Mr. Chairman, members of the committee, thank you for the invitation to come to speak to you this afternoon. It's certainly a pleasure to do so.
Let me start by giving you a thumbnail sketch of my background. I'm a chemist and chemical engineer with too many degrees, who has had a pretty varied career in the venture capital industry as an entrepreneur. I've run a number of technology companies, both in Canada and in the U.S. I spent three years in Ottawa fairly recently as vice-president of technology and industry support for the National Research Council and then as acting president of the National Research Council. I left that and I'm now back running EnergyINet. I can describe a little more about EnergyINet, but one of the themes that's always gone through my career has been one of technology development, innovation, and of course the commercial sides of that through the venture capital industry experience I had as well.
I'm sure you've guessed from my accent that I wasn't born here, but it might be interesting to note that I am a Canadian citizen. I've also spent five years in the U.S. and over two years in China. I'm leaving in two weeks' time for my fiftieth visit to China, and my wife was born there. If you have any questions on China and oil and heavy oil in China, I'd be delighted to address some of those.
Let me talk briefly about EnergyINet, a not-for-profit organization funded by many of the provincial governments, the federal government, particularly supported by NRCan and Environment Canada, and about 25 of the major energy industry companies across Canada.
When I say energy industry companies, that's a very important distinction in the sense that these are not just oil and gas. We have members from the oil and gas community, including such companies as EnCana and Shell and so on, but we also have members in the oil sands, Syncrude and Suncor. Also, we have members from B.C. Hydro, Nova Scotia Power, which are respectively hydro, then an electric power generating company based on coal. We also have Luscar, Canada's biggest coal company, as a member. We also have users of energy as well in the form of Agrium, one of the largest fertilizer companies in the country, and NOVA Chemicals, one of the largest petrochemical companies in the country. We draw our membership from a very wide range of both government and industry contacts, which gives us an unusual breadth and perspective.
I want to make it very clear from the outset that our mandate is technology and the development and acceleration of appropriate technologies in the energy industry. We are absolutely technology agnostic. You will never see me in this town lobbying on behalf of any company, or any company position, or any industry position, as I and EnergyINet will only talk to you about technology and what it can do and what it can't do. I hope we are able to offer a very objective view of technology to present issues that are in the public good.
Before I start the presentation itself, I would like to apologize to the members of the Bloc because part of my presentation is not adequately translated into French. Part of that was due to the fact that some of my slides draw on a PDF format and stuff that's been screened and scanned from other sources, and it was impossible to overwrite that in English. My apologies in advance for that, but I hope you'll be able to follow the content of what I'm about to say.
I understand this committee is particularly interested in oil sands and what it can do and some of the challenges that confront it. I want to start by putting the oil sands in a global context. One of the roles of EnergyINet is not only as a national organization truly across the country, but indeed with strong international linkages. We have over 200 partners worldwide who can provide us with information on what's going on in the energy industry. Again, I emphasize energy industry as opposed to oil industry throughout the world.
Today we're here to talk about oil sands. As I've said, I want to put this in the context of the energy industry in a global sense to start with.
On the first slide you'll see I've presented numbers, which I'm sure you've seen before, addressing the fact that the world will continue to increase its energy demand. Whatever we do about conservation and efficiency, we will not in any way in the next 50 to 100 years make a significant impact on the fact that energy demand will increase.
Now, that's not necessarily a Canadian phenomenon; it is driven in significant measure by developing countries throughout the world, particularly the Chinas and Indias of this world. For example, China puts on a 500-megawatt, coal-fired power plant—with uncontrolled emissions, I might add—every two weeks. You can't fault them for their demand for energy. We enjoy energy, and energy has given us the ability to have the rich society we have today and the social benefits we derive from it. So other countries want their energy supply as well.
Energy demand will continue to increase, and indeed energy will be required for many of the environmental processes we put in place and other things that can help develop underdeveloped countries. For example, desalination requires large quantities of energy. Even environmental measures to alleviate such things as greenhouse gases and so on require large quantities of energy. We must not muddle the facts thinking that energy equals something bad. In fact, energy is a key to solving many of the environmental, social, and economic problems we have in this world today.
On the second slide I indicate that the world actually has plenty of energy reserves, and again you may have seen something like this before. At the top you see the world annual consumption and underneath you see the world's reserves of various different types of energy. As you can see, there is no danger that the world will run out of energy reserves in the near future.
