Should B.C. be trading power with the U.S.?

Photo: Bartz/Stockmar, CC BY 4.0. Diagram courtesy of Prof. Werner Antweiler, Sauder School of Business, University of British Columbia

B.C.’s sales and purchases of electricity with the U.S. have come up in two contexts recently.

In December 2023, B.C. set a record by purchasing approximately 1,500 gigawatt hours from the U.S. Should B.C. buy U.S.-generated electricity? The second question is should B.C. sell clean hydro-generated electricity and buying coal- and gas-generated electricity?

Powerex (a subsidiary of BC Hydro) trades power on the Western Interconnection, which includes B.C., California and 13 other U.S. states.

Why does B.C. belong to an interconnection? Belonging to a cross-border grid does two things. First, trading power across the grid can push the price of electricity down. On the electricity exchange, suppliers offer electricity and purchasers select the lowest cost supplier (and wind and solar are now cheaper than fossil fuels).

Second, it allows risks to be spread across the grid. Individual generation sites may go down but belonging to a large grid means electricity can be purchased from other generation sites.

Even during the dark ages, where much of the western seaboard’s electricity was produced by coal and natural gas, regulators and power producers needed wider grids to increase stability.

The best argument for belonging to a large grid today is supply and demand—the supply of renewables and spreading out peak periods of demand.

First, the supply. Wind energy fluctuates locally and solar peaks during sunny days. Spreading out 34 gigawatts of wind and 28 gigawatts of solar (2021) from B.C. to southern California evens out the renewable supply. The Western Interconnection can support more intermittent renewables than B.C. alone.

Then comes the demand. B.C.’s electricity usage peaks during the winter, while Californa’s peaks during July and August. Winter temperatures are generally mild along the Pacific coast but can drop to -20 C inland. Participating in the Western Interconnection evens out demand and makes space for more intermittent renewables.

There aren’t really any alternatives to participating in the Western Interconnection. B.C. utilities have to meet not only average electricity demand, but peak electricity demand. Cold days during the winters of 2022 and 2024 set demand records near 11,000 gigawatts. Without the interconnection, B.C. would have to massively overbuild electricity generation. B.C. would be forced to build fossil fuel plants, which run only a few days or a few weeks per year. If unusual conditions raised the demand higher, even for a few hours, there could be blackouts.

So, if trading electricity through the Western Interconnection reduces prices, why are BC Hydro and FortisBC raising rates? The problem is not trading, it is that BC Hydro is generating less electricity.

Up through 2022, BC Hydro bought and sold electricity on the exchange but generally sold more electricity than it purchased. In 2023, the first half of the year had less precipitation and was followed by an early snowmelt, leaving B.C. reservoirs startlingly low, resulting in less hydroelectric power. To make up the shortfall, B.C. purchased more electricity through the Western Interconnection. The new Site C dam and the 2024 clean energy power call will increase the supply of electricity but global warming promises more unpleasant surprises.

Is BC buying dirty electricity? The problem is electrons don’t have ID tags. When you pull an electron out of a wall socket, you really have no idea where it came from. However, as a whole in 2021 Western Interconnection region generated 47% of its electricity from clean sources, such as hydro, wind and solar.

More remarkable was how fast the region is evolving—wind and solar resources across the grid have increased by 50% since 2017. Powerex, being an intelligent trader, buys electricity when it is cheap. Often that means buying electricity during the day when an abundance of Californian solar energy forces the price down. One could make the argument Powerex is purchasing “solar electricity”.

As we watch the market, we should remember carbon emissions are not a B.C. problem, they are a global problem. Reducing emissions from B.C. generation is good, but influencing the market represented by the Western Interconnection has a much larger impact.

We are all in this together.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.