POWER July 2014 - 60

POWER BRITISH COLUMBIA
Global Business Reports
www.gbreports.com
with supplying LNG facilities with grid-based power according to
McTavish: " Northwest BC [where the LNG sites are located] is
dependent on a single radial 500 kV transmission line from Prince
George to Terrace that is subject to numerous small outages during
the year. As the LNG sector moves forward, we will probably
see the industry rely on their own gas generation for their power
needs; so there is signiicant opportunity for gas generation and
renewables combined with local transmission and distribution upgrades
in and around Kitimat, Terrace and Prince Rupert. A limited
transmission infrastructure in the north is also affecting the
construction of new industrial and IPP projects in much of BC.
The large costs and timelines required to interconnect into the
BC Hydro grid has signiicantly reduced the viability of some of
these projects. "
As the Liberal government faced the realities of its LNG promotion,
BC has revised some of its ambitious efforts to reduce the province's
greenhouse gas emissions. In 2012, the Clean Energy Act of
2010, which outlined an objective " to generate at least 93% of the
electricity in British Columbia from clean or renewable resources, "
was amended to allow for gas generation at LNG facilities to be
considered a " clean source " of energy. " Certainly the decision to
label LNG as a clean fuel source and the upcoming decision on
whether or not to allow as-yet-to-be-built LNG export plants to
power inside the fence will have an effect on IPPs, " commented
Jason Jones, business development director - power transmission
and distribution sector - environment practice, at Tetra Tech EBA.
Waxing or Waning?: The Role of IPPs
In the early 2000s, the Liberal government under Premier Gordon
Campbell took the view of developing IPPs to meet generation
demands. Although IPPs have had a presence in the province
since the 1980s, this strategy enabled private sector players
to make a signiicant impact in the market for the irst time.
Presently IPPs account for approximately 20% of BC's power
production.
In 2008, 27 electricity purchase agreements (EPAs) were awarded
to IPPs in a Power Call put out by BC Hydro. Of these 27, 14
projects have come online or are expected to come online in
the near future. The rest have had their contracts terminated
or deferred by mutual agreement between BC Hydro and the
respective developer.
Glen Ichikawa, president of Kawa Engineering, a Vancouver-based
engineering irm specializing in work with IPPs, explains the attrition
rate from the 2008 Power Call. " The irst is inancing;
some of these projects are millions (of dollars) over budget and
no one is making much money on them. Some companies have
gone belly up in the process. Lenders realize this and do not want
the exposure, so it is harder to get money. The other side is the
First Nation relationships; usually projects that fail have offended
bands at an early stage and thus the project is always ighting uphill.
Third, are construction costs. Contractors have lost money in
the past, so they have raised prices to de-risk themselves when
someone cannot pay. "
The project-developer model of British Columbia's IPPs
has had mixed success. Some projects begun by smaller local
companies never made it off the ground, while other projects,
such as GDF Suez's purchase of the Cape Scott wind farm
from Sea Breeze Power, were attractive M&A options for global
players. The province's IPP sector has consolidated to fewer,
larger players; namely Innergex Renewable Energy, Alterra Power,
AltaGas, Brookield Renewable Power and Capital Power.
Compared to earlier power calls, John Carson, CEO of Alterra
Power, sees the attrition rate as a structural reality: " The contract
structure of any power call will affect the number that succeed,
whether it is being more generous on dollars per MWh or the
times of year when certain 'revenue buckets' can be illed. In the
2006 versus 2008 call for power, contracts were totally different.
www . g e a . c a
engineering hydropower
weirs ¥ intakes ¥ gates ¥ lake taps ¥ pressure tunnels
penstocks ¥ powerhouses
1 to 100 MW
4
Global Business Reports // POWER BRITISH COLUMBIA
July 2014
http://www.gbreports.com
POWER July 2014

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