Tag: Globe and Mail

Reports on Hydro fiascos in Manitoba and B.C. expose the rot at Crown-owned utilities

4 March 2021

 

Transmission lines, Globe and Mail
Full text of this excellent piece by Konrad Yakabuski in the Globe and Mail, March 4, 2021
Misery loves company. And so it was that taxpayers in Manitoba and British Columbia found themselves commiserating last week with the release of separate reports detailing the mismanagement and dissimulation that has left them to foot the bill for uneconomic hydroelectric projects championed by provincial monopolies with dreams of empire.
The reports on Manitoba Hydro’s Keeyask dam and B.C. Hydro’s Site C generating station were eerily similar in how they enumerated the factors that led to massive cost overruns on both projects, beginning with complacent politicians and a lack of independent oversight at the government-owned utilities that had promoted them. The reports also read much like the findings of an earlier inquiry into the financially ruinous Muskrat Falls project in Newfoundland and Labrador.
In all three cases, provincial premiers allowed their better judgment to be clouded by a desire to build personal legacies in the form of gigantic dams that they perhaps hoped might one day be named after them. They allowed the heads of their respective Crown-owned electrical monopolies to indulge their own empire-building instincts to pursue those projects based on rosy assumptions concocted to dazzle unsuspecting taxpayers and avoid scrutiny.
Politicians of all stripes fell into this trap. In Manitoba, it was former New Democratic premier Gary Doer’s government that authorized construction of Keeyask dam and Bipole III transmission line, the costs of which have ballooned to $13.4-billion from an initial estimate of $9.7-billion, and led to a tripling of Manitoba Hydro’s debt in 15 years.
In 2008, Mr. Doer declared that “hydroelectricity is Manitoba’s oil,” suggesting his have-not province might get rich by exporting power to midwestern U.S. states hungry for clean energy. This was always a pipe dream, since continental electricity prices were already then beginning a steep descent because of a glut of cheap natural gas and the increasing attractiveness of alternative sources of renewable power. The oil-electricity analogy was also highly misleading. In 2019, for instance, Canada exported $87-billion worth of crude oil. Electricity exports totalled a mere $2.5-billion, mostly from Quebec.
As last week’s report from an independent review of Keeyask and Bipole III, led by former Saskatchewan premier Brad Wall, concluded: “The incomplete analysis of the projects, driven by government endorsement, a construction contract that deferred construction risk to Manitoba Hydro, and a lack of effective project oversight at the corporate level, led to project delays and significant cost overruns.”
As a former right-leaning premier of an oil-producing province, Mr. Wall may not have been the best choice to lead the review commissioned by Manitoba’s Progressive Conservative Premier Brian Pallister. But his exhaustive report, which runs more than 14,000 pages with appendices, should put to rest charges by Mr. Doer and others that this was just a partisan exercise.
In B.C., former provincial deputy finance minister Peter Milburn’s report on the Site C fiasco found a similar story of politicians rushing to sign off on a megaproject without due diligence. In this case, it was former Liberal premier Christy Clark’s government that gave the go-ahead to Site C in 2014, forgoing a prior independent review by the B.C. Utilities Commission.
Premier John Horgan’s New Democrats, which had opposed Site C in opposition, put in place a “project assurance board,” or PAB, that was supposed to keep tabs on B.C. Hydro. It also hired consultants Ernst & Young to provide an additional layer of oversight. But the PAB, Mr. Milburn found, was stacked with B.C. Hydro board members, while E&Y appears to have been systematically kept out of the loop by officials at the provincially owned utility.
“Ultimately, B.C. Hydro determined the amount and type of oversight they would receive from EY,” Mr. Milburn wrote. “This appears inconsistent with the concept of independent review and with B.C. Hydro’s commitment to government.”
Astonishingly, Mr. Horgan has chosen to make only cosmetic changes at B.C. Hydro in the wake of Mr. Milburn’s report and a jaw-dropping revision to Site C’s budget. The project is now slated to cost $16-billion, or almost twice the $8.7-billion it was estimated to cost in 2014, with no guarantee that further problems won’t still arise as B.C. Hydro seeks to reinforce Site C’s shaky – literally – foundations.
Mr. Doer and Ms. Clark may have thought they were following in the footsteps of the visionary premiers of the past – Manitoba’s Duff Roblin and B.C.’s W.A.C. Bennett – by developing their provinces’ hydroelectric potential. But those earlier mid-20th-century projects were pioneering feats that paid off because of the unbeatable natural attributes. Keeyask, Site C and Muskrat Falls were subpar in comparison.
That all three projects were allowed to proceed speaks to the rot within Canada’s Crown-owned electrical utilities. It is beyond high time someone cleaned house.

