pipelines and carbon tax: February 2015

Wind power for British Columbia

Apart from Quebec, BC has better wind conditions than any other province. We have 31 hydro reservoirs where, in order to obtain a regulated electricity supply, hydraulic turbines have to work less when there is lots of wind and more when there is insufficient or no wind. So, unlike other provinces, we can store lots of excess wind power until needed. We also have the clean energy act, which forces us to be self sufficient even in the peak hour of the coldest winter day. That allows generating quite some power for export. The act also requires that at least 93% of our power has to be renewable. The export has not yet been successful because there is still a lot of cheap power available from coal fired power plants in the US, The latest BC statistics I could find are for 2013. During that year we exported 6922 GigaWatt hours(GWH) to the US and imported 8473 GWH. Only in a few previous years did we export more than we imported. This may change when the June 2004 EPA rulings start taking effect. These rulings, which can’t be contested in court, require US power plants to cut emissions to 25% below 2005 levels in 2020 and 30% by 2030. This means that a lot of 4c/KWh plants have to be replaced by new facilities which produce in cents per KWh at the following rates: natural gas 6-7-13, on shore wind 8.7, geothermal 9, hydro 9.0 , nuclear 10.8, biomass 11.1. Advanced coal with CCS 13.6, solar 14.4-26.2, offshore wind 22.2.

In BC Wind, run of river, solar and biomass generation has been encouraged by paying high prices per KWh to Independent Power Projects, also called Independent Power Producers (IPPs). Since BC Hydro has the storage capacity they are obliged to buy all of it until the contracts run out. One source reports that it costs ratepayers 12-14c/KWh even when BC Hydro can’t sell their surplus or can buy cheap 4c/KWh power on the spot market. Another source quotes the IPP power at 8.5-9.1c/KWh. That is the actual cost. The higher figures are caused by export problems. The hydro turbines are forced to produce less, increasing their cost per KWh. Also occasionally the power is wasted when reservoirs overflow. Our export sales include long term contracts for power at 3.75-4.5c/KWh. Present trade practice are complex. Our total supply is as follows: BC Hydro 72%, Fortis BC 6%, Alcan EPA 1%, IPP Generation, 12% Columbia River Entitlement 9%.

Now that the price of wind power for new installations in the US is lower than for hydro it would follow that. if the same applies in BC, we no longer need to flood important valleys to obtain extra electricity. As part of the Site C debate we should also realize that we are in a unique position to increase our wind power from the present 1.5 % to at least 20% allowing us to export 45% of our clean energy to replace fossil fuel for Alberta’s oil extraction. That would wipe out the pipeline protester's argument that our rising oil exports cause climate change. Until a global carbon tax has been established demand for oil will keep on rising and it makes no difference in the world’s greenhouse gas emission which country supplies the extra oil as long as its extraction energy is not far more than that for conventional oil.

Information on BC cost of wind power is hard to obtain so when site C was approved I wondered if, based on the US cost data, we had to flood such an important valley to obtain more electricity. The 2011 estimate for site C was $ 7.9 billion for 900 MW capacity and 8.7-9.5 c/KWh generation. At that cost wind power was competitive. The present estimate for site C is $ 9 billion for 1100 MW at a cost of 8.5-8.8c/KWh . This includes 2.6c/KWh inflation cost which will now be paid by existing facilities while the government will pay .1c/KWh reduction in water rental. At those rates wind power is still competitive although the drop of our dollar will make it more difficult to establish. The capacity factor (CF), that is actual yearly output divided by year round operation at nameplate capacity, is quite important. For the hydro turbines site C has a 53%CF and the US turbines operate at 52% hence there is little difference. For wind turbines the US figures are based on 34%. From the data in several articles it can be calculated that our 217 wind turbines operate at a CF of 41%, which would bring the US cost of 8.66c/KWh down to 7.18c/KWh. If the Bear Mountain CF of 30% is used the cost would be 9.81 c/KWh. One future wind farm with modern turbines envisages 45%, which would bring the cost down to $6.54c/KWh.l. Since our dollar has dropped to 80c US, imported components will drive up the costs but it can be seen that depending on selection of equipment and location the cost of wind farms will likely not exceed the site C cost. Also to be considered in favor of wind farms are, no flooding, no protests, no public funding required, extra job creation and gradual increase to suit market conditions.

