provide energy in BC once the contracts have expired. The energy will be available for the highest bidder and BC will have squandered its most valuable energy producing resources.
The 2006 tender call resulted in the astounding commitment by BC Hydro to purchase 7,125 GWh each year from 38 new private energy projects. This figure is significantly greater than the 2,700 GWh the government quoted as its intention (approximately 4% of BC energy consumption). This increased capacity, however, does not yield economies of scale because each private power plant is relatively small. Instead, the market price of energy also swelled from $55 MWh in 2005 to an average rate of $74 MWh in 2006, which BC Hydro accepted from bidders.
Energy produced by BC Hydro, comparatively, is priced at $5.81 MWh, almost 13 times lower than energy bought from private producers. While this price takes into account investments made during the 1970s, it demonstrates the rewards associated with ownership, something BC Hydro is forfeiting by purchasing from independent power providers.
These energy deals, called Energy Purchase Agreements (EPAs), are binding for 20 and 30 years; this means that BC Hydro has committed to pay the private sector between $400 and $500 million every year from 2021 to 2039. The most disturbing aspect of these agreements is that after billions of dollars of investment, BC Hydro will acquire no assets. The ratepayers will have almost entirely funded private energy projects with no commitment that suppliers will continue to provide energy in BC once the contracts have expired. The energy will be available for the highest bidder and BC will have squandered its most valuable energy producing resources.
Further reading:
- Calvert, John. Liquid Gold: Energy Privatization in British Columbia (Fernwood Publishing, 2007)