British Columbia Power 2014 BRITISH COLUMBIA POWER 2014

Economy | Hydropower | Independent Power Producers Clean Energy | Conservation | Infrastructure Perfect for British Columbia: the 3.2M114

With 25 years of engineering experience, Senvion is welcoming the winds of change. Building on our Canadian successes, Senvion is putting its German know-how and Canadian experience together in order to provide a turbine perfect for British Columbia. The 3.2M114 type turbine offers the best possible yields, is one of the quietest wind turbines in its class and is optimized for medium wind speeds. With a hub height of 100 metres, the 3.2M114 offers great flexibility, and is perfectly suited for Canadian cold climates and icing conditions. Not to mention, its electrical characteristics perfectly match any grid requirements across Canada.

www.senvion.com/ca Perfect for British Columbia: Dear Readers,

the 3.2M114 Fifty years ago, BC Hydro built the backbone of our electricity system to power British Columbia’s growing economy. Today, some major components of that system need to be repaired or replaced. B.C.'s economy is growing and so is our need for power. Over the next 20 years, B.C.’s population is expected to increase to nearly 5.7 million, and electricity demand is expected to grow by as much as 40 per cent.

As one of the largest electric utilities in Canada, BC Hydro serves two million customers by delivering safe, reliable electricity at competitive rates. The majority of BC Hydro’s electricity is generated by hydroelectric facilities with significant reservoir storage, which provides a high degree of reliability and flexibility.

In November 2013, B.C. introduced its 10 Year Plan to strike a balance between keeping electricity rates as low as possible, while allowing BC Hydro to invest in aging assets and new infrastructure. Through new measures in the 10 Year Plan, BC Hydro is striving to keep B.C. residents paying the third lowest residential rates in North America, while also investing in important capital projects that will keep rates predictable for years to come. Several major projects recently began construction as part of the $1.7 billion dollar capital investment fund. BC Hydro’s job is to make sure that the power is there when we need it. Overall, this balance is aimed to support our growing population and economy.

BC Hydro has also created a 20-year plan to meet future electricity demand - the Integrated Resource Plan (IRP). Through investments in infrastructure, conservation and clean energy, the IRP provides a roadmap for updating the entire power system. More than two thirds of British Columbia’s electricity demand growth will be met through conservation efforts and energy efficiency strategies.

B.C. has among the lowest industrial electricity rates in North America, making it an attractive investment environment for industrial customers. That being said, we recognize in order to maintain its competitive advantage, help our economy develop, and continue to attract industry to operate in our province, the 10 Year Plan provides industry with predictable rates for the long-term, and a commitment to look at rate design options for industrial customers. Projects like the Northwest Transmission Line (NTL) are powering new industrial development in B.C.’s north. The NTL will open up regions to world-class mineral deposits, new mines, and clean energy operations. An independent report estimated the NTL has the potential to attract more than $15 billion in mining investment alone – creating up to 10,000 jobs and generating $300 million in annual tax revenues.

B.C. is making long-term investments today to continue to lead in clean energy production. We are committed to providing the benefits of clean, reliable, and cost-effective power to all British Columbians for many years to come. With 25 years of engineering experience, Senvion is welcoming the winds of change. Building on our Canadian successes, Senvion is putting its German know-how and Canadian experience together in order to provide a turbine perfect for British Columbia. The 3.2M114 type turbine offers the best possible yields, is one of the quietest wind turbines in its class and is optimized for medium wind Honorable Bill Bennett, speeds. With a hub height of 100 metres, the 3.2M114 offers great flexibility, and is perfectly suited Minister of Energy and Mines and for Canadian cold climates and icing conditions. Not to mention, its electrical characteristics perfectly Minister Responsible for Core Review match any grid requirements across Canada. Province of British Columbia

www.senvion.com/ca CONTENTS

OVERVIEW 31. Interview with Kawa Engineering Harnessing Hydro Glen Ichikawa, President 32. Interview with Tetra Tech EBA 8. An Introduction to British Columbia Jason Jones, Vice President, Power A brief overview of the province and Transmission and Distribution Sector, economy Environment Practice 10. Interview with Ministry of Energy and 33. Interview with Rakia Recruiting Mines, British Columbia Amir Marciano, Managing Partner Bill Bennett, Minister of Energy and 34. Expert Opinion by Schneider Electric Mines and Minister Responsible for Canada Core Review 35. Interview with Schneider Electric 11. Interview with BC Hydro Canada Doug Little, Vice President, Energy Susan Uthayakumar, Vice President, Planning and Economic Development Partner Business 12. Addressing the Old, Pursuing the New Power in British Columbia 14. Interview with Fortis BC THE 20-YEAR HORIZON Doug Stout, Vice President, Market The Integrated Resource Plan Development and External Relations 15. Interview with Clean Energy BC 38. Upgrade and Conserve Paul Kariya, Executive Director The Long-Term Trajectory of Power 16. Expert Opinion by Senvion Canada Generation in British Columbia 17. Interview with Senvion Canada 41. Interview with Corpfinance International Helmut Herold, CEO North America Limited (CFI) 18. Interview with Ausenco Christopher Ball, Executive Vice Peter Galbraith, Global Lead, President Infrastructure, and Simon Davies, 42. Interview with Lex Engineering Senior Project Manager, Oil and Gas, Guy Lemieux, President Power 43. Interview with Amix Heavy Lift 19. Interview with Hatch Clarke Longmuir, President David Daw, BC Regional Manager, 44. Interview with Apex Industrial Movers Renewable Power David Stroud, John Brise, and Shawn Smith, Senior Electrical and Doug Elliot Engineer, Renewable Power 46. Interview with Gygax Engineering Associates (GEA) Adrian Gygax, Principal MEETING FUTURE DEMAND 48. Interview with Knight Piésold Site C and Independent Power Sam Mottram, Managing Principal, Producers? Power Services

22. The Last in a Legacy’s Line The Push for Site C APPENDIX 24. Expert Opinion by Stantec Into the Future 25. Interview with Stantec Graham McTavish, Vice President, 50. Final Thoughts Power, Canada 51. Company Index and Credits 26. Expert Opinion by Gowling Lafleur Henderson LLP 2 7. Interview with Gowling Lafleur Henderson LLP G. Henry Ellis, Partner This research has been conducted by Katie Bromley, Andrew Mason and Anita Kruger. 28. Waxing or Waning? Edited by John V. Bowlus The Role of IPPs Graphic design by Gonzalo Da Cunha

30. Interview with Travelers Power A Global Business Reports Publication Corporation For more information, please contact [email protected] follow us on Twitter @GBReports Mark Bohn, Managing Partner or visit our website at gbreports.com

BRITISH COLUMBIA POWER 2014 Exclusive Interviews Major players in British Columbia’s power sector talk to Global Business Reports about their businesses, the market, and global economic forces. Featuring BC Hydro, the Ministry of Energy and Mines, and many more.

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Analysis GBR’s on-the-ground journalists provide editorial analysis and research on all facets of B.C.’s power industry. There is no substitute for face-to-face interaction with industry leaders as well as government officials. 8-9, 12-13, 22-23, 28-29, 38-40

Maps and Quantitative Data For more background on the economic fundamentals of the province and power market, GBR’s maps and quantitative data allow readers to place anecdotal company intelligence in the political and economic context of British Columbia. SITE C

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Expert Opinions Gowling Lafleur Henderson LLP, Schneider, Senvion, and Stantec provide expert opinion articles that help readers take a step back and conceptualize the broad factors impacting power generation, transmission, and distribution in British Columbia, Canada, and the world. 16, 24, 26, 34

Final Thoughts Leading business figures provide some final thoughts on the future potential of the power industry in British Columbia, the challenges it faces, and the opportunities present for those willing to create innovative solutions and apply new technologies.

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Harnessing Hydro: An Introduction to British Columbia and its Power Sector

“Many of the electrical utilities in North America, including BC Hydro, are undergoing large capital spending to expand their grid to support residential and industrial growth. At the same time these utilities have to upgrade their existing transmission and distribution systems due to aging infrastructure, and many of the large transmission lines built in the 1950s and 1960s are now starting to go through upgrades. With this need for capital spend the utilities are struggling to keep rates down and lower their overhead costs, and as a result they are turning to outside consulting firms to help support their workforce.”

- Graham McTavish, Vice President, Power, Canada, Stantec

“The beauty of these hydropower projects is that they last almost forever, hence the term ‘heritage assets’. These projects were built in the 1960s and 1970s and at that time people were concerned about their costs. We now know that they have been a good source of development for the province and have allowed the province to maintain a competitive edge in attracting new businesses. However, the upgrade of the province’s infrastructure is essential, especially looking at how congested the transmission lines are in some areas. The transmission of energy and upgrade of this system may open new opportunities for Innergex to build projects and create interconnection capacity on BC Hydro’s grid.”

- Richard Blanchet, Senior Vice President, Western Region, Innergex Renewable Energy Inc.

Image: BC Hydro EDITORIAL Global Business Reports

An Introduction to British Columbia

A brief overview of the province and APPROVED OR PROPOSED ELECTRICITY RATE CHANGES SINCE JANUARY 2013 SITE C economy IN SELECT CANADIAN PROVINCES Source: National Energy Board of Canada

PROVINCE OR TERRITORYEUTILITY RATE INCREASE FFECTIVE DATE (PER CENT) British Columbia BC Hydro 1.44* April 1, 2013 Manitoba Manitoba Hydro 3.5 May 1, 2013 New Brunswick NB Power 2.0 October 1, 2013 Dixon Entrance Nova Scotia Nova Scotia Power 3.0 January 1, 2013 Nova Scotia Nova Scotia Power 3.0 January 1, 2014 Quebec Hydro Québec 2.4 April 1, 2013 Quebec Hydro Québec 5.8 April 1, 2014 (Decision Pending) Saskatchewan SaskPower 4.9 January 1, 2013 Hecate Strait

*(Deferral Account Rate Rider set at 5 per cent up from 2.5 per cent)

SITE C MAP $219.94 billion Source: Site C Clean Energy Project 29 GDP Queen Fort St. John Charlotte Expenditure-Based 2012 Sound Source: CIA World Factbook PROPOSED SITE C RESERVOIR PROPOSED SITE C DAM Taylor Pacic Ocean 2.0% Peace River 97 GROWTH RATE Moberly River W.A.C. BENNETT DAM 2013 Hudson’s Hope PROPOSED NEW 500kV LINES Source: CIA World Factbook ALONG TRANSMISSION CORRIDOR

PEACE CANYON DAM Vancouver DINOSAUR RESERVOIR $45,993 Strait of Moberly Lake GDP PER CAPITA SALTEAU IR Georgia

2012 WEST MOBERLY IR 97 Victoria Source: CIA World Factbook

In a country full of natural beauty, British sequences. Christina Joan "Christy" Clark the full extent of the damage to the water Columbia may be Canada’s richest prov- of the British Columbia Liberal Party is and wildlife is unknown, the level of the ince. In addition to stunning interior B.C. second female premier and has lake has risen 1.5 meters, and it appears landscapes, British Columbia, or B.C., is been in power since March 2011. The that the company, Imperial Metals, did home to gorgeous coastlines with multi- Liberal Party won reelection in 2013, not have an emergency plan in place. The tudes of islands and marine life. In addi- although Clark lost her seat in the legis- government has announced two separate tion to natural beauty, B.C. is also blessed lature and had to win a by-election in a reviews of the spill and will likely institute with natural resources. The country’s different jurisdiction to reassume her more stringent monitoring requirements massive river systems have provided the post in the premiership. The center-right as a result. This disaster may actually country with bountiful, cheap hydroelec- Liberal Party has enjoyed considerable force the two sides into greater agree- tric power for decades. Electricity rates success in recent years, although it of- ment if such measures are adopted. are set to rise because of the expected ten comes under attack for being too Another reflection of the province’s pol- increase in demand and the need for pro-business. Political opposition to new itics can be seen in the existence of a new infrastructure, and politicians will projects in the power and energy sectors carbon tax. Instituted in 2008, British feel pressure from citizens, but, from an will shape in the form of popular rejection Columbia became the only jurisdiction outside perspective, the province is truly of business-friendly policies. in North American to tax its citizens for blessed. In early August 2014, the tailings pond at fossil-fuel consumption. This electorally Still, there are major political challenges the Mount Polley mine in the Cariboo re- popular initiative is championed for hav- that are connected to power and energy gion was breached, releasing toxic mud ing lowered consumption, but business and that have local and international con- and water into the Polley Lake. Though and government leaders decry the lack

BRITISH COLUMBIA POWER 2014 - 8 - Industry Explorations Global Business Reports FACTSHEET

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of competitiveness and the loss tax rev- will transport Alberta oil to the British BRITISH COLUMBIA AT A GLANCE enue, respectively. Columbian Pacific coast. This pipeline Source: Statistics Canada, BC Stats, British Columbia Ministry of Finance On the international stage, B.C. plays an system has international consequences important role. The province is fortunate and has resulted from the lack of ap- to be neighbors with Alberta, whose fu- proval for the Keystone X Pipeline in the Population: 4,581,978 (2013 estimate) ture oil production can provide B.C. with United States. Cultivating Chinese oil im- Capital: Victoria Chief of State: Premier, Christy Clark, British Columbia cheap and affordable fuel as well as the ports will certainly create further foreign Liberal Party opportunity to gain revenues from trans- investment from China and other Asian GDP, Expenditure-Based: $219.994 billion (2012) porting the tar sands oil by pipeline. The trading partners. Growth Rate: 2.0% (2013) GDP per Capita: $45,993 (2012) Alberta tar sands already provide over It will be important to monitor the gov- Economic Sector Breakdown: Services 61%, Goods 50% of Canada’s daily production of oil, ernment’s decision about approval for 24.3%, Other 14.7% (2012) Exports to Other Countries: $47.337 billion (2012): coal, a figure that could rise to 75% in 2030, Site C, a long-proposed 1,100-megawatts lumber, machinery, copper, pulp, natural gas, agriculture according the Canadian Association of (MW) project on the Peace River, and to Exports to Other Provinces: $37.008 billion (2012) Petroleum Producers. Environmental develop substantial gas reserves through Imports from Other Countries: $59.458 billion (2012): motor vehicle parts, crude oil, metals, chemicals, concerns after the potential despoiling the construction of electricity-intensive machinery, electronics of B.C.’s natural beauty as well as ways liquefied natural gas (LNG) export facil- Imports from Other Provinces: $48.437 billion (2012) Major International Trade Partners: United States, of life of First Nations communities have ities. Local elections will be held in the China, Japan, South Korea been raised. It is still unclear whether fall 2014 and issues relating to power, the government will approve the North- energy, electricity, and the environment ern Gateway pipeline system, which will likely be debated. •

Industry Explorations - 9 - BRITISH COLUMBIA POWER 2014 INTERVIEW Global Business Reports

There is a direct, unassailable connec- 10 years to get it to the point where it Honorable tion between investment in infrastruc- will generate electricity. ture and rates. During the WAC Ben- Conditions have changed, and I would Bill Bennett nett government in the 1980s, rates not classify myself as an advocate of in some cases went up over 100%. the [Site C] project. Over the last sev- This rise was simultaneous with the eral months, I have been trying to de- investment in the Peace River Dams velop alternative packages of ideas, and Columbia River Dams. During the combinations of generation that I can Minister of Energy and Mines and 1990s, rates did not rise because the take to the Cabinet and let it choose Minister Responsible for Core Review NDP government chose not to invest whether to pursue Site C or another Province of British in infrastructure and made it policy to option. Columbia avoid rate increases. We are catching up from this policy. If Site C goes ahead, will there be room for the independent power pro- The 10 Year Plan also reduces and ducers (IPPs)? eventually calls for the elimination There will be [room for IPPs] at a mini- of the dividend that BC Hydro pays mal level. When I first received the IRP to the government. Why was this Draft last summer, it contained almost necessary? nothing about IPPs, so we worked The formula for calculating the dividend with BC Hydro to keep the door open was created in 1992, and at that time for future investment by the renewable the acceptable debt/equity ratio was industry. There is now a seven-page set at 80/20. After taking a look at the section in the IRP on IPPs. We also in- regulatory accounts, I concluded that creased the size of projects allowed un- the growth in the deferral accounts ver- der the Standing Offer Program (SOP) sus the growth in the debt equity ratio from 10 megawatts (MW) to 15 MW. was not sustainable. As part of the 10 It is a smaller program overall, but the Year Plan, we are aiming for a 60/40 SOP has never been subscribed to the How will the 10 Year Plan tackle the debt/equity ratio, we will not quite pay level that it should be. The government aging infrastructure in British Colum- off the deferral accounts in 10 years, is reviewing the SOP at the moment to bia? but we will be close. People have said understand why it has not been fully The 10 Year Plan is an integrated plan that BC Hydro is close to bankruptcy, subscribed in the past. that will improve infrastructure and re- but this is not true. Nonetheless, gov- IPPs are also still in the game because duce costs. We have allocated C$1.7 ernment has probably been taking too no one knows what is going to happen billion per annum to invest in infra- much from BC Hydro in dividends and with the economy. If it grows as it did structure. The cost of infrastructure is net income. [before the recession] or huge lique- the main driving factor in determining fied natural gas (LNG) investments are rates, but it is not the only factor that Why is now the correct time to go made, demand could change. On the drives rates up. The Rates Plan will ahead with the long-proposed Site C LNG side, preliminary signals indicate bring certainty to electricity rates for project? that they will use natural gas to drive the residential, commercial and indus- When the decision was made to their compressors inside the fence. trial consumers of British Columbia. restart Site C planning, British Colum- There is also a good chance that they Through the Deputy Minister’s Review bia’s economy was booming, and de- will want to buy ancillary power from of BC Hydro, we found almost C$400 mand for electricity was considerably the grid. A standard four-train LNG fa- million of savings over the next three higher than it is today. Now, BC Hydro cility will need 150 to 160 MW of ancil- years and have worked with BC Hy- is actually selling less electricity than lary electricity. It only takes one com- dro to keep executive compensation was sold in 2008. With the Integrated pany to move forward with a plan like in line. Additionally, within BC Hydro’s Resource Plan (IRP) we know that the this to change demand significantly. regulatory accounts there is currently province will need new generation. If The third variable is Site C. There C$4 billion in debt that we are working we do not have adequate demand side would obviously be opportunity for the to pay off under the plan. management we will probably need IPP industry if we decide to seek 1100 new generation in six to seven years MW of generation from elsewhere. • British Columbia’s rates fell through- and if there is adequate demand side out the 1990s, but have risen over management, we will not need it for at the last few years and will continue least 10 years. Site C will take a long to rise. How much of a connection is time to design and build. If we decide there between investment in infra- to go ahead with the project in the next structure and rates? year or two, it would still take close to

