The Case For Electrifying BC's Natural Gas Fields

It is no secret that beneath the surface of the northeast section of the province of British Columbia lies very large natural gas reserves. Last week, the Provincial Government announced that it believes the province has an astounding 3.93 quadrillion cubic feet of natural gas potential, of which 449 trillion cubic feet are estimated in the Montney gas field alone, roughly a 150 year supply (presumably based on current Canadian use).

Energy intensive natural gas processing and piping from the wellhead to the processing plants can be done using natural gas or electricity. In B.C., electricity from the BC Hydro grid is about 93% renewable. Given the expected long life span of the drilling activity in the Montney, it makes economic sense to electrify operations in this region. Any fear of stranded investment in electricity infrastructure is virtually eliminated.

The business case for electrifying the Montney gas fields including processing in B.C. is compelling. That it can be paid for is of course critical, but there are many more reasons:

  1. The Montney is located relatively close to the B.C. Hydro transmission grid and much of the new generation that would be required (wind and small hydro projects with thermal back-up);
  2. B.C.’s predominantly clean electricity makes for low emission gas extraction (attention: “Cleanest LNG in the World”);
  3.  A significant opportunity for the B.C. renewable energy industry, including First Nations (see Premier’s mandate letter to Minister Bennett);
  4.  First Nations participation in natural gas industry (see Premier’s mandate letter to Minister Rustad);
  5. Private sector investment, jobs and economic development in remote B.C. communities; and
  6. Royalty capture (less gas burned to produce gas, so more Provincial natural gas royalties).

Electrification of the fields and processing is not a novel concept. Just look at some current examples:

  1. The Bakken oil fields in North Dakota where the local utility, Basin Electric, is building a new 200 mile $347 million transmission line and two power plants;
  2. The Permian Basin oil fields in Texas will be serviced by the new $7 billion CREZ wind power supported transmission line; and
  3.  In eastern Ohio, electricity is being used for natural gas processing.

Here in B.C., the Northwest Transmission Line is being built to support future mining development in the northwest sector of the province. The electrification opportunity in the natural gas fields and processing plants is greater and even more certain that the mining potential.

The time for expansion of the B.C. transmission grid to support electrification is now. British Columbia has no shortage of renewable energy resources and developers keen to supply the electricity requirements of the natural gas industry.  Using clean renewable electricity to support large scale industrial development is a hallmark of this province. There are many good reasons to support electrification including reductions in greenhouse gas emissions. It is time to get on with it.

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BC Government Delays BC Hydro's Long Term Forecast

Today, the BC Government announced that it has once again delayed the delivery of BC Hydro's Integrated Resource Plan to Cabinet until August 3, 2013 due to uncertainty of the electricity requirements for the prospective liquefied natural gas (LNG) export projects to be located in northern British Columbia. The announcement stated that Government, BC Hydro and LNG proponents are currently negotiating electricity-supply agreements. The good news for the IPP sector is that the use of electricity is under serious consideration.

The potential size of the LNG load is extraordinarily large.  Yet the current electricity service to the region is insufficient to meet the potential demand. From what we know, energy/electricity supply decisions at Kitimat and Prince Rupert have not been made. There are options here; some low-carbon, some not so much. But because of the long lead time needed to meet the electricity supply requirements, careful planning must take place before the big decisions are made. But at this point in time, no prospective LNG proponent has the necessary agreements in place to start construction of the LNG facilities. The great BC LNG infrastructure build-out won't get started until the planning is done and big decisions are made.

With this new industry, the BC Government has the opportunity and is truly in a unique position to create a lasting legacy for the North, for the regional First Nations and the entire Province of British Columbia.  But leadership here is critical. And, most importantly, the Province must have a development plan that addresses GHG emissions, environmental stewardship and development of legacy infrastructure.  Giving BC Hydro some additional time to submit its 20 year supply/demand forecast is a good decision given the current uncertainty of the potential massive load in the North and the general enthusiasm for realistic load forecasts.

The big question is: whether the outcome of the discussions between Government, BC Hydro, and LNG proponents for the supply of electricity pre-determines the contents of the ultimate IRP?

BC Hydro Draft Integrated Resource Plan

Today, BC Hydro released the much anticipated draft Integrated Resource Plan - 2012 (IRP) (Executive Summary and draft IRP Discussion Guide) which is a long-term forecast on supply and demand for electricity in British Columbia.  Essentially, the IRP is to expected to be used as a key document for long-term electricity planning in the Province.

The draft report contains 14 recommended actions and is released to the public today for consultation until July 6, 2012. Then, sometime before December 2012, BC Hydro will submit the final IRP for approval by the BC Cabinet. People are invited to have a say at an IRP consultation event hosted by BC Hydro.