Globe editorial: The Site C dam has been a disaster in the making for decades. Should B.C. pull the plug?

3 January 2021

Globe and Mail editorial, January 3, 2020

The report must have landed on British Columbia Premier John Horgan’s desk with a thud. It was not a welcome Christmas present.

The report in question is an independent assessment of the troubled Site C hydroelectric dam under construction on the Peace River in the province’s northeast. It was scheduled to hit the Premier’s desk in the days before Christmas, and could be made public as soon as this week.

It will be grim. How grim is the question.

Last summer, BC Hydro revealed Site C was in big trouble. A shaky foundation on the river’s right bank threatened the stability of the dam, and costs were spiralling. The $10.7-billion project was already over budget, with about half the money spent. Mr. Horgan ordered an independent review and said halting Site C for good was possible.

“If the science tells us and the economics tells us that it’s the wrong way to proceed, we will take appropriate action,” the Premier said.

If this sort of story sounds familiar – big dam, big promises and big problems – that’s because the saga of Site C has many prequels in the world of hydroelectric megaprojects. Backers exaggerate the benefits and minimize the challenges; then construction starts and predictable surprises pop up like weeds. What started life as a reasonable idea is suddenly twice as expensive – and no longer so reasonable.

In Newfoundland and Labrador, the Muskrat Falls dam is, at $13.1-billion, more than double its original budget. It has pushed the province to the financial brink. Ottawa, which had guaranteed $7.9-billion of project debt, stepped in again in mid-December and deferred $844-million in payments. Power is finally supposed to flow late next year.

The feds are also aiming to make Muskrat Falls viable – or are they throwing good money after bad? – by backing the so-called Atlantic Loop, a network to carry the electric power to Atlantic Canada.

For B.C., there is still time to turn back at Site C, as difficult and financially gutting a choice as that may be. Killing the project now means $6-billion-plus spent for zero power. But it may make sense, if pushing forward means a final bill at upwards of $15-billion.

There is bipartisan blame for this mess, which is decades in the making. There are two large dams on the Peace River, one completed in 1968 and the second in 1980. They have supplied plentiful and affordable power to the province. The plan had always been for a third dam. In 1967, a spot near the Alberta border, Site E, was seen as the best location. The terrain was firm, but it was rejected because of cost.

Instead, a decade later, the seemingly cheaper but geologically troublesome Site C was chosen.

In the 2000s, building Site C became a priority of the BC Liberals. It was exempted from an independent review and construction started – with a budget of $8.8-billion – in 2015. Former premier Christy Clark promised to get the work beyond the point of no return. In 2017, the NDP formed government. They had opposed Site C but Mr. Horgan decided to push forward. Mike Harcourt, a former NDP premier, in 2017 called Site C a “clear, unmitigated disaster.” And that was when only $2-billion had been spent.

More warnings came behind closed doors, before finally spilling out last summer.

Mr. Horgan’s first big decision as Premier in 2017 was whether to continue construction at Site C. The first big decision of his second term will once again be Site C.

Is the project already so far along that stopping it makes no sense?

In October, the C.D. Howe Institute released an analysis from two hydro experts, which concluded that the case for Site C is “getting weaker.” At $10.7-billion, it is only “marginally economic.” Cancellation, the report said, should be on the table if costs jump. At $15-billion, it makes more sense to shutter Site C, absorb the costs, and invest in wind power and battery storage, the report said. Wind power plus battery storage would also allow for smaller projects, rather than one huge one.

Site C was always a problematic place to build a large dam. Numerous decision makers over the years pushed ahead anyway.