BRITISH COLUMBIA POWER 2014 - 10 - Industry Explorations Global Business Reports INTERVIEW

Many IPPs are worried that the de- implementing the various actions in the Doug Little velopment of Site C will negate the IRP. demand for future independent power production. If Site C moves forward will Forecasting load demand in the future it displace IPP developments? is a difficult task. What would be BC While our heritage assets provide the Hydro’s plan of action if future load majority power, IPPs help us close the demand exceeds your expectations? gap between what our existing assets We acknowledge that there is uncer- Vice President, Energy Planning and can provide and what is required. Inde- tainty in our load forecast, largely in the Economic Development pendent power producers have been industrial sector due to the potential BC Hydro supplying clean electricity to British Co- development of the liquefied natural lumbia for more than 20 years and gen- gas industry and the upstream natural erate about 20 per cent of BC Hydro’s gas sector. One of the action items we electricity supply. have in the IRP is to be ready with a Re- Over the next five years, we expect to quest for Proposals from the IPP sector renew many IPP contracts. We will also if needed. We are following the load continue procuring energy through our growth very closely and if it looks like Standing Offer Program, through which load is increasing faster than expected, we will enter into new contracts for we will be ready to launch a new pro- smaller projects. There continues to be curement exercise. good opportunities for IPPs in the prov- In addition, we will provide an update ince. to the IRP in 2015. Normally, our cycle is every four to five years with these The provincial government’s own plans. This two-year window is a reflec- 10 Year Plan as well as BC Hydro’s tion of the uncertainty we currently see Integrated Resource Plan were officially in the market, which should largely be launched in late 2013. What is BC resolved after two years. Over the last decade and a half the Hydro doing to ensure these long-term British Columbian government and BC plans get off the ground? British Columbia is a net exporter of Hydro have deferred Site C. Why is now The Integrated Resource Plan (IRP) is a electricity to the United States and the correct time to move ahead with flexible, long-term strategic plan to meet neighboring provinces. How attractive this long-proposed project? British Columbia’s growth in electricity are these markets at the moment? As we have outlined in the Integrated demand over the next 20 years. It fo- How important will power exports be to Resource Plan (IRP) and the environ- cuses on making prudent investments British Columbia moving forward? mental impact statement application in conservation and clean energy and on BC Hydro has traded with the United submissions, our long-term portfolios keeping future electricity supply options States and Alberta for over 20 years. that include Site C are the best way to available. Since 2003, our trading subsidiary Pow- meet the energy demands of the prov- We are already moving forward with a erex has earned $1.7 billion in revenues ince. Site C is the right project to build. It number of actions laid out in the IRP. to help keep rates low in BC. Selling will provide the province with 100 years One of these actions is to develop the power is important to us, and we will of energy supply, and it is the right time Site C project. Site C is undergoing a continue it. to bring this project forward. cooperative federal-provincial environ- Export opportunities are not as great mental assessment, including a Joint now for a couple of reasons: 1) low nat- Many of the independent power pro- Review Panel process, which is rigorous ural gas prices in the United States have ducers (IPPs) have disputed the claim and independent. Construction of Site C reduced generation costs there, and 2) that Site C is the most cost effective is subject to the project receiving envi- tax subsidies from the U.S. government way to meet British Columbia’s energy ronmental certification and other regula- have created an overabundance of wind needs. In your view why is moving for- tory permits and approvals. and solar generation that has depressed ward with Site C the most cost effective On the procurement side, we have prices. way? committed to increase the volume un- We will continue to buy energy on the Our portfolio analysis shows that Site C der the Standing Offer Program and market when it is of lower value and is more cost-effective, particularly when consult with First Nations to get them save the water in our reservoirs to you consider the quality of the electricity more involved with the program. This produce electricity at periods of higher that will be produced. Site C is dispatch- has already started. Our Net Metering value. Given these dynamics, this robust able and produces 1100 megawatts of Program application to increase the size trade between British Columbia and its firm capacity, which ist higher quality of projects in the program was filed with neighbors will continue for the long than run of river or wind, which are both the BC Utilities Commission in February. term. • intermittent resources. So, we are moving ahead full speed on

Industry Explorations - 11 - BRITISH COLUMBIA POWER 2014 EDITORIAL Global Business Reports

bution for 1.1 million customers in south- electricity plan, but rather a plan for the Addressing the west B.C. power utility BC Hydro. Looking at the Over the last two years, the Liberal govern- activities of BC Hydro from a long-term Old, Pursuing ment and BC Hydro have worked together view they have one last legacy project to to plan B.C.’s energy future as the prov- complete, Site C. The government’s 10 the New, ince’s demand for electricity is expected Year Plan is oriented to assist BC Hydro’s Power in British to rise by 40% over the next 20 years. The Integrated Resource Plan and ensure Site culmination of this work was announced C is completed.” Columbia at the end of 2013: the government’s 10 BC’s energy future will also be affected by Year Plan and BC Hydro’s complementary how Site C’s development will impact the Integrated Resource Plan (IRP), which province’s independent power producers Government and British Columbia called for extensive new investments and (IPPs) and what direct and indirect effects upgrades to infrastructure but simultane- the province’s burgeoning, power-inten- ously sought to stem the inevitable tide sive gas sector will have on electricity British Columbia, with its abundant hydro of rate increases for customers. The plans reserves, has long enjoyed some of the fail, however, to clarify two very impor- lowest electricity costs in North America. tant issues: the upcoming final decision According to a study from Hydro Quebec, whether to approve BC Hydro’s Site C, Vancouver, the province’s most populous a long-proposed 1,100-megawatts (MW) “ metro area, ranks as the second lowest re- project on the Peace River, and to develop Making multibillion-dollar investments, tail electricity price for large and medium substantial gas reserves through the con- like those called for under the Integrated customers and third lowest for small and struction of electricity-intensive liquefied Resource Plan, require complex environ- residential customers in Canada. How- natural gas (LNG) export facilities. mental information with very extensive ever, the market appears set to change. Under its current plans, BC Hydro plans to special-temporal data analysis. To truly In August 2013, a draft was leaked of the spend C$1.7 billion per year over the next understand how to best optimize the B.C. Rates Plan, which proposed a 26% 10 years on capital improvements, while use of British Columbia’s renewable rate increase by 2016. The rate increase rates are expected to rise by 28% by SITE C energy resources and to minimizing was met with such a backlash of protest 2019. “There is a direct, unassailable con- adverse environmental impacts requires that the government was forced to recon- nection between investment in infrastruc- the evaluation of decades of hydrolog- ture and rates,” said Bill Bennett, B.C.’s GM PEACE sider the proposal. ical data, the development of sophis- SHRUM CANYONUnlike its deregulated neighbor Alberta, Minister of Energy and Mines. “The cost ticated weather forecasts (including B.C.’s power sector is regulated and dom- of infrastructure is the main driving factor rainfall-runoff catchment modeling), inated by BC Hydro, a crown-corporation in determining rates. The Rates Plan was flood frequency analysis, and the evalu- accounting for 80% of the province’s brought about to bring certainty to elec- ation of alternative river and watershed generation capacity. Additionally, BC Hy- tricity rates for the residential, commercial system simulations. dro controls most of the province’s major and industrial consumers of B.C.” transmission and distribution channels to The provincial government’s attempt to - Ed Quilty, President and CEO, the province’s 4.6 million inhabitants. The plan for B.C.’s energy future is admirable, Aquatic Informatics exception to this is Fortis BC, a division but the 10 Year Plan outlines only a piece of Newfoundland-based Fortis Inc., which of the story, according to Paul Kariya, ex- controls electricity generation, transmis- ecutive director of Clean Energy BC; “I sion and distribution, as well as gas distri- would say the plan is not a full provincial ” MICA 1 2

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BC HYDRO’S FACILITIES Source: BC Hydro

Peace Region: 2 Total capacity: 3,430 MW, 32% of BC Hydro's capacity. Facilities: 2 hydroelectric generation stations, completed in 1968 and 1980; Site C Pending approval (2014) would provide 1,100 MW.

Columbia Region: Total capacity: 5,200 MW, 49% of BC Hydro’s capacity Facilities: 4 major hydroelectric dams, all built before 1984; 2 water storage dams that don't generate power; and 7 smaller hydroelectric dams. 1 Lower Mainland and Coast: Total capacity: 976 MW, 9% of BC Hydro's capacity. Facilities: 11 hydroelectric facilities, originally built between 1911 and 1960; 1 thermal plant, not used for 4 generating power. SITE C

Vancouver Island: 3 Total capacity: 458 MW, 4% of BC Hydro's capacity. Facilities: 4 hydroelectric systems, with 6 generating GM PEACE stations, built between 1911 and 1971. SHRUM CANYON

demand. Although most indicators point were awarded to IPPs, but of these 27, or terminating bySITE mutual C agreement some towards Site C’s approval in the coming only 14 are expected to come online in of these contracts, we are looking to re- months, there are still some hurdles to the near future. Luckily for BC Hydro there solves this issue.” GM PEACE overcome. “In the joint federal-provincial has been some attrition in the private sec- SiteSHRUM C, if approved,CANYON has an expected environmental review, BC Hydro has to tor, as almost half of the awarded con- completion date of 2024. The 1,100 MW demonstrate to regulators that Site C is tracts appear to have stalled. At the Cana- of generation capacity that this project necessary and the only source of elec- dian Institute’s BC Power Symposium in would add would likely crowd out the tricity to meet British Columbia’s needs,” last week, Doug Little, vice president of need for more new IPPs for some time, said Kariya. energy planning and economic develop- but the project is not a death knell for Despite long-term demand projections ment for BC Hydro commented: “Our them either. Under current provincial law, and its argument in favor of Site C, BC Hy- best view of our requirements over the Site C is the last major project BC Hydro dro sees a short-term glut in generation next five to seven years shows us with is permitted to construct and the govern- capacity. In the early 2000s, the province a fairly significant long position. If those ment has given no indication that it will looked towards IPPs to meet future gen- projects come online, we will have to take change this regime. In the event Site C eration demands, which enabled private electricity produced at $100 megawatts is not approved or severely delayed, IPPs sector players to make a significant im- per hour (MWh) or $125 MWh and sell it will have an unprecedented opportunity pact in the market for the first time. In on the export market. Export markets are to fill a huge void in the British Columbian 2008, 27 power purchase agreements very unattractive right now. By deferring market. •

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STRATHCONA PUNTLEDGE WAHLEACH BUNTZEN ASH LAKE RIVER STAVE RIVER RUSKIN JORDAN RIVER BURRARD

Industry Explorations - 13 - BRITISH COLUMBIA POWER 2014 INTERVIEW Global Business Reports

Fortis BC has upgraded the main trans- the public is going to be the biggest Doug Stout mission backbone, replaced and added challenge for us. The second challenge a number of substations to improve is building infrastructure, even replac- reliability, and have been upgrading ing infrastructure is a challenge be- generation assets that in many cases cause of the social license issues with were 80 to 100 years old. On top of First Nations issues and managing the this, we have improved our customer public’s expectations of projects. service through new contact centers in Given that British Columbia has en- Vice President, Market Development and Trail. Fortis has also made an effort to joyed some of the lowest rates in External Relations stay on top of monitoring all the statis- North America for half a century, do Fortis BC tics in the system, which improves its you think public image is the biggest reliability and safety. problem facing the industry and do you need to better educate the public? Over the last 10 years Fortis BC has The public does not care what the price spent nearly C$1 billion purchasing of electricity is in Los Angeles or New and upgrading assets in the province. York because it does not directly affect How can such a large amount of them. There is a need to educate not upfront capital expenditure provide just on power price, but also on the strong return on investment for Fortis importance and value of the energy Inc? sector to the province’s economy. It We have invested heavily over the goes beyond just heat and lights in our last number of years. Our investments homes and businesses, but it drives are all in regulated assets; those dol- the economy. lars are in the rate-base that our customers pay. Obviously, when there is Given Fortis Inc’s growth across North investment by a utility, the rates for America, what do you see as the customers go up. We were probably a role British Columbia will play for the bit ahead of the curve in the province, group going forward? What were some of the reasons Fortis as now BC Hydro is on a similar tra- At present 40-45% of the asset-base Inc. decided to become involved in jectory with new expenditures and rate of Fortis Inc is in British Columbia and British Columbia in 2004 through its increases. Now we are trying to man- we see some great organic growth purchase of Aquila’s assets? age the rate impacts on our customers opportunities in the province as well. In 2004, Aquila Networks owned gen- this investment has caused. This is the Over the next five years we hope to eration and distribution assets in both biggest challenge facing utilities across capitalize on these growth opportu- Alberta and British Columbia, and For- North America. nities as we contribute to the group tis Inc. believed that these assets were overall. British Columbia is facing a a growth opportunity for the company As BC hydro is now embarking on great opportunity, we need to engage and complemented the other assets its own capital expenditure program, people in the province and show them that Fortis Inc. owned. We saw this as do you foresee there being greater how the energy sector, from LNG to a timely opportunity, as the economy rate parity between Fortis BC and BC upstream gas to power generation, is was growing and both Aquila’s net- Hydro? driving jobs and fueling a robust econ- works in British Columbia and Alberta We are expecting to see the rates gap omy. This will help manage costs and had some older assets that we could close given the government’s signals create new opportunities ahead. • refurbish, revitalize and put a different with regards to its plans for BC Hydro management philosophy in place. over the next five years. Fortis Inc. is our holding company in Newfoundland and each division of What do you see as the principal Fortis runs autonomously, with its own challenges for British Columbia's respective board of directors. This al- power sector over the next three to lows us to focus more closely on our five years? customers in each particular region. The biggest challenge in British Co- lumbia is managing power rates for The assets in the West Kootenay customers. People can only absorb a power system you purchased in 2004 certain cost threshold and there is a were characterized as “terrible” in tipping point on how much people are terms of their reliability. What were willing to pay for the service. As we some of your priorities in upgrading have had to invest money and as BC the assets over the last decade? Hydro is investing money, managing

BRITISH COLUMBIA POWER 2014 - 14 - Industry Explorations Global Business Reports INTERVIEW

announced its Ten Year Plan to modern- We also recognize that climate change Paul Kariya ize BC Hydro, but mention of IPPs was may cause us to have years with elec- conspicuously limited. How does this tricity deficits and others with surpluses, plan impact your members? as rain and snowmelt become more vari- The plan is not a full provincial electricity able. No one wants to be in a deficit po- plan, but a plan specifically for BC Hydro. sition in which they have to import what- It is oriented to assist BC Hydro’s Inte- ever is available on the spot market. This grated Resource Plan (IRP) and ensure was the rationale for the self-sufficiency Executive Director that their last legacy project, Site C, is policy. Clean Energy BC completed. In the joint federal-provincial environmental review, BC Hydro has to When comparing BC to Alberta, the demonstrate to regulators that Site C is two provinces have charted different necessary to meet British Columbia’s paths with regards to the generation mix needs. Therefore the Minister will re- and amount of regulation. Why did BC main relatively silent about IPPs until Site choose its path of a hydro dominated, C has received an environmental cer- fully regulated industry? What have tificate. However, the two-year review been the consequences? window of the IRP indicates that the British Columbia developed hydroelec- government still sees value in IPPs. Typ- tric power because of its geographic and ically, an IRP is given a five-year review topographic makeup. However, this has window, but this shorter window will come at a cost. For example, while our permit the government to review its poli- two dominant river systems for power cies once a decision on Site C is made generation are the Peace and Columbia and if LNG companies reach final invest- Rivers, the Fraser River, the largest sin- ment decisions in 2014 or 2015. If Site C gle salmon-producing river in the world, is not approved or extraordinary new load has not escaped development. All of the emerges, it provides a great opportunity major tributaries on the lower Fraser have for Clean Energy BC’s members to fill a been dammed. This has certainly been at Could you please give us a brief over- void. If the project goes through, it will a cost to salmon runs and the environ- view of Clean Energy BC? be a longer wait until their markets picks ment in general, which has affected the Clean Energy BC, previously known as back up. First Nations. Outside of Meso-America the Independent Power Producers As- and Southern Ontario, British Columbia sociation of British Columbia, represents In the last two years British Columbia has the richest diversity of aboriginal approximately 220 members, including has been a net exporter of electricity. peoples because of the abundance and 80 developer/operators in British Colum- How important are electricity exports to diversity of salmon populations. How bia. Its members constitute companies the province and what, if anything, can it we develop hydro in the future has to be across the value chain including gas do to increase them? conscious of salmon, the environment, generators, consultancies, engineering Arbitrage and power trading has always and the First Nations. The days of big hy- firms, and service providers. brought money to the province, and the dro developments on the coast are over. government will not want to relinquish How has the role of independent power that revenue stream. BC Hydro could Do you have a final message for our producers (IPPs) evolved in British Co- change how its stores generated en- readers? lumbia, especially since the passage of ergy from renewables through firming The government issued its final power the Clean Energy Act in 2010? and shaping, but this method could re- call in 2008, when 27 power purchase IPPs picked up steam in 2001 under the strict arbitrage. The government has not contracts were issued for 3,500 gi- Liberal government. In 2007 the govern- indicated that it does not want to part gawatt hours; 14 projects from this and ment enacted the Clean Energy Plan, from its current power trading and the the 2006 power call are currently under which laid out British Columbia’s vision arbitrage of it. If California and the West construction. These projects are creating to be a leader in renewable energy. Prior Coast of the United States had come out almost 2800 direct jobs, 700 to aborigi- to this development, IPPs made up 1% of the recession like anticipated, the de- nal people. The 14 projects representing to 2% of the grid’s production, today mand for clean energy would have been $4 billion of capital expenditure are on our members make up over 15% of grid greater. However, the slow recovery time and on budget. Not all of the original production with non-member private pro- and the advent of cheap gas have com- 27 contracts will be developed and that ducers in the mining and pulp and paper plicated the situation. There is export attrition, while troublesome, is part of sectors also being active in selling ex- potential to Alberta, which needs to di- the efficiency of the private sector. The cess power to the grid. versify away from dependency on coal clean energy sector is delivering what production, but the east-west transmis- we promised to deliver: jobs and invest- In December 2013 the government sion network is not in place. ment. •