Below are further details and cross references about the problems and solutions. The reference numbers show on which website listed below the data can be found. The numbers behind the website are page numbers of my Carbon tax reference document, in which I pasted specific information from the particular website. I can't link it to my blog but can email it as a word document if you request it via a comment on the blog

1 Wind conditions and clean energy act

Apart from Quebec BC has better wind conditions than any other province.( 26)Wind power can’t be delivered as a steady flow unless excess energy generated during high wind periods is stored for later retrieval during low wind or no wind conditions. By far the cheapest energy storage is achieved by pumping water to an elevated reservoir and discharge it via a hydraulic turbine-generator to deliver extra power during below average wind conditions. We already have 31 reservoirs with turbine generators. They fill up without pumping and that is why wind and hydro work so well together. The clean energy act requires that we have to be self sufficient under almost all conditions and that at least 93% of our generation has to be green.(4) A BC Hydro table shows for the period 2005 to 2011 how the peak demand compares to the total demand during the coldest winter days (32). It shows that the one hour peak demand varies between 13 and 18% above the average demand. That gives an idea how much surplus power we could generate on milder days.

2 Electricity generating costs, general

The cost per KWh for a new facility is based on the total cost over its expected lifetime and how much electricity it will produce during that time. Hydro turbines don’t always operate at full capacity due to water levels, river flow restrictions imposed by fisheries or specific treaties, A capacity factor is applied which is the actual output divided by the rated capacity. For site C the rating is 1100 MW.(34) If the turbines would operate year round at that rating they would generate 1100x24x365/1000=9636 GWh. The actual output will be 5100 GWh/year (34) so the capacity factor (CP) is 5100/9636=53%. Wind turbines can only operate when there is wind, which means that their CP will be considerable lower. Wind turbines are rated by their nameplate capacity. When a turbine and its generator are designed for very high wind, which seldom occurs, it will not produce more energy than a turbine with a lower rating. While a wind atlas shows available wind strengths, not all turbines will catch the full strength when some of the wind is taken by a upwind turbine When comparing costs the lifetime is just as important as the capacity factor otherwise wind farms look very promising like in the cost comparison between Site C and the Bear Mountain Wind Park (29). There it is shown that if the $ 9 billion for site C would be spent on wind farms we would obtain almost double the amount of electricity which site C can generate. That is fine for the first 30 years which is the lifespan for wind farms but site C will last 100 years so who pays for the remaining 70 years?. A more logical comparison is that at the quoted CF of 30% it will take 53/30 x 1100=1943 MW of wind turbine capacity to replace site C for 30 years. If that can be done for an acceptable cost per KWh we hope that after 30 years the replacement cost will be about the same. That is quite feasible considering that wind turbines are still improving and may, 30 years from now, be mass produced. In the US the generating costs per KWh for new hydro is slightly higher than wind power so it is worthwhile to check if it applies to BC as well before flooding such an important valley at site C

3 Old power versus new power and present trade practices

The capital cost and operating cost of new facilities is obviously much higher than what was built 50 years ago and that makes new power far more expensive than old power. In the US, where the average generating cost is 5c/KWh (13),new facilities have to charge as follows: natural gas 6-7-13, on shore wind 8.7, geothermal 9, hydro 9.0, conventional coal 10, nuclear 10.8, biomass 11.1. Advanced coal with CCS 13.6, solar 14.4-26.2, offshore wind 22.2.(1) With the 30% reductions in GHG emissions imposed in the US by the EPA (post20) a lot of coal fired power plants in the US will have to close down or switch to natural gas. It emits only half the amount of GHG. A global carbon tax will have a similar effect. At the BC rate the price of coal will rise by 70%(post 17). Already several years age this has been foreseen by oil companies with natural gas reserves. They will profit from a carbon tax. Shell, BP and Statoil were among over 1000 companies who signed communiqués demanding a global carbon tax, ExxonMobil declared that a global carbon tax would help their future planning .(post12) At the moment our hydro costs are above the US cost. Apparently we send our summer surplus to California to help feed their air conditioners while we buy their cheap electricity in the winter for part of our heating requirements.