Now, Mr. Horgan has to eyeball the sums and consider the conclusions in that report on his desk – and decide whether prudence means pressing forward, or turning back.

Globe and Mail: B.C. needs a public inquiry to sort out the Site C mess

31 December 2020

By Konrad Yakabuski, Globe and Mail, December 31, 2o20.
Article is paywalled so full text is here.

The evidence is now indisputable that British Columbia’s Liberal government erred in 2014 in approving construction of the Site C hydroelectric dam on the Peace River, and that the province’s current NDP administration should not have allowed the project to proceed in 2017.

The question now facing Premier John Horgan is whether, more than five years into construction and with about $6-billion spent on the 1,100-megawatt hydro generating station, his government can pull the plug on the project without causing more problems than it solves.

Either way, it is a bad situation that calls for a public inquiry into how Site C got this far in the first place. The pattern of a provincial hydroelectricity monopoly influencing gullible politicians to back its anti-competitive ambitions regardless of the costs is a familiar one in Canada. In its desire to block potential renewable energy interlopers on its turf, BC Hydro appears to have provided its political overlords with a less than fulsome explanation of the downsides of Site C.

This is not to say Mr. Horgan and former Liberal premiers Christy Clark and Gordon Campbell do not bear blame for what is becoming a financial fiasco. Independent energy experts warned them against building Site C, arguing that BC Hydro had used questionable assumptions about future demand and the cost of alternatives to make the economic case for Site C.

The risk that Site C would become a financial sinkhole was not even the biggest strike against the project. It had been common knowledge that Site C was a suboptimal location for a big hydroelectric project. There was a reason for that. The best sites in B.C., and indeed across Canada, had all been developed by the 1970s. Since then, provincial hydroelectric utilities had been pushing increasingly marginal developments to satisfy their thirst for empire building.

The extent of the problems now facing Site C and the likely cost of fixing them have been the subject of a review commissioned by Mr. Horgan after BC Hydro’s July disclosure that “foundation enhancements would be required to increase the stability below the powerhouse, spillway and future dam core areas.” In other words, the worst-case scenario that geological experts had warned about from the outset had, in fact, materialized. Quelle surprise?

In October, The Narwhal published the results of a months-long investigation based on Site C documents, obtained under a Freedom of Information request. The report noted that the technical advisory board overseeing Site C warned in May, 2019, that the stability of the dam is “a significant risk and the hazards of the weak foundation have been adequately recognized.”

Mr. Horgan has insisted that he was not aware of the geotechnical issues facing Site C until BC Hydro disclosed them publicly in July, more than 14 months after the technical advisory board had shared its conclusions. It remains unclear who knew and when about Site C’s problems along the chain of command within government leading to Mr. Horgan’s office.

“We put in place significant oversight on this project and it hasn’t proven to be adequate at this point,” Mr. Horgan this month told Vancouver Sun columnist Vaughn Palmer.

Frankly, that is not good enough. Only a public inquiry, similar to the one Newfoundland and Labrador conducted to get to the bottom of the Muskrat Falls boondoggle, can identify those responsible for allowing a misguided project to continue unchecked. The original $8-billion cost of Site C was revised to $10.7-billion in 2017. But foundation reinforcements alone could boost the construction price tag by another $2-billion. More cost overruns seem inevitable.

Mr. Horgan punted a decision on Site C’s fate until after last October’s provincial election by appointing Peter Milburn, a former deputy minister of finance under Ms. Clark, to recommend whether the project should be halted. Few observers are betting on Mr. Horgan to pull the plug on Site C, however. Organized labour, a major force within the NDP, has been a big supporter of the project and the construction jobs it has brought.

There are still a few optimists who believe the economic case for Site C could be salvaged if B.C. could sell power from the project to Alberta, enabling the latter province to decarbonize its electricity grid. Interprovincial electricity co-operation is, however, one of those uniquely Canadian ideas that never materializes. Besides, private electricity producers in Alberta have invested billions in natural gas-fired generating capacity that can keep the lights on at a far lower cost than power from Site C, even if the gap will shrink gradually as carbon taxes rise.

It will take a public inquiry to expose the folly that led B.C. to this very bad place.

