An Electrification Plan Part 3: Frameworks of Adequate Policy

INTRODUCTION

Electrification of industry could provide a platform for BC to achieve the goals of First Nations reconciliation, GHG reductions and economic development. Successful electrification, however, is not possible without adequate policy that creates a framework capable of success.  An Electrification Plan for Northwest British Columbia (“the Plan”) explores how achievement of the aforementioned goals is possible through the adoption of a related set of policy actions.

Critical to the implementation of a successful electrification plan is policy that gives adequate consideration to the supply and demand implications of electrifying industry. Namely, any such framework must create demand by properly mandating that industry switch to electrified methods. Similarly, the framework must ensure that adequate supply of electricity is available in the system.

Failure to ensure constant and stable supply will erode industry confidence and undermine the entire system. It is not tenable for industry in BC to engage in a system of electrification where there is less than complete confidence in BC Hydro’s ability to supply electricity at a level that meets the future increase in load demand due to electrification.

DEMAND SIDE CONSIDERATIONS

For years, economists have agreed that demand creates supply, and not the other way around. For this reason, it is clear that policy development must focus on incentivizing BC customers to electrify. As previously discussed, the carbon tax plays a role in guiding corporate behaviour in BC, but the price signal is not strong enough to be a determinative factor between choosing to electrify or use fossil fuels. Therefore, adequate policy will consist of technology mandates of one form or another across a range of sectors.

However, compelling industry to electrify is not practical if BC Hydro is not able, and is not seen as able, to deliver electricity in a timely manner and at a competitive cost. When industry demands electricity and BC Hydro is unable to supply it, either industry seeks and secures relief from electrification requirements or it moves out of BC. This type of response has been observed before in BC with LNG in the Northwest and natural gas fields in the Northeast. Clearly, this response from industry is not good for either BC’s economy nor the environment.

SUPPLY SIDE CONSIDERATIONS

BC Hydro is currently understood to be in a supply surplus. BC Hydro expects this surplus state to continue through the early years after Site C is completed (although there is reason to believe that the surplus may erode more quickly than anticipated). However, determining exactly when the surplus will end is impossible, in large part because BC Hydro has not undertaken a robust Integrated Resource Plan (“IRP”) in a number of years, and the utilities’ load forecasts have not proven reliable in recent years. This is problematic, as industry will expect clear governance and a transparent planning process if it is to rely on BC Hydro to supply it under a comprehensive electrification plan.

As such, part of an adequate policy plan for electrification must include a robust BC Hydro review process that results in the development of a model for predictable supply additions of both generation and transmission. Critically, BC will also need to turn its head to, and implement, a tariff model that is effective at triggering these investments in a timely manner, and at allocating costs and risks in a way that is both affordable and supportive of driving electrification. 

Inclusion of these planning practices in a comprehensive electrification plan is of paramount importance, as industrial developers will need to have the assurance that their electrical needs will be met by the time their plant is ready to come on line. Demand is only able to create supply if that supply is reliable. For the system to function, electricity must be able to be delivered when and where needed, at a reasonable cost. The burden of this is squarely on BC Hydro’s policies and practices.

Clarifying the planning process is not the only supply side consideration to be dealt with in developing adequate policy for a comprehensive electrification plan.

Electrification raises another supply side question: what generation can BC Hydro practically build or buy to meet the needs of electrification?

Answering this question requires a review of BC Hydro’s potential generation assets. Site C is more than likely BC’s last major dam. This rules out future generation from additional large storage hydro assets. New gas plants are, of course, not a viable solution given that GHG-reduction is the primary motive behind electrification. Cleaner generation alternatives, such as wind-power and non-storage hydro offer hope for GHG-free electricity, but are intermittent and thus not able to deliver power on a reliable schedule. In utility jargon, these cleaner solutions are capable of delivering energy, but not capacity.

Industrial plants require energy exactly when they need it. So, the system, under an electrification plan, must be able to meet industrial load when it occurs, not just when the wind blows or the water flows.

Adequate policy for electrification will create a system that delivers both energy and capacity. Given BC’s shortage of new generation options, the Plan leans on BC’s Heritage Assets as part of its strategy to build such a delivery framework. This strategy enables both clean generation of energy, and an environmentally acceptable source of required capacity to meet industry’s needs and develop adequate supply side electrification policy.

POLITICAL AND ECONOMIC CONSIDERATIONS: ECONOMIC DEVELOPMENT, ENVIRONMENTAL PROTECTION, AND FIRST NATIONS RECONCILIATION

In addition to being designed with the preceding supply and demand considerations necessary to be technically functional, policy in a comprehensive electrification plan must achieve the following objectives: (1) responsible economic development, (2) environmental protection; and (3) First Nations Reconciliation. Adequate electrification can only proceed under a plan that offers the opportunity to develop a system that aids in meeting these inherently linked policy goals.

The Plan takes into account these demand and supply side considerations as well as the policy objectives, both economic and political, of government under an electrification agenda. The result is a set of related policy actions that are characterized by their ability to develop an adequate policy framework that compels industry to electrify while ensuring that BC Hydro will deliver the required electricity capacity on the supply side through creative resource planning solutions.

Further, the Plan serves to provide Government with the social license necessary to advance substantial energy intensive industrial development in the Northwest and offers the one vehicle through which Government is able to reconcile a gas-based industrial strategy with an aggressive climate change agenda. Finally, the Plan offers First Nations a foundation on which to pursue their economic goals, while protecting their cultural and environmental values. The Plan, in turn, will help Government meet its commitments in respect of the UNDRIP and the Calls to Action from the Truth and Reconciliation Commission’s report. By doing so, the Plan works to achieve the objectives that adequate policy in an electrification plan must. The next post introduces these four specific policy actions.