The Economics of Site C Shouldn’t Scare Us Away from Decarbonizing Electricity

In a recent analysis we examined the value of B.C.’s Site C hydroelectric project, answering the question Is the Site C Dam Worth its Growing Price Tag? In his January 6th article “B.C.’s Site C hydro power boondoggle shows real cost of ‘clean’ energy” Terence Corcoran references our research to assert that clean energy projects, as exemplified by the Site C project in British Columbia and similar hydroelectric projects in Labrador and Manitoba, are an expensive way to procure energy. It is true that these three mega-projects are expensive, and this conclusion emerges clearly from the analysis we conducted. But in response to Mr. Corcoran’s article, two points require some additional clarification.

First, while these mega-projects are expensive, their high costs are not representative of the costs of clean energy overall. In fact, rapidly falling costs for clean energy is one of the climate change success stories of the past decade. Today, electricity generated from wind and solar is cost-competitive with electricity generated from fossil fuels. We can eliminate carbon emissions from our electricity system and save money (and our health) in the process.

Second, investments in reducing emissions–even through expensive projects like Site C–pay dividends by reducing climate change. Mr. Corcoran focuses only on the cost of the Site C project and ignores the benefits from reduced climate change. The cost of runaway climate change far exceeds the cost of moving from coal, natural gas, and gasoline to zero-emitting energy sources. That is, much climate action passes the cost-benefit test and should be pursued.

In our research, we ask, what is the most cost-effective way to reduce emissions in BC and Alberta’s electricity systems? We find that if BC and Alberta were starting from scratch, they would be better served by a combination of wind generation and high efficiency combined cycle natural gas generation with carbon capture instead of Site C. Only when aiming for zero emissions, and only in the case when BC and Alberta build greater transmission links, is Site C’s total cost lower than the alternatives that could replace it.

However, roughly half of the Site C budget has now been spent and there are additional costs involved in cancelling the project. This means we need to compare the alternatives to the net savings that would result from cancelling Site C. We find that the value created by Site C is comparable to the net savings created by cancelling it. This means, there are neither big gains nor big losses from cancelling Site C or completing it at this time.

If the cost of Site C rises due to the geologic faults that have recently been identified, then BC Hydro might find that cancelling the project makes more sense than completing it. If Site C is cancelled, then it is our hope that BC Hydro looks to zero emissions energy sources to replace it.

We also find that interprovincial cooperation means a more efficient and lower cost electricity grid. Building better transmission links between BC and Alberta would help lower the cost of reducing pollution. The results of our research suggest this collaborative, clean energy grid would be better for electricity consumers and our climate.

About the authors:

Dr. Brett Dolter, Assistant Professor in the Department of Economics (University of Regina)

Dr. Kent Fellows, Economist and Associate Program Director (Northern Corridor) at The School of Public Policy (University of Calgary)

Dr. Nic Rivers, Associate Professor, Graduate School of Public and International Affairs, Faculty of Social Sciences and Canada Research Chair in Climate and Energy Policy (University of Ottawa)