Premier Christy Clark has recently given a new status to natural gas: It is now to be considered a clean energy source, similar to wind and solar power, as long as the reason for its use is to produce electricity for liquefied natural gas production.
It is obvious the premier's intent is to meet the criteria for the Clean Energy Act initiated in the Gordon Campbell era and at the same time, to power and ship shale gas overseas.
This might be the perfect time for a sober examination of the financial case behind the Site C hydro dam proposal.
The City of Calgary's natural-gas-powered generator, called the Shepherd Energy Centre, is about two years away from completion and will be capable of producing 800 megawatts of usable power. Total cost: $1.3 billion.
The Shepherd Energy Centre is operated by Enmax, which is owned by the City of Calgary. Electricity will be sold at eight cents per kilowatt-hour. B.C. customers currently pay from six cents to 10.2 cents per kWh.
Meanwhile, B.C. Hydro's Site C hydroelectric project is at least eight to 10 years away from actual production. The new dam will produce about 1,035 megawatts of usable power. Total cost: $7.9 billion. B.C. Hydro is a Crown corporation owned by the taxpayers of B.C.
The Site C dam will produce 1,035 megawatts in comparison with the Shepherd Energy Centre's 835 megawatts of peak power. On a per-megawatt basis, the capital cost for the Site C project will be 5.7 times greater than the natural-gas-fired facility.
It is clear that a megawatt from Site C will cost us almost six times the cost of the average megawatt being generated by the Shepherd Energy Centre. The inflated cost per megawatt for Site C electricity will continue for the life of the proposed dam.
Is this differential reasonable considering the option of using natural gas? How is it that the number-crunchers among the B.C. Liberals or B.C. Hydro have not revealed better financial options regarding the production of electricity?
Shale-gas production is booming in B.C., yet the government wants to extract it and ship it overseas. The price of the gas is expected to remain low for years to come, around $3 a gigajoule.
Some might argue that water is free and natural gas will cost the taxpayer. This is not the case. For example, B.C. Hydro is currently dumping free water from our dams while it pays a number of independent power producers under a previous contract about $50 per megawatt hour.
Shale gas is owned by the citizens of B.C., and the province can set the royalty rates. Neither water nor natural gas is free and both resources are equally owned by the people of B.C.
To build Site C, the government will need to borrow money. Even with an interest rate of five per cent, B.C. citizens will be on the hook for nearly $400 million a year in interest payments alone on the $7.9-billion capital cost. In comparison, the natural-gas generation system would require annual interest payments of $45 million a year on the $1.3-billion capital cost.
The cost difference in interest payments (minus the marginal cost of natural gas used in the facility) makes this option clearly the better financial choice. Should interest rates rise further, the advantage for the natural-gas system would rise dramatically.
Whom exactly do we hold responsible for making such poor financial decisions on massive amounts of capital expenses? What is the motive behind this massive expenditure when much cheaper, clean natural-gas-fired systems are available?
Rick Koechl and Mike Kroecher
Fort St. John