American energy experts advocate Cascadia supergrid for energy trading
With a robust physical infrastructure for energy trading, “spot markets” can arise: power can be sold to where it is needed on short notice. Murray Margolis, the Executive Director of Morgan Stanley’s Vancouver office, advocated three reforms that would encourage spot markets.
First, BC’s incremental cost of export is highest in the west and BC hydro proposes a 30% increase. This “denies practical access” for parties wanting to move electricity in and out of BC. Margolis suggested a reduction of this charge. Second, he’d like to see private sector players help build enough buyers and sellers for a robust, efficient energy market. Third, BC producers of renewable power could pursue eligibility for REPs. This would make their power a more valuable commodity in the States.
3: BENEFITS FOR BC?
The third obstacle is the lack of clarity regarding what BC stands to gain. Waldo showed compelling graphs of the way wind power off Vancouver Island and wind power in the Columbia Gorge could complement each other. But BC hasn’t built its turbines and Washington has. Tellingly, the planned transmission towers all have greater capacity heading north than south suggesting BC and Alberta would increase their imports more than their exports. Mike MacDougall, the Director of Trade Policy for Powerex (a wholly owned subsidiary of BC Hydro) cautioned that energy trading may give Morgan Stanley more sales, but utilities are in a riskier position because if they sell part of their load, they can’t get it back and BC Hydro can be stuck making purchases for the load it is obligated to serve.
MacDougall saw an energy trading market full of unforeseeable consequences in the absence of the stability of carbon pricing. For example, with no meta-strategy or regional integration, REPs resulted in each state building surpluses of renewable energy that they can’t sell. Similarly, no one could foresee dropping natural gas prices, which have hurt the market for renewable energy, or the parity of the loonie with the dollar. Big utilities with rate payer obligations need predictable markets to benefit from energy trading. MacDougall agreed with the general proposition that diverse energy markets make for better use of existing capacity, but he seemed skeptical that the necessary conditions were in place yet.
IT’S ABOUT THE CARBON
From a climate standpoint, energy trading can have major benefits. With a large, shared grid, a greater percentage of renewable can be fed into it and find a matching demand. For example, Alberta generates over 80% of its electricity from coal. If it could buy electricity from renewable sources across the border instead of using coal and natural gas, it could reduce carbon emissions by up to 52 million tons per year. That is more than the emissions from the oil sands last year.
The policy initiatives that could facilitate such energy trading include first and foremost a price on carbon pollution. This would create a more rational and predictable market in which utilities aren’t forked between conflicting mandates. Making BC energy eligible for REPs would increase its market value in the states. And regional integration of infrastructure throughout Cascadia, with new and updated transmission lines, would remove physical barriers to efficient distribution of renewable energy. With physical access to renewable energy and an active market, Alberta could decrease its use of climate destabilizing coal.
The potential for a Cascadia energy trading market in which Canada becomes a net importer of renewable energy parallels Canada’s failure to move ahead with low carbon technologies in all sectors. While Europe, China and the US gear their economies toward a low carbon future, Canada sits on its hands, forgoing its rightful place as a center for investment and development of the technologies that will create the economic winners of the new century.