On November 26, 2013, the BC government confirmed its approval of BC Hydro's Integrated Resource Plan (IRP). The IRP provides a 20-year outlook of how BC Hydro expects to reliably and cost-effectively meet the anticipated future electricity needs of the province through conservation and acquisition of sufficient generation and transmission resources.
As we noted previously, BC Hydro submitted its draft IRP (Draft IRP) to Minister of Energy and Mines Bill Bennett for approval on August 2, 2013. Minister Bennett subsequently directed BC Hydro to carry out a final round of consultation on the Draft IRP by October 18, 2013 and re-submit a revised draft for consideration by November 15, 2013.
Although the IRP is in most cases substantially identical to the Draft IRP, the final IRP includes a new strategy for clean energy and a number of other notable revisions.
Clean Energy Strategy
As previously alluded to by Minister Bennett at Clean Energy BC's annual conference in October 2013, the final IRP features a new chapter entitled "Clean Energy Strategy" which outlines BC Hydro's strategy to support the province's clean energy sector and promote clean energy opportunities for First Nations communities.
Reflecting input from the Minister of Energy and Mines as well as feedback received during the final phase of IRP consultations, the Clean Energy Strategy aims to advance a number of objectives embodied in the province's Clean Energy Act (CEA), including:
- generating at least 93% of the province's electricity from clean or renewable resources;
- encouraging switching to energy sources that decrease greenhouse gas emissions in the province;
- fostering development of First Nation and rural communities through the use and development of clean or renewable resources; and
- ensuring that BC Hydro's rates remain among the most competitive in North America.
Under the Clean Energy Strategy, the following actions by BC Hydro will be taken over the next two years:
- undertaking cost-effective electricity purchase agreement (EPA) renewals. EPA renewals are predicted to be second only to demand side management (DSM) in contributing to BC Hydro's ability to meet forecasted energy demands. The IRP confirms that during EPA renewal negotiations, BC Hydro will consider the seller's opportunity cost, the electricity spot market and the cost of service for the seller's plant, among other factors;
- broadening opportunities under standing offers for clean energy
- increasing the maximum project size eligible under the Net Metering Program from 50 kW to 100 kW;
- introducing a "micro-SOP" component of the overall Standing Offer Program (SOP) annual target dedicated to projects in the range of 100 kW to 1 MW and involving a simpler, more streamlined process within the SOP, including a simplified form of SOP EPA;
- increasing the overall SOP annual target from 50 GWh/year to 150 GWh/year (including the new "micro-SOP" stream described above); and
- removing high-efficiency co-generation using non-clean fuels from SOP eligibility in order to create more opportunity for clean energy projects within the SOP.
- promoting greater participation by First Nations in clean
energy projects by:
- engaging further with First Nations and the clean energy sector on mechanisms to encourage greater participation by First Nations in the SOP as well as future competitive bid processes; and
- giving weight to maintaining or improving relationships with First Nations as it manages its independent power producer (IPP) portfolio through deferrals, downsizing or terminating pre-COD EPAs where projects are in material default.
- reviewing the IRP in two years to determine if, as a result of changes to the load-resource balance, an energy gap is expected in the near or medium term, potentially requiring additional power acquisitions. By way of an illustrative example, if the fall 2015 review of the IRP indicates a need for additional power of 3,000 GWh/year or more of clean or renewable energy, BC Hydro would likely launch a call with EPA awards taking place nine to 12 months later, such that successful projects could be online as early as F2020-21.
- pursuing bilateral EPAs that are cost-effective and benchmarked to competitive processes and which further the province's energy objectives embodied in the CEA.
- working with government to advance electrification options for industrial, transportation, and other sectors to reduce GHG emissions and support long-term demand for clean or renewable resources. Among other initiatives, BC Hydro cites its implementation of the Dawson Creek/Chetwynd Area Transmission Project (DCAT) to serve electricity demand from natural gas exploration and development activities in the Montney Basin.
- continuing to encourage the liquefied natural gas (LNG) industry to use clean or renewable electricity, including for ancillary power requirements by larger-scale plants and for both compression and ancillary requirements for smaller projects.
- maintaining a current understanding of clean or renewable technologies in BC and their resource potential, prices and technical capabilities.
