Dear Premier Horgan: Let's Build Site C

November 17, 2017
Greg D'Avignon

Dear Premier Horgan:

Re: BC’s Energy, Climate and Investment Future

The Business Council of BC and our 250 members spanning every part of the province’s economy write today to communicate our views on the future of the Site C project.

British Columbia is at a crossroads in terms of the prosperity of our province. Our ability to deliver equality of opportunity for citizens and to address climate change in a manner that creates the conditions for competitiveness and investment are at risk. Addressing these challenges relates directly to your cabinet’s pending decision on Site C. We recognize that this is a complex matter, not least because the previous government failed to undertake a proper independent BC Utilities Commission (BCUC) review of the economic and business case for the project. Nonetheless, the decision now rests with you and your colleagues.

Having considered the evidence, including the BCUC’s recent report, our reputational risk, and the anticipated significant electricity demand as we accelerate into the digital age and low carbon economy, we offer our support for completing the project, for several reasons – some of which are also referenced in a recent submission from the BC Building Trades unions.

First, in reviewing Site C, the BCUC was given a narrow mandate and a very short timeframe. While we recognize that the Commission worked under tight constraints, its report does not reflect a comprehensive examination of the trends shaping the outlook for electricity demand over the medium- and longer-term. Therefore, the BCUC’s default to the low load forecast is suspect and inadequate given the reality of our need for energy in the coming decades, let alone the potential of the contribution that reliable firm power can make to a lower carbon future.

While actual demand growth has underperformed BC Hydro’s projections over the last few years, there are reasons to anticipate stronger demand over the next two decades. Apart from a steadily rising provincial population, we anticipate significant growth in the digital economy, healthcare, film production, e-commerce, gaming, mixed reality technologies, financial services, fintech, tourism, the Gateway transportation sector, and segments of advanced manufacturing. Additional demand will arise through shifting regulatory realities touching everything from marijuana legalization (requiring electricity, substations and transmission for cultivation) to increased use of electric vehicles, server farms and carbon sequestration facilities. In addition, electrification transitions are either under way or possible in areas like port terminal operations, mining and metals production[1], value added forest manufacturing, and industrial robotics. Then too, in the medium-term there may be opportunities to sell BC renewable power to Alberta as that province moves away from coal.

Also worth noting in this regard is the City of Vancouver’s Renewable City Strategy, part of its sustainable city plan, which targets 100% renewable energy consumption in Vancouver before 2050. The City’s plans, analysed in their October 2017 report,[2] call for 50%-75% growth in electricity use within a jurisdiction that accounts for 14% of the provincial population. It is conceivable that more BC municipalities will follow an energy path similar to Vancouver’s in the years ahead.

In total, none of these sources of future electricity demand is considered in detail in BCUC’s analysis.

As an added point, we would note that cancellation of Site C will stop any future investment and climate gains from upstream electrification in the natural gas and oil sector, while also complicating the situation for other BC industries looking to transition to lower carbon sources of energy. This includes LNG projects that may be developed in British Columbia. Our understanding is that one large LNG project would require all of the power from Site C to support two trains of electrified compression at the facility. As another example, Encana earlier this summer operationalized the electrification of new gas plants in the northeast that draw 200 MWH of firm power. The switch from gas fired operations reduced greenhouse gas emissions by ~ 900,000 tonnes of carbon dioxide equivalent (CO2e) on an annual basis -- the equivalent of taking 191,000 cars off the road.[3] Within the upstream industry, there is further scope to dampen emissions via electrification. These kinds of transition projects in BC – along with future electricity demand that may stem from Alberta’s shift away from coal-fired power – are overlooked in BCUC’s low load forecast.

Second, the BCUC review suggests that the power to be produced by Site C can be replaced with a portfolio of additional renewable projects that are not in existence, and which would be challenging to develop in a timely manner given the delays experienced in advancing all types of energy, industrial and infrastructure projects in BC (and Canada).

Third, the BCUC report does not consider how cancelling Site C mid-way through the construction work would impact BC’s and Canada’s already eroding reputation as a place to invest. Outside of the real estate sector and the advanced technology industry, BC today is viewed globally as an increasingly uncertain, complex and costly place to invest compared to many other jurisdictions, including the United States, but also – in some industry sectors – Australia and some emerging economies. The weakness of capital spending and the paucity of greenfield investment in manufacturing and some key natural resource industries are signs of the province’s diminished competitiveness. Terminating Site C is likely to compound the problem.

Lastly, the BCUC review was undertaken absent the province having adopted a new energy policy framework that the Business Council believes is urgently needed. An updated and retooled provincial energy strategy is required given the opportunities available in BC to stimulate low-carbon economic growth, advance reconciliation with Indigenous peoples, and remain in the forefront of efforts to tackle climate change. We believe BC can be a leader in supplying relatively low-carbon goods and services, including energy, to the world. A revamped provincial energy policy framework can create conditions that allow this to happen and attract new investments by companies and entrepreneurs in sectors like light tight oil and condensate, LNG, hydro, and wind as well as digital technologies, clean technology, and manufacturing.

We stand ready to work with your Ministers and senior officials in developing a renewed energy strategy for the province.

In summary, our conclusion is that BCUC’s Site C review falls short of the mark in some important respects. It ignores the difficulties of developing other sources of power if Site C is terminated. It underestimates the future growth in electricity demand in a global context, where electricity is destined to play a larger role in the overall energy system. Further, the BCUC review overlooks opportunities to export BC-produced renewable energy to other provinces committed to reducing their own carbon emissions.

Finally, unlike the Commission, cabinet must consider the consequences of its decision in terms of the province’s reputation in capital markets and in the eyes of investors and corporate managers. Despite our size, bounty of resources, diverse pools of talent and demonstrated innovative capacity, we are at risk of squandering our riches and advantages while competitors benefit from our inaction and confused policies. The climate, reconciliation with Indigenous peoples and middle class incomes and jobs will all suffer unnecessarily if we abandon thoughtful policy approaches, innovation and foundational investment decisions.

Our prosperity will be greater and the global environment healthier if BC and Canada work together to pursue cogent and integrated climate and energy policies that leverage our strengths and keep us in the vanguard of innovation and efficient regulation.

Respectfully submitted,

Greg D'Avignon, President and CEO, Business Council of British Columbia

Copies to:

Right Honorable Justin Trudeau; Prime Minister of Canada

Honorable James Carr; Minister, Natural Resources Canada

Honorable Catherine McKenna; Minister, Environment and Climate Change Canada

Honorable Michelle Mungall; Minister, Energy, Mines and Petroleum Resources

Honorable George Heyman; Minister, Environment & Climate Change Strategy

Honorable Dr. Andrew Weaver; Leader, Green Party of British Columbia

Mr. Don Wright; Deputy Minister to the Premier

Mr. Dave Nikolejsin; Deputy Minister; Ministry of Energy, Mines and Petroleum Resources

Ms. Bobbi Plecas; Deputy Minister, Climate Change, Ministry of Environment & Climate Change Strategy

Dr. Mark Zacharias, Deputy Minister, Environment, Ministry of Environment & Climate Change Strategy

Mr. Ken Peterson; Executive Chairman of the Board, B.C. Hydro and Power Authority

[1] We note that the Commission assumes aggressive measures by metal mining operators to reduce energy demand at peak times; we believe this assumption to be dubious.

[2] City of Vancouver Energy and Emissions Forecast Oct 10, 2017

[3] “Greenhouse gas emissions from a typical passenger vehicle” EPA-420-F-14-040a May 2014

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