The Regional District of Central Kootenay is urging the B.C. government to loosen the rules on who can generate and sell hydro power in the province.
A March 5 letter signed by RDCK board chair Aimee Watson states that rural and remote communities are increasingly vulnerable to power outages resulting from long transmission distances, aging infrastructure, extreme weather events and wildfires.
“In this context, small-scale and decentralized generation systems should be viewed as a strategic asset within the provincial electricity system,” the letter states. “Locally based utilities and generation facilities can improve reliability, reduce dependence on long-distance transmission infrastructure, and strengthen the resilience of rural communities that are often at the end of the grid.”
Although the RDCK letter says that this is a province-wide issue, it expresses support for one specific independent power producer – Silversmith Power and Light, a historic hydro power generating station in Sandon, the oldest continually operating hydro plant in the country.
Its manager, Hal Wright, says that unless provincial policies change, his business might not survive.
“We may be forced into insolvency,” he says.
The plant’s turbine and generator convert local creek water into electricity and has done so for more than a century beginning with a silver mining boom in the 1890s that had the population of the town at more than 5,000. By the time Wright bought the plant and began restoring in 1996, the miners were long gone and the population of Sandon had decreased to its current two dozen. The functioning power plant is now part of Sandon as a tourist attraction.
The type of power plant at Sandon is known as run-of-river because it uses the flow and elevation drop of water from creeks and does not require a dam or other water storage.
There are 65 such hydro suppliers of various sizes in the province, and another 54 independent suppliers of energy from wind, solar, biomass or waste energy recovery.
Wright’s ability to sell power is limited by government policy, which allows sales by independent power producers (IPPs) like Silversmith only to BC Hydro, which is the province’s sole buyer, grid operator and retailer.
IPPs are not allowed to sell electricity to end users (residents or businesses), said BC Hydro media relations spokesperson Kyle Donaldson in an email. Consumers can not choose their supplier, and buying from a supplier other than BC Hydro “is not permitted under current provincial direction,” he said.
For some IPPs, the price BC Hydro is willing to pay them for their power is not high enough to run the operation, Wright says.
He says his power plant could produce 440 kW of electricity, but produces much less because he is allowed to sell only about 23 per cent of his product to the BC Hydro grid at about seven cents per kWh (a reasonable price, he says). But after that point the price drops to less than one cent per kWh, which Wright calls an “artificially low price.”
BC Hydro says paying low rates to small producers helps it to minimize electricity costs for its customers across the province.
“BC Hydro is focused on keeping rates affordable for customers, and we actively manage our electricity supply costs, including power purchased from IPPs,” Donaldson said.
Even if IPPs, including solar and wind sell into BC Hydro’s grid, its customers can not choose to buy “green power.”
“Electricity from different sources is blended together, and customers do not choose energy from a specific generating facility,” Donaldson said.
Contract renewal?
Wright’s 10-year contract to sell even that small amount of power to BC Hydro expires in 2027 and he does not know whether it will be renewed. He says BC Hydro has been choosing not to renew contracts with some other producers around the province.
“We are not asking for special treatment. We are asking for fair wholesale rates, contract renewal and stability to continue serving our communities. Without it, this 129-year-old hydro station will face closure.”
Jack Magnus, director of engagement and operations for Clean Energy BC, an industry association, said in an interview that B.C. Hydro’s dominance of the industry allows it to to manage contracts and large complex infrastructure in a centralized way that is efficient for the company.
It would be less streamlined, he says, for BC Hydro to work with small independent projects.
But Magnus argues that small decentralized resources are what the province needs, and his reasons echo those put forward by the RDCK.
The province needs a mix, he said, that includes small hydro, wind, solar, batteries and potentially geothermal. Even if B.C. don’t need more run-of-river IPPs (the province has about 65 of those), it should be supporting those already in existence, he says.
“At the very least, we should be supporting the existing facilities, which have for decades and continue to provide local and regional benefits economically, reliability for the grid as well, and they also are resilient to tariffs. And thanks to their long experience and the technology itself, do have a relatively low footprint.”
He said the rate Wright is getting from BC Hydro is “extremely low.”
Magnus said there needs to be a transparent process for the review of the contracts between BC Hydro and IPPs, many of which are covered by non-disclosure agreements and therefore cannot be publicly scrutinized. He said the review needs to include an assessment of the value that is being delivered, and that the IPPs should be compensated for that value.
“And those values are numerous … the future of our grid isn’t really about one technology winning. It should be about a team of resources, right?”
RDCK chair Aimee Watson told the Nelson Star that a power outage in rural areas can mean no cell service, internet or land lines, leaving no way to communicate with essential services across long distances.
She said improving the contracts with small power producers would be “an incredible opportunity to support rural power production in a changing climate with so many pressures for essential services. … We need to really harness it, not impede it.”