BC's New Electrification Plan is Embarrassingly Slight

[00:00:00]On Monday, June 15th, the British Columbia government released a new electrification strategy for the province, and I say new with air quotes around it. Uh it's called powering growth, fueling opportunity. It's called a comprehensive plan to power growth, strengthen strengthen communities, and support long-term economic development. The problem, folks, is that it's mostly repackaged programs that have been announced previously, and there are some serious deficiencies with it. I'm going to talk Antweiler. He's a an economist at the University of British Columbia.

[00:00:34]Werner, give me your overview on this plan.

[00:00:38]>> Hello, Mark. And um the plan that the BC government has released is indeed repackaging a lot of old announcements that we already well know are actually underway or are in the works. Uh for example, there are already upgrades happening uh to the Sham station uh at the W.A.C.

[00:00:56]Bennett Dam. Um these turbines are getting upgraded to deliver more power.

[00:01:00]And then Revelstoke Unit 6, that has been a long in the works. That will come online, too. So, these are essentially things that are already happening. Uh BC Hydro had a call for power in '24 and again in '25. There will be probably another one in '26. So, again, uh this is all uh new wind farms coming online, and that is well in the works. So, what is really new in the plan? Uh two potential hydro dams that are a little bit pie-in-the-sky. One is what's called Site E Dam, that is right at the border to Alberta downstream from the new uh John Hart Dam. And then there is another location that's closer to Vancouver that is in the Bute Inlet uh up the Sunshine Coast and a bit. And um that uh is a site that could be developed potentially. Now, um uh there are no engineering studies, so this is like uh uh probably two decades ahead and isn't going to address any of the needs we have uh that are much shorter term in the next 10 years.

[00:01:56]Werner, I want to you some uh percentages here about the electrification of the province because British Columbians pride themselves on being a clean energy province and this is a point that Adrian Dix, the energy minister and premier David Eby make all the time and I want to I want to prick the balloon because the province-wide electrification is 17%.

[00:02:22]That compares to Quebec, which is 40%.

[00:02:26]Ontario, which is 25% and only Alberta for the of the big provinces is lower at at 7%. They don't like electricity apparently in Alberta.

[00:02:37]And now the EVs, electric vehicles, as a percentage of the passenger vehicle fleet, 4.9%.

[00:02:45]Residences with heat pumps, 13.5% and when we get to business, commercial and industrial buildings, we don't have for those, but the likelihood of them being very high is pretty slim because of the size and complexity.

[00:03:03]So, at the end of the day, BC is not an electric province and the plan that the BC government and BC Hydro have foisted on us is not going to change that based on what we're seeing here.

[00:03:21]Do you agree or disagree?

[00:03:23]>> Yeah, so we're a very clearly a clean electricity province, but we're not a clean energy province and the difference is that our primary energy use is still driven a lot by fossil fuels and that comes from the fact that of course natural gas is really quite cheap here on the West Coast and we rely on natural gas for many different things including powering LNG plants. So, if you actually add up all the industrial use and the home heating use that's based on natural gas, you're getting very quickly to that number that you were quoting earlier.

[00:03:52]Yeah, we're not doing as well as Quebec because Quebec is relying a lot of electricity for heating. And I even though there is much to be said about making that more efficient, here in BC we're just not in that in that spot. And that means there is a really long and wide agenda to electrify a lot of different things and a lot more would need to be done to actually make us a clean energy province. We're really quite quite the numbers reveal it quite not.

[00:04:23]>> Well, I appreciate your professorial restraint on this topic.

[00:04:29]Yeah, I think you did a good job of summing it up.

[00:04:32]The Adrian Dix, the Minister of Energy, has talked about following the Norway model.

[00:04:38]And so what he wants Norway also has a very large hydro sector. And and also has an oil and gas sector.

[00:04:48]That's the the basis of their 1.7 trillion dollar sovereign fund.

[00:04:54]And what So what he wants is a future of greatly increased LNG exports, a lot more mines which these days are electrified, and and deep deep electrification, you know, like transportation and and buildings.

[00:05:12]And and then data centers on top of that which I think you pointed out earlier have a cap on them.

[00:05:19]All of that doesn't jive with BC Hydro's 1.4% a year load growth.

[00:05:28]>> No, BC Hydro has an integrated resources plan that looks at long-term changes mostly from population growth and increased industrial activity along a trajectory that's sort of business as usual. No major things other than LNG, the possibility of LNG being electrified. Now, whether LNG will be electrified, again, that is a big question. That is looking at the new plants. We know Woodfibre LNG and Cedar LNG will be electric, but these are relatively small plants about 2 to 3 million tons per year. The big questions are about Cedar LNG and initially they only will use electricity from the natural gas plants that they will put on a floating platform. If that gets a final investment decision and LNG Canada phase two, they have already a permit to use natural gas. So, they they may not ever really rely on electricity.