 

Gary Mason: Site C is a disaster in the making

20 October 2020

B.C.’s Site C dam project is a disaster in the making
By Gary Mason
theglobeandmail.com
October 20, 2020
Article is paywalled, so full text is below.

Of the many issues awaiting the next government of British Columbia, none is more vexing and politically fraught than the Site C dam project.

On its present course, it has the potential to be the greatest financial disaster in the province’s history. And all indications are it will be John Horgan and the New Democratic Party who will have to make some enormous, financially consequential decisions related to the problem-plagued undertaking.

Before calling the current election, which concludes Saturday, Mr. Horgan ordered an investigation into the current trajectory of the project and the consequences that its myriad challenges are expected to have on final costs and timeline.

That report is expected in the next few weeks. It will almost certainly contain bad news. The question is whether it will be bad enough to cause the government to consider cancelling it, despite the billions that have already been invested – and the billions more yet that it would cost to halt it in its tracks.

Mr. Horgan had, until recently, steadfastly rejected any notion of killing the project and taking the losses. However, pressed on the campaign trail by Green Party Leader Sonia Furstenau, he opened the door to that possibility.

In referencing the report that is coming, Mr. Horgan said, “We’ll take a good hard look at the evidence, and if the science tells us and the economics tells us it’s the wrong way to proceed, we’ll take appropriate action.”

While that statement may have buoyed the hearts of thousands opposed to the dam, cancelling it at this juncture seems unimaginable. On the other hand, the thought of a cataclysmic failure of the dam’s wall down the road – not to mention the small army of engineers from BC Hydro that is already working, right now, to triage the dam – must keep Mr. Horgan up at night.

The problem is the soft sedimentary shale that underlies the construction site. Harvey Elwin, one of the country’s most experienced dam engineers, has observed that he’s never seen such appalling foundation conditions for a project of this scale. Documents recently obtained by Ben Parfitt of Canadian Centre for Policy Alternatives (CCPA) have revealed that a decision to pour massive amounts of concrete to build a buttress before a critical water-drainage tunnel was completed “could cause the notoriously unstable shale rock to move even further.” Several prominent British Columbians and the former chief executive officer of BC Hydro, Marc Eliesen, have called for the project to be stopped until an independent team of professionals can assess the situation.

BC Hydro has been less than upfront (to put it mildly) about the problems the project is experiencing. The whole thing has the feel of an issue that is growing in ugly complexity every day, the ramifications of which are enormous for the provincial treasury.

Site C started out as a concept that would cost $3.5-billion. When plans became more serious, the price tag was changed to $6.9-billion. By the time the BC Liberals approved it in 2014, the estimate rose to $8.8-billion. When the NDP took over in 2017, it ordered a project review by the B.C. Utilities Commission, but by that point, almost $2-billion had already been spent. It was determined that if the project was cancelled at that point, it would cost another $2-billion – a $4-billion writeoff.

So the NDP decided to push on with the dam, at a revised estimate of $10.7-billion.

No one believes that will be the final tally – not by a long shot. Comparisons to Newfoundland and Labrador’s infamous Muskrat Falls dam fiasco suddenly seem not so far-fetched.

As is always the case in these matters, it will be future generations that will bear the brunt of the pain. In the case of Site C, hydro rates are going to have to rise precipitously in order to pay the bill.

And then there is the indelicate question of demand. By the time the dam is scheduled to be completed in 2025, there is expected to be little need for the power it produces. Demand will be there down the road, but it can be reasonably asked if that power could have been supplied far more cheaply, with less damage to the environment, via independent producers and alternative forms of energy such as solar or wind.

There is no question that the BC Liberals deserve enormous blame for this debacle, pushing the project to the point where most believe there was no turning back. But it’s the NDP’s problem now – and they are likely to wear this, no matter what happens.

Thanks for reading! PLEASE sign the petition to halt Site C!

The unnecessary Site C dam is shaping up as BC’s Muskrat Falls

The unnecessary Site C dam is shaping up as B.C.’s Muskrat Falls
By Konrad Yakabuski
theglobeandmail.com
October 20, 2020
The story is paywalled, so full text is below.

