BC LNG Strategy Includes Reversal of Goal of Electricity Self-Sufficiency

Environmental, Energy and Resources Law

February 07, 2012

As discussed here, the B.C. government's new Natural Gas strategy and LNG strategy released last week set out significant new details on the province's plans to develop its natural gas resources and promote the LNG export industry.

One key point of the strategies is the steps the government will undertake to ensure the availability of sufficient, clean, renewable electricity.

British Columbia's 2007 Energy Plan had set a goal of self-sufficiency for B.C. Hydro by 2016. The plan specifically mandated that B.C. Hydro plan for sufficient generation within British Columbia to ensure self-sufficiency even in years when inflow to reservoirs was extremely low, and that Hydro acquire an additional 3,000 GWh per year of "insurance" generation by 2020.

The LNG strategy reverses the 2007 Energy Plan on these points. The LNG strategy notes that the 2007 Energy Plan was written at a time when electricity prices were very high, and that the goals do not make sense in a market where natural gas is relatively cheap and generation (particularly subsidized renewables) in the United States are overbuilt. Accordingly, B.C. Hydro will be required to plan based on average inflow to reservoirs, and will not be required to acquire the additional generation. Any shortfall in electricity will be made up by imports.

The LNG strategy estimates that electricity rates will be reduced by approximately 8% by 2016 and 20% by 2020 as a result of the changes to the Energy Plan.

The biggest losers in the strategy may be independent power producers in B.C. The 2007 Energy Plan was responsible, in part for the surge in IPP projects over the last several years, and abandoning the requirement for self-sufficiency may reverse or end that trend.