British Columbia’s Electricity Supply and Demand Outlook

2012 Power of Water Conference 23 October 2012

Presentation Overview

 Midgard Introduction  Key Messages  Part 1 – BC Supply and Demand for Electricity  Part 2 – BC Capacity: Supply and Demand  Conclusions

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Midgard Consulting Inc. • Employee owned engineering consulting firm that focuses on the energy & utility sector in Canada and the United States

Major Clients

• Over 100 years of senior experience: → Energy & resource planning → Transmission & system planning → Project permitting & design → Negotiations & stakeholder relations → Project management → Due diligence, deal structuring & financing → Construction → Hydroelectric facilities operations 2

Key Messages For Today • BC Hydro Planning and Policies are being re-oriented  Previously (Campbell): Green and Build Energy Surplus  Under Clark: Clean and LNG enabling • BC Hydro will need to decide how to serve new Liquefied Natural Gas (LNG) and other infrastructure loads:  When to build generation & transmission  What type of generation & transmission to build  Who will build generation & where

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PART 1 – BC ELECTRICITY SUPPLY AND DEMAND

Supply and Demand – Highlights • BC Hydro Planning and Policies are being re-oriented  Previously (Campbell): Green and Build Energy Surplus  Under Clark: Clean and LNG enabling • Electricity demand set to soar with major resource infrastructure investments in northern BC • Supply decisions loom for BC Hydro and BC Government  Supply decisions will dominate policy making

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BC Major Infrastructure Developments Transmission (in progress)

expansion)

Mining Development • • • •

Horn

Red Chris Galore Creek Kerr Sulphurets Mitchell Kitsault

Montney Shale Area Horn River Shale Area Cordova Embayment

Cordova

Montney

Natural Gas Extraction • • •

Gas Pipeline (current) Gas Pipeline (future

Kitimat

LNG Export (Kitimat & Prince Rupert) •Shell •Kitimat LNG •Apache/EOG/Encana •BG Group/Spectra •Petronas/Progress

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BC Supply and Demand (with DSM): 2012-2032

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BC Supply and Demand (w/o DSM): 2012-2032

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BC Load Growth: 2012-2032

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Supply/Demand Observations

❶

Load may be significantly higher than recent forecasts

❷

Load growth dwarfs other government policy issues

❸

Stepped nature of load growth puts BC Hydro in a bind

❹

Reclassification of Natural Gas as “Clean” energy source for LNG loads supports BCH flexibility

Non-Firm energy closes portions of the supply / demand gap

e.g. DSM, Self-Sufficiency, Demand / Supply Accounting

How much to build, who should build, and when

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PART 2 – BC CAPACITY: SUPPLY AND DEMAND

BC Hydro Capacity – Highlights • BC Hydro telegraphing growing operational flexibility constraints  Mica 5&6, Revelstoke 6, Resource Smart • BC Hydro has stipulated that it will rely on the market for short term peak capacity resources (then Columbia Treaty & Burrard) • Deciphering BC Hydro’s actual capacity position is complicated • Energy supply decisions will either hinder or complement BC Hydro operational flexibility 12

BC Capacity Supply & Demand: 2012-2032 25,000

Capacity Supply and Demand (MW)

20,000

Pumped Storage Site C Revelstoke 6 New Clean Call Supply Available to BC Hydro Base Demand Base Demand with DSM Base + LNG + Mine + NE Base + LNG + Mine + NE with DSM

15,000

10,000

5,000

0

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Capacity Observations Supply Decisions will Impact Capacity Supply ❶ Energy Intermittent generation resources supply relatively little capacity Natural gas generation resources supply large quantities of capacity

Hydro studying Pumped Storage ❷ BC Arrangement with a third party Gas Generation a rich source of capacity ❸ Natural Preserves / Unlocks capacity in existing hydroelectric assets expansion is an Alternative Capacity Supply ❹ Transmission Solution 14

CONCLUSIONS

What is Next for BC? • Demand Issues: LNG ++ • Stepped decision – what to build and when • Mining & Northeast Oil & Gas depend on expanded transmission • Supply Issues: • Natural Gas Generation (limited to LNG supply & social contract questions) • ‘Green’ IPP Call (≈2000 GWh by 2018 in draft IRP) • Site ‘C’ • Pumped Storage 16

APPENDICES

Recent Government Policy POLICY

TIMING

HIGHLIGHTS

BC Energy Plan

Q1 2007

• • •

Carbon Tax Act

Q2 2008

• •

Cap and Trade Act

IMPLICATION

Zero greenhouse emissions by all new thermal plants 50% DSM target Self-sufficiency by 2016

