By Tom Hackney and Bill Andrews

6 December 2024

BCSEA is intervening in a BCUC proceeding that will impact the fate of the already-approved but not-yet-completed Decarbonization Project for the downtown Vancouver district energy system.

The Decarbonization Project will see new electric boilers producing steam with power from BC Hydro. When in service, the Decarbonization Project would significantly reduce GHG emissions (see Decarbonizing Downtown Vancouver, 20 May 2022 in Policy Corner). While electricity would replace natural gas as the primary fuel source, natural gas boilers would still be in place for backup and peak capacity. Development of the Decarbonization Project is well underway. But there is trouble in paradise.

The plan had been to connect the steam from the new electric boilers to a “New Plant” that would have replaced the existing steam plant by the time the Decarbonization Project was constructed, and from there the steam from the Decarbonization Project would be sent out through the distribution pipes to the customers. The problem is with the financing for the New Plant Premises (a crucial component of the New Plant, obviously).

Financing for the New Plant Premises is part of a complicated deal between Creative Energy and development company Westbank Projects Corp. (aka “the Developer”). The deal involves the sale of surplus land owned by the utility to the Developer, the Developer building a commercial office tower building, and – crucially for present purposes – the Developer constructing the New Plant Premises at its expense. The Developer obtained initial financing. As we understand it, the deal was lurching forward when the COVID pandemic killed the market for new office space, ruining Developer’s office tower concept, and preventing the Developer from getting new financing until after a time-consuming revamp of the development project. Meanwhile, the Developer had 80% finished constructing the New Plant Premises using the initial financing. Among many other issues between the utility and the Developer, two problems impact the Decarbonization Project: (a) Who would cover the $31-million shortfall for construction of the rest of the New Plant Premises (as the Developer is/has run out of funds)? (b) Who would cover the unanticipated cost of $7.5-million for connecting the Decarbonization Plant (assuming it is completed) to the existing Plant temporarily until the New Plant Premises are completed (assuming they are)? See the problem?

From our perspective, the utility and the Developer are now locked together in typical pre-litigation stage in which each large corporate entity needs the other to successfully achieve something different than the original concept (i.e., win-win), but at the same time each entity is jockeying to improve its future legal position if the mess goes to court (win-lose, or lose-lose).

In this fraught context, Creative Energy is asking the BCUC to approve spending $38.5-million to keep the Decarbonization Project on track. Some $31-million would be for Creative Energy to pay to complete the construction of the New Plant Premises and $7.5 million would be for Creative Energy to interconnect the Decarbonization Project to the existing plant to get low-carbon steam into the distribution system as soon as possible. The basic alternative would be to delay completion and implementation of the Decarbonization Project for at least a couple of years if not more, during which time there would be no zero-carbon benefits.

BCSEA strongly supported the Decarbonization Project in the BCUC’s initial proceeding and still supports it as an important step toward decarbonizing the energy use of buildings in downtown Vancouver, in line with the City’s climate action plans. BCSEA intends to support the emergency funding in its final written argument due in mid-December.