Customer Produced Power - Improving BC Hydro Policy

Year: 
2016

Preamble

Renewable, sustainable and carbon neutral power is a key to our province’s future. Other jurisdictions around the world, most notably the southwestern U.S., have passed policy and legislation that has fueled impressive renewable energy industries that include solar photovoltaics (PV), wind, and other renewable energy sources, in addition to hydro power. In the southwestern U.S., customers are producing power at prices below the cost of grid supplied power creating a new economic paradigm for power supply.

BC Hydro’s current net metering program has had some success, but there is room for improvement and further stimulation of this economic sector, which would result in many additional benefits for the Province.

Business Issue

Canada’s participation in the flourishing industry of solar power and other renewable energy production, other than hydro, lags behind that of our industrial trading partners. This is primarily because BC Hydro has abundant, inexpensive hydro power and wind power.

The B.C. solar PV industry has, however, developed capacity with a labour force of over 600 people and over 200 businesses, including a number of Canada’s industry leaders. Most of these trades people and companies also install wind, micro-hydro, and solar hot water systems, but to a far lesser degree than solar PV.

At present, market conditions for solar PV in B.C. do not provide opportunities for significant industry growth. The Province’s energy policy is supportive of emerging new technologies, and a solar PV project has been approved and implemented in the best solar energy location in the province, but it still demonstrates a significant economic cost disadvantage.

In the future, solar PV is expected to become competitive in B.C. and, at that time, B.C. will need to consider the major opportunities to benefit from innovation, industrial and economic development that growing the green business sector can bring.

Background

The Province of B.C. has a world-wide reputation for its clean energy and has set a high precedent through its work on climate action.

Solar PV is a reliable and proven technology that has great potential to deliver clean electricity right into the core of B.C. communities with the need for transmission to enable a firm energy supply where the solar PV is an intermittent source. It can displace energy demand right at the point of use. When viewed on a rooftop, solar PV is a visible reminder that energy supply comes at an environmental cost and that renewable energy and energy conservation are fundamental tenets of provincial policy.

Worldwide use of solar PV today is small, accounting for only 0.1% of total global electricity generation. However, deployment of the technology is rapidly accelerating with an average annual growth rate of more than 40% from 2000 to 2008.[1]

The global solar PV industry is thriving with annual global revenues now over $40 billion (USD). According to the International Energy Agency (IEA), if there is an effective policy effort in the next decade to allow for an increase in solar energy production, cost reduction and ramp-up of industrial manufacturing for mass production, solar PV could provide 11% of global electricity production by 2050.

Accounting for 80% of global installed solar PV capacity, a small number of countries with strong policy regimes are at the forefront of this technology sector. Many of these regimes have led with substantial subsidy costs for their end-use customers or taxpayers and have run into significant electrical system problems trying to manage the impacts of the intermittency of this energy source.

Home and Business-Based Renewable Energy Production Opportunities

Solar PV is a commercially available and reliable technology that converts solar energy (sunlight) directly into electricity by harnessing the solid-state physical properties of semi-conductors to create voltage when subjected to light. Typical solar PV systems in B.C. produce approximately 1 MWh per kWp per year.

Another exciting option is for small wind turbines, available for homes to collect wind energy, producing approximately no more than 100 kW of electricity. These are useful not only in homes, but farms and small businesses. They are helpful to lower electricity bills and offer a source of backup power. Wind availability is the main factor in installing a wind turbine. Local zoning regulations may also limit the minimum lot size that a wind turbine can be placed on. Typically, these small wind installations are not economic versus the BC Hydro supplied clean energy, but may be economic in more remote applications.

Micro-hydro, while a possibility, is only installed in rare situations. This is a type of hydroelectric power that produces electricity in the range of 5 kW to 100 kW using the natural flow of water. Micro-hydro is often accomplished with a Pelton wheel for high head, low flow water supply. Typical installations consist of a small dammed pool, at the top of a waterfall or elevation drop in a watercourse, with several hundred meters of pipe leading to a small generator. Typically, these small hydro applications are not economic versus the BC Hydro supplied clean energy, but may be in more remote applications.

Distributed Micro-Generation

Grid-tied electricity generation that is on the site of, or close to, an energy demand is referred to as ‘Distributed’. Electricity generation, typically less than 100 kW, that involves meeting the energy needs for single buildings or a small number of buildings is called ‘Micro-generation’. Distributed micro-generation is a complimentary model to the conventional model for power generation where centralized large generation facilities transmit electricity over long-distances to load centres. The only commercially available renewable energy technology that can be widely deployed in the built environment for reliable power production at this scale is solar PV.

These distributed micro-generation concepts can reduce the amount of energy required from main generation stations.

Distributed micro-generation with solar PV in B.C.’s communities may present an opportunity to address many of the issues that current B.C. energy policy seeks to accomplish, particularly as this option continues to become more economic in the future.

Status Quo – BC Hydro’s Net Metering Program

The BC Hydro net metering program is designed for both residential and commercial customers who want to connect a small electricity generating unit to the distribution system. Generating units up to 100 kW in capacity using a clean or renewable energy source are eligible to participate in this program.

Net metering customers use the recently installed smart meters to track electricity used and produced. When a customer generates more electricity than they use, they receive a credit on their account to be applied against future electricity consumption.

A customer who installs a generating system is assigned an anniversary date the day they connect it to the grid. Each year, at the anniversary date, if they have an excess generation credit remaining on their account, BC Hydro pays the customer back at the published rate of 9.99 cents per kWh.

