Canada: Site C: To Be Or Not To Be

New build major hydroelectric projects in Canada are proving costly, controversial and vulnerable to review and reconsiderations even after construction has commenced.

Three recent examples of this are the Muskrat Falls project in Newfoundland, the Keeyask Dam in Manitoba and Site C in British Columbia. Each of these projects:

  • is a major hydroelectric dam with a reservoir providing storage capacity – but also flooding river valleys;
  • is expected to cost in the range of $8Bn to $10Bn per 1,000 MW of capacity – making them among the most capital-intensive power facilities in the world;
  • has taken the better part of a decade to complete the required permitting and approvals process, including any necessary feasibility and field studies; and
  • became a Provincial election issue and, on a change of government, was required to undergo some form of review and reconsideration, despite billions having already been spent on construction.

Muskrat Falls

Muskrat Falls is an 824 MW hydro plant in Labrador linked by a 1,000 km transmission line to Newfoundland. Initially forecast to cost $7.4Bn, it has escalated to an estimated $12.7Bn as of June, 2017. Those overruns threatened the solvency of Nalcor Energy, the sponsoring Crown corporation, as well as of Newfoundland itself. After the November 2015 Provincial election, the newly elected Liberal government replaced Nalcor's management with a new group whose mandate was to consider whether to complete or to cancel the project. While Nalcor's new management labelled Muskrat Falls a 'boondoggle', the government concluded that completion was the only realistic option. Cancellation would have left the Province with no asset to show for all the money it had spent, while requiring it to write off billions in sunk capital costs, cancellation fees, remediation costs and other liabilities.


Keeyask, a 695 MW dam in northeastern Manitoba, was originally estimated to cost $6.2Bn but as of September 2016, had escalated to well over $7Bn – possibly as high as $7.8 Bn. Keeyask and various related Manitoba Hydro projects were an issue in the 2016 Manitoba election. After the election, the new Progressive Conservative government replaced senior management of Manitoba Hydro, who then engaged Boston Consulting Group to review the strategic options for Keeyask and other assets. Boston Consulting concluded that termination of the partially completed project was not a realistic option. On their analysis, the cost of completing Keeyask was the incremental cost to completion beyond the sunk costs already incurred – an amount they concluded was in the neighborhood of $4.7Bn. To cancel the project, on the other hand, would have required Manitoba Hydro to incur cancellation and remediation costs in the neighbourhood of $1Bn and the further costs of acquiring power from the next least expensive generation source – a gas-fired power plant. The aggregate of those costs was estimated to be in the $11Bn range. Although the new Chair of Manitoba Hydro concluded that Keeyask was 'imprudent' at the time it was commissioned, cancellation was accordingly not a realistic option.

Site C

Now to Site C – a 1,100 MW hydroelectric plant being constructed on the Peace River in northeastern British Columbia. In 2007, on completion of initial feasibility studies, Site C was projected to cost $6.6Bn. Cost estimates were subsequently increased to $7.9Bn in 2011 and increased further to $8.335Bn in 2014. With forecast demand for electricity in BC apparently slowing, much of the power from Site C could be surplus to the Province's requirements for up to a decade after completion, scheduled for 2024. Site C became an issue in BC's election last May. After the NDP/Green Coalition formed the new government, they determined to review whether Site C should be completed or cancelled and referred the issue to the British Columbia Utilities Commission.

The BCUC has just provided its Final Report on its inquiry into Site C to the BC government. The Final Report does not make cheerful reading for BC Hydro. The BCUC concluded:

  • there is doubt that Site C can remain on schedule for completion in November 2024;
  • Site C is not within its most recent proposed $8.335Bn budget – indeed total construction costs could escalate to be more than $10Bn, and could even escalate further into the $12Bn range – as much as 50% above its most recent budget;
  • the costs of cancelling Site C would include cancellation and remediation costs of roughly $1.8Bn plus the costs of finding alternative energy resources that would be required to meet expected demand in the future; and
  • various alternative energy resources (such as wind, geothermal and industrial curtailments) could provide similar benefits as Site C, at an equal or lower cost, even after accounting for any necessary cancellation and remediation costs.

The BCUC did not provide a clear recommendation as to what the government should do in these circumstances. Rather, the BCUC conceded that all of the alternatives have risks and appropriately left it to the government to make a final decision. Completing Site C involves risks of delays, cost-overruns and funding stranded and ultimately uneconomic resources. But cancelling Site C comes with its own risks, including that the BCUC may have underestimated a variety of factors, including the potential demand growth for electricity, cancellation and remediation costs and the execution risks associated with the acquisition of a portfolio of alternative energy resources to replace Site C.

The BC government has indicated that it will probably make its decision to complete or cancel Site C by the end of this year. One might initially be inclined to think that BC would grudgingly determine to carry on with construction, just like Newfoundland and Manitoba did when they had to make similar decisions regarding Muskrat Falls and Keeyask. However, there are several significant differences between Site C and Muskrat Falls or Keeyask.

  • First, it appears that the balance between the marginal costs to complete Site C and the costs to terminate it, remediate the site and acquire an alternate portfolio of energy sources, may be different and less favorable to completion.
  • Second, while the projects are all roughly the same size, the size of the sponsoring Provinces are not. BC's economy is almost five times the size of Manitoba's and ten times the size of Newfoundland's. At stake in the case of Muskrat Falls was the potential bankruptcy or reorganization not only of Nalcor, but also of the province of Newfoundland itself. In the case of Keeyask, the economic health of Manitoba Hydro was in the balance. While the costs of abandoning Site C seem large in isolation, they are relatively small in the context of BC's current and projected economy. Particularly if any potential write-offs associated with cancelling Site C were spread out over 10 years (as proposed by BC Hydro) or 30 years (as proposed by the BCUC) they would represent just a fraction of 1% of BC's GDP over that period.

That means the BC government, in making its decision to complete or cancel Site C, is free to take into account not just matters of pure regulatory economics, but also broader public policy considerations as to the future of BC's electricity industry. That makes the outcome of BC's review more difficult to predict – but also potentially more interesting. 

The electricity utility industry – certainly in the developed world - is at an interesting inflection point. Traditional large-scale, centralized generation plants and related transmission lines are increasingly controversial, costly and difficult to build – at least in any predictable manner. At the same time, the costs of various smaller and decentralized types of renewable generation, distributed energy resources such as roof-top solar and new storage solutions are becoming ever cheaper and more technically feasible. The decision by the BC government on Site C could provide some interesting guidance about designing the electricity grid of the future, whether based on traditional mega-projects, such as Muskrat Falls, Keeyask and Site C, or based on some combination of smaller and more discrete renewable projects, emerging storage technologies and more aggressive demand-side management.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions