The other day I was invited to present some information about the Site C Dam for a local news broadcast on Global BC. After a telephone pre-interview, I met a reporter for an interview on tape. After asking all the questions on his list the reporter asked me a very telling follow-up question. He asked if Site C was likely to result in an increase in hydro rates for British Columbians? I think he was expecting me to say no, as that would be the political thing to do, but instead I think I surprised him by telling what I believe to be true: that, in all likelihood the completion of the Site C dam will result in an increase in our hydro rates. To further compound my blasphemy I pointed out that this was not bug of the system but rather a necessary feature. Over the rest of this post I will explain why this is the case and what it means for our fight against climate change.
In the last month, I have spent a disproportionate amount of time talking and tweeting about the Site C Dam project. I have written a lot about the dam and my conclusion from researching the project is that even with all its flaws it still represent a net positive for BC and a necessary project from an environmental perspective.Why you ask? Well, I have strong concerns about climate change and believe that we, as a nation, have to reduce our dependence on fossil fuels. In this I agree with a very well-know local climate scientist named Dr. Andrew Weaver who once said:
The only solution, to be perfectly blunt, is to go carbon neutral.” And the only way to do that, he said, is for BC Hydro to get back in the business of mega-projects. “They should be carving out their niche with the Site C dam,” he said.
That option has been on the drawing board for years and now comes with a price tag in excess of $6-billion. It would be built on the Peace River, just southwest of Fort St. John, and would produce enough electricity to provide power for nearly half a million homes.
“I cannot see what is stopping Site C,” Prof. Weaver said. “There are environmental consequences, yes, but there are environmental consequences for everything we do and we have to stop using the atmosphere as an unregulated dumping ground.”
Since Dr. Weaver made that statement much of the rest of the world has agreed with this proposition and showed their support by signing the Paris Agreement.
So how do we fight climate change? We need to electrify everything and then make sure that the electricity we move over to is of the low-carbon variety (like Site C). Now comes the part you don’t normally hear, because I am here to tell you that if we are going to fight climate change we are going to need to see our energy prices increase. Prematurely retiring exiting infrastructure, building new infrastructure and re-tooling our economy cannot be done at little or no cost to the public. We are asking our society to abandon existing energy facilities that were built with the intention to be used for decades to come. The costs for building those facilities were to be amortized over decades and will come due far sooner than planned. This will cost money. If you want a concrete local example consider the Burrard Thermal Plant.
The Burrard Thermal Plant represents a cheap and inexpensive source of 900 megawatts of conventional natural gas-fired generating capacity. The problem is that even during its historically low 2006 output it still represented Metro-Vancouver’s fourth-largest source of GHGs. If we keep using Burrard Thermal we can produce cheap energy, but we do so by emitting a lot of carbon dioxide. Closing Burrard Thermal makes little economic sense because after recent upgrades it is a highly efficient producer and yet closing it make eminent sense from a climate perspective. By closing Burrard Thermal we guarantee higher hydro rates and yet we have chosen to do so for climate reasons not economic ones.
Earlier in this post I pointed out that raising rates was a feature and not a bug of the system. Why is this you ask? One of the critical means of eliciting a response in our economic system is to provide an incentive/disincentive. Higher energy prices are one of the major ways in which we can drive down demand. Make energy more expensive and people, and industry, will find ways to save energy. Make it cheap and it will be wasted; thus in order to drive down demand we need to make energy more expensive.
Now, from an economic perspective making energy more expensive may be the necessary thing to do but we live in a system of where not all have the same resources. There are people who can easily afford higher energy prices and others who cannot. In order to make this work, from a societal perspective, we need to shelter the poorest by subsidizing their energy costs. This is where the carbon tax comes in. It provides a large source of funds that can be used to protect the poorest from the effects of our fight against climate change. Now the logical reality of this is that if that money is being spent on the poor it will not be available for the middle class. What this means is that middle class energy users will necessarily be the hardest hit by the price increases.
This is the dirty little secret that the activists in the environmental movement don’t want to admit and why my interviewer probably expected me to deny the price increase. Read the 100% Wind, Water and Sunlight articles and they all talk about how their program will add jobs and bring brightness and light but what they never admit is that it will be done at a cost: increased energy prices and increased hardship on the middle class. Alberta can’t mothball their entire coal fleet while building solar and wind facilities at no additional cost. If 100% Wind , Water and Sunlight is going to generate millions of jobs we will need the money to pay all those salaries since all that cost is in energy. It is going to mean higher energy costs and much of that burden necessarily will fall on the middle class.
The same logic applies to Site C, it is not the cheapest energy out there (that would be Burrard Thermal), but it represents one of the cheapest of the clean alternatives. The activists keep arguing that other alternatives like wind, solar and geothermal represent cheaper alternatives but they have yet to demonstrate their case. BC Hydro has estimated the costs for alternative energy sources and all of them come in as equal to or higher in price to the Site C power once you factor storage and transmission costs into the equations and of the low-carbon options Site C is the cheapest base-load energy source. The activists present any number of hypothetical projects but once you include storage and transmission into the equations none can provide the reliable power of Site C at anywhere near its cost. Now comes the important part, because if we are actually going to beat climate change we need to build Site C AND many of the other renewable projects being put out there.
Ultimately fighting climate change means making a number of challenging political decisions. It means admitting that we need to raise hydro rates. It means admitting that we can’t protect everyone from the cost increases which means that the middle class are going to take a bigger hit than would be preferable in a perfect world. It means telling the public the truth and not pretending that this can be done easily. The most important things in the world don’t come easily they take effort and you only build support for these causes by being honest. Lie to the public and watch how the support fades when the truth comes out later.