The Site C Clean Energy Project launching of the super structure bridge off the causeway to an island, spanning the back channel of the Peace River, in October, 2019.
The Site C Clean Energy Project launching of the super structure bridge off the causeway to an island, spanning the back channel of the Peace River, in October, 2019.

 

In the past decade, Canada’s provincially owned hydroelectric utilities have sold gullible politicians on more than $50-billion in unnecessary dam and transmission projects.

From the Muskrat Falls project in Newfoundland and Labrador to the Keeyask dam in Manitoba and the Romaine River development in Quebec, the Canadian landscape is now blighted by big hydro projects that would never have seen the light of day had they been subject to independent and transparent analysis.

Residential and industrial customers now face sharply higher electricity rates as these projects come onstream. Instead of the juicy export profits that their backers promised, these projects face production costs that are significantly higher than the price their energy can fetch in a U.S. market awash in cheap gas-fired, solar and wind power.

This situation was entirely foreseeable when these projects were approved by premiers touting jobs and economic development. Unfortunately, it is too late to turn back the clock. All three projects are nearing completion.

There is still time, however, to pull the plug on British Columbia’s Site C hydro project before it ends up joining this trio of white elephants.

Both the incumbent New Democrats and opposition Liberals have avoided talking about Site C in the runup to Saturday’s provincial election. That is not surprising. Both parties are complicit in pushing ahead with a development experts warned was far too risky.

The Liberals gave the green light to Site C when they were in government in 2014 and the minority NDP government decided to forge ahead with the project in 2017. Since then the projected cost of Site C has continued to rise – to about $11-billion – while consumer demand and export prices have continued to fall.

Hence, the 1,100-megawatt project was already headed for trouble before BC Hydro disclosed in July that geotechnical risks that had been played down during the project’s approval phase had come back to haunt the utility. The foundation reinforcements required to fix the problem could cost upward of $2-billion and delay completion by a year or more. The final cost could total more than $13-billion.

This further undermines the already shaky economics of Site C, which will leave B.C. with huge electricity surpluses for decades to come. BC Hydro will likely be forced to liquidate these surpluses on the U.S. spot market at a fraction of the cost of production.

Export prices have plummeted by more than half since 2014 because of an abundance of natural gas south of the border and the rapidly falling costs for solar and wind power. In 2019, Canadian electricity exports fetched an average price of $40.70 a megawatt hour, compared with $87.23 a MWh in 2014, according to Canada Energy Regulator data.

As a result, net electricity exports fell to $1.9-billion last year from $2.8-billion in 2014. Hydro-Québec accounted for the bulk of those sales, owing to its vast reserves from older dams in Quebec and the 46-year-old Churchill Falls project in Labrador.

Site C has seen its production costs follow a steep upward slope since the project was first approved. Those costs are now expected to exceed $120 a MWh, according to some estimates. Given the environmental costs involved in damming and diverting the Peace River in Northern B.C. and geotechnical problems that threaten the project’s stability, the case for proceeding with Site C has simply become untenable.

Yes, halting construction on Site C would still leave B.C. taxpayers on the hook for several billion dollars in sunk costs, without any electricity to show for it. But killing the project remains the least costly option facing the province. Borrowing billions more to complete the project would make an already bad situation worse.

Pulling the plug on Site C would take political courage. But whoever wins Saturday’s election can no longer ignore the evidence. This project is headed in the wrong direction and there is no reasonable prospect of turning it around.

The inquiry into Muskrat Falls led by Newfoundland Supreme Court Justice Richard LeBlanc should serve as a warning to B.C. politicians still defending Site C. It concluded that successive Newfoundland governments failed in their “duty to ensure that the best interests of the province’s residents were safeguarded” and improperly placed their “faith and trust” in Nalcor, the provincial Crown corporation overseeing Muskrat Falls. Nalcor, the report added, “exploited this trust by frequently concealing information about the project’s costs, schedule and risks.”

The same story appears to be unfolding at Site C. The next B.C. government has one last chance to avoid an equally disastrous ending.

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Thanks to Margaret Atwood for tweeting this story! PLEASE SIGN THE PETITION!