As it embarks on a new term, the B.C. government has some important decisions that will determine the province’s economic future. A new report on liquefied natural gas markets flags risks to inform those decisions.
B.C. has a big advantage: Its ability to generate lots of affordable clean electricity. If put to the right use, B.C.’s electricity grid could make the province an appealing investment destination in a low-carbon world. In neighbouring Alberta, for example, companies can enter into power purchase agreements directly with renewable energy producers. As the province witnessed in recent years, if you can guarantee access to emissions-free electricity, the Amazons and Microsofts of the world will bring jobs and investment to your province.
Not only that, but low-cost clean electricity will be the route to making many aspects of British Columbians’ lives better, by lowering their home energy bills with heat pumps that provide both heating and cooling, for example, and giving them more access to electrified transportation that is cheaper to run and results in cleaner, healthier neighbourhoods.
So, B.C.’s large (but nevertheless finite) supply of existing and potential clean electricity must be treated as a precious resource, its use prioritized in a way that gives the best net benefit to the province and to British Columbians.
This brings us to the issue of LNG expansion.
Right now, three LNG projects in B.C. are either moving through the government approval process or awaiting final investment decisions. An important consideration for the projects’ investors will be whether the provincial government agrees to cover the cost of hooking the terminals up to the grid and supplying them with clean electricity, so that the highly emissions-intensive process of turning natural gas into liquid for export via sea can be made net-zero, which is a requirement in B.C.
A Pembina Institute analysis found that, if all those projects are built and electrified, in addition to those already under construction, B.C. would need the equivalent of almost eight-and-a-half Site C hydroelectric dams to power just its LNG terminals and associated upstream gas production.
While further expanding its clean grid is something we think the province should certainly be concentrating on, before LNG projects are given priority access to publicly funded clean electricity, we urge the government to take an objective look at the likely return on investment.
Carbon Tracker, an international financial think tank that specializes in the impacts of the energy transition on capital markets, finds that B.C. is late to the LNG export game — one where well-established and less-expensive operations are likely to dominate. Projects in Qatar, the United Arab Emirates, the U.S. and Mozambique have the potential to supply an unprecedented volume of LNG over the next three decades at lower cost than B.C. Take Qatar: its unit cost of production is almost 80 per cent lower than B.C.’s.
Industry proponents point to increasing LNG demand, especially in Asia. But these bullish scenarios assume the global shift toward clean energy will stall, when the latest and best evidence suggests it continues to gain momentum each year. From 2022 to 2024, global solar capacity doubled — to two trillion watts of electric power. By contrast, it took 68 years for the world to install the first trillion watts. This rapid increase of renewable power will erode the need for natural gas in many countries’ grids.
In other words, instead of having customers clamouring for their products, B.C. LNG producers are likely to find that the global market is oversupplied by the end of this decade, as a glut of new, lower-cost production comes online in other countries, and global demand plateaus.
If private-sector proponents wish to bear these risks, they can. But the provincial government should focus on expanding the clean grid in a way that lowers the energy bills of British Columbians and creates an attractive investment environment for net-zero-aligned industries that are showing much more promising growth over the long term. Otherwise, British Columbians may soon begin to wonder why the government is prioritizing the interests of big oil and gas companies over everyday people. The prospects for the LNG sector’s long-term viability are uncertain. Instead, to achieve the type of sustainable prosperity that British Columbians deserve, the government should think hard about other opportunities to put its clean electricity advantage to the best use.
Janetta McKenzie is manager of the Pembina Institute’s oil and gas program; Thomas Green is senior climate policy adviser at the David Suzuki Foundation.
