The prospect of an underwater cable joining power grids on Vancouver Island and Washington state has once again surfaced after Sea Breeze Power floated a proposal to the provincial government that could make its Juan de Fuca Cable project a reality.
Sea Breeze has submitted an unsolicited term sheet to the provincial energy ministry suggesting the province buy 550 MW of firm power (uninterrupted) for a 10-year period, at a price of $69 per megawatt hour.
In return for that revenue contract, the company believes it would finally be able to secure the financing to build the $500-million cable that would bring power from the U.S.
The energy ministry did not return requests for comment on the proposal, while B.C. Hydro would only say it had received a submission from Sea Breeze as part of the Integrated Resource Plan consultation.
Hydro is reviewing all submissions as it prepares to submit the final IRP, which lays out how Hydro proposes to meet growth in demand for electricity, to government by Nov. 15.
Sea Breeze chief executive Paul Manson said the timing is right for this kind of proposal.
“It comes at a time when B.C. is facing an interesting range of choices as to how it proceeds with future electrical supply,” he said.
“[This is] an offer to be selling a block of firm power to the province at a price which I don’t believe they can purchase firm power anywhere else.”
Manson said the low price is due to an excess of power available in the U.S.
“The proposition is based on a market imbalance — there’s demand in B.C. and supply in the U.S., by equalizing we create a win-win situation,” he said.
“But that won’t last forever. Energy markets can turn around very quickly.”
If the province takes a shine to Sea Breeze’s proposal, it would breathe new life into a 10 year-old idea that went quiet over the last three years.
The two-way, 550- megawatt cable would connect the Hydro grid at the Pike substation outside of Victoria to the Bonneville Power Administration’s substation in Port Angeles.
Manson said if the province enters into a purchase agreement, there is financing waiting in the U.S. to build the cable. He also noted no further investment from the province would be required.
“That transaction for the firm power would generate sufficient income to allow us to get both equity financing for the project in the order of $100 million and to borrow the balance, around $400 million,” Manson said.
He added private equity firm Energy Investors Funds, which specializes in financing power projects “has told us on many occasions that as soon as we have revenue contracts in place they are prepared to invest the equity.”
In 2005, Sea Breeze submitted the Juan de Fuca cable project as a competing alternative to the Vancouver Island Transmission Reinforcement project.
At that time the B.C. Utilities Commission opted for VITR, which replaced the aging undersea cables that provide about 75 per cent of the Island’s power.
In 2010, after it had received federal approvals in both Canada and the U.S., the Juan de Fuca cable project was waiting on a $480-million loan guarantee from the U.S. government before it could get started.
“Unfortunately, that program had been initiated under stimulus funding and the program ran out before we were able to secure contracts for the use of the line,” said Manson.
When asked if this latest proposal was a last ditch effort to resurrect the project, Manson was undaunted.
“I very much believe there are many ways to skin a cat,” he said.
“B.C. is at a point in time when industrial expansion seems to be the way of the future, whether it be LNG, mining and resource development. Electricity demands in the province will be exceeding the available supply here presently.
“I’m sure that over time this project will be built.”
Even if the province agrees to the Sea Breeze proposal the project, which at one point was fully permitted on both sides of the border, it would have to be approved for a second time by the National Energy Board, as its initial stamp of approval has expired.