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Eight reasons to stop the Peace River Dam

by Reimar Kroecher

Peace River

The proposed location for the Site C Dam. Photo by Don Hoffmann


• Over the last four decades, Site C, the giant hydroelectric dam that BC Hydro plans to build on the Peace River in northern BC, has been rejected by both the BC Utilities Commission and the BC government. Having been seen as too risky and too costly, it is now back on the table. At present, there are already two massive hydroelectric dams on that river. Our politicians in Victoria, after forcing the (independent) BC Utilities Commission to step aside, are now determined to build this dam in order to supply electricity for the planned natural gas liquefaction plants in Kitimat. In addition, Site C would supply the electricity to power the pumps of the Northern Gateway bitumen pipeline. The natural gas and the bitumen would then be exported to Asia. Below, I have provided eight reasons why the Site C dam is destined to be an ecological disaster and a colossal waste of money.

1) Site C is a white elephant, a project that would produce power at a cost much greater than the power can be sold for. If built, it would push BC Hydro one step closer to bankruptcy. Here’s why: According to BC Hydro estimates, Site C would cost $8 billion and would take 10 years to construct. Under optimum conditions, it is rated at 1,100 megawatts or 1,100,000 kilowatts. On average, year-round, it might run at 80% capacity and produce 880,000 kilowatts. To obtain the kilowatt-hours produced per year, we multiply 880,000kw by 24 hours, by 365 days and we get 7,708,800,000-kilowatt hours. A few big industrial customers would use all of this power: The liquefaction of natural gas plant in Kitimat (LNG), Enbridge’s Northern Gateway pipeline and a few mines. At present, large-scale industrial customers pay 3.671 cents per kwh so the total income Site C would produce per year would be 7,708,800,000 kwh multiplied by 3.671 cents – an annual operating income of $282,990,800.

This yearly income of $282,990,800 is not nearly enough to cover the yearly operating expenses. To begin with, the $8 billion price tag is probably on the optimistic side. It does not take into account the new transmission line to Kitimat that would have to be built, the fertile farms that would have to be expropriated and the large sections of the highway from Fort St. John to Hudson’s Hope that would have to be relocated. In addition, typically, there are cost overruns so a price tag of $10 billion is probably more realistic. Hydro would have to borrow all this money by selling BC Hydro bonds, presumably paying an interest rate of about 3%. During the construction phase, Hydro would have to borrow about $1 billion each year and pay interest on that so the interest bill accumulated during the 10-year construction period would be $1.65 billion. The total cost of the project would be $11.65 billion – $10 billion construction cost and $1.65 billion accumulated interest. Borrowing all this money at 3%, Hydro would be stuck with a yearly interest bill of $349.5 million. Interest, of course, is not the only yearly expense. The dam’s projected life expectancy is 100 years so it needs to be written off during that time period. That adds another $100 million to the yearly expenses so now we have $449,500,000. With wages, taxes, maintenance, etc., totalling maybe $5.5 million, we get yearly operating expenses of $455,000,000. Comparing the yearly operating income of $282,990,800 with the yearly operating cost of $455,000,000, we see a yearly loss of $166,509,200.

The above analysis is based on a very favourable low interest rate of 3%. Should interest rates rise during the next few years, as many observers believe they will, Hydro’s yearly loss would increase dramatically. At a rate of 4%, Hydro’s yearly operating expenses would be $571,500,000 and its yearly loss would be $288,509,200. What’s more, Hydro has very little scope to increase the rate of 3.671 cents per kwh that big industrial customers are paying now. If that rate goes up, these customers would generate their own electricity using natural gas. The capital cost of a natural gas facility, producing about the same amount of electricity as Site C, would cost only about $1.5 billion so these facilities would not be saddled with the huge interest burden of Site C.

2) The steep banks of the Peace River are highly unstable so landslides and a great deal of sloughing would occur, reducing the volume of water held by the reservoir. The huge silting problem would reduce the capacity to produce power, making it even more difficult to generate the money to service the billions of dollars of debt.

3) Over 13,000 acres of prime agricultural land would be lost, as 107 kilometres of the Peace, Halfway and Moberly rivers would be flooded. This area, during the growing season, could produce enough food for all of northern BC. The Peace River flats have their own mini-climate so even melons can be produced there. As well, 12,000 acres of boreal forest (an effective carbon sink) would be lost.

4) The carbon footprint of Site C is enormous. Three and a half billion cubic meters of concrete will have to be poured and one and a half million cubic meters of wood will have to be burned, not to mention the use of heavy equipment for 10 years.

5) The new reservoir would cut the Yellowstone to Yukon Wildlife Corridor in half at its narrowest and most vulnerable point. Many large animals require these lands for sufficient habitat. Wetlands that support migratory flocks would be gone. The habitat of several red and blue-listed species would be destroyed, including fisher and Northern Myotis bats.