Industry Explorations - 15 - BRITISH COLUMBIA POWER 2014 EXPERT OPINION Global Business Reports

ogy that lasts. This is why we have long- British Columbia: excellent term clients who know that their IRR will be excellent and the risk they have to fac- conditions for wind energy tor in is low. It’s also why banks financing projects with Senvion wind turbines give us an excellent rating. Of course, all these factors contribute to reducing the cost of energy significantly. Helmut Herold, One of the latest examples of how we Senvion Canada improve our technology is the Senvion 3XM series of 3 MW turbines we recently launched in North America. This technol- Compare the wind energy footprint in over, B.C. has set very high targets in ogy is based on our proven MM series Canada and Germany, or even in the terms of demand side management (DMS) combined with technological achieve- United States, and you will quickly draw that might not be met – again resulting in ments from our offshore technology. This one conclusion: there is still a lot of poten- higher energy demand than predicted. allowed us to develop a more powerful tial for wind energy in Canada. As a leader We hope that all these reflections will be turbine with a bigger rotor, without sac- in renewable energies, Germany has about taken into account in revising B.C.’s Inte- rificing the low sound characteristics of 34,000 megawatts (MW) of wind energy grated Resource Plan (IRP), due at the end our turbines. Today, we have a proven installations, while the United States – 26 of 2015, and wind energy will become a track record of 10 GW of this technology times bigger than Germany – has an im- bigger part of B.C.’s energy mix — espe- installed around the globe. This includes pressive capacity of about 61,000 MW. cially as hydropower and wind energy are about 2,200 MM92 and about 350 3XM Meanwhile, Canada has about 8,500 MW an ideal combination. Hydro can function turbines. Our excellent track record is a of wind energy – 2.5 per cent of global in- as an energy storage system for surplus direct result of upfront quality, R&D, installations. That said, although Senvion is wind energy. Moreover, it fits very well telligent product development, prototype active in all three countries, Canada is one into B.C.’s demand scheme, as there’s validations, and years of experience with of the most important markets. British Co- a lot of demand in winter, when wind is similar technologies. In Canada, we have a lumbia is a big part of this equation, as we strongest. In summer, when the wind is footprint of more than 600 MW. By 2016, see a lot of opportunities for wind energy, not as strong, energy demand can be sup- this number will have doubled, with a total enabling the province to remain a green plied by hydropower. capacity of more than 1 GW supplied to energy frontrunner and to reduce its CO2 Quebec wind farms alone. Given the great emissions. potential for wind energy developments, B.C.’s electricity generation is traditionally Proven technology for reliable and B.C. is one of the most promising markets based on hydropower, but natural gas has competitive energy generation in Canada, especially for the Senvion 3XM been growing in importance. However, a series. big portion of this natural gas is destined As a German company, Senvion is an In the future, we want to make sure British for export, which will lead to increased en- expert in wind energy generation tech- Columbians get clean, low-impact and low- ergy demand due to investments in LNG nology and a leader in the offshore busi- cost energy to fill the predicted supply gap. plants in the future. This is one of the big ness. Since our founding in 2001, we have We’re confident that Senvion has the right opportunities we see for wind power gen- continuously developed our technology to technology and experience to do this, and eration in BC Wind is the perfect choice increase energy yield and reduce asset have recently opened an office in Vancou- to supply this demand. It is low-cost and costs. As well, our goal is to build technol- ver. Let’s go, B.C.! • low-impact energy generation, and complementary with hydropower. Consider, too, that a decision on the big hydropower plant project, Site C, is currently pending. There are concerns that the project might result in higher energy costs for ratepay- ers and have major environmental impacts that cannot be mitigated. New wind power installations might be a great, cost-effective and predictable alternative — especially as the investment costs and risks for wind energy projects are usually borne by private developers (IPPs). Also, due to technology improvements, the cost of wind energy has and will further decrease in the future. More-

Senvion, Saint-Robert-Bellarmin wind project, 2012. Photographer Joan Sullivan.

BRITISH COLUMBIA POWER 2014 - 16 - Industry Explorations Global Business Reports INTERVIEW

ZED’s projects are the first projects for power expertise. Our machines are de- Helmut Herold Senvion in British Columbia, each having signed to be reliable over the long-term a capacity of 15 MW. They are also part and are environmentally friendly from of the few projects to be awarded within a noise perspective, having the lowest the new Standing Offer Program in the noise level within the industry. Senvion's province. KPMG LLP conducted the pro- machines can also cope with the extreme curement process. Project construction is temperatures in Canada. set to commence in 2015 and will feature CEO North America our 2-MW turbines, MM92; the off-taker Senvion has not had to develop special Senvion Canada of the energy will be BC Hydro. technologies to deal with the climate extremities of British Columbia. Are your What is the scope for the development technologies modelled on the machines of wind and wind technologies in British that you have used in Europe and north- Columbia? ern Quebec? Wind is an excellent complementary We will use all the good technologies de- source of energy to hydro. British Co- veloped in Europe and northern Quebec lumbia and Quebec they can accumulate for our machines in British Columbia. In the fluctuating energy from wind and still addition, we are introducing the new tech- rely on hydro. However, wind energy is nology of our European-proven 3-MW and not as intermittent as perceived; within a 3.2-MW into the British Columbia market, large province the wind farms are some which will complement our current 2 MW distance apart, and blowing wind usually - MM92 machine. The 3-MW and 3.2- results in power generation in at least MW being more powerful will reduce the farm. Seasonally, in British Columbia and cost of energy. Quebec, wind is at its strongest when hydro power is at its lowest. What have been the trends in the cost of Canadian wind energy over the last two The Integrated Resource Plan (IRP) is years and how tough is competition with Senvion Canada was founded in 2007. always subject to change. What do you other wind turbine suppliers? Can you highlight some of the com- think will happen in this regulatory frame- The wind sector is trying to bring down pany's key milestones? work in the next two years? the cost of energy via new platforms. Our Senvion Canada has achieved consid- Senvion would like to see wind power MM92 is an excellent machine, especially erable growth since its inception in play a more prominent role in any future for wind areas with medium-to-strong 2007 having installed in excess of 550 IRP. Wind could supply the increasing winds. In British Columbia there are also megawatts (MW) and more than 270 demand for energy from industry and areas with weaker wind that would com- wind turbines. Our development is con- particularly for liquefied natural gas (LNG) plement machines with bigger rotors. tinuing with the construction of the 350 plants in the north. MW Riviere-du-Moulin wind farm in Que- What are Senvion's key objectives for bec, the biggest contract in the history of Can you highlight some of the differ- the next five years in British Columbia? Senvion, with completion due 2015. In ences and challenges of operating in We want to complete our inaugural 2014, Senvion completed its first com- British Columbia as compared to Que- British Columbia project and enlarge our munity-based project in Quebec. Our bec and Ontario? office in British Columbia to service local development in Canada is on-going and Projects in British Columbia are at a requirements, as our offices in Montreal we have been retained as the preferred higher altitude, often over 1,500 meters and Toronto do. The wind business in supplier for Zero Emission Energy Devel- above sea-level, which presents specific British Columbia will grow and will benefit opments Incorporated's (ZED) projects in challenges, while Quebec and Ontario from investment in LNG. British Columbia British Columbia. Today, according to the have flat terrain. Senvion will overcome has a high target for demand manage- 2013 BTM Consult report, we rank as the the challenges of working at higher alti- ment. There is currently a review of BC second largest turbine supplier in Canada. tudes and logistically of moving between Hydro's Site C project. If this project fails Due to our success in Canada, Senvion the cluster of projects in the south to the to go ahead, other energy sources could has nominated our office as the hub for one in the north. be explored and present an opportunity United States and Canada. for wind energy. What makes Senvion unique from other We would like to see a positive develop- Senvion has yet to appear prominently wind technology specialists in British ment of wind and all stakeholders, includ- in British Columbia. How important is Columbia, for example, Siemens? ing First Nations, to appreciate the great British Columbia to the company and its Our machines have been designed, used benefits that wind power can bring with recent success in being named as the and approved in European environments, positive effects on the environment via ZED preferred supplier? and we have over two decades of wind clean energy and competitive pricing. •

Industry Explorations - 17 - BRITISH COLUMBIA POWER 2014 INTERVIEW Global Business Reports

BC Hydro plans to invest US$1.7 billion ities to the required level. Three years Peter Galbraith & per year over the next 10 years in its ago, Ausenco carried out an upgrade integrated resource plan (IRP). What for seismic requirements at the water Simon Davies is Ausenco's strategy to increase its intake tower at BC Hydro's Strathcona share of the power business? Dam near the town of Campbell River. PG: Our goal is to do the following: build Challenges included drilling holes to ex- a deeper in-house core of capability; tremely tight tolerances and accuracy team with appropriate partners when vertically through the concrete structure PG: Global Lead, Infrastructure it is more effective to do so rather than to install reinforcing cables. The work SD: Senior Project Manager, building organically in-house; continue was one-of-a-kind, carried out success- Oil and Gas, Power to build on our existing work at BC Hy- fully, under schedule and on budget. Ausenco dro and move outside our niche profile The project won BC Hydro's Lach Rus- that has evolved over the years be- sell Project of the Year award in 2011. tween BCH and Ausenco and previously This project is typical of many situations with Sandwell, demonstrating to BC Hy- where innovative techniques will have dro that Ausenco has a wider portfolio to be utilized while upgrading older facil- of expertise. ities. A further challenge is that the facilities frequently have to remain in service Our readers want to know more about while work is undertaken. gas feedstocks and supply of gas. How much do you see LNG being a part of What differentiates you from other your business and would you develop it players in the market? through your Calgary office? PG: Ausenco has a physical presence SD: LNG presents huge potential for in B.C. supported by a large pool of ex- B.C., and Ausenco anticipates carrying pertise. Many interested parties do not out a great deal of work in LNG. We have this talent locally and will have to PG have the expertise to add value in many team with companies such as Ausenco. areas, including ports and marine struc- SD: Ausenco possess the following: Can you give a brief overview of tures, as well as for larger volume engi- local knowledge of the regulatory Ausenco in British Columbia and the neering work. There are 15 to 20 projects process; relationships with first nations; importance of the B.C. power sector to currently under discussion. Preliminary awareness of the unique geographical the company? work will carried out on most but only a challenges; and familiarity with the local PG: Our largest office in North America handful will be completed. Ausenco also seismic characteristics. is in Vancouver, where we have approx- has a world-leading computer simulation PG: Arguably, you will hear most com- imately 400 employees. We also have group that can take any facility concept panies claiming similar attributes, but offices in Calgary, Halifax, Burlington, (in any industry) and carry out a simula- Ausenco has the nimbleness that bigger Toronto and Montreal, and in the United tion, which can facilitate and expedite players lack. We will be selective as to States - Denver, Reno, Concord and determining whether a project is viable what work we choose to target. Houston. We have a total number of 900 and its optimal configuration. employees in North America. In 2008, Our expertise in Calgary will support our Over the last decade and a half, the Ausenco acquired Sandwell, which LNG business in B.C. In 2012, Ausenco IPP sector in B.C. has grown larger and had a history dating back to the 1960s acquired Reaction Consulting, a special- more influential. Do you see this as an of serving BC Hydro and its precursor, ized gas and oil consulting business, and area of growth going forward? BC Electric Company. The peak of our in 2013, PROJEX Technologies Limited PG: We have carried out a limited power volume was in the late 1990s/ to expand into the oil sands market. amount of work for IPPs. One of the early 2000s, when we led a joint venture challenges in generating alternative called Pacific Power Consultants, which What are the main challenges to up- power sources to hydroelectric is that was involved in thermal power genera- grade BC Hydro’s infrastructure from a the consumer has become accustomed tion with BC Hydro at the Burrard Gen- technical perspective? to cheap electricity. An alternative erating Station. This was a major capital PG: One of the challenges of dealing power source will have to be special to reinvestment. Since then, our work in with 50- to 70-year old infrastructure can become viable. Going forward, Ausenco the power sector has reduced and now be the varying degrees of quality of the will work with IPPs, but this is not a pri- accounts for approximately 10% of our work that was originally carried out and ority. Our focus will be work related to total revenue in B.C. Over the next five integrating it with modern requirements. the core BC Hydro facilities. • to 10 years, power will be a huge part This is frequently seen in structures of our plans. We anticipate that it will since seismic performance standards account for at least 25% of our overall have changed significantly resulting goals. in the need to upgrade existing facil-

BRITISH COLUMBIA POWER 2014 - 18 - Industry Explorations Global Business Reports INTERVIEW

BC Hydro is investing US$1.7 billion per last in 2008. The last of these projects David Daw & year over the next 10 years in upgrad- awarded power purchase agreements in ing its infrastructure. What business the 2008 call, which are now in construc- Shawn Smith opportunities are there on the horizon for tion, leaving only smaller projects eligible Hatch in British Columbia? for BC Hydro’s Standing offer program DD: There are many opportunities for to be developed. For Hatch to focus on Hatch as consulting engineers. BC Hydro smaller projects would change its current is limited in engineering resources to ex- strategy. BC Hydro's larger projects are DD: BC Regional Manager, ecute its 10-year upgrade and has a strat- Hatch's core. Renewable Power egy to engage engineering consultants. SS: Senior Electrical Engineer, Hatch and its competitors are endeavor- The Vancouver Island project is BC Hy- Renewable Power ing to secure some of that work. BC Hy- dro's first major transmission line project hatch dro has three general categories of work: in 20 years. What have been some of the sole source requests for specific projects; project’s challenges? requests for proposals (RFPs) for single DD: It has been some time since BC Hy- projects; and blanket/master services dro has installed a major transmission agreements for multiple projects. line, and this change of direction has been a steep learning curve for BC Hydro; What do you think should be BC Hydro's Hatch has assisted as project managers. immediate priorities for updating its infra- SS: BC Hydro initially struggled to include structure? Do you feel that the 10-year external service providers for the design upgrade will guarantee the future of BC and execution of projects, historically. Hydro's infrastructure? Most of these projects were executed SS: BC Hydro's priorities run throughout in-house. In part because of their limited its infrastructure, ranging from spillways resources, BC Hydro have moved more to and generation equipment to sub-sta- executing projects with the help of engi- DD tions. A great deal of time, effort and neering consultants and design-build con- money was invested by BC Hydro in the tractors. It has been challenging for BC How much of your business in Vancouver installation of its infrastructure, followed Hydro to make the transition from sourc- is considered hydroelectric, and in what by a period of operation to the point ing in-house to outsourcing. BC Hydro will way is the hydro expertise gained in where it has no choice but to conduct an evolve a formula that will complement its British Columbia important to your global upgrade. Arguably, most of the infrastruc- requirements. operations? ture and equipment is now past its best. DD: Hatch has a few different sectors in DD: BC Hydro's 10-year plan will facili- What differentiates Hatch from its com- which it works: power and energy; mining tate recuperation of its infrastructure. It is petitors in the marketplace in Vancouver and mineral processing; and infrastruc- essential that the plan is carried through, and British Columbia? ture. Power contributes one-third of its even at the expense of increased electric- DD: Hatch is a global company with world- business in British Columbia, with the ity rates. wide engineering experience, making it main focus on hydroelectric working for a distinct choice for prospective clients. utilities, independent power producers What are some of the differences of Hatch is a private company carrying out (IPPs), other developers and financiers. working with BC Hydro and the IPP consulting engineering; it sells this as a sector? differentiator and is beholden to itself. Vancouver is considered a mining hub. DD: From our perspective, over the next SS: Compared to smaller consultants, How much does mining contribute to few years Hatch is looking for a greater Hatch has the expertise to execute entire your business? amount of work with BC Hydro than IPPs, projects in-house. It does not have to out- DD: Historically, our business has been which will permeate from its Integrated source the design of project components two-thirds mining, one-third power; today, Resource Plan (IRP). The projects for the to sub-consultants. the business-split is more or less equal past power call will be completed in two due to the lull in mining. As energy is not years. If there is no further power call What do you see as the objectives for related to commodity prices, much of our within the next two years by BC Hydro, Hatch in the renewable energy sector work is for utilities that have long-term there will be a decline in IPP develop- over the next three years? energy plans with multi-year projects. The ment. If IPPs cannot sell their power to DD: We are actively seeking to expand company's strategy has been to use the BC Hydro, there is a limited alternative globally and increase our business in energy sector as a means of compensat- market. South and Central America. We acquired ing for lulls in mining by acquiring power SS: Discussions with IPPs reveal that the a company in Brazil two years ago, as part companies, i.e. the acquisition of Acres In- IPP market is relatively quiet on the new of this strategy. Hatch will also maintain ternational back in 2004. This strategy has project front because BC Hydro has not and grow its business in Canada and the been adopted globally by Hatch. issued a new call for power since the United States. •

Industry Explorations - 19 - BRITISH COLUMBIA POWER 2014

Meeting Future Demand: Site C and Independent Power Producers?

“There is a direct correlation between aging infrastructure and catastrophe risk. As infrastructure ages, vigorous maintenance programs are critical particularly when introducing a large power generation project to the global insurance market; it will delineate the projects that receive special considera- tion, and will facilitate the most options and favorable terms as compared to parties that do not carry out the required level of maintenance.”

- Allison Miller, Senior Vice President and Leader, National Power and Utilities Practice, Aon Global Power

For growth within the power industry, the key goal is to secure the appropriate senior technical expertise and develop staff under that umbrella. Typically we see this expertise coming from retired utility employees. The goal is to capture the years of experience and expertise available from the aging utility employee pool so that their years of relevant experience does not retire with them. DMD has already introduced into its workforce experienced ex-BC Hydro personnel to help develop its skill set and will continue to do so as development of this market continues.