This rate is above BC Hydro’s evolving definition of its long run marginal cost of energy acquisition, which is now expected to be approximately 8.5 cents per kWh. BC Hydro generally looks to acquire energy, when it is needed at costs less than its anticipated long run marginal cost of clean energy.

BC Clean Energy Act

Passed into law on June 3, 2010, the Clean Energy Act (CEA) is a made-in-B.C., dedicated piece of renewable energy legislation.

The following summarizes the key components of this Act:

  • The Province is to achieve electricity self-sufficiency by 2016. The demand-side management target is raised to an aggressive 66% of new supply (which BC Hydro currently exceeds);
  • It sets a clean and renewable energy target of 93% (the highest standard anywhere in North America and one BC Hydro exceeds);
  • Certain major electricity projects are also exempted from BCUC regulation;
  • BC Hydro is to deliver comprehensive Integrated Resource Plans to Cabinet, every 5 years;
  • BC Hydro is made stronger by its merger and re-integration with BC Transmission Corp;
  • No clean energy projects are permitted in parks or conservancies;
  • Environmental cumulative impacts of clean energy projects are to be taken into consideration in the Environmental Assessment Act;
  • There is a feed-in-tariff, but only for emerging technologies (i.e., ocean and others to be prescribed);
  • Smart meters are to be added by 2012 (which BC Hydro has accomplished below cost budget);
  • Creates a First Nations Clean Energy Business Fund (with details to be prescribed by regulation);
  • Mandates reductions of B.C.'s greenhouse gases for prescribed periods to 2050; and
  • Standing Offer Program to be revamped (i.e. prices, size and included technologies).

The feed-in tariff section of the act is currently not being adhered to by BC Hydro. From the BC Hydro website:

“In light of efforts to minimize electricity rate increases, the B.C. Government is not planning to proceed with the implementation of a British Columbia Feed-in Tariff (FIT) Regulation at this time.

The Regulation would require BC Hydro to establish a FIT program in accordance with the Clean Energy Act.”

For information on existing power acquisition opportunities for small-scale generation, please see Standing Offer Program and Net Metering Program.

Policy Alternatives

While provincial and BC Hydro policies allow for net-metering, they provide minimal incentives for customers to use renewable energy or grid-intertie. In B.C., if you have excess energy to sell back to BC Hydro generated by a renewable source, you are credited at a fixed rate that is between the two rates that energy is purchased at, providing minimal payback to offset the cost to install renewable energy systems.

Contrasting this are the policies in some European countries and recently Ontario where what is known as Advanced Renewable Tariffs (ARTs) or Standard Offer Contracts exist. ARTs set a specified rate to be paid for the electricity generated over a fixed period of time by grid intertie systems. These rates are significantly higher than the market price of buying electricity. Ontario and Germany are examples of very costly implementations of solar PV energy supply. However, Germany has accomplished some of the lowest implementation infrastructure costs, which it will be useful to learn from.

The benefits of ARTs are two-fold:

  1. They guarantee a faster payback to help compensate the high initial capital investment, which makes renewable energy more affordable; and
  2. They help encourage a sustainable base of electricity generation for the future.

The negative aspect of ARTs and FITs is that they support, at taxpayer or ratepayer expense, uneconomic acquisition of power, particularly in a B.C. context.

In implementing ARTs, Germany has successfully implemented 21,000 MW in 7 years and created 170,000 new jobs.[2] The key elements of their ARTs are:

  • guaranteed and priority access of renewable energy to the grid;
  • guaranteed fees for 20 years and differentiated prices between energy options (e.g. photovoltaics requires a higher capital investment for the amount of power produced, so they are granted a higher rate of return than wind, which is more cost competitive); and
  • no limitations set (i.e. prices wouldn't stop when a certain number of megawatts were reached so investment in production facilities occurred).

Germany, however, has one of the highest costs of power supply in the world and is having a number of challenges absorbing the acquisition of this intermittent energy source.

In 2010, the B.C. government released the Clean Energy Act that includes provision for Standard Offer Contracts and Feed-in Tariffs. This is an important move forward to increase renewable energy supply in B.C.

The B.C. government, for the benefit of ratepayers, has deferred implementation of its FIT policy to avoid acquiring uneconomic sources of intermittent power, which it may then have to sell at a loss. Solar PV technology and installation costs continue to decrease considerably faster than other potential sources of energy for the future and may be expected, at some point, to become an economic and firm source of energy supply. Now will be an opportune time to develop strategies and plans for the future of solar energy in B.C.

Summary

The Province of B.C., in the future, may have significant potential for distributed micro-generation, with the most achievable form being solar PV systems.

The Clean Energy Act of 2010 includes provisions for a “feed-in tariff” system for energy produced by BC Hydro customers. This portion of the act could be used to enable solar PV as a distributed micro-generation opportunity, when this technology achieves a level which could represent an economically successful source of energy in the future.

At this point in time BC Hydro is preparing to develop its next Integrated Resource Plan (IRP) for 2018.  The IRP process will likely enable a significant opportunity for consultation and engagement on energy resource options and resource balance planning. The time is now right for advocacy of a solar PV strategy scenario in the IRP development. 

THE CHAMBER RECOMMENDS:

That the Provincial Government and BC Hydro, in the process of preparing the next Integrated Resource Plan, develop a solar PV strategy and scenario for the future supply of economic, reliable and firm solar energy for B.C., encouraging local innovation.

Footnotes

[1] From CanSIA Report “Solar Power Feed in Tariffs for British Columbia: Canada’s Clean Energy Powerhouse and Global Leader on Climate Change”.  September 2010.

[2] “Net Metering: One Sky Case Study”. Allison Bryan and Nikki Skuce. 2006.

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