6) The majority of First Nations in northeastern BC are adamantly opposed to the dam. In an area already overburdened with oil and gas developments, destroying the last relatively untouched areas in BC’s Peace River Valley is the last straw for First Nations and other residents. The communities of northern BC have born the brunt of industrial development in the province for decades. People are still feeling the impact of the first two dams that flooded people out of house and home.

7) The Peace River Valley is an area of stunning natural beauty. Destroying this valley to build a money-losing power dam to export bitumen and LNG to Asia, which, in turn, will dump more greenhouse gases into the atmosphere, seems like utter madness.

8 ) If Site C was built and its power used for export-based LNG plants and bitumen pipelines, the Canadian dollar would rise substantially above parity, sending even more shoppers south of the border. The Canadian Retail Council has called this a $20 billion dollar hole. That hole would become much bigger – $30 or $40 billion dollars per year. The jobs lost in Canadian retailing and manufacturing would far outweigh the few short-term construction jobs created by the carbon pipelines and Site C.

So why, given all these drawbacks, is Site C even on the agenda? It seems there are powerful groups in North America who would love to see BC Hydro drift into insolvency. These groups applauded Victoria’s policy of forcing BC Hydro to buy power from independent power producers at prices far exceeding the prices this power can be sold for. Should BC Hydro become insolvent, it would be a golden opportunity to privatize it and for powerful vested interest groups to pick up some of the best hydro electric facilities on the continent at bargain basement prices.

Reimar Kroecher taught economics at Langara College for 30 years. For more information about supporting the protest against Site C, visit the Keep the Peace Blog at https://keepingthepeace.wordpress.com/ and the Peace Valley Environment Association at www.peacevalley.ca

7 comments

  1. G.N. Thompson /

    Well written…thank you. Would add that decommissioning costs are not included in their estimate…Washington state have learned that decommissioning can cost more than construction.

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  2. Tasikat /

    The last paragraph contains a mischaracterization and is misleading.

    IPP power has always been comparable and less than BC Hydro’s marginal power cost. New green and clean power by IPPs are 30% to 50% less than that of BC Hydro. This is because IPPs pay 4.1 cents a KWh to governments in fees and taxes, while BC Hydro pays only 0.2 cents a KWh to the province.

    The average price of IPPs in the Clean Power Call, after taxes paid, is only 6.9 cents.

    While BC Hydro’s Site C is anywhere from 10 to 12 cents (cost overruns).

    IPP power imposes no risk to the consumers, while Site C carries a huge risk of cost overruns and interest rate increases.

    Finally the market price of power is about 7.6 cents to 10.9 cents if you include externalities like non-GHG pollution from coal and gas and environmental degradation.

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  3. frank lehmann /

    Excellent assessment of site C dam.Is anybody out there listening or are we dealing with corruption on all levels of government?

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    • Tasikat /

      Site C is pushed by the public unions, in particular by the BC Hydro union, and the BC Hydro management and staff whose salaries are about 40% above the market rates.

      The government is not so much in favor of it, and IPPs are far better for the province.

      This article fails to mention the role of the public unions.

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  4. I personally do not want to see Site C built, but I am really tired of people creating facts to create support for their own ideals.

    Whether intentionally or unknowingly, Kroecher’s income estimate for Site C’s potential is understated. BC right now uses more electricity than we produce, but BC Hydro earns a profit each year. They can do that by trading power generated by our dams.

    Natural gas and coal generating stations must run at full capacity to be efficient. When the demand for electricity drops the price for this energy goes down because it is surplus. A hydro-electric dam can increase or decrease its generating capacity with the turn of a valve.

    BC Hydro will buy power from other provinces and states at a lower rate when everybody is sleeping, then sell it back at an increased rate when there is and increase in demand. Thereby earning a profit.

    If you don’t believe me then go down to the river and watch it for a day. You will usually see the river rise fairly quickly around 6:00 am then slowly fall around 9:00 am. Then it will start to gradually rise again mid-afternoon and be reduced to its lowest level around midnight. The river levels sort of coincides with the times you cook your meals and are active in your homes.

    Hydro-electric dams can also help ease problems with instability and unpredictability with our power grid today. Simply put by opening or closing a valve a dam can fairly quickly increase or decrease the amount of power available to the grid if there is a sudden fluctuation in usage which may cause brownouts or full blown blackouts – thereby allowing us to watch “the Daily Show” each night in our ignorant bliss.

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  5. Miriam Khan /

    Congratulations on having this well-written, poignant article published on what is set as my PC’s home page, Common Ground! May ‘C’ never see the light of day. -MK

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  6. I’m surprised to find so many Common Ground readers apparently defending or attempting to minimize the impact of this proposal! It’s like “HUH!!?!?”. Overall, this is one of the stupidest plans I’ve heard of lately! Nothing can justify the massive carbon footprint involved. STOP this proposal by writing to your MP’s and MLA’s NOW. Just tell them you won’t vote for them if this is approved despite the overwhelming evidence against it!

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