- Trevor Stemo, DMD & Associates Electrical Consultants

Image: Stantec EDITORIAL Global Business Reports

BC Hydro began securing the next round operating. Over the last several months The Last in a of permitting and social licenses for Site I have been busy trying to develop al- C. “The approved IRP contemplates ternative packages of ideas, combina- Legacy’s Line that BC Hydro would proceed with var- tions of generation that I can take to the ious processes and stages to advance Cabinet and let them make the choice Site C to a stage that would enable the whether to pursue Site C or another op- government to make an informed fi- tion,” commented Minister Bennett. nal decision on whether Site C should Site C is the largest major supply-side The Push for Site C proceed sometime in 2014 or 2015,” question mark for B.C. On the de- commented Charles W. Bois, a partner mand-side, a number of soon to be de- at Miller Thomson LLP. If approved in termined factors caused BC Hydro to the aforementioned timeframe, BC Hy- accelerate the IRP’s revision timeline dro plans to bring the project online by for 2015. “We acknowledge there is un- 2024. “Site C is dispatchable and pro- certainty in our load forecast, largely in Site C was originally proposed as the third duces 1100 MW of firm capacity, which the industrial sector due to the potential of four major dams on the Peace River makes it higher quality than run of river development of the liquefied natural gas in the middle of the twentieth century. or wind, which are both intermittent (LNG) industry and the upstream natu- Two other dams, the 2,876-megawatts resources,” said Doug Little, vice pres- ral gas sector. One of the action items (MW) W.A.C. Bennett Dam and the 700- ident of energy planning and economic we have in the IRP is to be ready with MW Peace Canyon Dam, were com- development at BC Hydro. a Request for Proposals (RFP) from the pleted in 1968 and 1980, respectively. B.C.’s independent power producers IPP sector if needed. We are following In 1982 and 1989, the British Columbia (IPPs) are closely monitoring the situa- the load growth very closely and if it Utilities Commission (BCUC) indefinitely tion. “Conditions have changed; I would looks like load is increasing faster than tabled proposals for developing Site C, not classify myself as an advocate of expected, we will be ready to launch a but BC Hydro announced plans for its the [Site C] project. It is my job to as- new procurement exercise. In addition, resurrection in April 2010. sess whether Site C is the best way to we will provide an update to the IRP in Following the approval of the Integrated generate 1100 MW of electricity at the 2015,” said Doug Little of BC Hydro. Resource Plan (IRP) in November 2013, point in time when it would be built and Paul Kariya, executive director, Clean Energy BC, sees the IRP and 10 Year Plan as designed to meet the interests of BC Hydro and its priority to build Site C, but also considers the two-year review window as a potentially positive development: “Typically an Integrated Resource Plan is given a five-year review window, but this two-year window indicates that the government is willing to review its policies once a final decision on Site C is made and if LNG companies reach final investment decisions in 2014/15.” Much of the province’s economic and demand-side future hinges on how B.C. takes advantage of Western Canada’s upstream gas reserves and whether it can position itself as an investment destination for oil companies that want to export to Asia. According to government figures, these companies have invested nearly C$7 billion in corporate acquisitions and upstream production, but reviews are ongoing before final investment decisions are made. An estimate by Midgard Consulting puts the electricity demand needed for four of the 13 proposed projects: Kitimat LNG (Apache and Chevron), LNG Canada (Shell with KOGAS, Mitsubishi, and PetroChina),

BRITISH COLUMBIA POWER 2014 - 22 - Industry Explorations Global Business Reports

Pacific Northwest LNG (PETRONAS, Progress Energy and JAPEX) and Prince Rupert LNG (BG Group), at 2900 MW. Even if Site C came online, there would not be enough generation capacity to accommodate LNG. “The larger question becomes if there is large build out of oil and gas or mining in the north, will industry be able to obtain power from the existing grid, or are they going to be forced to self-generate?” according to Graham McTavish, vice president of power, Canada, at Stantec. Thus, there remains insurmountable connectivity issues associated with supplying LNG facilities with grid-based power according to McTavish: “North- west B.C. [where the LNG sites are located] is dependent on a single radial 500-kilovolt transmission line from Prince George to Terrace that is subject to numerous small outages during the year. As the LNG sector moves forward, we will probably see the industry rely on their own gas generation for their power needs; so there is significant opportunity for gas generation and renewables combined with local transmission and distribution upgrades in and around Kitimat, Terrace and Prince Rupert. A limited transmission infrastructure in the north is also affecting the construction of new industrial and IPP projects in much of B.C. The large costs and timelines required to interconnect into the BC Hydro grid have significantly reduced the viability of some of these projects.” Aware of the consequences of LNG pro- motion, B.C. has revised some of its ambitious efforts to reduce the province’s greenhouse gas emissions. In 2012, the Clean Energy Act of 2010, which outlined an objective “to generate at least 93% of the electricity in British Colum- bia from clean or renewable resources,” was amended to allow for gas generation at LNG facilities to be considered a “clean source” of energy. “Certainly the decision to label LNG as a clean fuel source and the upcoming decision on whether or not to allow as-yet-to-be- built LNG export plants to power inside the fence will have an effect on IPPs,” commented Jason Jones, business development director - power transmission and distribution sector - environment practice, at Tetra Tech EBA. •

Industry Explorations EXPERT OPINION Global Business Reports

Powering Northern British Columbia

Graham McTavish, Stantec

British Columbia is the fourth biggest development of power transmission is, Requiring a firm to spend decades navi- economy of Canada, but most people are for industry, easily as knotty and com- gating the approvals process to know if surprised to learn that roughly a third of plicated a problem as environmental ap- the system will allow a project to proceed B.C. is off the grid. No substantial elec- provals or First Nations consultation. is the same as turning many firms away. tricity transmission structure exists from The crux of the issue is that industry and This cannot be done at the expense of Prince George to the northern border of government are stuck in a chicken-and- environmental protection, of course. An the province. This has not shooed res- egg situation. B.C. generates most of industrial project is only as strong as its idents and industry out of the area en- its power from hydroelectricity. Building social license to operate. The current reg- tirely, but it has put brakes on the speed industrial power transmission for that ulatory regime is far from perfect, and the of development and limited economic energy usually costs between $500,000 efficiency and efficacy of the system can growth. Diesel generation provides and $2 billion per kilometer of line. In a be improved. power to these areas, but, over the life- province this big—11 times the size of Second, BC Hydro and industry need to time of an industrial project, the cost of Austria—transmission projects can be- work together. There is enough project using diesel instead of hydroelectricity come prohibitively expensive. To make potential in oil and gas, mining and renew- can drag an otherwise healthy develop- investment on that scale palatable, in- able energy in northern B.C. to help fund ment into the red. Yet the region’s re- dustry would like to build its projects as transmission line expansion throughout source wealth has tantalized both indus- quickly as safety allows. But that is the the province, providing that there is a try and government for decades. Large exception more than the rule. For exam- long-term commitment from BC Hydro to deposits of copper, gold, and other exotic ple, Imperial Metals began the permitting repay those costs over time. If the public metals like niobium and molybdenum dot process for its Red Chris gold and copper and private sector work together, they the map of northern B.C. mine in the late 1980s. The mine is, as can meet the energy demands of the fu- The area also contains what will become of late summer 2014, just on the cusp ture. It makes good business sense for substantial pipeline corridors for B.C.’s of production. Industry is hesitant to tie both sides to find the common ground. liquefied natural gas export industry—if up capital in such slow-moving and risky Third, many rivers in the state of Alaska the industry ever matures. There are 15 ventures. So why does government not flow a comparative stone’s throw from proposed LNG plants in various stages of kick start the process? some of northern B.C.’s biggest potential regulatory approval right now in the prov- The provincial government regulates industrial projects. Damming them and ince, all hoping to ship cooled methane the power market through BC Hydro, a running transmission lines into Canada to the lucrative Asian market one day. Crown corporation. The logical way to en- would be much cheaper than extending Construction on the biggest terminals on courage these developments would be to the grid within B.C. The most likely sce- the province’s west coast is scheduled to have BC Hydro build one or two transmis- nario would be for a series of dams north begin next spring, but most of the termi- sion lines to carry cheap, clean power to of Wrangell-St-Elias National Park to run nals face significant regulatory hurdles, the remote corners of the province. But power into mining projects in northwest- and, less commonly, financial issues and BC Hydro cannot do that with its current ern B.C., and then on down the coast social opposition. revenue. Legally prohibited from rais- into the American market. The ability to Developing both LNG and mining would ing its rates, the corporation is currently sell power to large industrial customers supercharge the province’s economy. It trying to maintain its aging inventory of would make the cost of building a trans- would also require substantial boosts in hydroelectric dams. Finding the $1 or $2 mission line down the length of B.C. power generation and transmission. A billion needed to construct these lines much more palatable, and the power single mine can consume as much elec- does not seem likely. Less likely is that demand in the American market is ex- tricity as a small city. Meanwhile, natural the provincial government expends polit- pected to increase by almost a third by gas becomes a liquid at -162 Celsius and ical capital necessary to raise the cost of 2040. There have been rumors of several the compressors that bring it down to power. So what is to be done? credible firms mulling this over in recent that frigid level consume huge amounts There are two obvious steps from my years. It would be a great boost to indus- of energy, whether powered by hydro- point of view. First, permitting should be try, government, and ultimately the eco- electricity or natural gas. However, the made more straightforward and efficient. nomic future of British Columbia. •

BRITISH COLUMBIA POWER 2014 - 24 - Industry Explorations Global Business Reports INTERVIEW

A huge opportunity for growth exists in opportunity for gas generation and renew- Graham northern B.C., where oil and gas, mining ables combined with local transmission and remote communities want to connect and distribution upgrades in and around McTavish to the grid rather than burn costly diesel Kitimat, Terrace and Prince Rupert. fuel. There is also the possibility of distributed generation combined with wind How much of a risk is it for the province power or run of the river hydro. Our team to not install redundancy across parts of in British Columbia is focused on trans- its transmission system? Vice President, Power, Canada mission and distribution, but our teams Most transmission in North America has Stantec elsewhere in Canada and the United lightning protection. One lightning strike States are ready to help with a generation in the area of a transmission line could or renewable build project. take that line down for up to a second, but that second or fraction of a sec- As BC Hydro sets to upgrade aging ond can mean huge costs to industrial infrastructure under the Integrated clients. Northwest B.C. is also fed off Resource Plan (IRP), is there enough of a single 500-kV radial line, and even expertise to complete this task? though that line has some backup from There are a limited number of veteran the 700-megawatt (MW) hydro facility transmission and substation engineering, at Kitimat, an outage would have a huge procurement and construction experts. impact on Northwestern B.C. industrial BC Hydro and many of the other utilities clients, which need 100 percent reliability still have them, but many of their senior not 99.99 percent. engineers are starting to retire. Stantec has spent the last few years building a Stantec was the engineer for BC Hydro highly experienced transmission and dis- to replace a fallen transmission line over tribution team and is well positioned to fill the Fraser River. What were some of the this manpower gap. We are also looking challenges of this project? to grow in the next two to three years The main challenge was coordinating with the addition of industry experts as the construction requirements with the well as with younger staff. engineering team and making sure a con- You recently joined Stantec. What structible design was in place quickly. attracted you to the company and what Are current plans to upgrade aging Nonetheless, the approvals and design are some of its medium-term plans? infrastructure extensive enough to meet were executed quickly. There was an ac- Stantec is in growth-mode. There are British Columbia’s future needs? celerated construction timeline, and BC lots of opportunities in the industry right These plans are extensive enough for up- Hydro will be doing more upgrades on the now, especially for transmission and dis- grading aging infrastructure. However, if line before there is another incident. This tribution, because there are few qualified there is a large build out of oil and gas or goes back to the aging infrastructure is- consultants with the capabilities to engi- mining in the north could these projects sue; the original engineers probably never neer large transmission and distribution obtain power from the existing grid or thought that the flows of the Fraser River projects. We plan to expand our work would they be forced to self-generate? would change like they did leading to the with utilities such as BC Hydro as well as BC Hydro’s IRP indicates that they will be erosion around the foundations. with mining, oil and gas and IPP clients to able to support the power requirements help them with transmission, distribution for the province for the next 10 years, What are your top three objectives for and generation. and they are not looking at construct- Stantec in British Columbia over the next ing any additional large lines in northern five years? How important is the power sector to B.C., other than the possible new line We have three objectives: (1) to build your business here in British Columbia? from Kitimat to Terrace. The LNG indus- on our current transmission and distri- The power sector is a growth opportunity try has had to eliminate the possibility of bution clients to become the number for Stantec. Many of the electrical utilities electric drive engines for their plants, as one transmission consulting company in in North America, including BC Hydro, this source is not guaranteed. Northwest Canada; (2) to build on our gas generation are undergoing large capital spending British Columbia, where the LNG facilities capabilities in Canada and be ready for to expand their grids. At the same time, will be located, is dependent on a single, the gas generation market that will ma- they have to upgrade their existing trans- radial 500-kilovolt (kV) transmission line terialize in British Columbia, Alberta and mission and distribution systems due from Prince George to Terrace, which is Saskatchewan over the next 5-10 years; to aging infrastructure. The utilities are subject to numerous small outages dur- an (3) to leverage our renewables exper- struggling to keep rates down and lower ing the year. As the LNG sector moves tise in Ontario, especially in wind, and ex- overhead costs and are turning to outside forward, it will probably rely on its own pand into Western Canada when renew- consulting firms to help. gas generation. Thus, there is significant ables are constructed again. •

Industry Explorations - 25 - BRITISH COLUMBIA POWER 2014 EXPERT OPINION Global Business Reports

New Power Generation: Independent Power Producers or BC Hydro

G. Henry Ellis, Gowling Lafleur Henderson LLP

An interesting debate is going on in The BC Hydro IRP estimates power-ca- the target is met, capacity demand would British Columbia with respect to sourcing pacity surpluses of 240 MW and 135 MW increase by 650 MW in 2021. By 2033, of new electricity for the next 20 years. In in 2017 and 2018, respectively. It also the DSM deficit could be 1300 MW, re- November, 2002, the B.C. government’s estimates continuous capacity deficits sulting in a shortfall potentially available to energy plan, “Energy for our Future: A from 2019 to 2033. In the short-term, the IPPs of 1356 to 1717 MW. Plan for B.C.,” included a policy action capacity surpluses/deficits are miniscule Other BC Hydro assumptions include that the private sector would develop percentages of current total capacity and wide ranges of expected loads from: (1) new electricity generation with BC Hydro given the likelihood that BC Hydro will the LNG sector, a range of 8x (100 to restricted to improving existing plants. not meet its demand side management 800 MW) with an expected load of 360 The 2002 Energy Plan led to a prolifer- (DSM) targets, there may be short-term MW by 2022; (2) the mining sector in the ation of independent power producers deficits, which will exacerbate the long- North Coast region, the forecast of 130 (IPPs) responding to the BC Hydro 2003 term deficits. BC Hydro’s forecasted MW could be 380 MW by 2019; and (3) Green Power Generation Call, the 2006 capacity surplus of 240 MW in 2017 as- the oil and gas sector, the potential load Open Call, the 2008 Bioenergy Call, the sumes 957 MW of incremental resources in the Fort Nelson region could grow be- 2008 and 2010 Standing Offer Programs, will be available in 2017. However, 82% tween 13 MW and 80 MW by 2020 and the 2010 Clean Power Call and Integrated (781 MW) of these incremental resources the Horn River Basin could require addi- Power Offer as well as electricity pur- are attributable to savings from its DSM tional capacity of 350 MW to 1,000 MW chase agreements (EPAs) directly nego- program. As BC Hydro places a 50% by 2033. tiated with BC Hydro. probability estimate on meeting its DSM It is difficult to estimate the long-term ca- BC Hydro reported that as of April 1, targets, the DSM increment might be 390 pacity deficit that BC Hydro will incur over 2014, there were 86 EPAs with IPPs in MW, resulting in a 2017 deficit of at least the next 20 years, given the many vari- commercial operation with capacity of 150 MW. ables at play. However it appears that BC 3,764 megawatts (MW) and an additional The question is whether IPPs can con- Hydro’s estimates are conservative and 41 EPAs with IPP projects in develop- tribute to meet the increased capacity de- that there is significant opportunity for ment with a potential capacity of 1,703 mand for power beyond 2018 or whether IPPs to invest. While the IRP indicates BC MW. This potential capacity is being BC Hydro will meet the demand itself. Hydro is only looking to optimize existing reduced as BC Hydro, relying on its de- If BC Hydro’s plans to add 1,820 MW IPP resources, there is an acknowledge- mand forecasts and cost projections, is though Site C, Revelstoke 6 and GM ment that BC Hydro will have to launch a negotiating cancellation of EPAs where Shrum, the projected shortfall potentially major acquisition process if the large gap commencement of commercial operation available to IPPs in 2033 would range Contingency Resource Plan scenario ma- dates have not been met. IPPs contribute from 56 MW to 417 MW. While these terializes. This article is to encourage IPPS approximately 20% of BC Hydro’s total numbers suggest limited opportunity for to carefully review the 2013 IRP, monitor power capacity of approximately 15,800 IPPs, BC Hydro’s assumptions will likely growth and make an informed determina- MW. prove inaccurate and the capacity deficit tion of the future capacity requirements. Following the introduction of the British will be significantly greater. For exam- The immediate opportunities are for Columbia Clean Energy Act in 2010, the ple, the IRP estimates an increase of projects of less than 15-MW capacity un- power dynamics changed. One significant 1,100,000 people (24%) in population for der the Standing Offer Program, net-me- change was that in its November 2013 In- the next 20 years, while BC Statistics es- tering projects, co-generation projects tegrated Resource Plan (IRP), BC Hydro timates an increase of 1,389,000 people and projects where there is a demonstra- moved away from the 2002 policy of leav- (30%) by 2036. ble demand for localized power capacity ing new electricity generation to IPPs and In 2021, BC Hydro is targeting DSM-ca- that BC Hydro cannot meet. However, included the building of Site C (1,100 MW pacity savings of 1300 MW. To put these analysis and planning for medium- to of capacity by 2024), with contingency savings in context, this requires a reduc- long-term projects should be undertaken plans to add Revelstoke Generation Sta- tion of 78% in new electricity demand, now, given the multi-year time frame tion 6 (500 MW by 2021) and upgrades to which seems improbable, given popula- needed to design, permit and finance a GM Shrum Units 1-5 (220 MW by 2021). tion and industrial growth. If only half of new power project. •

