By RUSS FRANCIS

Aug 08 2007

$100,000 later, hydro project pullback raises questions

Just how green is hydroelectric power? As the B.C. government energetically pushes so-called “green power,” there is a widespread belief that hydroelectricity is as environmentally benign as planting a tree. A little water pushes turbines around. No waste products. No pollution. No impact.

Well, it’s not quite that simple, as BC Hydro’s largest contractor recently discovered. Even the so-called “run of river” types—involving no large dams or reservoirs—can do significant environmental harm.

Just over a year ago, Vancouver-based Plutonic Power Corporation boasted it was poised to become B.C.’s largest independent developer of renewable power, after being offered energy purchase agreements with BC Hydro.

“Obtaining these energy purchase agreements is a major milestone for Plutonic that will help transform the company into a significant energy producer,” Plutonic president Donald McInnes said in a July 27, 2006 statement.

The figures were impressive, with the Crown corporation promising to pay more than $2 billion to Plutonic during the 35-year deals.

One was for Rainy River, near the shore of Howe Sound. The other was at the headwaters of the Toba Inlet, about 100 kilometres from Powell River. Both were run of river hydro, and both contracts were to provide electricity for 35 years.

The company has yet to produce any income from generating electricity. Or, as the company expressed it in a management discussion and analysis paper released May 29: “The company has no history of profitable operations as all its projects [are] at a development stage.”

For the three-month period ending March 31, 2007, Plutonic lost $576,000—something that might be expected while a new company gears up. At present, it has a total of 31 generating projects “under development.”

The company drew the attention of General Electric subsidiary GE Financial Services, which said last May it planned to invest up to $112 million in Plutonic.

Other investors, too, seemed to like what they saw. Plutonic shares, which trade on the Toronto Stock Exchange, soared from less than a dollar in 2005, to a peak of $9.75 earlier this summer.

Then, late last week, the company had a little news. Just 18 months before it was due to start producing electricity, the Rainy River project is now off, and Plutonic told Hydro that it planned to “exit” the energy purchase agreement it held with the Crown corporation. The reason? The project’s environmental impacts.

Or rather, those environmental impacts mean, according to Plutonic’s August 3 press release, there are now “unexpected complexities in the environmental permitting process”—complexities which “decrease certainty around the timing for the project commercial operation date.”

The environmental impacts in question are the discovery of several fish species, including salmon, in the area. The presence of these fish, said the statement, has made obtaining environmental permits “exceedingly more difficult.”

Consequently, the company is now “reviewing a full range of options” for the project, including (presumably) cancelling it altogether. In any case, the Hydro agreement is off.

But a company can’t always pull out of a deal unscathed. According to Plutonic’s contract with Hydro, it was required to pay a $100,000 penalty for “exiting” it. Speaking in an interview, a Plutonic official says the company paid Hydro this amount last week.

New Democrat MLA Guy Gentner has been following independent power producers and their BC Hydro deals—which he claims will cost consumers more in the long run than if Hydro were to build new capacity itself.

Gentner says that Plutonic’s share price could be restrained until the company begins actually producing electricity. “There’s only so far one can go speculating with what’s on paper versus actually completing a project,” Gentner says.

While Plutonic shares have certainly enriched anyone who bought them a few years ago, this week they were down almost one-fifth from their peak.

To put things in perspective, Rainy River is not a huge project. It stood to produce a little over one-tenth of Plutonic’s total projected power output, averaged over a year.

As well, there are innumerable other projects on the go.

According to Take Back the Power, an organization created by the Canadian Office and Professional Employees Union and devoted to publicly-produced electricity, the government is poised to award water licences for power projects on more than 500 B.C. rivers.

Environmental impacts of run of river projects are considerable, says the group.

At the top, a weir diverts water into a “penstock,” a pipe which typically runs seven kilometers downhill through forested areas that need to be cleared. At the bottom, of course, the powerhouse needs to be in a building, and the entire structure has to be serviced by roads. Water returned to the river at the bottom can be contaminated by oil and grease. The portion of the river that has less water will be affected, damaging wildlife habitat. And so on.

Standing over any discussion of B.C.’s hydro use is the fact we are net importers of electricity—and have been since 2001.

At present, every time our total electricity consumption increases, it generally means more damage to the global environment. That’s because the electricity we import comes from elsewhere in Canada, as well as the U.S. And the sources are often anything but clean. Coal- and gas-fired plants provide much of it.

That’s something to think about when we use more electricity: Very often, a marginal increase in use means a considerable increase in greenhouse gases.

Still, if the government was thinking that hydroelectricity from private producers was going to provide a significant problem-free energy solution for the province, it may need to think again. M

russfrancis@mondaymag.com