But if you turn to the next slide, there's a bit more of a bad news story. While the world has sufficient energy resources for several hundred years and perhaps indefinitely, the location of those supplies doesn't match the consuming areas, and the extraction technologies that we use today are a major issue, in terms of some of their environmental impacts.
The second point I'd like to emphasize here is that there is no magic-bullet solution to the energy issues we face in the world today. We will need every ounce of conservation we can muster. Every conservation plan has terrific merit, but we will also need every energy source we can muster too. That includes everything from hydro and renewables—wind, solar, and so on—through to fossil fuels and the oil sands, included as part of fossil fuels.
Real energy sustainability is not just about the adequacy of our energy resources; it's also about how we exploit them to make certain we don't damage the planet, damage our environment too much—in fact, at all—in the extraction of those energy resources. The fact is that given the scale by which we produce and use energy in the world today and the infrastructure we have in place, carbon energy sources, fossil fuels, will supply most of the world's energy for the foreseeable future, and by that I mean the next 50 to 100 years.
Now, it will be a transition period, and indeed we need to accelerate renewable energy sources. Those technologies are coming on stream, but even some of the most optimistic projections suggest that they will comprise no more than about 20% of the world's energy supply in 2050.
I'll make some comments a little later in relation to the scale of the oil sands and the amount of renewable energy by way of wind power, for example, that you would need to replace that.
What we need to focus on in particular is the integration of energy supply, of infrastructure. We have many pipes and wires running around the country, so new sources of energy and new locations are great. But how do we get them to the users who want to be able to pump gas in their cars, even if they're doing 50 miles to the gallon, and to their homes for heating, and so on? For the most part, during this next 50- to 100- to 200-year transition period, we must use the infrastructure that already exists.
Building new transmission lines is something that certainly raises concerns in many parts of the world, including in this country.
Even putting in a wind farm in Georgian Bay isn't going to solve Mr. McGuinty's problem of replacing Nanticoke outside Toronto.
We need an energy systems approach. We must not look at things on a piecemeal basis. Oil and gas, coal, nuclear, and electricity have previously been looked at in silos. Part of the responsibility of EnergyINet is to look horizontally across these forms of energy and see how they can be linked into an energy system. Integration goes far beyond energy alone. We must look at how energy integrates into our economy and society.
So we have two scenarios confronting us. On the one hand, we can do business as usual. It's inevitable that we'll see increasing geopolitical tension because of disputes surrounding our oil supply. We see the Chinese, for example, getting very friendly with Sudan, Iran, and Venezuela, because they were unable to secure oil post-Unocal from some sources. We'll see supply disruptions. We'll see deteriorating environmental and climate change issues. And we'll see a very marked increase in market and price instability. I'm not saying it's going up or down, only that it will be unstable. This is if we continue business as usual.
On the other hand, however, we can enter an era of responsible and reliable energy supply. All we need to do is focus on the responsible development of conventional energy resources, with particular emphasis on our lower carbon footprint and reduced collateral resource requirements. By this I mean water and other things necessary to produce energy. We should accelerate the development of unconventionals and alternate sources of energy, including renewables, while emphasizing technology development and deployment. We also need a responsive regulatory environment and, equally important, a more certain and stable business environment, so that the private sector can make and deploy the technology necessary to obtain environmentally benign forms of energy production and usage.
There is a report by some university professors out of Princeton that says we have today all the technology necessary to produce environmentally clean energy. We simply don't have the environment required to encourage the private sector to invest in it.
So my next point is that energy usage per se, energy intensity, is not bad. I'll give you a straight set of numbers on this. If we took every joule of energy produced in the world and converted it to heat—and the thermodynamic principle says that most of it ends up as heat—we would not raise the temperature of this planet more than about a quarter of a degree. It is the by-products of energy production and usage that cause the environmental problems.
Allow me to repeat that, because it is a critically important point. Energy usage and energy intensity per se are not a problem. In fact, they are required. We will not advance as a society or solve our environmental problems without large quantities of additional energy. Moreover, the use and production of this additional energy will not cause global warming. It is the by-products of energy consumption and use that cause the problem.
So if I can produce electricity from coal and capture all the mercury, SOx, NOx, and GHGs, I have clean electric energy that is not going to raise the temperature of this planet. It is the by-products of coal combustion that cause the environmental issues that are beginning to become of increasing concern in the world today.