[00:06:23]So, we're going to see more fossil fuel use and more emissions. We're not going to see the electrification that the province actually thinks would make it clean. That's just not where the market is and um the final investment decisions are at this point. And that leaves data centers as a big question mark. And and here we need to have a very serious discussion about what this actually entails. So, let me give you some numbers here. Telus is proposing to build 150 MW data centers in Vancouver and Kelowna in the next number of years.

[00:06:52]And when you run those at, you know, a utilization rate of 85% you use up about 3,000 GW hours of electricity and that's you know, compared to maybe the 5,000 from the clean call for power from 2024 and and the additional ones from 2025.

[00:07:10]So, we're not near what we would need to actually grow data center significantly and that doesn't even cover, of course, what we need for LNG and for EV growth.

[00:07:20]>> The reason I'm harping on LNG, Werner, is because back in November the Prime Minister Prime Minister John Horgan made a speech at Terrace and he said, and remember he's got a PhD in economics from Oxford. You know, he's he's also a doctor professor or a doctor of economics. But, here's the point. He said, "I've looked at the West Coast production, which will be 1.9 million tons per annum." And he said, "We believe that can be increased by 500% by 2035, up to you know, 10 10 million tons per annum."

[00:08:02]So, if we were going to have basically six or seven more LNG Canada, and they were going to be electrified, because again, the point here is that the government in Ottawa and the government in Victoria are selling hard this idea of clean LNG where the liquefaction is is electrified. So, you you either have dirty LNG and and expand it, or you have clean LNG and electrify it, and you have to add supply. There's no way to make out There's no magic that can somehow can can change that calculation.

[00:08:40]>> Precisely. Any new LNG plant of the size of Cedar LNG or LNG Canada phase two at and they're producing 13 million tons of LNG per year.

[00:08:50]And if you multiply that you use some US plants as a benchmark, you get to around 600 to 700 megawatts.

[00:08:58]And they again, they run flat out through the year. So, you need essentially a site Cedar LNG or John Hart Dam are running at full capacity almost all the time to deliver that energy. We're just not there. Um, of course, BC Hydro is building the North Coast transmission line that will certainly power a Cedar LNG and mining projects. But when it comes to LNG, I really don't see where the power's going to come from.

[00:09:22]Of course, Cedar LNG is based on their own power running on natural gas turbine that's attached to their plant. And that's like the electric train. And it looks electric, but it's not really because the power's going to be coming from natural gas.

[00:09:33]>> Right.

[00:09:34]>> So, Um the other thing that isn't uh in this plan, and remember this includes BC Hydro, is any sort of major campaign to increase the electrification of homes with heat pumps or the electrification of industrial and commercial buildings with heat pumps with or to sub-significantly advance the adoption of electric vehicles, which is now 22% of all provincial sales, which is, you know, in Canada that's a that's one of I think that's the highest rate right now, but nevertheless, compared to other countries, you know, like Norway is only is 100% and China is 64.5% and you know, we're a third to a fifth of of what other countries are doing, and again, it belies this argument that we are have a clean economy, and there's no programs like this to significantly accelerate electrification of those sectors.

[00:10:36]>> That is quite right. The province and the country has fallen behind when it comes to electrification, especially in when it comes to mobility, where other countries are now way ahead. And we're basically still um running policies that are not accomplishing that. Of course, the answer is we need more affordable EVs in the marketplace.

[00:10:57]The door has been opened to some imports from China, but again, it's also other producers, especially from from Korea and from Japan, that are filling the gap, but again, the cost really has to come down for these vehicles. We need to to remove some of the obstacles when it comes to the charging in homes, but other jurisdictions are leading the way, and we can learn from that, and we're we're not adopting what's best practice elsewhere. That said, when it comes to buildings, again, we have to be a lot more creative to use heat pumps wherever possible, and finding ways to retrofit that as well. Um a lot more can be done. Um the we're treading water. We're not really making a significant progress.

[00:11:40]And the same goes for industry when it comes to the electrification of pipeline uh you know, the the compressor they use here. A lot more can be done to to decarbonize. Uh we're not there yet. And uh we're we're falling behind, you know, if you look at the overall greenhouse gas footprint of Canada, they're stagnating. It's uh they're leveling off at 700. We're you know, it's an inching down like by by a very very small amounts. And uh population growth is compensating and we're we're treading water.

[00:12:08]Can we do more? Yes, we can. Uh what are the right policies? That is the big question. Uh we definitely need more capacity. We need more transmission capacity as well.

[00:12:17]Um we need a lot more wind. We need a lot more solar where it's possible. We also need other sources like geothermal that we could have here in BC. Ontario is working nuclear. I have some stories about that, too. That's a bit expensive.

