Summary and Commentary of BC Hydro Signpost Update for 2021 Integrated Resource Plan

June 16, 2023
Travis Lusney

BC Hydro filed its Signpost Update for their 2021 Integrated Resource Plan (2021 IRP) with the BC Utilities Commission (BCUC). As the name suggest, the Signpost Update updates the 2021 IRP to reflect changes in system needs that go beyond the capabilities of Near-Term actions.  As described by BC Hydro, the updated 2021 IRP:

  • Accelerates or extends the timing of several of the existing Near-term Actions, including actions on energy efficiency, demand response, industrial load curtailment, electricity purchase agreement renewals, and utility-scale batteries; and
  • Adds a new Near-term Action to acquire approximately 3000 GWh of new clean or renewable energy from greenfield facilities in the province able to achieve commercial operation as early as fiscal 2029 and approximately 700 GWh of new clean or renewable energy from existing facilities prior to fiscal 2029.

As part of the Signpost Update, BC Hydro updated its demand outlooks for various scenarios contained in the 2021 IRP (i.e., reference, low load, north coast, and accelerated electrification scenario).  Under all scenarios, the demand outlook is higher at the end of the planning horizon (see figures below).

BC Hydro also updated its near-term actions to address system needs, while also introducing new Load Resource Balances for the various scenarios.  In addition to higher demand, BC Hydro now expects less supply to be available and committed in the future, which will further increase the supply need.

To acquire the new resources, BC Hydro says it will work with proponents and stakeholders on the design and engagement for the procurement.

Finally, BC Hydro put forward a recommendation for a “living” long-term resource planning cycle to address the uncertainty and rapidly changing energy sector.  BC Hydro recommended the next long-term resource plan would be filed in 2025, roughly 18 months after the expected conclusion of the 2021 IRP in early 2024 (over 4 years after the initial 2021 IRP filing).

Power Advisory Commentary

The Signpost Update that highlights growing system needs in BC follows similar outcomes in markets across Canada.  Climate change policy, emerging technologies, and changing customer preferences have resulted in a significant pivot for the electricity sector.  Whether it is Environmental, Society and Governance (ESG) mandates for corporations, sustainability objectives for municipalities, or broader government-mandated net-zero goals, it is clear that the energy transition and next build phase of the electricity sector is underway.

With BC Hydro’s power call announcement, they are now one of six Canadian provinces to have announced procurement targets for new resources over the next year.  Based on Power Advisory’s analysis, every region in Canada has a supply need emerging within the next decade and many do not have clear plans on how to address the need.  BC Hydro correctly notes that competition for resources – particularly non-emitting resources that are being encouraged through federal government grants (i.e., Incentive Tax Credits (ITCs)) – could increase project development timelines and costs.

BC Hydro is focused on energy resources.  In Power Advisory’s view, the challenges of a decarbonized economy for the electricity sector will be acquiring enough energy from non-emitting resources to meet electrification and fuel-switching needs.  Acquiring energy resources also allows BC Hydro to leverage its flexible large hydroelectric resources and may offer a path to maintain cost-effective electricity supply while the system expands. This is primarily because renewable resources are the lowest cost of new supply in the near-term and are expected to be even lower cost with the federal ITC grants.  A lot will depend on the design of the procurement and the challenges of developing projects in a market that has not seen much activity in the past decade.

The call for 3,000 GWh of energy is modest compared to other jurisdictions (e.g., 3,000 GWh of onshore wind would likely result in 800 MW to 900 MW of installed capacity).  The call for power is encouraging and the timelines BC Hydro expects resources to be built are achievable.  However, in recent years BC Hydro has signalled a lack of a need for new resources and generally discouraged new development.  This means that most developers will be exploring new sites or re-opening old development opportunities.  Resource analysis, community engagement, indigenous outreach and connection assessments will need begin immediately for projects to be prepared to submit a proposal.  Successful projects will need to be supported by local communities – and that requires time that may not be available. This is particularly true for Indigenous and First Nations entities that may be interested in partnering or participating in the procurement.  Indigenous and First Nations communities have a wide range of views and priorities that generally go beyond energy infrastructure and environmental impacts.  The rush to prepare projects for competition could result in negative backlash from communities as those communities work to understand what the impact of the project will have and what is the best arrangement to allow the project to move forward.  Having available time to complete robust community engagement and secure community support is an early primary risk in Power Advisory’s view to the procurement.