As expected, the draft IRP is long on measures to encourage energy conservation and efficiency but also includes a few recommendations for much needed infrastructure capital investment for both capacity (Revelstoke Dam upgrade) and transmission (Prince George to Terrace upgrade) purposes. The $7.9 Billion Site C Dam is proposed to move ahead with an expected online date of 2020. In the meantimne, the spot electricity market, the Canadian Entitlement and Burrard Thermal are recommended to used as energy supply gap fillers. 

For the BC renewable energy sector, the most noteworthy draft recommendation is:  

RECOMMENDED ACTION #8: Develop energy procurement options to acquire up to 2,000 gigawatt hours per year from clean energy producers for projects that would come into service in the 2016-2018 time period.

The prospect of new BC power calls is of course welcome news to the sector, but there is caution: (a) this is a draft IRP only; and (b) the draft IRP notes that any new electricity procurement decisions would made only when there is more certainty of the demand.  Most of the new power is expected from wind, run-of-river and biomass project as these are proven to be the lowest-cost options, but geothermal and ocean technologies may also be considered. The objective in the BC Clean Energy Act that the Province "generate 93% from clean or renewable sources" effectively prohibits new power from natural gas facilities, which is good news from a greenhouse gas emissions standpoint.

Much of the long term electricity load is contingent on the development of the proposed LNG export projects on BC's Northwest coast. If the LNG export facilities are built, the demand for electricity in the Province could exceed 25% of the existing BC Hydro load (based on an estimated 4 LNG plants at approximate use of 4,000 GWh/year each. For context, the current BC Hydro load is approximately 60,000 GWh/year). Decisions on the LNG export projects are still under consideration by the proponents, with some decisions expected before the end of the year.  

With bi-partisan political and First Nations support for the proposed LNG export projects, the British Columbia Government's $20 billion BC LNG Energy Strategy may yet be realized. And if so, be certain that it will be all hands on deck in British Columbia for the next few years to support this significant new energy intesive economic opportunity.

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British Columbia's New Energy Plan

Today, the BC Government announced another in a series of many energy plans and strategies. The 2012 Natural Gas Strategy actually puts energy front and centre for economic development in the Province. The policy is big on ideas, but short on details.

According to the Government, liquefied natural gas (LNG) is to be the key driver for the provincial economy for decades to come.  The global demand for liquefied natural gas is strong and BC's estimated natural gas reserves are substantial. Local First Nations have expressed support for LNG facilities and the pipelines that will bring the natural gas from the North. Nominating LNG as a pillar of the BC economy makes good sense. How the new energy plan is implemented is of course, critical.

For the BC renewable energy industry, growing the demand for electricity in the Province is a good thing. The important decision is how much of the new LNG development will be powered by renewable energy and how much will be from natural gas. The Gas Strategy seems to state that the first two LNG facilities in Kitimat, BC will be required to be fueled by renewable energy. The problem right now is the Province is short on renewable energy generation and even shorter on transmission.  Much needs to happen on both fronts before the Government's LNG objectives can be met.

Not to be forgotten are the Province's climate change goals.  Extracting and exporting more natural gas will put increased pressure on the Province's greenhouse gas emission objectives.

British Columbia is at a cross-road with respect to climate change policy and economic growth. The Province is blessed with an abundance of natural gas and buyers in Asia are willing to pay for it. At the same time, to its credit, the Province has laws which restrict GHG emissions. A clear and obvious hedge against GHG emissions is renewable energy. The challenge for the Province is to balance economic growth with a GHG intensive industry with its climate change laws.

Renewable energy will play an important role in the development of the Provincial economy. New electricity infrastructure, both generation and transmission, is critical to meet the opportunity presented to the Province.  Both mining for minerals and turning natural gas into liquefied form (LNG) for export, require massive amounts of energy. Meeting this new demand with renewable electricity with natural gas as a possible backup is smart fiscal and environmental policy.  GHG emissions are lower when electricity from renewable resources is used rather than natural gas to power the Province. 

In the coming days or months, we expect to see further details on the following issues:

  • The Province's definition of "clean".  Does this mean renewables only?
  • The BC Hydro grid. Is there sufficient electricity on the existing transmission grid for Apache Phase 1, Apache Phase 2 and Douglas Channel LNG facilities?
  • Carbon capture and storage. Really? Where?
  • Infrastructure Royalty Program Credits. Will this be available for electricity infrastructure (ie, new or upgraded transmission lines) ?
  • Self-sufficiency changes. Drought insurance is gone. What now? Increase in imports?  

Provided development of the natural gas fields and the mines in the North are in compliance with world class environmental practices, in cooperation and participation with First Nations and local communities, British Columbia is well positioned to be a major player in the new world economy. Some new thinking on old ideas is needed. But let's get it done while the opportunity is there.

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