Market Snapshot: British Columbia Uses its Hydro System to Maximize Gains from Electricity Trade
Release date: 2015-12-17
British Columbia (B.C.) was a net importer of electricity for seven out of the past eleven years. However, B.C. has had a positive trade revenue balance since 2011 due to its additions of generation over the last few years and its ability to buy electricity when prices are lower (e.g. during the night or during spring) and sell when prices are higher (e.g. during peak hours).
For example, in 2014, companies in B.C. exported 7.4 terrawatt-hours (TW.h) of electricity and imported 9.7 TW.h.Footnote 1. B.C. firms sold these exports for $388 million and purchased these imports for $306 million, resulting in net export revenue of $82 million despite net energy imports of 2.3 TW.h.
Figure Source and Data
Source: NEB statistics
Description: The above chart compares the net amount of B.C. electricity exported (i.e. energy exports minus imports) and the net revenue from this trade activity (i.e. export revenue minus cost of imports). B.C. was a net importer in seven of the eleven years between 2005 and 2015, but did have significant net exports in 2012 and 2015. B.C.’s net export revenue has been consistently positive since 2011 after negative net revenue balances from 2008 to 2010 and in 2006. Note that 2015 data is for January through September.
The ability to take advantage of these opportunities to “buy low and sell high” is based on several factors. Due in part to the addition of sizeable amounts of wind capacity in the last few years, prices in the United States Pacific Northwest (PNW) are often low (sometimes even negative), especially during spring and early summer when there is abundant hydro generation from rain and melting snow. At such times, B.C. may choose to import electricity from the PNW and keep B.C. water stored behind dams – releasing it later to generate and sell hydro power during higher priced periodsFootnote 2. In order for this strategy to be economic, the B.C. export price needs to be at least $10/MW.h higher than the import price (primarily to cover transmission costs).
NEB historical data shows that average B.C. electricity export prices over the past ten years were consistently higher than average import prices. From 2005 to 2015, the spread between the two average prices ranged from $10 to $25, with an average annual difference of $15.01.
|Calendar Year||Average Import Price
|Average Export Price
Source: NEB Statistics
Description: The above table shows three values related to B.C.’s electricity exports: average prices paid for energy imported (purchased) and exported (sold), plus the average difference between these prices. From 2005 to 2015, prices ranged between import and export lows of $15.79/MW.h and $25.33/MW.h respectively in 2012, to import and export highs of $60.64/MW.h and $86.10/MW.h respectively in 2005. The price differential ranged from a low of $9.54/MW.h in 2012 to a high of $25.46/MW.h in 2005.
Despite this consistent price differential, B.C.’s net revenue has not always been positive because the differential earned on exports was sometimes not large enough to offset the cost of net imports needed to meet domestic demand. As B.C. expands generating capacityFootnote 3 in pursuit of its provincial policy that B.C. Hydro be energy self-sufficient by 2016, B.C.’s trade balance and trade revenues are both expected to continue their recent upward trends.
The role of B.C.’s trading partners is also changing. Imports have remained stable, with over 98 per cent of B.C.’s imports originating from the PNW over the last five yearsFootnote 4. However, between 2011 and 2014, B.C. exported twice as much power to California (22.2 TW.h) than to the PNW (11.8 TW.h). B.C.’s hydroelectric power qualifies as “low-emission” supply under the rules of California’s carbon market, which increases the competitiveness of B.C. exports to California. In addition, four B.C. wind farms have been certified to sell both energy and renewable energy credits that California utilities can use to meet obligations under the state’s renewable portfolio standard.
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