Energy projects in B.C., particularly ‘green ones,’ could benefit from the economic crisis that is spreading across the globe, says Steve Davis.
Davis, president of the Independent Power Producers Association of B.C., said there’s no doubt the economic uncertainty resulting from the ongoing credit crisis could negatively impact power projects that are trying to line up financing or are in the process of closing financing deals.
But he said while most industries are prone to be less attractive to investment while a recession looms, during times of economic uncertainty, energy infrastructure is considered by many investors to be a “safe haven.”
“B.C. Hydro has reported that while energy demands have flattened out in the province from time to time during some hard times, it has never gone in the negative direction,” Davis said.
Davis said green projects, such as wind and solar power generation, are especially attractive to investors now that the price of fossil fuels is high and general interest rates are low.
“In the 1990s, interest rates were higher than today which made capital intensive projects (like green energy projects that require lots of land and infrastructure) less attractive,” he said. “With 70% of the expenses of electrical generation using non-renewable sources going to pay for the gas, the cheaper gas prices of the 1990s helped attract investment.”
But Davis said today’s reality of high gas prices and lower interest rates favours investment in green energy projects.
And he said it would be a mistake to stop building new electrical generation projects, either green or not, at this time in B.C.
He said most of the new generation that is being built in the province is not to meet forecasted new growth, but to play “catchup” from the past.
“No new large power projects have been built in B.C. for 24 years and one in eight houses is running on imported power,” he said. “That’s not good economic policy and, because most imports are from fossil-fueled plants, it’s terrible environmental policy as well.”
© The Daily News (Nanaimo) 2008