First, I'd like to thank you for inviting me to speak to you today. Greater integration, like provincial electricity markets, is an area I've been interested in for a long time.
I'm an adjunct professor in Simon Fraser's public policy school and I have been a consultant for many years. One of my first major assignments was to participate in a comprehensive study of the technical, economic, and contractual aspects of a western electric power grid. The study was undertaken in accordance with a 1980 agreement among the three prairie provinces to investigate the feasibility and desirability of a 1,000 megawatts sale of firm power from Manitoba to Alberta and 500 megawatts to Saskatchewan.
The study identified and assessed alternative intertie configurations. It analyzed economic impacts, benefits and costs, and pricing and ownership arrangements. The study did identify a preferred high voltage B.C. link. It studied the economic impacts that would be redistributed within the region and it did estimate the benefits and costs. Overall, the study concluded that there would be utility cost savings, and in terms of the social benefits and costs, there would be net benefits for the region as a whole.
Notwithstanding the finding of overall net benefits, as you know, the western electric power grid did not proceed. The different jurisdictions could not get beyond narrow provincial considerations. Manitoba Hydro was clearly focused on north-south trade and Alberta and Saskatchewan were interested in their own resources and power potential. Here we are 35 years later and I'm not sure how much has changed. There are significant opportunities in potential net benefits from stronger interprovincial ties, but the lesson from the western electric power grid is that it isn't enough to identify opportunities that offer economic and environmental benefits. It's essential to align narrow provincial with broader regional and national interests.
I'm in Vancouver at Simon Fraser University and I'm most familiar with the circumstances of British Columbia and Alberta right now, having left the prairie provinces some time ago. There have always been synergies and opportunities for mutually beneficial trade between the predominantly hydro system in British Columbia and the thermal system in Alberta. These opportunities have been explored to some degree but not to their full potential because of constraints in intertie capacity, planning criteria—and the self-sufficiency criteria in British Columbia stands out in this regard—and the dominance of provincial perspectives that give rise to divisive concerns about equitable access to markets and transmission in each other's jurisdiction.
With developments that have taken place and are planned in British Columbia, and the phase-out of coal and the emphasis on wind and renewables in Alberta, the opportunities are, if anything, much greater today.
As a result of reduced growth in requirements for electric-intensive industry, combined with the possible development of the Site C hydroelectric project, B.C. Hydro will have considerable surplus energy in the short to medium term that could serve to displace coal and other federal production in Alberta. More importantly, over the longer run, with the development or possible development of Site C, the addition of generating capacity at Revelstoke, and the refurbishment and upgrade of existing facilities, B.C. Hydro will have flexible capacity that could support and enhance the rapid expansion of wind energy in Alberta. It could provide the system backup that Alberta would most likely have to otherwise get from single-cycle gas turbines, with the economic costs and GHG emissions that would entail.
Displacement of thermal generation and the provision of hydro backup to support more wind production are two obvious opportunities that could be pursued with stronger ties and coordination. There are other opportunities as well. The thermal and other resources in Alberta could provide the backup energy capability that B.C.'s hydro system needs for low-water years, and generally it could enable British Columbia to ensure a reliable supply without the costly self-sufficiency criterion it currently has in place.
More intertie capacity and access to U.S. markets through British Columbia for surplus Alberta wind production could improve the economics and incentive to develop more wind in that province. It could mitigate the price collapse that otherwise can take place during wind events.
There is no shortage of opportunities. One way to think about all of the opportunities is to ask yourself the question: how would the systems develop without a border if it were one jurisdiction, one integrated or combined system? A politically unconstrained view of that hypothetical combined system would identify the opportunities, and with some analysis, identify the opportunity cost or what we’re foregoing by not pursuing them. The challenge would then be to consider how to get there institutionally, with a planned system in British Columbia, and politically, with the need for both provinces to perceive a fair sharing of the benefits that greater intertie capacity and coordination can provide.
The federal government, in my view, can play an important role in bringing the parties together to analyze the opportunities in the context of an integrated system, what that might look like, and to address the institutional and political constraints. The federal government has important interests here as well. More efficient development and operation of the electric systems will be increasingly important for competitiveness and efficiency in the national economy with the shift away from thermal production and the electrification trends in transport and other sectors that we can expect in the near term and certainly longer term. More rapid displacement of thermal production and reduced need for and reliance on thermal backup capacity for renewables will be important in meeting GHG reduction targets in the most cost-effective ways.
Finally, and not insignificantly I believe, strengthening east-west trade in electricity can reduce the dependence on U.S. markets and the energy trade surpluses that, for political reasons in the United States, may be used to limit economic trade in manufacturing and other areas.
Thank you.