Have I made myself clear? It's a very important point.
I would argue that Canada has a need, an opportunity, and even a global responsibility to develop more energy in environmentally sensitive ways.
Some of you may be aware that my organization leads a bit of an initiative. I'm glad to see that the Prime Minister and the Minister of Natural Resources are now referring to Canada as an energy superpower, because we truly can be one. That's not the belligerent form of a superpower. It is a responsible world leader showing that we can extract, process, and use energy in an environmentally responsible manner. By transferring that technology to countries operating in an uncontrolled manner, we can do a lot more for GHGs than we can by just using the technology at home. We have a huge export opportunity if we develop the right technologies.
Why does Canada have this responsibility, as I put it, and this opportunity?
If you look at the next page, I have listed most--but even there I notice that I'm missing at least one--forms of energy reserves that Canada has, from conventional oil right down to biomass. The one I'm referring to that I'm missing is geothermal, and it certainly should be part of that list.
If there were Russians in this room, they might disagree with the statement on the right that Canada has more energy resources than any other country in the world, but our analysis to date says that Canada has the world's richest reserves of all forms of energy combined. And that is a huge natural heritage that we have an obligation to the rest of the world to develop in a responsible manner.
Just to give you some idea of the scale, I've tried to put these all in a consistent unit. You'll often hear about barrels of oil, standard cubic feet or cubic metres of gas, gigawatts of electricity, and tonnes of uranium. How do you convert all these into a single energy form so you can see the relative magnitudes of them? I've at least given you some examples here.
You can see now, as we move towards a discussion of oil sands, that oil sands, frankly, dwarf conventional oil, gas, and even coal, combined, in terms of the recoverable potential of energy. Just to give you an idea of the measure of the units I'm giving there, they're in exajoules, and an exajoule is equivalent to about 160 million barrels of oil or the energy produced by fourteen Pickering-sized nuclear power plants every year.
So in terms of energy priorities, then, we need to recognize that we will have to rely on fossil fuels to supply most of the world's energy for the next 50 to 100 years, and I'd be pleased to justify that statement time after time after time. But we must rapidly accelerate the development and deployment of environmentally responsible technologies for the use of those fossil fuels. There is no question about that.
I think Alberta argues strongly that we should explore and introduce value-added fossil fuel and energy technologies. I think that applies to the rest of the country too. The more value we can add to exports of energy, whether that be electricity, gas, oil, or even wood in some form, the more jobs and the more economic value we can create in Canada.
At the same time, as I mentioned before, we are entering a period of transition, and we need to rapidly accelerate the development and deployment of alternate and renewable sources. But it is not a trivial problem to integrate them into conventional energy systems, and by that I mean distribution systems. Here I'm talking about the fact that wind energy.... As I think I mentioned before, you could put a wind energy farm on the Bruce Peninsula, but how are you going to get it to Toronto? There aren't transmission lines to get it there. And by the way, as you well know, the wind blows intermittently. So how are you going to load-level the intermittent supply of energy from the wind?
A perfect example of that is Quebec and how Hydro-Québec is now doing some work to combine hydro and wind, which are a beautiful combination and can work extremely well together. Wind and coal-fired electricity don't work very well together, because you get to the problem of, “Hey, George, the wind is blowing hard, so shovel some coal out of the boiler”, and then, “Hey George, the wind's dropping, so shovel coal into the boiler”. The response time of a coal-fired energy power plant just doesn't work that way.
People will cite Denmark to me, time and time again, as a country that has done great things with wind energy. I will answer questions on that later if you like, but it has actually done a lousy job, and it has very narrow-minded policies. What that has resulted in is higher electricity costs and a minimal reduction in GHG emissions, because they're still having to spin the turbines on their coal-fired plants. So we need to think, as I mentioned earlier, about integration as being critically important.
We do need to encourage the wise and responsible use of energy. That argues for energy efficiency, and we certainly need to do everything we can. But that will not solve energy problems by any stretch of the imagination. Indeed, there's a commonly known phenomenon called the rebound effect, which means that the more you introduce energy-saving products, the more people actually use more of those products.
I will put it to you as individuals. I'll ask how many televisions you had in your house in the 1950s when they were first coming in. I can remember--it wasn't mine, it was my parents--that we had one in 1957, and it was an energy hog. Today I should probably apologize for the fact that I have five TVs in my house. They are five times more energy efficient. It means that I'm still using the same amount of electricity overall in my house.
