IPPs are Cost-Effective

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IPPs are Cost-Effective

Presentation to Joint Review Panel

of Site C EIS

December 10, 2013

(Summary of Written Submission on Nov. 25, 2013)

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Philip K. Barton – Lawyer, Entrepreneur and Engineer.

Representing several IPP clients developing renewable projects in BC

Acted in past for developers, lenders and contractors in $500+ million of IPPs 22 MW ($65 million) Jamie Creek started in my basement: COD expect Q1 2014

Boughton Law – 50 lawyers in Vancouver

Focus on finance, mergers & acquisitions and litigation.

Steve Davis – IPP Consultant, Engineer, MBA

Past President of Independent Power Producers association of B.C. and developer of several IPP projects in B.C.

Presenters:

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EIS overlooks Alternatives

Alternatives are more cost effective

Steve Davis & Associates Consulting Ltd.

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IPPs have identified over 1,000 potential renewable projects in BC: 600 run-of-river projects;

400 wind projects;

40 biomass projects, and 16 geothermal projects.

BC Hydro’s 2013 Integrated Resource Plan (IRP) lists many projects with Unit Energy Cost (UEC) lower than Site C.

With limited time and resources, we have assembled a New Portfolio of projects which is more cost effective.

The IPP sector can quickly assemble and propose other new portfolios with lower costs and very small environmental impacts.

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BC Hydro assessed 3 main portfolios:

Based on these specific portfolios, BC Hydro asserts that

Site C is the most cost-effective for BC’s future electricity

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1 _{Site C EIS Technical Memo “}_{Alternatives to the Project}_{” (June 4, 2013)}

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BC Hydro

Clean

Generation

Block

5

1000 MW of

Pumped Storage

+

11 wind,

1 MSW,

1 ROR, and

1 Biomass

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BC Hydro

Clean +

Thermal

Generation

Portfolio

500 MW of

Pumped Storage,

588 MW of SCGT

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MW:

PROJECT:

SOURCE:

488 MW

Revelstoke #6 (Upgrade)

Table 3-24 of IRP

220 MW

GMS #1-5 (Upgrade)

Table 3-24 of IRP

320 MW

Geothermal Projects in

Lower Mainland TR

Table 3-15 of IRP

33 MW

Municipal Solid Waste

Clean Generation Block

80 MW

Wood Biomass

Clean Generation Block

1141 MW

New Portfolio #1 with Capacity ~ 1,100 MW

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All data is strictly from BC Hydro’s Documents (IRP & Technical Memo).

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New Portfolio #1 delivers 5,109 GWh of energy

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Furthermore, we assert:

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Site C AUEC = $110

$F2013/MWh

+$5

Sunk Costs

+$11

10% Cost Overrun

Revised Site C AUEC

= $126

$F2013/MWh

BC Hydro does not make these adjustments in its comparison of alternatives

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Site C vs New Portfolio #1:

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Adjusted Site C AUEC

AUEC Portfolio #1

(Rev+GMS+Geothermal)

$126 per MWh

>

$122/MWh

(All data from BC Hydro)

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MW:

PROJECT:

SOURCE:

488 MW

Revelstoke #6 (Upgrade)

Table 3-24 of IRP

220 MW

GMS #1-5 (Upgrade)

Table 3-24 of IRP

294 MW

Simple Cycle Gas Turbine

(SCGT)

50% of SCGT from BC

Hydro Clean+Thermal

33 MW

Municipal Solid Waste

Clean Generation Block

80 MW

Wood Biomass

Clean Generation Block

1115 MW

New Portfolio #2 with SCGT Peaking Gas

delivers 1,115 MW

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New Porfolio #2 delivers 5,112 GWh of Energy

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All data is strictly from BC Hydro’s Documents (IRP &

Technical Memo)

AUEC

=

$138/

MWh

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Site C vs New Portfolio #2:

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Revised Site C AUEC

Portfolio #2 AUEC

(Rev+GMS+SCGT)

$126 per MWh

or

$138/MWh

(All data from BC Hydro)

Still cost effective? Barely…

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1. Data: New Portfolio is assembled from BC Hydro’s IRP.

2. Prices: Bid prices for IPPs will be lower than the UECs by BC Hydro.

3. Asset Lives: Actual for renewable IPPs are longer than the figures BC Hydro uses in their UEC calculations.

4. Cost Adjustments: BC Hydro imposes adjustments on IPPs that are too high or unnecessary: soft costs, freshet, time of delivery, etc.

5. WACC: BC Hydro imposes lower Weighted Average Cost of Capital

6. First Nations: FN oppose Site C; FN support many IPP projects across BC.

7. Construction Risks and Over-runs: FN opposition and construction boom will cause great risk to BC Hydro ratepayers (and BC taxpayers with public debt).

8. New Portfolio: Private sector is ready, willing and able to accept all development risk, financing risk, construction risk and operational risk.

9. Economic Development: Many IPP projects across BC vs. single mega-project.

10.Non-Firm Energy: IPPs average supply is $68/MWh (BCH 2012 Annual Rpt).

Additional Points:

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IPP Cost Reductions vs Site C:

• Deduct Income Tax payments to government

• Deduct value of equity given to First Nations in IBAs

• More efficient EPA contracts with comparable penalties

• Consider non-firm energy as well as firm energy

Site C Cost Adders vs IPPs:

• Remove Cost of Capital support from Province

• Include Cost of equity during construction

• Match Water License Terms (Max 40 years)

Total of Additional Adjustments = $20 - $40/MWh

(Net Reduction of IPP costs vs Site C costs)

Additional Cost Adjustments

(not yet quantified)

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• IPPs are Cost Effective

• Our Portfolio #1 has an AUEC that is 3% less than Site C.

• Renewable portfolios can deliver energy and capacity

• Our pricing analysis used BC Hydro data

• And included several conservative assumptions

• Many new alternative portfolios can be created from the

1,000+ IPP projects identified – likely cheaper

• Site C is not the most cost effective

• Significant adverse environmental impacts are not justified

Conclusion:

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APPENDIX

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New Portfolios offer New Balance

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Bill Bennett, Minister of Energy and Mines stated:

“Governments make decisions on balance,

and the balance in this case leads us to think this is the

best available source of a large amount of electricity,

and that justifies the environmental impact.”

Vancouver Sun – December 7, 2013