Is the Site C hydropower dam under construction on the Peace River in British Columbia economic?

The answer is, apparently, yes.

I present the arithmetic below.  While it may seem long and complicated it is just arithmetic and actually very easy to follow if you take it step by step.  I use the cost of electric power to be provided to the Woodfibre LNG plant in B.C. as the basis for the calculation.  Note that these are scoping economics with many simplifying assumptions to get a quick, ballpark estimate.

The normal operating power required by the Woodfibre LNG plant is about 145 MW.  See: http://askwoodfibrelng.ca/how-much-electric-power-will-your-project-require-on-an-annual-basis/

      145 MW x 8760 hr/yr x $83.02/MWhr = $105 million/yr electric power bill

      1 MW = 3.412 million BTU/hr, therefore, 145 MW = 495 million BTU/hr

      Since 1 cf of natural gas yields approximately 1000 BTU, 495 million BTU/hr = 495             thousand cf/hr (normally written as 495 mcf/hr, which is 11.9 mmcf/d)

      495 mcf/hr x 8760 hr/yr x $3.00/mcf = $13 million/yr natural gas bill at 100%                       efficiency. 

The question is: does $83.02/MWh reflect the true lifetime cost (Initial Capital for Site C + Transmission Line Upgrades + On-going Expenses ) of low-carbon, clean hydropower like Site C?

Assume 1,100 MW capacity for Site C and assume 80% of capacity. That is 7,700 GWh/yr or 7,700,000 MWh/yr. Assume a very conservative fifty-year life for Site C (Site C is designed for a 100+ year life).

At $83.02/MWh, Site C will generate $640 million/yr in gross revenue, or $25 billion over 50 years.

That indicates an annual return of probably at least 5-10%, which is quite acceptable, if the Site C hydropower project ends up costing $10 billion - and that doesn't count the benefits of the reduction in GHG emissions that it provides or the stimulus to the regional economy from the availability of low-carbon, hydroelectric power.

An electric power cost of $83.02/MWh, which is equivalent to $0.08/kwh, is a little more than the average Alberta consumer is currently paying. For example, the undersigned is currently paying $0.04/kwh on a floating rate on an ENMAX residential utility bill, but this is an historically very low rate. ENMAX currently offers residential consumers five-year term rates at just under $0.07/kwh. However, electric power rates to large industrial customers can be expected to be lower than residential rates.

As cheap coal-fired power is phased out, as natural gas prices increase, and as carbon taxes increase, such low electric power costs can be expected to increase for customers currently benefiting from low natural gas prices. But it's unlikely hydropower will be cheaper than natural gas in the foreseeable future. The difference is the price to be paid to reduce GHG emissions.

It would be interesting to find out the current cost and profitability of co-gen power from the oil sands and the reduction in GHG emissions achieved by utilizing the waste heat from natural gas burned to provide extraction and process heat in the oil sands. Currently, about 2,200 MW of that is tied-into the Alberta power grid.

Mike Priaro, P.Eng.

Calgary

403-281-2156

Author Bio 

Mike Priaro, B.Eng.Sc. (Chem. Eng.), U.W.O. '76, P.Eng., Lifetime Member Association of Professional Engineers and Geoscientists of Alberta (APEGA), worked in facilities, production, operations and reservoir engineering, as engineering consultant, area superintendent, and engineering management in Alberta's oil patch for 25 years for companies such as Amoco and PetroCanada.

He increased oil production from the historic Turner Valley oilfield and brought in under-balanced drilling and completion technology to drill out, complete, and test several of the highest producing gas wells ever on mainland Canada at Ladyfern. He co-authored ‘Advanced Fracturing Fluids Improve Well Economics’ in Schlumberger's Oilfield Review and developed the course material for the ‘Advanced Production Engineering’ course at Southern Alberta Institute of Technology.

Mike has presented his work to Canada’s House Committee on Natural Resources in Ottawa and to the Senate Committee on Transportation and Communications in Calgary. He has had work published by: Alberta Oil magazine on Oct. 20, 2016; World Pipelines magazine in September 2016; the Macdonald-Laurier Institute in the March and April, 2014 and February, 2015 editions of Inside Policy magazine; U.S. energy industry websites such as RBN Energy; in the July 17, 2014 edition of the Oil and Gas Journal; in Petroleum Technology Quarterly, Q3 2014; and in several columns in the Calgary Herald, Edmonton Journal, Montreal Gazette, Halifax Chronicle Herald, and others.

Mike has no formal connection to any oil company, environmental organization, think tank, labour organization, lobbying or special interest group, academia, or to provincial or federal politics.

In 2015 Mike provided "A Preliminary Engineering, Economic, and Environmental Evaluation of ASRL's Partial Upgrading Process" to Alberta Sulphur Research Limited and presented it to 80 representatives of ASRL's member companies. ASRL partial upgrading subsequently obtained Alberta government funding and industry support. On Jan. 29, 2016, the Alberta Government made partial upgrading a priority based on its Royalty Review Panel’s recommendations. As of Nov. 2016, the ASRL partial upgrading flow test pilot is running at CANMET/NRCan’s research facility in Devon, AB.

In 2016 Mike was invited to be a Bowman Centre Volunteer Associate at the not-for-profit Bowman Centre for Sustainable Energy. Its mission is 'to catalyze big energy projects which drive Canada’s energy strategy and generate sustainable wealth and jobs'.

Mike’s work can be found on his LinkedIn pages:https://www.linkedin.com/in/mike-priaro or Behance website:https://www.behance.net/Mike_Priaro

Mike is available for special projects and speaking engagements.