Written By Sharon Singh, David Bursey, Duncan McPherson, Vivek Warrier and Kenryo Mizutani
On January 28, 2021, the Government of British Columbia announced that BC Hydro will offer discounted electricity rates to innovative industrial customers seeking to use clean electricity in qualified “green” operations, as well as industrial customers who convert their operations to be powered by electricity instead of fossil fuels. In addition to rate discounts, British Columbia will also provide financing to encourage electrification projects through a new $84.4-million CleanBC Facilities Electrification Fund.
CleanBC Industrial Electrification Rates
BC Hydro’s two new rate options are: 1) the Clean Industry and Innovation Rate; and 2) the Fuel Switching Rate. Both rates are available until March 31, 2030, and qualifying industrial customers can enjoy discounted rates for seven years. The discount is 20 percent for the first five years, 13 percent in the sixth year, and seven percent in the seventh year. The CleanBC Industrial Electrification Rates have an energy cap of 5,000 gigawatt hours (GWh) a year for all customers, of which 1,500 GWh/year is allocated to customers under the Clean Industry and Innovation Rate and 3,500 GWh/year to customers under the Fuel Switching Rate.
Clean Industry and Innovation Rate
Under the Clean Industry and Innovation Rate, power costs are lowered for eligible industrial customers involved in: carbon sequestration from the atmosphere; hydrogen production from electrolysis (for an overview of the emerging hydrogen economy, see Hydrogen 101: Basics of Hydrogen Supply Chains); synthetic fuels production from hydrogen, carbon dioxide or biomass; or carbon capture and storage.
In addition, industrial customers setting up new data centres with over 10,000 kilovolts amperes and over 70 GWh/year of electricity demand are eligible to benefit from these lowered rates. Cryptocurrency projects are, however, ineligible, unless otherwise approved by BC Hydro.
Fuel Switching Rate
Existing and new industrial customers switching from fossil fuels to electricity to power their operations may also qualify for the discounted rates. To qualify, a customer must be able to demonstrate that their electrification will reduce greenhouse gas emissions. The discounted rate will apply only to the fuel-switching portion of their electric load.
Examples of eligible projects include: new electrification projects where new industrial customers choose to electrify their operations instead of relying on fossil fuels; and electrification of existing projects to reduce reliance on fossil fuels. In addition, industrial customers who permanently modify their equipment or expand existing projects to use electricity from BC Hydro may qualify for the discount.
However, the Fuel Switching Rate is not available to oil pipelines, oil refineries, methanol production, and natural gas liquefaction facilities. There is also a minimum energy demand requirement: the increase in electric demand from the fuel-switching must be at least 20 GWh/year.
Facilities Electrification Fund
In addition to BC Hydro’s CleanBC Industrial Electrification Rates, the Province has established a new CleanBC Facilities Electrification Fund to assist customers in reducing their costs of connecting to the electricity grid or upgrading their connections to use more electricity and reduce air pollution. The Province has allocated $84.4 million of federal green infrastructure funding from the Government of Canada’s Investing in Canada Infrastructure Program (ICIP) to establish this fund.
For qualifying industrial customers, including in the oil and gas sector, BC Hydro will provide funding up to 50 percent of eligible costs to a maximum of $15 million per project. The customer would be responsible to fund the balance of the cost, however, some of that cost may qualify for funding through other electrification incentives and programs offered by the Province and BC Hydro.
Eligible projects must satisfy the following conditions:
- switch from carbon-based fuel to use electricity;
- new connection or upgrade connection to BC Hydro's electric grid;
- support public infrastructure (customer transmission lines are eligible; however, ownership of that line must be transferred to BC Hydro upon completion);
- the interconnection work must be completed by spring 2027; and
- the amount of load switched from fossil fuels to electricity must meet the following minimum thresholds based on customer type:
- industrial customers (transmission or distribution voltage): 5 megawatts (MW) with a minimum interconnection cost of $5 million; and
- transportation or built environment customers: 2 MW with a minimum interconnection cost of $2 million.
BC Hydro will review applications on a first come, first serve basis, and funding will be available until the Facilities Electrification Fund is depleted.
The CleanBC Industrial Electrification Rates and the related CleanBC Facilities Electrification Fund offer attractive incentives for mining and other industrial operations to electrify, while also providing opportunities for clean technology companies, electric transportation projects and other clean fuel projects set up or expand in British Columbia. The announcement aligns with the government’s marketing and policy efforts to brand the province’s industries as the cleanest in the world, including through the implementation of the CleanBC Plan.
If you have questions regarding electrification of new or existing projects, please do not hesitate to contact a member of the Bennett Jones Energy, Regulatory or Capital Projects groups.