BRITISH COLUMBIA POWER 2014 - 26 - Industry Explorations Global Business Reports INTERVIEW

the 1990s? EPAs, as the current IPPs are locked into G. Henry Ellis Initially, there were no major players. EPAs ranging from 25 years to 40 years, Knight Piesold Consultants, an engineering guaranteeing their cash flow. The bigger firm, was one of the visionaries and se- issue is that as Site C progresses, BC Hy- cured the water license for the East Toba dro will reduce its emphasis of engage- and Montrose Hydroelectric project, which ment with IPPs, as it is confident that was subsequently developed by Plutonic Site C will supply most of the incremental Power Corporation (now Alterra Power power required for the next 20 years. The Partner Corp.). Initial development was under- government’s focus on LNG, coupled with Gowling Lafleur taken by small developers, funded through the results of existing power calls and BC Henderson LLP their own resources, venture capital and Hydro’s interest in cancelling some EPAs, limited public offerings. Development has suggests that the government will place progressed to a mix of small developers less emphasis in the future on contribution and major players, i.e. Brookfield Renew- from IPPs and greater reliance on Site C for able Energy Partners and Innergex. Capital the extra capacity. from European energy funds is now being invested in IPP projects. Major financiers, It has been said that with LNG the fiscal such as GE Capital, have also invested in regime has to be correct. What will it take the IPP market by way of combinations of to achieve this and how important is it to equity and debt. be carried out quickly given the competition for LNG capital? From the last power call, only 14 of 27 The government is aware of the time awarded Electricity Purchase Agreement constraints, and is trying to achieve the (EPA) came to fruition. What are the balance between a fair return and en- difficulties that IPPs face to complete couragement for industry. I am confident projects? that the government will discuss its fiscal The biggest difficulty in completing an regime with the majors and come up with EPA is the rising costs for project con- a mutually satisfactory resolution in an ap- Why has British Columbia taken a more struction, as the capex budgeted at time propriate time frame so as not to lose this regulatory approach in the power sector of submission for an EPA often turns out opportunity. than other provinces? to be well short of actual costs given the In Ontario, the power sector is comprised time between negotiation of an EPA and Would you agree that LNG does not of many power-generating companies with construction. The permitting procedure attract the same controversy as oil? What a multiplicity of distributors. By way of con- has been a hurdle with some IPPs, which are the challenges to overcome if LNG is trast, in British Columbia, the government fail to qualify for licenses of occupation or going to be developed? has monopolized power generation, trans- leave to commence construction either for LNG is not as dangerous and its ignition mission and distribution. Arguably, the environmental concerns or the impact on point is not as volatile compared to oil. reason for this is the nature of British Co- recreational resources. Accommodating However, LNG is capital-intensive and lumbia's power source, i.e. mainly stored the requirements of First Nations can also requires international capital to develop a water requiring large dams for generation, impact the timing and economic model. plant and pipeline infrastructure. The tax extended transmission lines, distribution in regime will be the first issue to address, many disparate population centers and ex- Do you feel that IPPs are better equipped followed by permitting requirements and tensive capital as the projects are located than BC Hydro to deal with First Nations First Nations consultation and accommo- in the less populated eastern portions of issues? dation. the province while most the users are in The IPPs are business-focused, keen to the southwest sector of the province. This secure business agreements with First Na- What will be Gowlings’ objectives over the setup can be traced back to the 1960s, tions, and able to be more creative in their next five years and what will be the split to W. A. C. Bennett, the then Premier of negotiations, as they are not as hampered of your business between IPP proponents British Columbia, who successfully imple- by government regulation. BC Hydro en- and the LNG sector? mented his vision to build large dams on ters negotiations with good intentions, but Over the next five years, Gowlings will be the Columbia and Peace Rivers to provide is constrained in what it can offer to First looking to continue its active involvement power for the province. BC Hydro's Site C Nations. in the power sector. We have had inter- project will be the third dam and generat- esting retainers, including involvement ing station on the Peace River. Do you see there being more merger and in many IPP projects and the current up- acquisition (M&A) activity amongst IPPs grading of the John Hart dam. Gowlings is How have the projects in the independent because of the uncertain future of Site C? experiencing growth in IPP business but power producers (IPP) sector evolved Site C should have little impact on M&A currently LNG impacts have been limited since you first got involved with them in activity in respect of current projects with to site explorations for potential plants. •

Industry Explorations - 27 - BRITISH COLUMBIA POWER 2014 EDITORIAL Global Business Reports

mutual agreement between BC Hydro and the respective Waxing or developer. Glen Ichikawa, president of Kawa Engineering, a Vancou- Waning? ver-based engineering firm that specializes in work with IPPs, explains the reasons for the attrition rate from the 2008 Power Call. “The first is financing; some of these projects are millions (of dollars) over budget and no one is making much money on them. Some companies have gone belly up The Role of IPPs in the process. Lenders realize this and do not want the exposure, so it is harder to get money. The other side is the First Nation relationships; usually projects that fail have offended bands at an early stage and thus the project is always fighting uphill. Third, there are construction costs. Contractors have lost money in the past, so they have raised prices to de-risk In the early 2000s, the Liberal government under Premier Gordon themselves when someone cannot pay.” Campbell supported Independent Power Producers (IPPs) to gener- The project-developer model of B.C.’s IPPs has had mixed ate energy and meet the province’s demands. IPPs had been present success. Some projects launched by smaller local companies in the province since the 1980s, but this strategy enabled private have never made it off the ground, while other projects, such sector players to gain significant market share for the first time, and as GDF Suez’s purchase of the Cape Scott wind farm from IPPs now account for approximately 20% of B.C.’s power production. Sea Breeze Power, were attractive mergers and acquisitions In 2008, 27 electricity purchase agreements (EPAs) were awarded (M&A) targets for global players. The province’s IPP sector to IPPs in a Power Call put out by BC Hydro. Of these 27, only 14 has therefore consolidated to fewer, larger players; namely projects have come online or are expected to come online in the near Innergex Renewable Energy, Alterra Power, AltaGas, Brook- future. The rest have had their contracts terminated or deferred by field Renewable Power and Capital Power. Compared to earlier power calls, John Carson, CEO of Alterra Power, sees the attrition rate as a structural reality: “The contract structure of any power call will affect the number that succeed, whether it is being more generous on dollars per megawatt hours or the times of year when certain ‘revenue buckets’ can be filled. In the 2006 versus 2008 call for power, contracts were totally different. 2006 was more developer-friendly showing a lower attrition rate, 2008 was tougher and had a higher attrition rate.” While M&A activity in the IPP sector was robust from 2010 to 2013, most opportunities for a well-capitalized buyer to snatch a long term EPA at an attractive price have passed, even with Site C on the horizon. “Site C should have little impact on M&A activity in respect of current projects with EPAs, as the current IPPs are locked into EPAs ranging from 25 years to 40 years, guaranteeing their cash flow,” said G. Henry Ellis, a partner at Gowling Lafleur Henderson LLP’s Vancouver office. As BC Hydro moves forward with Site C, it will likely dampen the prospects of IPPs in the province according to Ellis: “The bigger issue is that as Site C progresses, BC Hydro will reduce its emphasis of engagement with IPPs, as it is confident that Site C will supply most of the incremental power required for the next 20 years. The government’s focus on LNG, coupled with the results of existing power calls and BC Hydro’s current interest in cancelling some EPAs where the opportunity presents itself, suggests that the government will place less emphasis in the future on contribution from IPPs and greater reliance on Site C for the extra required capacity.” Vancouver-based Alterra Power, which plans on delivering its 62-MW Jimmie Creek run of river hydro project in 2016, is in many ways the quintessential example of an IPP navigating the cocktail of confusion in B.C. through geographic diver- sification and de-risking its assets. However, the company

BRITISH COLUMBIA POWER 2014 - 28 - Industry Explorations Global Business Reports EDITORIAL

Image: Kawa Engineering has a desire to continue its growth in B.C. cording to Mark Bohn, managing partner at if political decisions allow it. “If there is a Travelers Capital Corporation. “There are call for more power input, Alterra is ready,” some mid-market developers that have the commented Carson. experience and financial capacity to make Regardless of the course of action for Site these transactions happen. A 15-MW hy- C, small opportunities for IPP develop- dro project needs to be done smartly, but ments remain under BC Hydro’s Standing it can be a good deal. A developer has to Offer Program (SOP). The SOP is designed have a good handle on the construction to allow small projects a streamlined, ad- costs; perhaps they opt for a multiple con- hoc EPA process with BC Hydro, rather tractor model versus a fixed-price EPC.” than having to bid through a power call. Re- One of the most precarious issues in B.C. cently, the size of projects allowed under is land use due to the dozens of First Na- the SOP was increased from 10 MW to 15 tions with land claims throughout the prov- MW, and the government is reviewing the ince. SOP projects require careful consid- program with the relevant stakeholders to eration of this land use and in many cases create a more impactful program. “The IRP can deliver electricity to power-hungry may have shut the front door to IPPs; the remote First Nations communities. “While side door is still open via First Nations op- the SOP is a bit limited at the moment, portunities, as well as the SOP,” observed First Nations and other communities are Michael Walsh, principal and international beginning to get more involved. Many of managing partner at Midgard Consulting. these communities run off of diesel and While the SOP will be an option for IPPs, are looking for more energy efficient and it will be a niche market and will take the environmentally friendly solutions,” com- right developer to execute the project ac- mented Bohn. •

Industry Explorations - 29 - BRITISH COLUMBIA POWER 2014 INTERVIEW Global Business Reports

more attractive deals, where there is the for IPP developers whose projects came Mark Bohn potential for capital markets business and to fruition? the deal execution risk is perceived to be The larger players were more disciplined lower. It is the same amount of work to and some were able to refinance partly execute a $10-million non-recourse project through the construction phase, as they financing as a $100-million deal. had the balance sheet strength. Lining up financing for construction of a project Does a lack of economies of scale hurt is an extremely difficult task. Players like Managing Partner the viability of small and mid-market Innergex, for example, have the breadth Travelers Power projects? and depth of experience to do this, while Corporation That is a valid question. The world has smaller players have more trouble espe- changed. The market dynamic is challeng- cially if they have limited access to capital. ing because each deal has its own unique characteristics. We are trying to streamline Are there opportunities for smaller players the entire process, while still maintain- to be viable moving forward? ing an appropriate level of due diligence. Under the Standing Offer Program with BC As time progresses, we will begin to see Hydro, there is opportunity for projects un- more of a cookie-cutter approach, partic- der 15 megawatts (MW). It does not move ularly as it relates to legal documentation the needle for the big players, but there are on smaller projects. This should speed up certainly opportunities for smaller players the process and allow developers, financial in the province. There are some mid-mar- institutions and law firms to execute these ket developers that have the experience deals faster. and financial capacity to make these transactions happen. A 15-MW hydro project How does your specialization in off-bal- needs to be done smartly, but it can be a ance-sheet loan structures help provide good deal. A developer has to have a good clients finance? Is this typical in the handle on the construction costs; perhaps industry? they opt for a multiple contractor model Could we begin with a brief introduction Off-balance-sheet loan structures are a versus a fixed-price engineering, procure- to Travelers Capital Corporation? common product offering in project fi- ment and construction model to keep their Travelers Capital Corporation is a special- nance. We specialize in non-recourse costs lower. While the Standing Offer Pro- ized financial services company that offers project financing, particularly in the gram is a bit limited at the moment, First structured debt and project finance solu- mid-market space. A lot of the Canadian Nations and other communities are getting tions along with financial advisory services banks, particularly the mid-market com- more involved. Many of these communi- to developers in the renewable energy mercial banks, have a challenging time do- ties run off of diesel and are looking for sector with a focus on middle market ing non-recourse financing for $10 to $20 more energy efficient and environmentally transactions up to $100 million or more in million deals. Typically they would require friendly solutions to meet their energy size. Having spent my career with various some form of recourse backing the deal. needs. financial institutions in project finance I no- ticed a gap in the marketplace in terms of Of the 27 Electricity Purchase Agreements What is your outlook for your target mar- mid-market project finance expertise. Trav- awarded in the 2008 Power Call only 14 of kets over the coming months and what elers Capital was set up in 2010 leveraging these projects will come to fruition. What unique services does Travelers Capital off the Travelers platform that was already have been some of the stumbling blocks offer? in place with their equipment financing for these developers? Contrary to the mood amongst some in business. It was a nice fit and the timing The challenges for many of these less ex- the industry, I feel optimistic with what is was right. perienced developers, particularly those happening with community-based involve- who used a public financing vehicle, is that ment and its impact on the sector. These This gap in mid-market project finance they needed to show shareholders that will be smaller, localized, bilateral oppor- expertise, especially in the renewable they were making progress. Perhaps they tunities in British Columbia and across sector, is a common observation in our were not cautious enough in evaluating Canada that provide this opportunity for us. reports worldwide. Why are the larger factors such as construction costs and bid Larger banks do not want to get involved financial institutions unwilling to take on too low based on optimistic projections. in them, which creates opportunities for some of these projects? The process to be awarded a contract is us. Travelers Capital is unique because it is The large project finance institutions have long, and developers were aggressively one of only a handful of firms in Canada fo- limited resources to focus on smaller bidding in an inflationary environment, cused on structuring and arranging private deals; in many cases, they are driven to which escalated construction costs. non-recourse debt for renewable projects. existing relationships with experienced My philosophy in life is if you are going to developers and limit themselves to larger, What were some of the keys to success do something, focus on it and do it well. •

BRITISH COLUMBIA POWER 2014 - 30 - Industry Explorations Global Business Reports INTERVIEW

interested in making a fortune in the in Quebec, where the government used Glen Ichikawa short-term, so we can charge much to subsidize the local engineering com- lower engineering fees than these larger panies. players can. They cannot compete with us on price. I rely on young engineers; From the last Power Call by BC Hydro, I train them up and they gain unprece- only 14 of the 27 projects awarded dented experience and qualifications. EPAs are coming to fruition. From your We offer young engineers a higher num- perspective what can the IPP sector do President ber of projects and a wealth of experi- to improve this attrition rate? Kawa Engineering ence in the field that the big companies The first way to improve this attrition do not offer their employees. As a result rate is financing. Some of these projects their résumés look great because the are millions (of dollars) over budget and skill set gained from this experience is no one is making much money on them. missing in the industry. Some companies have gone belly up in Kawa has C$200,000 invested in soft- the process. Lenders realize this and do ware, probably another C$200,000 in- not want the exposure, so it is harder vested in hardware. This gives us more to get money. When these things are computing capacity than any other happening it is harder for contractors to engineering company in British Colum- believe that they will get paid for project bia. We have some genius, Ph.D.-level work. The second is the relationships programmers to help us diversify and with First Nations. Usually projects that allow us to do very detailed analysis of fail have offended band societies at an designs. We did forensic analysis of pen- early stage and thus the project is always stock failure on a project in Ontario and fighting uphill. The third way to improve on these projects our computing power this attrition rate is through construction comes into play. If the company can use costs. Contractors have lost money in a 24-core machine versus a four-core ma- the past, so they have raised prices to chine for complex computing processes, de-risk themselves when someone can- Kawa Engineering is a relatively new then it is more productive. I make sure not pay. company, founded in 2012. Could you we have the most powerful computing provide a brief overview of the com- system possible to not waste time. If there is the chance that a client will pany’s short history? not be able to pay, is there any way that After working at Knight Piesold from To what extent has your work been with you can limit the risk? 1996 to 2001, I founded Amnis Engi- British Columbia’s IPP sector versus BC It is a risk, a real risk. We have been wait- neering and subsequently sold it to Hydro? ing to be paid for six months by a major HDR in 2010. After one year I bought I am hesitant to work with BC Hydro be- engineering, procurement, and construc- out my 5-year non-competition clause cause of the bureaucracy involved. They tion management (EPCM) client. When with HDR and started Kawa Engineer- would take up too much of my time; I can a smaller client ensures that we are paid ing. After starting my first business I currently work on ten different projects in a timely manner, I express how grate- learned my lesson: minimize your part- at once with the IPP sector. To illustrate ful I am because it is not easy to finance ners and do not allow family members the point if the private sector had done non-payment, as we are a small com- into the business. Currently we are the Site C, it would cost a quarter of the pany ourselves. • lead engineering firm on a number of price and be done already. The John Hart small projects (under 15MW) associated Project is another example; the millions with the Standing Offer Program as well that are being spent could be halved if as involved with larger projects such as the private sector controlled the project. Jimmie Creek in partnership with SNC- Lavalin. We make projects work; we are In your view, is there the expertise left in not a study company. We have a high British Columbia to compete Site C? build success rate because we provide Yes there is, but at the moment Site C is solutions. just a waste of money. The people working on Site C are not being productive. What can Kawa Engineering provide Environmental and social issues permit- that larger, more-established companies ting, Site C would have been done had in the engineering sector cannot? the private sector controlled the project. Their overheads are too high, we have The relationship with BC Hydro amounts very little overhead costs and that makes to a subsidy for the approved EPCM con- a huge difference. Personally, I am not tractors on site C. It is like the situation

Industry Explorations - 31 - BRITISH COLUMBIA POWER 2014 INTERVIEW Global Business Reports

Since the government amended the How are these issues you are seeing Jason Jones Clean Energy Act of 2010 to facili- on the West Coast impacting Tetra tate LNG investment are we seeing Tech’s company strategy in British decreased demand for renewable Columbia? production centers because of the It has actually simplified our strategy availability of cheap fossil fuels? in some ways. Tetra Tech’s goal, par- We are absolutely seeing this. The two ticularly in the power market, is to provinces where this is most relevant offer a full suite of services. Having Vice President - Power Transmission and are Alberta and British Columbia. There governments and crown corporations, Distribution Sector - Environment Practice are a couple factors at play. First, there like BC Hydro, starting to put their Tetra Tech EBA is the global commodities market driv- money where their mouth is in terms ing fossil fuel prices. Second, there are of committing to their refurbishment government policies making certain programs makes our business develop- energy mixes more or less attractive ment strategy much easier. BC Hydro’s to development. The third factor is commitment to spend at least CAD British Columbia’s abundant pool of 1.5 billion on refurbishments over the resources. British Columbia is in an en- next five years cannot be ignored. For- viable position with lots of water and tunately, given our company’s internal abundant resources, therefore what structure, Tetra Tech has the flexibility drives choices here can sometimes be to be responsive and to increase our independent of global considerations. staff capacity in short order. We have Certainly the decision to label LNG as a large work force with experience in a clean fuel source and the upcoming multiple jurisdictions to take advantage decision on whether or not to allow of cyclical markets. as-yet-to-be-built LNG export plants to power “inside the fence” will have an What do you see as Tetra Tech’s top effect on independent power produc- three strategic priorities in British Co- ers (IPPs). lumbia over the next five years? Could we begin with a brief overview I am very curious to see, with Premier The first is to continue to develop Van- of Tetra Tech’s power-related business Redford stepping down in Alberta, how couver as a center of excellence for in British Columbia? energy relationships between British electrical engineering in order to sup- Globally, Tetra Tech organizes its busi- Columbia and Alberta will be affected. port not only BC Hydro’s infrastructure ness operations around emerging and She and Premier Clarke were just be- refurbishment, but also position our- strategic initiatives. Strategic initiatives ginning to talk the same language on selves for Site C and provide electrical are those whose annual income is energy flows between the two prov- design capabilities for our industrial greater than $100 million per year. Min- inces. clients. Second, equally important as ing, oil and gas, and electric generation the first, Tetra Tech considers mean- are all considered strategic initiatives for What will be the challenges of upgrad- ingful aboriginal engagement as a core Tetra Tech. Our power interests within ing trans-border infrastructure? corporate value. Aboriginal peoples are Tetra Tech usually fall within the elec- The US and Canadian system opera- partners that we have developed pos- tric generation initiative or the oil and tors each need to take care of their re- itive and productive business relation- gas initiative. There are seven Tetra spective shop. The hope is that these ships with throughout Canada. Lastly, Tech entities in Canada, all of which individual operators coordinate the Tetra Tech wants to be the go to firm operate within the power space. Tetra timing and type of upgrades they do. for complex projects; the projects no- Tech EBA, the entity I am involved with, There is no point doing an upgrade at body else wants to touch. Tetra Tech’s interacts with the power sector in two one end of the line if the other side corporate motto is ‘complex world, primary ways: on the environmental cannot accept the energy being sent clear solutions.’ The company has front through routing, siting, permit- and vice versa. Aging infrastructure is the reputation of taking on the hard ting, wildlife surveys etc, and on the the essential problem for transmission projects and finding cost-effective, so- engineering side through geotechnical, and distribution in North America re- cially responsible and environmentally electrical, civil, and structural engineer- gardless of location. How each system responsible solutions. • ing. Throughout our divisions Tetra Tech operator in the US and Canada pays for has taken a strategy to look at Western upgrading infrastructure is one of the North America as a whole. Although the most thorny questions we will see at 49th parallel matters jurisdictionally, it is a political level over the next five to six less important for the flow of electricity years. It is certainly a thorny issue here because there is so much north-south in British Columbia and in Washington, movement of energy. Oregon and California.

