Our analysis shows that, compared to a Fossil Energy scenario, maximizing renewables in British Columbia LNG facilities will increase regional permanent employment by 45 percent, decrease carbon pollution by 33 percent, and build the foundations of a clean energy economy in the North Coast region. Further, the more extensive the use of renewable power sources, the greater the corresponding decrease in air pollution.
Permanent Secure In-Region Jobs
An LNG plant that maximizes its use of renewables will increase regional, secure full-time employment by 45 percent compared with the other two scenarios. If the first three LNG plants come online by 2020, as the province proposes, and if all maximize their use of renewables, an additional 400 jobs will exist between Kitimat, Prince Rupert, and Terrace.
That translates into hundreds more people buying or renting homes, and supporting local shops and services such as grocery stores, bakeries, fitness centres, and more. Further, the jobs in question are high paying. According to renewable-energy industry sources, such skilled positions would likely pay between $70,000 and $120,000 per year (Personal Correspondence, Alterra).
We estimated job numbers using LNG proponent project descriptions and B.C. Hydro estimates of employment associated with energy production (B.C. Hydro 2013).
Carbon Pollution
If the Shell coalition, Chevron-Apache, and the BG Group build the initial LNG facilities outlined above using fossil energy technology as proposed, the three plants would release 12.8 megatonnes of equivalent carbon dioxide per year in operation. That would create the same annual climate-disruption impact as:
- Adding a new metropolitan area the size of Metro Vancouver to the province; or
- Adding three million more vehicles to British Columbia’s roads; or
- Building three new medium-sized (500 MW) coal plants.
In contrast, a maximum renewables scenario reduces those emissions by 33 percent—to 8.6 megatonnes of equivalent carbon dioxide per year.
The Maximum Renewables and Renewable Ready scenarios can also improve in the future as more sources of cleaner energy become available—reducing the need for combined-cycle natural gas power. As new clean energy sources become available, carbon pollution in the proposed coastal LNG industry could be reduced by an additional 50 percent as shown below.
In contrast, the Fossil Energy scenario closes the door to this future, and effectively binds proponents to a high-carbon plant configuration. Facilities equipped in this manner cannot further reduce their carbon pollution without a prohibitively expensive retrofit. The carbon pollution remaining in the Maximum Renewables and Renewables Ready scenarios cannot be reduced by using renewable energy, because it is the result of carbon dioxide in the natural gas supplied to the LNG facilities. However, this carbon dioxide could be removed from the gas and sequestered underground before it reaches the LNG facility using a process known as carbon capture and storage. We discuss this our previous report, The Cleanest LNG in the World? Other benefits of E-Drives extend beyond the scope of this document, but are worth touching on here. A recent report from SkeenaWild Conservation Trust examined the air-quality implications of three D-Drive LNG plants as currently proposed for Kitimat (Moorhouse, Knox, 2013). That report found that:
…each year they would burn a quantity of natural gas equivalent to two and a half times that burned annually in all of Metro Vancouver. Put another way, the three plants would collectively burn, in a confined airshed, 60 percent of all the natural gas already burned in the entire province every year.
Clearly, beyond their carbon reduction benefits, E-Drives offer significant ecological and public health advantages to communities that would host LNG plants.
Legacy Infrastructure
A Maximum Renewables approach would create a lasting legacy in the form of clean power production and transmission infrastructure, which would remain in the region long after LNG facilities close or become unprofitable. Our analysis finds that in the Northwest coast region, LNG Canada, Prince Rupert LNG, and Kitimat LNG would require 2,832 MW of electrical capacity which would require 2,265 MW of renewable installed capacity backed up by 2,265 MW of natural gas driven electricity capacity, 567 MW of grid capacity and upgrades to the Prince Rupert and Kitimat grids and twinning the Williston to Skeena transmission line. These projects would continue to generate revenue and employment for communities in the region. Approximately 125 out of the 203 First Nations in B.C. are involved in renewable energy projects, from ownership to revenue sharing, and enjoy multiple positive benefits including jobs, income, and capacity building (Sayers, 2013). Total royalty revenues are unclear but a recent survey of 21 clean energy projects estimated First Nations royalty revenues of $350 million over the life the projects. There are currently 130 clean energy projects in British Columbia (Kariya, 2013). By contrast, the Fossil Energy scenario would require 2,832 MW of natural gas driven electrical and mechanical capacity inside the LNG facilities. Once the plants closed or became unprofitable, little infrastructure would remain beyond natural gas pipelines, which will be of limited value in a future lower-carbon economy.
Competitiveness
In our assessment, designing a plant to maximize renewables would add two percent to the fuel’s break-even price—the minimum selling price for an LNG project to cover its costs. This increases the break-even price from $11.08 to $11.28 per Gj of LNG sold. As shown below, even if an LNG proponent was unable to access renewable energy today, the company could adopt E-Drives to prepare for such a future, while having a lower sales gas price.
Even with a two percent premium in their fuel’s selling price, British Columbia LNG projects would remain less expensive—ergo, more profitable—relative to most global competitors. The following graph shows the base costs (costs to drill, produce, process, pipeline and liquefy natural gas), shipping costs, maximum renewables premium and likely taxable income from a variety of LNG projects around the world. The Maximum Renewable scenario remains as competitive as the Fossil Energy and Renewables Ready scenarios.
Global LNG Project Price Comparison
The graph above presents a snapshot of LNG project costs as of 2013. Such costs can change continuously in response to dynamic variables, including but not limited to construction costs, labour costs, natural gas supply costs, natural gas demand, project timing, and carbon price. Some of these variables swamp the incremental increase of renewable energy. For example, a $1 per Gj change in natural gas price—which Japan experienced last year—would reduce net income and tax revenue by 20 percent based on the graph above. The renewable energy “premium” in the Maximum Renewables scenario is approximately five percent of net income and taxes. Adopting renewable energy also allows a company to continuously improve its carbon footprint by incrementally increasing renewable energy over time and so is less sensitive to carbon price increase than the fossil fuel energy scenario. Globally, wind energy prices have decreased over the last decade, decreases that are expected to continue in the future. LNG operations with E-Drives can take advantage of those falling costs.
