By: Korie Marshall
A study just released shows how low the cost of geothermal electricity in BC can be, but the developer behind the project in the Canoe Reach says that project will be even lower. And it will have far less impact than projects like Site C, something that is not even considered in the average cost calculation for most electrical generation projects.
The study released on July 17th was commissioned by Geoscience BC, an independent non-profit organization working to build the BC economy by generating and sharing earth science information with everyone. The organization recognizes the potential of the geothermal resources in the province, and has recently started looking at ways to support its development.
Kerr Wood Leidal and GeothermEx were awarded a contract in early 2015 to assess the economic viability of geothermal energy for electrical generation in BC. They looked at 18 locations across the province, chosen by Geoscience BC because of their known potential for geothermal electricity. One of the locations chosen was the Canoe Reach, just south of Valemount. It also made the cut to one of the nine most promising sites the researchers evaluated more fully, because of criteria like low exploration risk, support from the community, and low issues with the environment and transmission line infrastructure.
The study used the same formula to calculate the “levelized cost of electricity” – a measure of a power source which attempts to compare different methods of electricity generation on a comparable basis – for the sites with the most potential.
The report says the cost of electricity for the nine projects with the most potential range from 6.9 cents (Pebble Creek) to 17.6 cents (Clark Lake) per kilowatt hour. For comparison, BC Hydro calculates Site C’s levelized cost at 8.8 cent per kilowatt hour.
It says the project at Canoe would cost 15.6 cents per kilowatt hour, almost twice the cost for Site C. But the report notes that Borealis Geopower has carried out a number of exploration and project development activities on its permit area in the last few years.
“They may have detailed information that would reflect in their calculations the levelized cost of electricity,” says the report.
Craig Dunn, spokesperson for Borealis, says they definitely do, but it’s also important to note that many things aren’t factored into the levelized cost, because the calculation is based on using the electricity at the site and doesn’t include the costs of distributing it. Site C, for example, would cost more, he says, because of the cost of transmission lines to get the electricity to where it is needed, and the loss of electricity over distances. Costs for a plant in the Canoe Reach would be less because power is needed here, and there is already a transmission line.
Levelized cost also doesn’t take into account differences in reliability. For example, a geothermal plant can produce power more hours of any given day than a wind turbine – three times as much. Dunn says his plant will actually produce 8,300 megawatt hours a year for each megawatt the plant is rated at.
The report estimates the capital costs for the Canoe project at $170.1 million, but Dunn says Borealis’ estimate is less than half that – only $80 million. He says most of the discrepancy in the numbers is based on drilling costs, and his are more accurate because of the non-invasive research they’ve been doing over the past few years. The cost he’s figured for his project is 0.7 cents/kWh, a mere fraction of the 15.6 cents the study reports. And a mere fraction of Site C’s 8.8 cents/kWh.
Dunn says the levelized cost also doesn’t account for environmental and other external impacts.
“They don’t incorporate greenhouse gas, heat – that’s a big one,” says Dunn. He says the levelized cost puts no value on the “waste” heat left over from a geothermal project like his plant, and doesn’t take into account other things like air pollution (his plant will give off no emissions) or other health problems like cancer rates and asthma, which are associated with some forms of electrical generation.
Dunn says two big issues facing his project right now are keeping the plant small enough so that it meets BC Hydro’s requirements for their Standing Offer Program while still being large enough to be profitable, and meeting the program’s three-year window to be operational after signing the agreement.
“It’s tight,” says Dunn. The drilling would have to be perfect, and no arguments or delays with other tenure holders or interested parties in order to start making power on time. “If I am short of that deadline then I owe power to the grid and it’d bankrupt me.”
But Dunn says that over a 20-30 year contract that is currently available with BC Hydro, he could generate over $12 million a year with his 15 MW plant. That is $300 million over 25 years for an $80 million investment.
“That looks very similar to the kind of coin they have to put out for a hydro facility. Site C doesn’t even make money for the first few years,” says Dunn.
The report says it was not within the scope of the project to comment on policy issues. It did however note that there are currently no BC Hydro calls for power from independent power producers, and their Standing Offer Program is limited to projects with a capacity of 15 MW or less. The report noted the only projects it evaluated that would meet BC Hydro’s Standing Offer Program price of $100/MWh were Meager Creek and Pebble Creek, both of which are larger than 15 MW. It did note that more detailed studies of two sites, Sloquet Creek and Canoe Creek, may reveal lower costs, which might make them eligible for BC Hydro’s standing program, and there may be opportunities for the operator of a larger project to negotiate with BC Hydro for the same rates as those available in the standing program.
“BC Hydro was pleased to participate in the study”, said Randy Reimann, Director of Resource Planning for BC Hydro in a news release. “It offers a good estimate of how low costs could be and the potential of the resource on what we believe are the most promising sites for geothermal development.”
“This study provides British Columbians with a strategic economic framework necessary for the informed discussion of geothermal power generation in the province,” said Carlos Salas, Geoscience BC’s Vice President of Energy. The release notes that proprietary information often represents more in-depth knowledge which could result in a different cost of electricity than those produced by the model used in the study.
Geoscience BC is also commissioning a report on the potential for direct-use geothermal in the province, which still uses the heat from the earth but doesn’t require drilling as deep as for electricity. That study will also look at the Valemount area. Salas says they are in the process of awarding the contract right now.