BRITISH COLUMBIA POWER 2014 - 32 - Industry Explorations Global Business Reports INTERVIEW

fered attractive packages to move compa- from Shell, Chevron Corporation and Amir Marciano nies; Rakia oversees this transfer of skilled Apache Corp and a limited number of labor. personnel who have LNG skills. How do you think British Columbia can attract Do Canadian companies have a prejudice LNG expertise? against employing foreign workers, or Skilled foreign workers will follow work is it a lack of willing to change historical opportunities from country to country. policies? Canada's immigration policies will not be a Managing Partner The language-barrier is cited as a reason problem for companies, as the government Rakia Recruiting for not employing foreign workers; our understands that in these circumstances initial sources would be to recruit from foreign workers will benefit the Canadian Anglo-countries, furthermore most highly market. In Alberta, the government invests qualified professionals have learned to money to promote the facet of skilled for- speak English. Another concern from eign workers; in British Columbia, this pol- clients is how the foreign worker will take icy is still to be adopted. to relocation. Rakia covers all aspects of relocating including immigration and hous- Are the educational institutions in British ing. Columbia providing a talented workforce that can be trained-up through the ranks? Is the seven to 10-year gap of a skilled The educational institutions in British Co- workforce in the power sector peculiar lumbia are providing a talented workforce. to British Columbia? How is it impacting Five or six years ago, young people were BC Hydro’s evolving business model of not interested in entering the energy sec- relying more on outside specialists? tor as a career. Today, education insti- This void of a skilled workforce is through- tutions are making careers in the energy out Canada but more specific to western sector more attractive by marketing and Canada, where there are an increasing advertising. However, after finishing their number of energy projects requiring skilled education, students will still need to gain What is Rakia Recruiting’s niche market labor. BC Hydro already has two large oper- experience in the sector before they can for the power sector in British Columbia? ating dams, and the third will likely require start to fill the expertise void. In the power sector in British Columbia, sub-contractor expertise. All situations can there has been a lack of focus across the be managed providing there is the avail- With British Columbia's educational insti- whole energy spectrum. In the electricity able capital to accommodate needs. There tutions cultivating a talented workforce, sector, government statistics predict that is an increase in demand for our services do other provinces/countries try to poach in five years there will be a void of 45,000 from the developer, the energy company, the students? skilled personnel. There will be a seven to the sub-contractor, and other project advo- There is a silent-war between provinces 10-year window while current students cates, to source expertise. for good brains; provinces are improving complete their studies and gain the neces- benefits to attract expertise. sary expertise in order to reduce the short- LNG is on the verge of final investment age of skilled personnel. In the interim, decisions and there is a lull in mining, your What do you see as the main strategic skilled workers can be imported from other other main sector. Do you see the LNG priorities for Rakia over the next three provinces, but this will not compensate for sector as an opportunity for Rakia and for years? the historic lack of ability to attract person- a demand for jobs in the province? Our main priority will be to educate clients nel into the power sector. Currently, Rakia It is sensible to have LNG as an addition on the benefits of the foreign worker so- Recruiting is focusing on employing skilled to hydro in British Columbia. This will bring lution in the energy sector. Some clients foreign workers as another option to fill the many jobs including pipeline engineering are reluctant to move away from their pol- void. and design draft engineers. LNG is a good icy of only employing Canadians. Rakia's resource for energy with a long lifespan objective is to allay its clients' fears of Has employing foreign workers always and does not require a highly skilled trade employing foreign workers, currently the been a specialized-field for Rakia, or is workforce. Only a short training course is only solution for filling the expertise void. it an option it has adopted over the last necessary to give local workers the nec- For example, we have a job opportunity four to five years because of the dearth of essary skills. The majority of the workers for a distribution engineer that has been skilled workers in British Columbia? will be in these trade positions, whereas a open for eight months. If the client would We are associated with a global workforce minority will be highly skilled workers that change its policy on employing foreign company - Rakia Global, working together we can recruit from overseas. workers, Rakia could source it within a offering worldwide recruitment expertise. month to a non-Canadian with the neces- The Canadian market is important. In this Looking at the LNG sector worldwide, sary expertise. • market, skilled workers are regularly of- there is competition for investment dollars

Industry Explorations - 33 - BRITISH COLUMBIA POWER 2014 EXPERT OPINION Global Business Reports

Electric Utilities Facing the Disorder Equation

Dan Boucher, regulators to reconcile public interest spectacular improvements can be ex- Schneider Electric Canada with the true cost of electricity. plored, proven and sustained. We should We also must modernize the old, un- do not look for easy decisions or expect der-performing grid. We know the grid is to get the perfect plan for delivering the Electric utilities and associated organiza- over 50 years old. The average life cycle smart grid of the future. Instead, we tions are going through very challenging of electrical equipment is 25 years. What should focus on incremental improve- times. The “commodity” grid most peo- happens after the life cycle is exceeded ments, annual program reviews per shift- ple know from receiving their monthly bill can be catastrophic! Switches and break- ing grid conditions, and appreciation of is about to change. Although each utility ers may start behaving abnormally due to the key performance indicators. operates inside its own context, all are fault conditions and intense weather. Be- The last component of the Disorder facing new problems and dilemmas -- sides normal wear, there is always room Equation, but not the least, is the crucial call it the “Disorder Equation”. To make to reduce outage frequency and duration, importance of collaboration. A wise man it more challenging, utilities must remain two fundamental metrics for all utilities. told me: “If both of us trade a dollar, we profitable while: sustaining energy rates Replacing the “old” with the “better both have one; but if each of us share or proving why their productivity cannot new” is inevitable to manage these an idea, we both have two”. Over the overcome inflation; massively investing performance levels, as well as power next decade, electrical utilities will face in their infrastructure despite declining quality challenges and demand increase. perhaps their biggest challenge, as half or flat revenues; coping with renew- We cannot afford to procrastinate when their workforce will retire. Utilities can able generation, micro grids and power equipment fails to operate adequately address this by getting valuable inputs quality issues; remaining in full control and should adopt methodical root cause from non-competing utilities. Those who despite half of their workforce retiring analysis and field urgency plans, when are better communication agents will get over the next decade; and being more outages could interrupt or disturb sensi- more digested information from subject resilient to extreme weather conditions. tive loads. matter experts and be better at leading Is there hope for electric utilities to solve Leveraging new technologies is also change management. Collaborative utili- the new Disorder Equation? Of course. important, and, if there is a dialogue ties will work faster and cheaper around The energy revolution will never be sim- where everything is converging, it is the attrition issues. How could we better ple math. In the meantime, we can think so-called “smart grid.” The smart grid address the climate change dilemma? of the following dimensions and debate definition can be as short as the “com- Knowledge and insights can only speed which ones should come first or last. ing together” of kilowatts and kilobytes. up our capacity to lower its negative im- The first goal must be to educate cus- Some new technologies have amazingly pacts. tomers. Educating consumers is not so high returns on investment, but some The Energy revolution we are in will last much about the new “normal” weather, can bring more harm than good. Utili- for a long time. Utilities have realized that greenhouse gases, or energy efficiency. ties must decide if they want to enable their business will no longer be about The message should be about aging infra- new technologies to centralize their op- just selling electrons but providing valu- structure, reduction of outage frequency erations, or progressively resolve local able information and connecting to all (SAIFI) and duration (SAIDI), and the im- issues. Once that strategy is agreed, home occupants. The Disorder Equation portance of no longer taking electricity utilities can outline the whole roadmap is triggered by financial opposites, diffi- for granted. Currently consumers are for the next 5 to 10 years to their regula- cult revenue assurance and rising costs. not paying the true cost of their electric- tors. For utilities with a big footprint and To solve this equation we must collab- ity. Education goes both ways: to make complex mesh topologies, this thinking orate. If we worry more about getting the customer experience better, utilities process can take time. A strong leader, things done and less about protecting must also pay attention to the perceived fully empowered, can alleviate the risk of intellectual property, we can improve value. It is no longer just about supplying never getting close to a regulator’s de- faster with the talent we have. We can electrons. Less biased lobbying against cision. be optimistic, as most utilities are now rising electricity pricing without sharing To significantly mitigate the risks of seeking the best practices outside their the total long-term true cost if the old scope, time and cost variance, the ranks. From the generation turbine grid is not modernized and/or improved project team and their sponsors should down to the outlet at home, there is a would be helpful. We should also encour- get good benchmarks from other utilities reinforcement of the community. Energy age simpler and regular education of con- and/or capable solution providers. With a leaders are finally connecting in local and sumers by governments including their strategy in place, both incremental and global forums. •

BRITISH COLUMBIA POWER 2014 - 34 - Industry Explorations Global Business Reports INTERVIEW

global competency centers? ters to use solutions that reduce costs, so Susan We align our research with the province’s they focus much of their attention to this interest in renewable energy, looking at expenditure. Schneider Electric has one of Uthayakumar ways to harvest clean energy and release its four business units dedicated to using it into the grid. In Victoria, we have our me- energy more efficiently in heavy industry tering competency center, which keeps businesses. track of how and where energy is being spent and how to best preserve it, and Looking at BC Hydro’s integrated Vice President, Partner Business for we just opened the world’s largest private resource plan, are we likely to see more Schneider Electric MicroGrid Solar Laboratory in our Burnaby opportunity created for IPPs? Canada office. In the medium-term, BC Hydro cannot meet energy self sufficiency on their own, Upgrading aging infrastructure is a global so bringing smaller run-of-river operations concern. Does Schneider Electric play a or wind farms in is one of Schneider Elec- role on the smart grid side in modernizing tric’s more exciting tasks. this infrastructure to meet the province’s goals? What are some of the key features of your Looking at the energy needs of B.C., BC monitoring systems? Hydro’s intention is to generate 66% of We actually use our monitoring system in their energy through conservation initia- our own facilities. Our monitoring system tives in order to find the cheapest and eas- provides a real-time feed of how we are iest way for the province to reduce their using energy in our facilities. The monitors energy needs. BC Hydro serves about are not only manufactured at our facilities 95% of the province’s population, which but are integrated into our facilities. In or- means that virtually every home in British der to be a good energy steward, the first Columbia will have a smart meter, enabling need is measurement. Our monitoring sys- them to monitor how much energy they tem allows us to examine where the costs are using and thus help everyone save. and greatest demand for power lie; to track What is the importance of the Energy Additionally, B.C.’s economy is tied in part electricity and natural gas usage annually market in British Columbia in the context to the growth of liquefied natural gas facil- and summarizes our monthly usage; and to of Schneider Electric’s operations? ities, with most of them being operational measure energy use throughout our facil- Schneider Electric has a dedicated pres- by 2020. The province does not have the ity, allowing us to create an action plan that ence in British Columbia, with over 50% of infrastructure to support this ambitious in- will reduce our energy consumption and our employees based in Western Canada. dustrialization initiative, so we are working increase our efficiency. A client could use Schneider Electric stands for energy effi- with BC Hydro to put energy efficient and this tool to reduce energy costs in multiple ciency and sustainability, which puts us cost-effective structures in place. facilities, as it can be synchronized through very much in line with the provincial gov- different locations, even internationally. ernment in helping to reduce energy de- What are other examples of opportunities From one location, a client of ours can mand. We have two global competency for companies such as Schneider Electric know in real-time exactly what energy is centers in B.C. tied to conservation: our to eliminate waste and inefficiency from being spent where in multiple international solar center in Vancouver and the metering the system? facilities. Our system can also help reduce center in Victoria. This starts with a look at how energy is fluctuations in the grid that can damage being spent, followed by managing the de- equipment or result in fines. How does this compare to your presence mand to lessen the load in the province. in the rest of Canada? We have significant utility expertise, with What are some of your key strategic ob- Schneider Electric is present across the our utility group currently working on up- jectives in the medium-term in British Co- country, but our natural resource play is grading BC Hydro’s systems to help re- lumbia? primarily in the west and our two global duce the energy load. Secondly, in order Schneider Electric hopes to partner with competency centers make British Colum- for the government to reach their goal of the province to achieve its energy effi- bia a hub location for Schneider Electric. energy self-sufficiency by 2016, they need ciency goals. We also want to help upgrade We have many products and services that to produce energy locally using inventive the aging infrastructure, focus on energy enable customers, both residential and in- methods. efficiency in new buildings and industrial dustrial, to manage their energy, from load facilities, and help B.C. balance its indus- centers to inverters, and various types of What is the economic benefit for the trial growth with its dedication to sustain- solutions with the end goal of making elec- industry of incorporating energy efficient ability. We invest 4% to 5% of our topline tricity green, productive and reliable. technologies? globally in research and development, and It is in the best interest of energy inten- our partnerships in B.C. offer a wonderful What research are you undertaking in your sive industries such as mining or data cen- opportunity for growth and innovation. •

Industry Explorations - 35 - BRITISH COLUMBIA POWER 2014

The 20-Year Horizon: The Integrated Resource Plan

“The wind business in British Columbia will grow and benefit from investment in liquefied natural gas (LNG). British Columbia has a high target for demand management. There is currently a review of BC Hydro's Site C project. If this project fails to go ahead, other energy sources could be explored and present an opportunity for wind energy.”

- Helmut Herold, CEO North America, Senvion Canada Inc.

Image: Senvion Canada Inc. EDITORIAL Global Business Reports

B.C.’S TRANSMISSION SYSTEM Source: BC Hydro Upgrade and Conserve “Renewable energy is a long game for • High voltage transmission: Over investors but long-term constant returns 18,000 km of lines and underwater are very rewarding. submarine cables; 100,000 wood poles; 22,000 steel towers; 292 substations. - Chris Ball, The Long-Term Trajectory of Power Executive Vice President, • Transmission grid operates at Generation in British Columbia Corpfinance International Limited (CFI) voltages from 69 kV to 500 kV and stretches over 75,000 hectares.

• Generation primarily from northern and southern interior of province Under the Integrated Resource Plan etc in order to reduce usage. As ”they (IRP) ushered in by the Clean Energy Act move forward, there will be a reliance • 70% to 80% of consumption is in the of 2010, BC Hydro is looking to imple- on new technologies that in many cases Lower Mainland and on Vancouver ment significant demand-side savings have not even been developed yet to Island. and conserve energy. The authority ex- help them realize their future savings. pects to reduce the expected increase in There is obviously a bit of skepticism as • Two 138 kV lines and one 500 kV demand for electricity in the year 2020 to whether BC Hydro can really realize line connect B.C. to Alberta by at least 66%. these savings,” commented Sam Mot- Reducing energy usage will take much tram, managing principal of power ser- • Two 500 kV lines and two 230 kV more than a clever, omnipresent ad cam- vices at Knight Piésold. lines connect B.C. to the United paign. “BC Hydro is first targeting the Another key component of the IRP, States low hanging fruit, changing light bulbs, which should serve as a major boon to the province’s service providers, is the C$1.7 billion BC Hydro plans to spend on upgrading its system. As aging infrastructure serves as a crucial issue across North America, British Columbia is making key investments to nip the problem in the bud. However, with aging infrastructure comes an aging workforce across the continent as well. “There are a limited number of veteran transmission and substation engineering, procurement and construction experts in the industry. BC Hydro and many of the other utilities still have many of them, but we have seen a trend where many of these senior engineers are starting to retire,” said Graham McTavish, of Stantec. While an older generation retiring, Stantec and other firms are assembling ample teams to take the reigns in British Columbia. However, with aging infrastructure comes an aging workforce across the continent as well. Amir Marciano, managing partner of Rakia Recruiting, sees foreign workers as a solution to British Columbia’s medium term labor short- ages. “In the electricity sector, government statistics predict that in five years there will be a void of 45,000 skilled personnel. In the interim, skilled workers can be imported from other provinces, however, this will not compensate for

BRITISH COLUMBIA POWER 2014 - 38 - Industry Explorations Global Business Reports

the historic lack of ability to attract personnel into the power sector. Currently, Rakia Recruiting is focusing on employing skilled foreign workers as another option to fill the void.” While an older generation is retiring, firms are grooming younger teams to take the reigns. Adrian Gygax, principal of Vancouver-based Gygax Engineering Associates (GEA), sees B.C. as maintain- ing its position as a hub of innovation, as the next generation of engineers gain experience. “There are numerous young engineers and technologists in this province that have developed unique skills in the hydropower sector. There is a real potential to export these skills, but we need a strong project base in this province on which to build. It is essential that we do not lose the knowledge base that now resides in our young engineers.” Although not an insurmountable challenge, extreme weather conditions in the central and northern parts of B.C., with snow lasting from November to March, adds another layer of complexity when it comes to infrastructure build. Guy Lemieux, president of Lex Engineer- ing, which specializes in the design and build of substations and transmission lines, explains some of the special ad- justments needed for their work in the province, “Lex transmission line and substations are designed to accommodate extreme temperatures of minus 50 ‘C and plus 40 ‘C. Transmission line conductors are sagged to not over tension at minus 50 ‘C and to provide the required vertical clearance at maximum sag during full load at maximum ambient temperature.” Engineering firms also tend deal with the winter conditions by building as much of the substation and transmission line components at a manufacturing facility before transporting it to the remote locations where it is then assembled. Finally, generation firms are preparing machinery to handle the elements by fine-tun- ing design and manufacturing in Europe. Helmut Herold, CEO North America of Senvion Canada Inc., a wind power generation company, says, “Senvion's machines can cope with the extreme temperatures in Canada. Senvion will use all the good technologies developed in Europe and northern Quebec for its machines in British Columbia.”