[00:12:29]Um it's a first-of-a-kind uh technology, but we certainly see the cost of wind and solar is coming down and we can have a lot more of that. We need to remove the obstacles to deploying them.

[00:12:41]>> Yes. And uh I want to talk uh about the economics of this over because I know you do a lot of work uh on the international economy, the adoption of electrotech, it's called electrotechnologies, uh wind wind turbines, solar panels, batteries, EVs, heat pumps, all of that stuff that's coming out of out of China.

[00:13:02]And China has scaled up to such a an enormous extent, driven the cost down so significantly that in most cases uh outside of North America, uh the electric uh option is generally the cheaper and more efficient option. And we're rapidly approaching a point where if you don't electrify your economy, you're beginning to suffer productivity issues, competitiveness issues. And if we're going to remain competitive and keep the wages that we enjoy and the lifestyle that we enjoy, we have to be at the forefront, not at the back. We have to be innovators and early adopters, not laggards. And would you agree or disagree with that argument?

[00:13:46]>> I think I agree with most of your points here simply because we need to invest in the future and the future is going to be based on electricity.

[00:13:57]And whether it's the generation, the battery storage, all the technologies that come along with that. Now, we need to be innovators in the space and the market is actually shifting. You mentioned there's a pivot point that has already crossed in China where EVs that are electric are now cheaper than the alternative. We are rapidly approaching that here, too. And the auto industry hasn't really woken up because they are lulled by the policies in the United States that are quite going in the other direction.

[00:14:26]And our Canadian producers are falling behind because they don't want to be at a different speed than the American counterparts in their companies. So, they're losing out on the market.

[00:14:38]The market is going to be dominated by the the new innovators in China that have actually mastered the supply chain.

[00:14:46]They don't make better vehicles, but they make better batteries and that is driving the cost much quicker than it is here.

[00:14:54]They're also innovating constantly into these new technologies and new chemistries for batteries. Whether it's going from nickel manganese cobalt versions of lithium ion to iron phosphate.

[00:15:05]The next generation of batteries is just around the corner. Where are we with this? Where are our companies in North America? It's not just Canada, but also the US really in that at the forefront of it.

[00:15:16]We have fallen behind in North America as well as in Europe and we're losing out to the innovators in China.

[00:15:23]>> Speaking of innovation, Werner, uh this is something that I think Canadians don't appreciate. And that is combustion technologies. And we could talk about the internal combustion engine, we could talk about boilers, we can talk about gas furnaces, and so on.

[00:15:37]But essentially, they can't be made much more efficient than they are now. We They've kind of reached the the limits of their their efficiencies. Their electric versions of those technologies have much much higher efficiency. So, an internal combustion engine, 20 25%, an electric motor, 90%. Just as a heat pump, 400% versus 90% for for the gas furnace you have in your house.

[00:16:04]And and here's the point I'm getting at, the cost competitiveness between combustion and electric today will not be the the the difference a year from now, because all of this technology has a long long innovation runway ahead of it. And China has got uh they've got scads of engineers working on these kinds of issue. The amount of innovation coming out of China in this area guarantees that prices will continue to go down, efficiencies will continue to go up, value will continue to go up, and so every year that we tarry, we fall further and further behind.

[00:16:45]>> Yeah, certainly that is the case. Uh uh China's great advantage is that uh they have uh cutting-edge engineers that are working in many different disciplines, and they have the money to throw at the problem. Our problem is underinvestment. Uh China has a huge savings rate. So, uh if you look at the composition of investment and consumption in China, uh 45% of uh every uh dollar of GDP is going to investment.

[00:17:08]Here in Canada, it's maybe like 15%. So, what we're seeing in Canada is we're uh we are a consumption society, not an investment society. That is vastly different in China, and that's the reason why they're getting ahead. Um if you were in to invest at the same rate, uh we would be seeing uh more risk capital being formed, and new ventures forming, new technologies being pioneered. Uh but here in Canada, uh investment isn't going to take great risks. Uh we have very conservative investors, and that means uh we're not seeing the productivity gains that we're seeing in other parts of the world. And unless we're changing uh more towards investment, and uh that means uh it's uh it's a painful shift because it means less consumption. But unless we're investing more into the future, we're going to be falling behind in our productivity. It's quite visible, and in the results, uh the lack of electrification, the lack of um new new tech companies that are pioneering new technologies, it's uh unfortunately just too visible in the data.

[00:18:07]>> And on that note, Werner, what you just described is the status quo report that came out on Monday, uh reflects that perfectly. It's not going It has no intention of is incapable of changing that. We're not going to catch up to the Chinese, we're not going to catch up to other economies that are electrifying. We're basically it's a status quo kind of a strategy.

[00:18:31]Thank you very much, really appreciate this. Uh I'm sure we'll be talking about it again in the very near future.

[00:18:37]>> My pleasure, Mark.