Thread by @ThomasforBC

Given recent $16 billion #SiteC news I want to explain this project as a business decision to build a rental house. Buckle up and grab a sewing machine as I pull this 🧵

My main point: any project choice is a trade-off compared against alternatives. 1/LOTS

What kind of house should we build? Hydro? Wind? Geothermal? In 2013 @AJWVictoriaBC compared the 2013 site c costs to a different renewable: wind. In 2011 a $7.9 billion site C would cost between 8.7-9.5c/kWh - but wind costs were about the same. bit.ly/3r5c44j

Since 2013, global solar and wind costs dropped dramatically, but the capital costs of Site C have doubled from 7.9 to 16 billion. (If you have current site C kWh costs, @ me) bit.ly/2NQTEG2

In December of 2020, an analysis determined that site c was not-cost effective at the current price tag of 10.7 billion. In fact it's 3x the cost of wind and 50% more than solar - with some caveats (pg.3). bit.ly/3b0i5tq

So our hydro house is now much more expensive than other carbon-neutral options - but the rent we receive from all types is the same. BC Hydro charges a fixed rate regardless of the source. Things get complicated with renting to other jurisdictions, intermittency and etc 4?/??

We still don’t know if our house will only cost $16 billion. The Milburn report was conveniently hidden during the 2020 election and still isn't public knowledge. However, a public summary notes the serious geotechnical issues and warns "the final cost is unknown".

One big issue with our rental house is that commercial tenants pay less than residential tenants - but as a landlord we don’t get to choose who we rent to. So regardless of what we build, if a business wants to use our “rental house” their rent is cheaper than a family pays

Industrial customers pay a fraction of residential hydro rates. Eg $0.0596 per kWh compared with residential rates of $0.0930-0.1394 bit.ly/3sx5yDV Industry pays their own transmission costs, but LNG get even more discounts. So it's hard to determine their actual price

In any case industrial rates are still cheaper than residential rates, and Site C was built to supply energy to LNG projects - so if it loses money at residential rates it's going to lose even more money at industrial rates. Hooray!

A frustrating part of Site C is the lack of transparency. BC Hydro first knew, on the record, of serious cost overruns in 2019, but the government never publicly admitted these until 2021. thenarwhal.ca/site-c-dam-geo…

If you’re building a rental house and you know rental rates, you can make an informed decision at ANY point to cancel the project. The decision is never how much have I spent, but how much will I spend MOVING FOWARD. You’re not getting those “sunk costs” back, so ignore them.

The government has used sunk costs to justify continuing with the project. This is stupid. The framing shouldn’t be “how much are we spending on nothing” but “how much do we save by cancelling”

Eg, if you’re halfway through building a house and you realise it’ll cost $600k to finish but only $100k to cancel, you should ask “can I build a different rental house for $500k”? That's the difference between cancelling and completing.

(Or ask "do we even need this house")

Ignoring sunk costs, in 2017 it was $8.6billion to finish or $1.8 to cancel - so in 2017 could we have built 5,100 GWh elsewhere for less than the difference? Probably. Alberta paid $37 per MWh for wind projects that year. canwea.ca/wind-facts/aff…

The math this year is similar with a cost difference of $6 billion (if you trust the $16billion price tag, which I don’t). So in 2021, could we build 5,100 GWh for less than $6 billion? Again, probably yes. Photo source: bit.ly/3uIgiRR

Of course, this ignores the always known massive geotechnical risks - we knew this before ground breaking. This was known in 2017 and it was known that cost overruns were likely - so that $6.8 billion decision to proceed was a MINIMUM $6.8 billion decision. #oops

And, of course, is there a rental market for this rental house we’re building? Well, it seems only if LNG goes ahead. And if LNG goes ahead, we’re selling the power at the super-reduced industry rate which means we lose even more on Site C. #dam

Hope this helps. I haven’t even discussed the other enviro impacts, farmland loss, and the upcoming charter challenge which could derail the entire project. As always @ me with comments, info, or stir fry recipes. /END