Industry Explorations Global Business Reports

Infrastructure precedes development, which makes getting it out a challenge. “Arguably, the biggest problem with removing old infrastructure, especially in the metropolitan areas, is that site access conditions have significantly changed since infrastructure installation. His- torically, transformers were moved by rail or barge; rail sidings have since closed, and barge sites have been replaced with condominiums,” commented David Stroud of Apex Industrial Movers. As BC Hydro and the IPP sector are both active in developing projects, the province’s logistics sector has seen an increased workload as massive generation and transmission components are imported from around the world and often sent inland via rail, river and/or road. “Our growth has come from both BC Hydro and IPPs. BC Hydro has been enacting system upgrades, new sub-stations as well as replacing old infrastructure. When working with IPPs, there are additional site issues tending to be more in rugged remote terrain and difficult to access areas; BC Hydro’s locations are easier to access, being generally near major infrastructure, but BC Hydro’s equipment is usually much larger,” added John Brise of Apex Industrial Movers. Given British Columbia’s closer proximity to Asian manufacturing centers, it is surprising that many of Western Canada’s oversized industrial components arrive in a port such as Houston and are moved overland due to difficulties and lack of equipment necessary of moving such objects through British Colum- bia. Canadian companies such as Apex, Triton Transport, T-Lane Transportation and Amix Heavy Lift are working to make British Colum- bia more accessible. Amix Heavy Lift acquired a ringer-crane in 2005 and placed it on its Arctic Tuk barge in order to move heavy equipment, including transmission cable spools, and generation turbines of up to 380 metric tons. “There are substantial savings in time and money; companies can import straight into a British Columbian port, utilize our services of heavy-lifting equipment, and then truck the cargo to site,” said Clarke Longmuir, president of Amix Heavy Lift. Like many in British Columbia’s power value chain, the IRP is expected to contribute to Amix’s bottom-line, “We expect business to permeate from the IRP. When there is a requirement for heavy lifting, Amix is ready with equipment to service BC Hydro’s needs; whether it be for one large crane, the tug-and-barge service, or the use of our facilities at Chilliwack, Langley, New Westminster, Surrey and Prince Rupert,” commented Longmuir. •

Industry Explorations Global Business Reports INTERVIEW

British Columbia is also a strong infra- What is the current lender appetite for Christopher Ball structure financing market for CFI. We renewable energy Independent Power have raised capital for eight infrastructure Producer (IPP) projects? projects in the province, mostly in social in- Lenders have had a generally positive ex- frastructure and particularly in the areas of perience, and appetite for new projects is retirement/nursing homes and hospitals. strong. As long as projects have a strong We expect a continued strong pipeline for power purchase agreement for a lengthy social infrastructure projects, as the popu- period of time, such as the 40-year deals Executive Vice President lation grows and ages, demand for elder being offered by BC Hydro, renewable en- Corpfinance care will most certainly increase. ergy opportunities will be sought after. International Limited (CFI) Can you tell us more about CFI’s risk How important has local First Nations' criteria when selecting energy projects? support been in previous projects and CFI is able to help guide the client through what measures do you put in place to the intricate nuances of non-recourse ensure their continued support? financing structures as well as advise It is important to understand the historic our clients as to what the financing mar- situation of the First Nations, who want a kets will expect, including appropriate relationship that is a two-way street. They contracting agreements for inputs and also understand that both parties must outputs, First Nations’ consultations and benefit from a project and they are always agreements, and transmission intercon- mindful of how the land will be affected, as nects. Our due diligence will also focus we all should be. The environmental and on geo-technical work, robust cash flows economic advantages to which the First and sufficient capital and contingencies to Nations are entitled can be realized without complete a project. making the economic and investment returns of a particular project sub-par. Replac- What made your key projects in British ing the ongoing use of extremely expensive Could we please begin the interview Columbia bankable and sound invest- diesel fuel for power generation in remote with an introduction to CFI and your key ments? communities with cheaper and environ- projects in British Columbia? The key to bankable and sound invest- mentally sensitive sources of renewable, Corpfinance International Limited (CFI) ments is identifying and mitigating risks, alternative energy is another priority. has been active in providing advisory ser- putting appropriate financial leverage on a vices and financing for infrastructure and project, and getting good long term power What is the potential for renewable energy projects for 30 years. Our clients sales contracts with sound counterparties energy in British Columbia and the rest of are in Canada and the United States and such as BC Hydro. Canada? are predominantly mid-sized enterprises, The Rutherford Creek project is an exam- Investment potential for renewable energy although some of our earliest customers ple. The original owner was Cloudworks, is largely driven by governmental policy. have grown into well-known publicly which CFI introduced to Innergex Energy. The industry can play a role in enhancing traded names, such as Algonquin Power Innergex wanted to expand into British Co- government awareness of the benefits in- and Utilities Corporation, Innergex Renew- lumbia and, by joint venturing with Cloud- dependent power producers can bring to able Energy Incorporated, and Boralex. works to build the project, added a good the table such as the entrepreneurial will to British Columbia is a strong market for CFI sized project with a good design, robust find and develop more (often smaller) sites, in the power sector. We are currently pro- cash flow, and a power sales contract of enhancing local employment, and the grow- viding services to twelve hydroelectric and 40 years from BC Hydro. Cloudworks got ing expertise of professionals in the field. alternative power projects that have been a strong partner in Innergex, which helped British Columbia has key natural resources completed (Rutherford Creek, Zeballos complete the project at a higher capacity available, such as rivers with high head- Lake, Furry Creek, McNair Creek, Ocean than originally envisioned. waters with long flows, which usually Falls, Tyson Creek, Upper Slave, Kwalsa, Furry Creek is another. It was one of our equate to a lower cost of construction per One Hundred Fifty Mile House, Boston first transactions and a smaller deal, but megawatt compared to other regions that Bar and, Savona). In addition to completed we were able to negotiate a First Nations’ also host run-of-river projects. All that is projects, we are raising debt capital for agreement in short order. Furry Creek required is reasonable transmission costs four additional power projects with strong also suffered from a dropped turbine dur- to interconnect the projects to where the cash flows and reasonable construction ing shipping, but we had the appropriate demand exists. Renewable energy is a long costs on a per megawatt basis. However, insurance in place to cover the additional game for investors but long-term constant due to the customary confidentiality provi- costs and delays. To date, Tyson Creek has returns are very rewarding. The power in- sions of our mandates, we are unable to proven to have the strongest cash flow de- dustry in Canada is exciting, and the coun- disclose additional details about projects spite the last two years of low water lev- try is a worldwide leader in the natural re- under development. els. source sector. •

Industry Explorations - 41 - BRITISH COLUMBIA POWER 2014 INTERVIEW Global Business Reports

We are experienced in designing sub- atures. The transmission hot and cold Guy Lemieux stations for major generation tech- curves are generated by our PLSCAD nologies, i.e. wind, hydro and thermal. software. Generation and load project examples in Western Canada include the What are the advantages of 230-kV 144-megawatt (MW) Dokie Wind Farm, transmission line design using brace near Chetwynd, B.C. and NR Green post insulators on single pole struc- heat recovery generation at White tures? President Court, Alberta. Our load substation In the case where a transmission line Lex Engineering work includes a 69 kV, Gas (SF6) Insu- is placed adjacent to an existing major lated Substation (GIS) for Neptune Ter- transmission line, such as at BC Hydro’s minals in North Vancouver. Our work 500-kV line, the conductor geometry of at Vancouver Airport Authority consists the braced post insulator line enhances of the introduction of concepts making reduction of asymmetrical induction by their power system more efficient, and rolling the phase at two transpositions. less costly to operate. Other projects The braced post geometry facilitates include a 230-kV substation for Spec- “rolling the phases” (rolling the con- tra at Sukunka south of Chetwynd. In ductors). Our computer modeling in a many cases, Lex completes the BC Hy- recent project shows an open circuit dro tap design. At the Dokie Wind farm, voltage unbalance of 17% is reduced Lex brings power from the wind turbine to the 1% range by rolling the phases generators on 35-kV collector power in two transpositions to provide three lines to the substation, stepping it up equal length segments exposed to the to 230 kV, and transmitting it to the BC adjacent line. The single pole struc- Hydro tap point. ture also reduces the transmission line right-of-way width. Where are the control buildings built, are they transported, and how difficult How tough is the competition in Could you give us a brief overview of is it to work in extreme weather con- engineering services and how do you how Lex Engineering Ltd. entered the ditions? carve a niche? power industry in British Columbia? Lex minimizes low winter temperature There is competition but Lex enjoys a Lex Engineering was established in site work by arranging to have the con- good amount of repeat business and 1979 and has grown to a company of trol buildings fitted with all equipment also “word of mouth” recommenda- 23 personnel. Since our establishment at the control building manufacturing tions. Larger engineering firms have we have completed 80 substations of facility. The off-site work includes in- retained Lex on big projects. Lex’s sin- 69 kilovolts (kV) and higher, which is stallation of protective relay racks, com- gle discipline staff of 23 compares well comparable to, if not greater, than other munication equipment, switchgear, AC to the electrical departments of larger consulting engineering companies in and DC station services, HMI systems, multi-discipline firms. Our strategy is to Western Canada. Our work includes building HVAC and security systems. continue steady growth and to lead in 287-kV substations and transmission All interconnection wiring is completed the industrial power and control field. lines in the Kitimat area. Our work in at the factory with interface terminal Our office is located in Richmond, B.C., the mining industry includes design strips provided for connection of field Canada. of a 230-kV substation and 92-kilome- wiring, and where necessary, terminal ters (km) transmission line design for strips are provided at shipping splits. Do you have a final message for our the Mount Milligan Mine. Lex works Lex attends the factory to up-load pro- readers? mostly domestically, but has com- tective relay programs and test relay The abundant and economic supply of pleted international assignments. Lex function, including 61850 protocol com- energy defines the standard of living works in all sectors, including utility, munication, as well as final testing of of a society. British Columbia has en- transportation (YVR), mining; forestry, the control building at site. joyed plentiful and low cost electrical institutional, petrochemical, and petro- Lex transmission lines and substations power provided by WAC Bennett’s leum and pipelines. In summary, power are designed to accommodate extreme Two Rivers Policy (the Columbia and is our business. temperatures ranging from minus 50 the Peace) from the late 1960s to the degrees C to plus 40 degrees C. Trans- present. It is now time to develop the British Columbia is known for its mission line conductors are sagged to next frontier of power, and Lex looks hydroelectricity. Do you specialize in prevent over tension at minus 50 de- forward to continuing its sustainable any specific technologies and could grees C and to provide the required ver- growth in the power field. • you give details of current projects in tical clearance at maximum sag during British Columbia? full-load at maximum summer temper-

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as well as heavy-lifting transmission ca- Resource Plan (IRP) that will invest Clarke Longmuir ble spools, the heaviest being 380 metric over 10 years an annual C$1.7 billion to tons (mt). upgrade its aging infrastructure. Has the IRP directly affected your business? Prior to Amix entering the market, its We expect business to permeate from type of service offering did not exist in the IRP. When there is a requirement British Columbia. How much are you for heavy lifting, Amix is ready with able to save companies on logistic, as equipment to service BC Hydro's needs, President they no longer have to import into the whether it is for one large crane, the tug- Amix Heavy Lift United States then truck to Canada? and-barge service, or the use of our facil- There are substantial savings in time and ities at Chilliwack, Langley, New West- money. Companies can import straight minster, Surrey and Prince Rupert. into a British Columbia port, utilize our services of heavy-lifting equipment, and What percentage does the power sector then truck the cargo to site. contribute to your business? Currently, the power sector does not Were there any particular challenges for contribute a large amount of our busi- Amix' involvement in the Cape Scott ness; over the last few years, we carried wind farm project? out 25 days of craning work related to Amix became involved with the Cape power projects equating to approxi- Scott wind farm project because there mately 10% of our business. was a requirement to lift some of the components of the wind turbine towers. There will be a considerable number of The managers of the project decided liquefied natural gas (LNG) facilities that that all components would be staged will be built on British Columbia's coast. at the Port of Nanaimo, Vancouver Is- These facilities will require equipment. land. There were limitations on what Do you see this as a business opportu- land-base cranes could reach from the nity for Amix? Could we begin the interview with a dock, and it made economic-sense to Amix see LNG sector as a future busi- brief overview of how Amix was formed commission Amix's water-borne Arctic ness opportunity. It will be a competitive and its niche market? Tuk ringer crane to lift the 85-mt nacelles market, but Amix has the equipment and Amix dates back to the early 1970s, and some of the large columns. Land- expertise to service the needs of this de- when its primary focus was scrap-metal. base hydraulic cranes handled the lighter veloping sector. We have already been As this market for scrap-metal and de- equipment, including hubs and blades. approached by companies within and molition developed, there was a need The Arctic Tuk ringer crane proved suc- outside British Columbia vying for busi- for larger equipment to improve the cessful, lifting from the lower holds of ness in the LNG sector for pricing input company's capabilities. In the 1980s, the ship across to the waiting trailers. towards future concepts. Amix became more involved in marine Amix was hired by DP World, Vancou- transportation, partnering in tug and ver, and worked with the cargo carrier, What are Amix’s strategic objectives barge ownership, which evolved into Grieg Star Shipping and Nanaimo Port over the next three to five years? barging scrap-metal and other commodi- Authority. The contract was carried out 1. We will improve industries' knowl- ties. As Amix advanced, it added further successfully without issue. edge, including power and LNG, of equipment, including cranes. In 2005, Amix's service offering in the heavy lift- there was an opportunity to purchase a For the Cape Scott project you worked ing and marine transportation sectors large ringer-crane. We had it designed alongside the Nanaimo Port Authority and partner with other contractors in the for mounting on our barge, the Arctic and Grieg Star Shipping for an inde- area to share information and resources. Tuk, which was originally designed for pendent power producer (IPP). When 2. We will also seek a good business-fit transportation in the Canadian Arctic. carrying out a project, is there a differ- for our facilities at Prince Rupert and This equipment enabled us to enter the ence between working for IPPs and BC Vancouver. Both are equipped with heavy-lift market in Vancouver and North Hydro? off-loading and re-load and have room America's west coast, in addition to us- We are a service-provider and can work for expansion. There is potential for new ing it for our demolition work related to directly with owner or manufacturers, business in Prince Rupert and Vancou- the scrap business. We marketed the but predominantly we are more involved ver; arguably, it would make economic Arctic Tuk along with other supporting with a shipping company/agent or a sense to ship through these two ports, equipment. Since then, this market sec- transportation company, which hire us rather than the southern United States tor has grown steadily to include pow- for our ability to lift heavy cargo. and overland into Alberta. Amix is trying er-related projects, including transport- to correct the misconception of British ing generators from ship-to-rail or barge, BC Hydro has its 10-year Integrated Columbia's service offering. •

Industry Explorations - 43 - BRITISH COLUMBIA POWER 2014 INTERVIEW Global Business Reports

Apex Industrial Movers is a division of You have some very specialized David Stroud, the Pacific Group of Companies. Can equipment, including a 200-metric ton we begin with a brief overview of how (mt) transformer trailer. Is this a unique John Brise & Apex Industrial Movers fits into the service offered from Apex, and are you Doug Elliot broader Pacific Group of Companies focused totally on the British Columbia and how it contributes to the revenue of market? the Pacific Group? JB: 200-mt transformer trailers are rare; David Stroud (DS): Apex has been with there are very few transport compa- Apex Industrial Movers the Pacific Group for 21 years; we inter- nies in British Columbia that can handle face primarily in the heavy industrial-side such a load. We have the only dual-lane of the sector. As a rule, there is little transporter that is permanently based in crossover with the Pacific Group but British Columbia, giving us a big advan- we do have the advantage of sharing tage over our competitors. labor when necessary. Overall, Apex ac- DE: As well as British Columbia, Apex counts for 10% to 15% of the Group's operates in Alberta and Saskatchewan. revenue. Our equipment is suitable for operation in the four jurisdictions in western Is the power sector important to your Canada and the Pacific Northwest, en- overall business, what percentage does compassing predominantly power gen- it contribute, how has it grown over the eration/transmission, but includes pulp last five years, and what growth do you mills, shipyards, mining, and oil and gas. anticipate over the next five years? DS: For the last three to four years, 90% Looking at power transmission and the of our work has been associated with replacement of its aging infrastructure, power generation or transmission. We there will be much demolition involved. anticipate that this trend will continue Is the removing of the old equipment an DS for the next four years. area that presents particular technical challenges for Apex? Are there safety Is your growth in the power sector due issues? to BC Hydro's Integrated Resource DS: Arguably, the biggest problem with Plan (IRP) and the upgrading of its ex- removing old infrastructure, especially isting infrastructure, or has your growth in the metropolitan areas, is that site permeated from independent power access conditions have significantly producers (IPPs)? changed since infrastructure installation. John Brise (JB): Our growth has come Historically, transformers were moved from both BC Hydro and IPPs: BC Hy- by rail or barge; rail sidings have since dro has been enacting system upgrades, closed, and barge sites have been renew sub-stations as well as replacing old placed with condominiums. infrastructure; our growth with IPPs has How does British Columbia's regulatory evolved over the last few years. When regime compare to other provinces? JB working with IPPs, there are additional DE: From a regulatory viewpoint, British site issues, which tend to be in more Columbia is comparable to California rugged and remote terrain and more for its stringent rules; however, British difficult to access. BC Hydro's locations Columbia is looking at ways to become are easier to access, as they are gener- more accommodating on the movement ally near major infrastructure, but BC Hy- of large loads. Over the last nine months, dro's equipment is usually much larger. Apex has been working with the authori- Doug Elliot (DE): Considerably more ties to agree on the movement of a large logistics are involved in moving BC Hy- load for the Northern Gateway pipeline dro's product than that for IPPs. With project through the province to Alberta BC Hydro, the ministry's infrastructure and Saskatchewan. Good headway is is used to move product. For the remote being made. There are principles that locations of IPP sites, ministry infra- have to be applied for large-load haulage: structure is not involved and therefore can it be moved by barge or rail; if not, the logistics are not as difficult. Product then the ministry will consider the road is barged or railed near to the site and option. All Canadian provinces conduct off-roads usually owned by IPPs are this policy. Loads are now so large that used to access the site. rail-movement is becoming redundant.