The trade is complex. IN 1964 we agreed with the US to build and operate storage dams in our part of the Columbia river in exchange for half of the extra power they could generate due to that improvement. That entitlement, around 1200 MW (4400 GWh/year) is not used by BC Hydro but sold to the US.(27). In total we sold in 2013 6,922 GWh of electricity to the US and imported 8,473 GWh. In 2013 we sold 1,818 GWh of electricity to other provinces but still imported 224 of their electricity.(17). The US trade is in sharp contrast with the aim of the clean energy act but it is done to provide customers with the cheapest electricity. Wind and run of river power is delivered by Independent Power Projects, also called Independent Power Producers (IPPs). Since BC Hydro has all those storage reservoirs they have to buy all IPP power. even if not needed. The IPP power, costing ratepayers 12-14c/KWh ,is more expensive than what BC Hydro generates and far more expensive than the 4c/ KWh they can buy on the spot market.(35 36). The actual cost of IPP power is 8.5-9.1c/KWh but the storage cost, accommodation and backup power raise the cost to the consumers to 11-13c/ KWh.(34) Yhe extremes of our long term trade deals are critised, buying at 9.4c/KWh and selling at 3.7-4.5c/KWh.(30) Apparently Run Of River electricity is abundant in the spring when at times BC Hydro can’t sell their surplus causing all reservoirs to overflow. These problems can be avoided by imposing limits on GHG emissions from the oil sands like the 30% reduction the EPA imposed on power plants in the US.(post 20). It would make us a prime supplier of green power without competition from not so green sources. By increasing our wind generation from 1.5% to 20% we could have a firm deal with Alberta to sell them our surplus. It would not make all the oil extraction green but at least send a message to the rest of the world that we are doing something about it. A revenue neutral carbon tax like we have in BC and the Sanders Boxer bill being considered in the US would be even more effective. People who spend below average on fossil fuel get more money back than they paid in carbon taxes and hence can afford to pay more for electricity and resulting price rises. Several influential US Republican Senators see that the Sanders Boxer bill, introduced by Democrats, will achieve the 30% reduction dictated by the EPA while leaving more control over the distribution of the money. They also like the extra income from the border tax adjustments which will impose import duties on goods from countries without carbon tax (post 20)

4 Cost comparison between wind and hydro power

Prior to the Site C approval I had seen the cost figures published by the US Energy Information Administration (EIA) which were developed by the National Energy Modeling System(NEMS) They show that the levelized cost per KWh for new on shore wind power installations averages at 7.03c for capital cost, 1.31 c for operation and maintenance and .32c for transmission, total 8.66c/KWh. Hydro cost in the same order is shown at 7.81+1,02+.2=9.0 c/KWh.(1) The Capacity Factor for wind is 34% as compared to 30% for our Bear Mountain Wind Park(29) and for hydro it is 52% compared to 53% for Site C. I saw that the 2011 Site C estimate was for a 900 MW facility, costing $ 7.9 billion , generating at 8.7- 9.5 c/KWh (9). I found that our existing turbines have a capacity factor of 41%, based on the following input data: At the end of 2013 we had 217 wind turbines with an installed capacity of 489 MW (3). BC has 13,250 MW of generating capacity (4), so only 3.7 % of generating capacity is from wind turbines. The total power generated in 2013 by wind was 1.5 %.(10 ),which suggests a capacity factor of 1.5/3.7 = 41%., Apparently a planned wind farm using improved vertical axis turbines will achieve a 45% CF.

The present estimate for site C is $9 billion for 1100 MW and a generation cost of 5.8-6.1 c/KWh(34) The actual cost per KWh is much higher. A technical briefing of the BC government shows that the lower figures were obtained by transferring the inflation cost to the existing facilities and eliminating part of the water rental charges.(38). The 2011 estimate shows $700 million for inflation cost and $40.2 million per year for water rentals(39). The $40.2 million per year water charges are more than five times the operating and maintenance cost of $7.5 million per year. Even though the inflation costs are no longer part of the cost per KWh the inflation must be paid and the lower water charges mean lost revenue According to the briefing 2.6c/KWh was saved by transferring the inflation costs while there was a .1c/KWh reduction in water rental charges. By adding them back in, the real cost for site C will be 8.5-8.8c/KWh., The cost of wind power will, as stated above be 8.66c/KWh based on the 34% CF of US wind farms. In BC It will change to 9.81c/KWh at a CF of 30, 7.18c/KWh at the 41% CF and 6.54c/KWh based on the 45% CF. These figures will increase depending on how much material has to be imported now that our dollar i s so low The figures above show that at least for the first 30 years the cost for wind power will be equal or lower than hydro power from site C. By that time the cost per KWh for new wind farms will have risen due to inflation but may have come down due to new technology and mass production. Apart from the cost advantage it should be considered that wind power will eliminate the protests, will not require public funding, can be introduced in stages based on market conditions and creates more jobs

If we let the world know that we are serious about taxing carbon and will send lots of clean energy to Alberta for oil extraction the BC pipelines may be accepted, which is a gain of billions of dollars per year for Alberta. By last count it was $15 billion per year (post 15) but the recently approved reversal of Enbridge’s line (37), which will help to reach the East coast may eventually improve the access to Asian markets somewhat, lowering the $15 billion figure. An alternative to the controversial BC pipelines is the proposed G7G railway for shipment of 1.5 million barrels per day through the under-utilized port of Valdez in Alaska. It will eliminate the controversial tanker traffic through BC waters and is more acceptable by First Nations (Post 18)