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Canada’s Hydro Facilities: A Valuable Long-Term Investment

Updated: Oct 14, 2021


This past month, we have seen renewed debate about the future of the Site C dam in North-Eastern British Columbia. This latest call for yet another review and the possible cancellation of the project comes following BC Hydro’s recent challenges in meeting deadlines in the midst of a global pandemic. The discovery of challenging bedrock that requires additional geological study hasn’t helped either. In the major infrastructure construction world, where time is money, BC Hydro is warning of another increase to the final price tag, already estimated at over $10 billion. 

Math savvy analysts quickly go to work converting this number into a price per MWh, determining that the final price residential ratepayers are to be saddled with could be over $120/MWh (or 12 cents/kwh). This is in an era when solar was recently bid as low as 2.0 cents/kWh in California and Saudi Arabia. Even in our own backyard, a recent wholesale wind contract in Alberta was signed for 3.7 cents/kWh, far below the 8-18 cents/kWh that residential customers in Canada are accustomed to paying (even after distribution costs are added). Frame Site C in these terms, and of course it doesn’t make any sense to continue with construction. Canada’s two other major hydro projects, the Keeyask Dam in Manitoba and Muskrat Falls in Labrador, face similar questions. 

There is one factor, however, that no one seems to be talking about – that analyzing Site C, Keeyask, and Muskrat Falls in terms of the final price for electricity produced ignores the important difference between energy and capacity system needs. Canadians can be forgiven for not beingattuned to this difference – after all, Canada continues to sell hydro energy at rock bottom prices to all too happy US customers south of the border. This practice dates back to an era when the other major sources of power were coal and natural gas, both burned in highly controllable generation facilities that could be turned up and down to meet demand. However, the landscape is changing as wind, solar, and other renewables are forming ever larger portions of the energy supply. Facilities that “shape” and store power are becoming essential.

Tesla’s battery farms are making headlines for their ability to store solar from mid-day producing periods and dispatch this power when energy demand is highest - in the evening. This is exciting technology, but what Tesla is doing is nothing new – they are selling highly valuable capacity – something that Canada’s hydro regions have in abundance. Compare Site C to the price of batteries, and the cost/MWh (even with the budget over-runs) is competitive. Tesla’s Hornsdale Power Reserve battery complex in Australia, for instance, cost Australian ratepayers 14.3 cent/kWh (with a 15-year lifespan). Add in the price of producing the power at the nearby wind farm, and consumers are on the hook for a total price of 17 cents/kWh (far more than even the worst estimates for Site C). Unlike Tesla’s batteries, Site C does not need to be charged by other sources of power and dams can function like a battery by holding back water when the wind is blowing and the sun is shining, offering much greater value to consumers at a lower cost than battery farms. Battery technology is generally smaller scale and has a limited discharge time (100MW for 75 minutes at Hornsdale), yet hydro operators can dispatch power on a much larger scale (Site C’s capacity is 900 MW) and do this for hours, days and weeks on end. Many of Canada’s hydro reservoirs, like Site C, have the advantage of multi-season and multi-annual storage reservoirs replenished by rainfall. Add in the fact that these new hydro projects will have a much longer lifespan than batteries (100 years vs 15), not to mention Site C’s ability to improve the capacity of the other two dams along the Peace River, and the project begins to make a lot of sense. 

Large hydro facilities are complex and costly to build in Canada – and Indigenous and environmental impacts must be fully considered. However, the Peace River has already been altered by previous hydro projects and Site C preparation. Site C, Keeyask, and Muskrat Falls are all opportunities to utilize Canada’s hydro regions more effectively as batteries to enable a low-carbon future for Canada. With the help of hydro, lowest cost wind and solar from the prairies and nuclear from Ontario and the Maritimes can be shaped and dispatched to meet consumer demand, eliminating the need for coal and gas electrical generation. 

Let’s get these projects built! 

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