BC Hydro has also reiterated its need for utility scale energy storage resources in the South Coast.  This is an important announcement for the energy storage sector as it reflects the recognition by a major vertically integrated utility of the role that energy storage resources can be play in meeting system needs.  It is particularly important given the fact that BC Hydro has significant access to flexible resources through their large hydroelectric fleet and robust interties.  Even with those resources, energy storage will have a role to play in meeting region needs and supporting optimal power system operations.

It should be noted that BC Hydro admitted their approach in the 2021 IRP did not provide the necessary flexibility required to respond to evolving power system needs:

This approach (i.e., 2021 IRP approach) did not provide sufficient flexibility to respond to changing circumstances. The omission of a Near-term Action allowing for the earlier acquisition of new energy resources, if it was required to meet future electricity needs, appears to be a weakness of the 2021 IRP, when considered with the benefit of hindsight. However, while including a Near-term Action allowing for the earlier acquisition of new clean or renewable energy resources, if required to meet future electricity needs, would have allowed BC Hydro to respond to the changes set out in the Signposts Update without a pause to this regulatory proceeding, advancing such acquisitions would have required some form of regulatory review of the circumstances that led to this need. In other words, new and more flexible Near-term Actions would not and do not, solve the fundamental challenge: the potential pace of change during this period of energy transition requires long-term resource planning decisions and the regulatory processes to review those decisions to move faster.

BC Hydro’s conclusion is critically important for system planners, policy makers and regulators across Canada.  Planning and decision-making require time; however, the current processes must adapt to be able to ensure the electricity system can continue to provide its fundamental services while evolving to meet broader global challenges of climate change, net-zero and rapidly changing technology and customer preferences.  BC Hydro should be commended for admitting the shortcomings of its process and recognizing the need for change.  Too often planning and decision-making focus on “getting it right” instead of focusing on moving forward prudently with an appropriate mix of solutions that can be adapted as the future unfolds.

Power Advisory believes that the electricity industry should support the “living” planning approach BC Hydro has proposed.  Consistent updates to planning assumptions and outlooks are required to reassess where the system is at and what challenges are unfolding.  The sector should leverage the “living” approach with respect to procurements as well.  Experience in other jurisdictions demonstrate that boom/bust cycles of procurement are generally not effective and can damage the reputation of system planners and the broader electricity sector. Boom/bust cycles encourage developers to engage communities in a short timeframe to prepare projects for a small window of opportunity; an approach that does not always align with the priorities of those communities or the broader provincial policy objective.  A more productive long-term alternative approach is to commit to consistent ongoing procurements that increase or decrease procured amounts (or types) depending on evolving system needs.  This approach provides long-term support for project development and, more importantly, for community engagement that can create projects that are beneficial for all parties.  Further, annual or bi-annual procurements can offer the ability to allow competition between a wide variety of resources (e.g., continued operation of existing resources, expansion of existing resources, repowering of existing resources, and greenfield developments). This could be accomplished by allowing entities to offer different term lengths that reflect various capital commitments and investment horizons.   Finally, consistent procurements incorporate the dynamic changes that we’re seeing in the electricity sector. As the Signpost Update describes, changes to the grid can occur on both the demand side and the supply side.  Consistent procurements reduce the impact of project attrition and allow utilities and regulators to wind down or makes changes to projects that are facing unexpected (and potentially costly) challenges). Finally, ongoing procurements allow for better insight and information on the cost of resources and the capabilities of emerging technologies.

After almost a decade since large scale development has occurred in BC, the province is entering a large build cycle.  In addition to new resources, BC Hydro will likely require significant transmission expansion in the northwest for industrial and LNG developments.  The traditional solutions for BC Hydro – that is large scale hydroelectric resources – are well over a decade away.  Site C, which was discussed in the 2013 IRP, will reach in-service in 2025 and has faced many financial and technical challenges.  This means that the energy gap will very likely need to be filled by IPPs for many years.

1 BC Hydro Signpost Update, Section 2, pdf page 16