•

Hindrance to CCGTs in BC

Tax on Carbon emissions $30/tonne as of July 1, 2012

•

Hindrance to CCGTs in BC

•

Hindrance to CCGTs in BC

• Reporting of emissions Q2 2008 • Offsets regulations (being proposed) • Tied into Western Climate Initiative (WCI)

Clean Energy Act

Q1 2010

LNG & Natural Gas: Strategies

Q1 2012

Clarity on BC Hydro supply / demand planning

Q1 2012

Redefine “Clean Energy” for LNG Plants

Q2 2012

• • • •

Energy self-sufficiency by 2016 + insurance 93% Clean/Green energy 66% DSM target Site C & major BC Hydro investment not subject to BCUC review

• •

3 LNG export terminals by 2020 Support for the natural gas extraction industry

•

Long term planning based upon average water year and not critical water year No requirement for 3000 GWh ‘insurance’

• • •

Pro-natural gas agenda expected to get non-partisan party support • Large new electricity demand •

Natural gas fired generation for northern BC LNG plants classified as “Clean Energy“ sources Other natural gas generation remains not Clean Energy

•

Current policy supports future IPP Calls, but “accounting” changes reduce near term electricity need

•

Promotes CCGTs in NW BC dedicated to LNG loads 18

LNG – The Major Demand Driver Project Proposal

BC LNG Export Cooperative • •

Haisla First Nation / LNG Partners LLC Phase 2 Option: Export Licenses 1.8 mtpa

LNG Capacity (mtpa)

Load (MW)

Energy (GWh / yr)

Timing

0.4

42

350

2015

Kitimat LNG • • •

Environmental Permits: Electric Drive Apache / EOG / Encana Phase 2 Option: Double Capacity

LNG Canada • •

Shell / Mitsubishi / Korea Gas / Petro China 2 Phase of 2 trains @ 400 MW/train

5

550

4,600

2016

Phase 1: 6 Phase 2: 6 Total: 12

P1: 800 P2: 800 Ttl: 1,600

P1: 6,700 P2: 6,700 Ttl: 13,400

P1: 2020 P2: 2026

9+

1000+

8,300+

TBD (2022+)

21+

1,600 2,600+

13,400 21,700+

“Next” LNG • • •

Progress / Petronas (2 Trains) BG Group / Spectra Approximately 5-8 Additional Proponents

Pending Total

BC Hydro Demand Status

Included in Current Plans

Inclusion Pending

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Is the Demand Forecast Realistic? Demand / Load Adjustments LNG •

BC load in Northern BC, expected to grow materially due to new LNG terminals

Oil and Gas •Load expected to grow in Northeast BC for Natural Gas extraction (700-800MW)

Mining •Estimated mine load growth is 300-400 MW (limited by NTL capacity)

DSM •BC Hydro has aggressive 66% DSM target that will be difficult to achieve •DSM may underperform with a maximum effectiveness of 25%

2026 Difference +12,800 - 25,600 GWh

+4,200 GWh

+2,000 GWh

+0 - 7,000 GWh

+19,000 – 38,800 GWh

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An Overview of Waterpower Challenges and Opportunities in Canada

Power of Water 2012 Niagara Falls, ON October 2012

Creation of Brookfield Renewable Energy Partners

Brookfield

•

One of the largest privately owned hydro portfolios

•

100 years of experience in power generation sector

•

Operations in the U.S. and Brazil

•

One of Canada’s most successful power income funds

•

Track record of growing cash distributions since 1999

•

Operations in Canada and the northeastern U.S.

•

Global, publicly-listed renewable power company

•

Predominantly hydro portfolio unique among peers

•

Listed on the Toronto Stock Exchange; New York Stock Exchange listing expected 2012

+ Brookfield Renewable Power Fund = Brookfield Renewable Energy Partners

One of the world’s largest listed “pure-play” renewable power businesses, well positioned to grow on a global basis

$14B RENEWABLE POWER ASSETS

5,000

86%

MEGAWATTS OF OPERATING HYDROELECTRIC GENERATION CAPACITY

A leading owner, operator and developer of high quality renewable power assets

180 power facilities 1,200 employees in 3 countries 10 markets in North and South America 2,000 MW in development pipeline Facilities on 67 river systems

Ontario Policy Highlights  North America’s largest GHG-reduction project – closing >9000MW of coal-fired generation capacity  Ontario Green Energy Act came into effect May 2009, and included several broad elements: –

Measures aimed at creating a “culture of conservation” and a “green economy”

–

Streamlining of permitting process (Renewable Energy Approval)

–

Procurement under comprehensive Feed-in-Tariff (FIT) program

–

Included framework for new transmission investment

 FIT v1.0 Program: –

Basic eligibility: • New facilities, located in the Province of Ontario • Renewable fuels (water