Thursday, February 22, 2007

No deal on Alcan power in BC: major economic, environmental opportunities slip by
The British Columbia Utility Commission (BCUC) recently shot down a proposal that would see BC Hydro buying up to 130 megawatts of carbon-free electricity at a premium rate (7.1 cents per kWh) from Alcan’s Kemano hydro facility near Kitimat. Their reason? Ostensibly, BC Hydro failed to demonstrate enough in-province electricity demand to warrant the high price. Plus, the company apparently didn’t bother to compare that price with what Alcan could have gotten from other prospective buyers.


It is difficult to tell the real reason why the BCUC nixed the deal. Perhaps the commission took the proponents’ lofty hectoring the wrong way—Alcan’s submission advised the BCUC that it “should avoid broadening the scope of its review into a socio-economic inquiry that is beyond its mandate.” Or maybe the commission simply felt the proponents failed to demonstrate a good economic justification for the price. Either way, the decision sent BC Hydro and Alcan back to their communication advisers.

If they do it right, their next go-round should be successful. There is a market for that power, if not in B.C. then in the land of Bush and Schwarzenegger. Upgrades to the Bonneville Power Administration’s Pacific Inter-tie have made it possible to wheel far more than 130 megawatts of electricity through Oregon into power-hungry California. And California, as its governor made clear when he signed SB 1368 (which limits imports of coal-fired electricity), will put a premium on clean electricity.

How much of a premium? More than 7.1 Canadian cents per kWh? According to the Intercontinental Exchange, for sixteen of the first thirty-three days in 2007, yes. On the days when the California wholesale market price was below CAN$0.071, the clean electricity premium would have kicked in.

Of course, it’s a bit of a mystery why BC Hydro didn’t put this up front in its submission to the BCUC. But Hydro and Alcan are appealing the commission’s decision. Maybe this time round they’ll remind their readers of the competitive advantages of selling hydro power to California. Because of SB 1368, American generators looking for a piece of California’s wholesale market in the near term can only offer power generated with either natural gas or gasified coal. Neither can compete with hydro, even if you factor in thousand-mile line losses.


And time is of the essence: sooner or later somebody will take advantage of the EPAct and build a new nuclear station, on the basis of the size of the California market.

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