Implementation of the Clean Energy Strategy will begin immediately with the increase to the SOP annual target and will continue with planned engagements in support of other action items throughout F2014 and F2015.
Other Changes to the Draft IRP
The IRP reflects a number of other notable changes to the Draft IRP, including:
- In reiterating its prediction that LNG projects will require 3,000 GWh/year of energy and 360 MW of capacity from BC Hydro in future (Expected LNG Load), the IRP indicates that four 100 MW simple cycle gas turbine generation facilities may be required in the North Coast region to satisfy these requirements. In turn, the IRP recommends that BC Hydro determine where and how gas-fired generation could be built in the North Coast region to reduce project lead times and to be able to meet LNG load requirements as they materialize.
- BC Hydro revised its estimated short-term firm energy gap that will emerge before Site C is in-service to 1,100 GWh/year (previously 1,500 GWh/year) and a short-term capacity gap of 650 MW (previously 600 MW). Similarly, if LNG-related loads are higher than expected, BC Hydro estimates that energy shortfalls could amount to 4,700 GWh/year and capacity shortfalls could be 1,100 MW (estimated to be 5,200 GWh/year and 1,000 MW in the Draft IRP, respectively).
- BC Hydro indicated that, in addition to actions highlighted in
the Draft IRP, BC Hydro could support government climate policy
objectives by working with:
- government, the ports, and industry to expand the availability of shore power to shipping at BC ports; and
- governments and other partners to manage the installation of electric vehicle fast-charging stations across the province.
- BC Hydro concluded that Site C continues to be a cost-effective resource compared to portfolios of alternative resources. Given its large up-front capital cost, the IRP confirms that Site C is expected to cause an increase in BC Hydro rates in the short term but will result in lower rates in the long term compared to alternative supply options. Interestingly, BC Hydro also concludes that the Expected LNG Load could reduce both the magnitude and duration of the rate impact of Site C as the energy surplus associated with Site C could be sold to LNG proponents at rates that are higher than what BC Hydro would obtain by selling such surplus power on the market.
- BC Hydro reduced its forecasted reliance on IPPs slightly and assumes that by F2017 the utility will rely on about 8,300 GWh/year of firm energy from IPPs, down from an estimated 8,500 GWh/year post-attrition as set out in the Draft IRP.
- BC Hydro acknowledged that its DSM targets are aggressive and, as a result, there is likely a greater risk that the program will under-deliver rather than over-deliver energy savings. In that regard, BC Hydro revised its DSM target in the IRP to conserving approximately 1,300 MW of capacity by F2021 instead of 1,400 MW, but left its 7,000 GWh/year target for energy savings unchanged.
- Assuming the implementation of the DSM target and EPA renewals, BC Hydro expects to experience a capacity gap in F2019 instead of F2021, with or without the Expected LNG Load. BC Hydro continues to plan to meet this gap with a series of bridging measures such as market purchases and power from the Canadian Entitlement under the Columbia River Treaty. The IRP also includes a revised estimated timeline for the emergence of an energy shortfall, with a gap now predicted for F2028 instead of F2027. BC Hydro also increased its proposal to rely on the Canadian Entitlement from 200 MW to 300 MW of capacity during a five-year capacity gap until Site C comes online in F2024.
- BC Hydro revised its forecasted capacity load-resource balance deficits between the IRP and Draft IRP as follows: (i) 693 MW by F2017, rather than 594 MW; (ii) 2,745 MW by F2023, rather than 2,646 MW; and (iii) 4,837 MW by 2033, rather than 4,737 MW. In contrast, the energy load-resource balance estimates remain unchanged between the Draft IRP and the IRP and remain 363 GWh/year in F2017, 15,660 GWh/year in F2023, and 26,634 GWh/year in F2033.
Future Updates to the IRP
Given the submission of the IRP to the Minister in August 2013, BC Hydro will be required to submit a new IRP in August 2018 (or upon another date that may be specified by regulation in the future). As BC Hydro is entitled to submit amendments to an approved IRP, the utility intends to review the IRP in fall 2015, when it expects to have further information concerning (i) ongoing progress with demand side management, (ii) EPA renewal pricing and volumes, (iii) an environmental assessment decision concerning Site C and (iv) a combination of LNG proponent final investment decisions and decisions to take service from BC Hydro.
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