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What makes British Columbia's regulatory regime so stringent? DE: It is the infrastructure that is in place. British Columbia does not have four-lane or six-lane roads; much of it is two-lane, mountainous and curvy, difficult for haulage. In Alberta, large and heavy loads are moved during the day; in British Columbia, they are moved at night, i.e. from midnight to 05:00, or for excessively large loads from 02:00 to 05:00. A load being taken from the Port of Vancouver to the British Colum- bia/Alberta border can take three days, where as a highway vehicle would take 12 hours. Apex is negotiating with the government to operate an eight-hour haulage day.

What were the challenges of delivering the transformers to the Seven Mile Dam project? DE: There was a significant amount of logistics involved in the delivery of transformers to the Seven Mile Dam, taking us eight months to secure haulage approval from the ministry. Actual delivery took five days from delivery at the British Columbia border to the pad. Once a certain threshold of weight is achieved, the ministry does not cover the analysis work for bridges. Apex had to hire an independent engineering firm to carry out bridge analysis, and the process took three months to complete. This analysis was then sub- mitted to the ministry, which conducted its own review. The whole process took six months. A project of this type, from its inception to the first transformer being on the road, can take 12 months. Most jurisdictions have a similar regulatory regime for this type of haulage project.

What do you see as the strategic objectives for Apex Industrial Movers over the next three to five years, and will that 90%-revenue contribution of power be maintained? DE: Apex will be able to maintain the revenue contribution of power provided that BC Hydro continues its current strategic plan to upgrade its infrastructure. It is important to cultivate other markets, i.e. pulp mills and mines, as a safeguard should our BC Hydro work reduce. •

Industry Explorations INTERVIEW Global Business Reports

Could we begin the interview with a early 2000s we carried out a similar Adrian Gygax brief overview of GEA, why did you project in the Dominican Republic. decide to form the company and Other projects have been in Southeast what opportunities did you see in the Asia, northern and western Africa, the market? Caribbean, and North America. My background is in heavy engineering design, consulting and site services. You have worked on smaller-scale run- For 15 years, I worked for a large Euro- of-river projects. Can you outline the Principal pean-based engineering firm covering technology gains and expertise that Gygax Engineering all sectors from public transit to nuclear have been achieved in this sector in Associates (GEA) power. I moved back to Vancouver and British Columbia? felt that there was a niche for small My early career involved working on players to provide engineering services similar sized projects in Europe. In to larger industrial public sector clients. North America, technology gains have These clients would typically go to the been made, but initially it was a steep big players in the engineering sector learning curve for engineering firms as for their large projects, but had smaller small hydro plants had been rare. GEA needs where it was not viable to in- has been successful in this sector as it struct the big players. has in-house experience of run-of-river hydro. There are issues where British GEA is involved in many sectors. How Columbia is at the forefront: many are much of your business is concentrated environmentally related, i.e. fisheries on power, and how is this business and habitat mitigation and protection apportioned between British Columbia through operational constraints on and the other provinces? the plants; the intake design; types of Our power business varies from year weirs and Coanda screen technology. to year. For the last two years, Gygax It is the application of this technology has been focused on hydropower; that has been championed by British primarily handling a total of over 100 Columbia. GEA is currently involved megawatts (MW) installed capacity in a project near Squamish where the from three projects, the smallest be- Coanda screen intake is not operating ing 18 MW and the largest 70 MW. In in its traditional use as a spillway; the previous years, we have been more screen would normally be oriented active in industrial port facilities, but try as a weir perpendicular to the flow of to remain active in different industrial water, but we are using a flap-gate to sectors not wishing to be pigeonholed. regulate a head-pond sending the wa- Currently, 45% to 55% of our revenue ter over the Coanda screen located at comes from hydropower. The bulk of the side of the head-pond. This method our remaining revenue is in the thermal was a requirement to address fisheries power sector having a standing-agree- issues. ment with Qulliq Energy Corporation in Nunavut, where we are designing re- Looking at the future, what is the mote power stations. Similarly, North- demand for small-scale hydro in the west Territories Power Corporation has province? been a long-standing client; we have The B.C. run-of-river power industry carried out projects on new and exist- has advanced considerably the way ing thermal plants and upgrading their such projects are developed. On a hy- hydropower facilities. We also act as dro-technical level, we have also ad- sub-consultants for projects in the mu- vanced considerably during the past nicipal sector; clients range from Metro two decades. For instance, our firm Vancouver through the various munici- designed the highest head run or river palities of lower mainland and through- plant in North America at 865 meters. out British Columbia. Our projects in We designed the first two projects in the industrial sector extend worldwide. B.C. to use fiber-reinforced-polymer For example: in 2013, we completed pipe for the penstock (conveyance an expansion to a clinker terminal and pipe) with a considerable advantage in cement production plant in the Port of construction time and complexity. And Abidjan, Ivory Coast; in the late 1990s/ we and other firms in the province have

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developed design methods that elimi- you mentioned that hydro is seen as the regulatory framework has since nate the need for expensive concrete controversial when it is built. Why do evolved to become clearer. Also adding foundations at the bends of welded you think this is when the province has to the confusion was the restructuring steel pipe, relying instead on the soil such a green reputation? of the ministry responsible for the run- backfill to limit movement. There are There has been a lot of misinformation; of-river hydropower. Then, there is a numerous young engineers and tech- arguably, there was lag between the public perception that small hydro activ- nologists in this province that have de- regulatory agencies’ requirements and ity regularly kills fish, permeating from veloped unique skills in the hydropower the initial development of the renew- media misinformation. sector. There is a real potential to ex- able sector in the early 2000s. There port these skills, but we need a strong was uncertainty by the regulators as to If we return in three years, how do you project base in this province on which how deal with renewable projects, and expect GEA to have developed in the to build. In any case, regardless of the most of the requirements and review market? current miscommunication between criteria seemed to be developed while GEA is currently in a transition phase; certain environmentalists and our in- projects were in motion. Arguably, the some of its younger employees are dustry, I firmly believe we will need government must take some responsi- coming into ownership and manage- small hydro in our medium and long- bility; the Gordon Campbell government ment, and it is unclear what their focus term future. It is essential that we do had this vision of green power to make and direction will be. Everyone in this not lose the knowledge base that now British Columbia one of the greenest office enjoys hydropower projects; my resides in our young engineers. places on earth. It failed to lay out suf- younger colleagues have gained in- ficient regulatory rules and preparation valuable engineering knowledge in this The British Columbia Clean Energy that would have made it easier for the sector. Hopefully, this expertise will be Act states that 93% of electricity must developers to understand the govern- utilized and not be lost out of the prov- come from renewable sources, and ment's regulatory requirements. Albeit, ince. •

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pacities. Knight Piésold is involved in Knight Piésold has grown much larger Sam Mottram assessing the downstream impacts of in the last decade. Do you still see op- Site C, including the fluvial geomorphol- portunity in smaller projects associated ogy of the river system. BC Hydro has with the IPP sector? assembled a team that has the experi- Although we are involved with megapro- ence to realize the project. There is still jects like the 1,333-MW Ingula Pumped a debate whether or not Site C is best Storage Project in South Africa, our for the province, but large hydro has niche is still in the small-to-medium hy- Managing Principal, Power Services served the province quite well in the dro sector with projects in the 2-MW to Knight PiésolD past and will continue to do so in the 200-MW range. There is unlikely to be future. a new, large Clean Power Call in B.C. in the next couple of years, but there are BC Hydro has a “conserve first” men- still opportunities for small hydro with tality to reduce electricity usage in the BC Hydro’s Standing Offer Program province by up to 75%. How can this (SOP) for projects up to 15 MW in size. goal be accomplished? The other opportunity for IPPs is go- BC Hydro is first targeting the low-hanging to be with First Nations-based and/ ing fruit to reduce usage, such as chang- or small communities-based projects. ing out light bulbs. Going forward, there Some of these off-grid communities are will be a reliance on new technologies currently running on diesel power that that in many cases have not yet even is costing them upwards of C$300 per been developed to help realize future megawatt hour to generate power, so savings. There is some skepticism as identifying viable small hydro or wind to whether BC Hydro can realize all projects for them is very important. these demand-side management sav- They want to get off the high cost, dirty ings. If the economy picks up, a few diesel and onto cost-effective, renew- new mines connect to the grid, or liq- able energy. uefied natural gas (LNG) moves ahead, Under the Integrated Resource Plan the energy forecast will change signifi- What do you see as the main chal- (IRP), BC Hydro is planning to spend cantly. BC Hydro is revising its demand lenges in the market over the next five $1.7 billion per annum over the next 10 forecast for next year because there are years? What can be done to keep rates years. What are the principal oppor- so many uncertainties about how much low, as BC Hydro and the government tunities for Knight Piésold in British more energy it is going to need. have promised? Columbia given this plan? There has been finger pointing at the We have bid on a number of upcom- Knight Piésold envisioned the Green IPPs for the cost increases in residential ing refurbishment projects, including Power Corridor of 30 low-impact hydro electricity rates, but IPPs only account the 130-megawatt (MW) John Hart projects in the Toba and Bute Inlets of for a fraction of the increases. The cost Hydroelectric Redevelopment Project, British Columbia. How has this corridor of building new power for BC Hydro, and teamed up with a number of con- developed with the Independent Power whether it is new generation or refur- tractors and developers to help realize Producer (IPP) sector since we last bishing existing projects, is having, as these projects. BC Hydro has aging fa- interviewed you in 2011? much, if not more, pressure on costs cilities that need a lot of work. Under Two of the 30 potential projects we than the development of IPPs. Having the IRP, BC Hydro now has a program identified are now operating, namely a blend of both public and private sector to upgrade all of these, many of which the 147-MW East Toba River and the development helps maintain competi- are 60 to 70 years old on both the hydro 88-MW Montrose Creek facilities. Al- tiveness and keeps rates as low as pos- generation facilities side and the trans- terra Power is currently developing the sible for customers. As long as the gov- mission and distribution side. third project, Jimmie Creek, with con- ernment maintains the SOP, there will struction scheduled to start in 2014. be opportunities for IPPs in the Clean It has been nearly three decades since Additional development of the Green Power sector in B.C. in the short-term. BC Hydro has undertaken a large-scale Power Corridor will be dependent on BC Hopefully, there will be a large Clean project. Does it have the in-house Hydro’s large Clean Power Calls, which Power Call in the future, as the econ- expertise to undertake Site C? are not expected in the short-term. The omy recovers and new mines and LNG BC Hydro no longer has large, in-house Green Power Corridor would effectively facilities are developed. • expertise, which is why they have hired compete with Site C in terms of energy external consultants to help them. A production volume. It is probably not number of consultants have been in- going to be advanced in the short-term, volved in the 1,100-MW Site C Clean but the potential in the long-term is cer- Energy Project (Site C) in various ca- tainly there.

BRITISH COLUMBIA POWER 2014 - 48 - Industry Explorations Into the Future: Final Thoughts, and Company Index

“In Ontario, the power sector is comprised of many power-generating companies with a multiplicity of distributors. By way of contrast, in British Columbia, the government has monopolized power generation, transmission and distribution. Arguably, the reason for this is the nature of British Columbia's power source, i.e. mainly stored water requiring large dams for generation, extended transmission lines, distribution in many disparate population centers and extensive capital as the projects are located in the less populated eastern portions of the province while most the users are in the southwest sector of the province.“

- G. Henry Ellis, Partner, Gowling Lafleur Henderson LLP

“The province has to decide where and how much its industrial growth will be. There are clear and accepted proposals for residential and smaller industry growth; what people are less comfortable with are the projections of the required industrial growth mainly around LNG, mining, and to a lesser extent any other industry that becomes predominant in B.C.”

- John Carson, CEO, Alterra Power Corp.

Image: Amix Heavy Lift FINAL THOUGHTS Global Business Reports

The needs will be enormous in Canada and US; in relation to Site C is a legacy project that could provide clean energy to the power in addition to BC Hydro's Site C, LNG will play a leading role province for decades. History has demonstrated that construction “because of that industry’s need for large amounts of electricity of the large hydroelectric dams 40 to 50 years ago, has allowed (which will in turn drive material increases in greenhouse gases). British Columbia to become a competitive resource-based The required power for LNG is likely to be produced inside the economy. However, the government could also achieve a similar fence. For example four of the proposed LNG projects will require or perhaps a greater legacy benefit by looking at and developing a total of 3,000 MW of natural gas-fired generation adding to the alternative projects to Site C, including constructing a number of greenhouse gas emissions regardless of the cleanliness of LNG. clean and renewable energy projects, such as wind, solar, run-of- The British Columbia government is pursuing the path of LNG; river, geothermal as well as natural gas fired generation projects, arguably, it will be successful. From our viewpoint, LNG is big in different areas of the province to ensure a diverse supply of business, and will continue to grow; we are already involved with a distributed generation sources which would stimulate longer number of projects both on the gas and procurement-side with Asia term economic development in the different communities. British showing great interest to buy into LNG. Columbia was a leader in developing renewable energy projects, but it is questionable as to whether it will remain a leader.

- P. John Landry, Partner, Davis LLP - Charles W. Bois, Partner, Miller Thomson LLP

Generally speaking, there are limits as to what loads can be hauled in B.C.; loads often have to be broken-down and made lighter to meet the axle weight restrictions on B.C. roads and bridges. Another challenge British Columbia faces is availability of big, heavy lifting cranes; these often have to be brought in from outside the It is challenging for Canadians to participate in U.S. markets: they province or even from outside of country. This means there are are highly uncertain, the regulatory regime is extremely risky and considerable costs when moving 30 to 80 loads of equipment the liabilities are extreme. It is hard to have confidence Canadian hundreds of miles for a specific project. Saying that, permitting in firms are going to be treated fairly in the United States. That said, British Columbia is efficient and relatively easy with costs that are the United States is an enormous market, so Canadian companies somewhat in line with other provinces and jurisdictions. have a financial interest to compete there. In my view, only the largest companies can survive; the United States has largely put itself outside the reach of smaller players because it is too difficult - Devlin Fenton, President of a market from a regulatory and liability perspective. DLB Cranes, part of the Surespan Group

- Chris W. Sanderson, Partner, There is a dramatic geographic diversity between the wind regimes Lawson Lundell LLP of Vancouver Island and the Columbia Gorge region. We found that the coastal wind regime has a winter-peaking system that drops off in the summer and then returns; the Columbia Valley region has exactly the opposite. If these resources are combined, they result in average with a generally similar profile to base-load power throughout the year; however, there will be the odd occasion when weather phenomena occurs, i.e. no wind in either region; back-up Design Group Staffing is one of the largest privately staffing from dams or gas plants will be required, but using far less of those company in Canada and has offices in 19 cities across 6 resources than if the geographic diversity were not being exploited Canadian provinces. We are focused on the technical side of at all. The only way that this valuable geographic diversity can be staff recruitment, while our two sister companies offer recruiting captured is by construction of more cross-border transmission services in the IT, finance and accounting, HR and administrative capacity connecting the regions, increasing the capacity and ability fields. Natural resources, including mining, energy, oil and gas, and to shift the power from one area to another as it is available. forestry, account for approximately 70% of our revenue in Canada.

- Paul B. Manson, President and CEO, - Paulo Brinholi, Practice Leader, Natural Resources, Sea Breeze Power Corp. Design Group Staffing

BRITISH COLUMBIA POWER 2014 - 50 - Industry” Explorations Global Business Reports COMPANY INDEX AND CREDITS

Associations and Government BC HYDRO 3, 6-19, 21-33, 35, 37-45, 48, 50 BC MINISTRY OF ENERGY & MINES 3, 10, 44-45, 47 CLEAN ENERGY BC 15, 22

Production and Service ALTERRA POWER CORP 27-29, 49 AQUATIC INFORMATICS 12 DMD & ASSOCIATES ELECTRICAL CONSULTANTS 21 FORTIS BC 12, 14 INNERGEX RENEWABLE ENERGY INC. 7, 27-28, 30 SEA BREEZE POWER CORP 29, 50 SENVION CANADA 2, 16-17, 36-37, 39

Consulting and Engineering AUSENCO 18 GYGAX ENGINEERING ASSOCIATES (GEA) 39, 46-47 HATCH 19 KAWA ENGINEERING 28-29, 31 KNIGHT PIÉSOLD 27, 31, 38, 48 LEX ENGINEERING 39, 42 MIDGARD CONSULTING 23, 28 SCHNEIDER ELECTRIC CANADA 34, 35 STANTEC 7, 20-21, 23-25, 38 TETRA TECH EBA 32

Financial, Legal, Logistical, Recruiting and Risk Management AMIX HEAVY LIFT 40, 43, 49 AON GLOBAL POWER 21 APEX INDUSTRIAL MOVERS 38,41 CORPFINANCE INTERNATIONAL LIMITED (CFI) 40, 44-45 DAVIS LLP 50 DESIGN GROUP STAFFING 50 GOWLING,LAFLEUR, HENDERSON LLP 22, 26-27 LAWSON LUNDELL LLP 50 MILLER THOMSON LLP 21-22, 50 RAKIA RECRUITING 33, 38-39 SURESPAN GROUP 50 TRAVELERS POWER CORPORATION 28-30

EDITORIAL AND MANAGEMENT TEAM

Senior Project Director: Katie Bromley ([email protected]) Journalists: Andrew Mason ([email protected]) and Anita Kruger ([email protected])

Managing Editor: Mungo Smith ([email protected]) Executive Editor: John V. Bowlus ([email protected]) Graphic Designer: Gonzalo Da Cunha ([email protected]) General Manager: Agostina Da Cunha Regional Director: Sharon Saylor ([email protected])

For updated industry news from our on-the-ground teams around the world, please visit our website at gbreports.com, subscribe to our newsletter by signing up to our VIP list through our website, or follow us on Twitter: @GBReports Additional copies of this book can be ordered through Elif Ozturk ([email protected]).

THANK YOU

GBR would like to thank

CLEAN ENERGY BC http://www.cleanenergybc.org/

BRITISH COLUMBIA MINISTRY OF ENERGY AND MINES http://www.gov.bc.ca/ener/

We would also like to sincerely thank all the companies that took the time to give their insights on the market and share their experience and knowledge.

Industry Explorations - 51 - BRITISH COLUMBIA POWER 2014