Penticton council has approved spending almost $9 million on an electrical microgrid system designed to help power Penticton Regional Hospital and other critical infrastructure during emergencies.
The project is also expected to reduce peak electricity demand and energy costs, improve community resiliency and energy security, support the city’s climate-action and greenhouse-gas reduction goals, and allow for the future integration of additional energy resources.
Council first reviewed the Electrical Microgrid project on Feb. 3 and authorized staff to advance it, provided 60 per cent of the project cost could be secured through external funding, said Draydan Power, the city’s manager of energy and environment.
The project was initially estimated to cost $9.3 million, with the city contributing a maximum of 40 per cent, or $3.7 million, from its Electrical Capital Reserve. The remaining $5.6 million was to come from grants or other external sources.
The city had received conditional approval for a grant of approximately $4.65 million, or about 50 per cent of the project cost, but was unable to secure the additional 10 per cent in external funding needed to meet the original financing plan.
The updated project is now estimated to cost approximately $8.9 million, meaning the city will contribute $4.45 million — about $750,000 more than originally anticipated.
The microgrid combines a battery energy storage system, solar photovoltaic generation, automated switching equipment and microgrid controls.
The proposed system would serve critical municipal and community infrastructure, including the City Yards, the electric utility operations centre, Penticton Regional Hospital and the new fire hall on Dawson Avenue. It would allow that portion of the electrical system to operate independently during major disruptions to the upstream power supply.
The system will include a 2.5-megawatt battery storage facility and 700 kilowatts of solar generation.
“This has been a long time coming,” Power said. “This is built upon our 2020 master plan, our 2020 generation feasibility study.”
The project’s capital costs are expected to be recovered through energy savings by approximately years 12 or 13 after installation. However, battery cells and other infrastructure will require reinvestment between years 14 and 16.
“This, unfortunately, delays our positive cash flow until around year 18, but once we hit year 18, we’re good for the rest of the asset life,” Power said.
The project is expected to provide a 252 per cent return on investment and a net present value of $3.35 million, based on a 3.8 per cent financing discount rate, he said.
Those projections are based on an assumed annual electricity rate increase of 4.8 per cent from FortisBC.
“We feel comfortable with that,” Power said. “However, it’s worth noting that we’ve seen the 2027 proposed rate increase from FortisBC of 6.42 per cent.”
If electricity rates increase by about six per cent annually, the city could recover the cost of the project through savings in approximately 12 years, compared with 18 or 19 years if annual increases remain in the four to 4.5 per cent range, Power said.
“In no way am I hoping for high FortisBC rate increases and we don’t want to see that, but if it does come to be, it does improve the business case,” he said.
The microgrid could also provide a reliable base of operations for the city during an emergency caused by a FortisBC failure, cyberattack, wildfire or severe storm.
Rather than having to establish an emergency operations centre and arrange internet or cellphone service following a major disruption, the city’s critical systems would already be operating, Power said.
“We would get to our home base and it would be up and running and we attack the problem,” he said.
The planned solar installation at the new Dawson Avenue fire hall also fits with the microgrid project, Power said.
The project is currently 50 per cent grant funded, reducing the overall cost to local taxpayers.
Mayor Julius Bloomfield said he has been interested in local electricity generation since he was first elected to council eight years ago and believes the microgrid will prove valuable.
“The difference now is … there is such an enormous demand on electrical supply and I think the demand on the supply is outstripping the supply potential,” Bloomfield said. “That’s why we’re seeing lots of applications for wind farms around the province.
“I can’t imagine the price of electricity is going to do anything but rise substantially over the next few years, so I’m very much in favour of this. I’m very much in favour of upgrading our electrical system to make sure we’re in a good position and a stable position in the future.”
Council voted overwhelmingly to approve $8.9 million for the Electrical Microgrid Project, with $4.45 million coming from the city’s Electrical Capital Reserve and the remaining $4.45 million from grant funding.