How many of you have multiple fridges: a beer fridge in the basement, a freezer, a two-door fridge in the kitchen?
And one of the fascinating ones of efficient lighting in London now means that a lot more of London is lit than it was before, simply because they have efficient lighting, so they can light up more of London. So it doesn't result automatically in reduced consumption of energy.
But now let's come to the oil sands, because I realize I've taken ten minutes already and I want to address the issue of why oil sands and why the scale.
First, all sources of energy are not equivalent. We need liquid hydrocarbon fuels. Aircraft won't fly on anything other than kerosene. I met with Boeing about three weeks ago and they were telling me that maybe by 2050, they may have some alternate engines, but it's very unlikely they will be commercial. So we need kerosene. You can get kerosene from coal. It's very expensive, but it will come from fossil fuels. You can't get kerosene from uranium. You must use fossil fuels to get that.
So again, my argument is that we're in a transition period, and for a long time we will be relying on fossil fuels.
The oil sands produce liquid hydrocarbons. It is also the most economical way to provide large supplies of energy in Canada. We're already producing a million barrels a day in the oil sands, and there's the potential to produce a lot more.
In western Canada's sedimentary basin, we are seeing an increasing decline in our conventional oil production, and our ability as an oil exporter is dropping. Therefore, the oil sands balance this off, offset this, and they will maintain our export revenues coming from oil and make certain that our own security of oil supply is maintained.
There's no question that the development of the oil sands provides jobs, opportunities, the export revenues that I've mentioned, and indeed economic stimulus across the country. Yes, it's greater in Alberta than anywhere else, but it hasn't always resulted in a good thing. I can't even get a fast food meal in Calgary now at 10 o'clock at night because nobody wants to work at 10 o'clock at night. There are “help wanted” signs out everywhere. So too much economic stimulus isn't always good.
One other issue that I'd really like to address here is to try to impress on you the scale of oil sands development as it exists already. In the bottom bullet of the slide titled, “But Why Oil Sands, and Why the Scale?”, you'll see it is because we simply can't supply our energy requirements now and into the future 50 years any other way.
I've given you some examples of substitution. For a million barrels a day of oil, which is the current production of bitumen out of the oil sands, it would be equivalent to 85 gigawatts of electric-generating capacity running at 100%. That's 75% of the total installed electric-generating capacity in the whole of this country. That's equivalent to 20,000 wind turbines, which is one and a quarter times the world's total installed capacity of wind energy. And if you look at wind turbine delivery lists, there's a four- to five-year backlog with most of the manufacturers of wind turbines, so it will be five years on a current scale of all the production of all the wind turbines in the world just to replace the oil sands. We couldn't even get on that list for probably four to five years, and there's no way we could be assured of every single turbine produced by every single manufacturer in the world for the next five years after that.
So the practicality of replacing a million barrels a day of oil sands production with alternate sources of energy--I can do the same calculations for other alternates or other fuels--is just not there. We need those fuels, and the oil sands is really the only place they can come from in the foreseeable future.
In doing so--many of you have seen, I'm sure, the next slide--we will bolt from number eight to number four in terms of oil production or as energy producers in the world. Indeed, if you look at energy reserves by country, we are now number two, and some will argue we're number one, because as technology improves, the recoverable percentage of the bitumen in place in the oil sands increases such that many in the business will argue today that the recoverable oil in the oil sands now totals about 320 billion barrels, which would actually exceed all of that supposedly--and I say supposedly--in place in Saudi Arabia. Please do read Matt Simmons' Twilight in the Desert for a little bit of a scary ride on whether that oil is in fact really there in Saudi Arabia.
The next slide shows you very clearly the history and the decline from today on of western Canada conventional oil; the contribution from offshore, which will remain relatively constant over the next twenty years or so; and the contribution the oil sands will make as currently regulated and planned in the growth of projects that have been announced and so on.
Clearly there is some variability--and I am not an expert in forecasting production--but it is obviously going to climb enormously.
The next slide, I think, though, is a critically important one here. I have argued--and I think you have heard me argue--strongly for the fact that there really are no other alternatives. Indeed we have a responsibility to develop the oil sands in an environmentally responsible manner, but there are challenges that come along with doing that, and many of those are environmental. I've listed some of those on the next slide, which talks about strip mining and land use. I would say that it's something that over a 20- to 50-year period is remediable, and in fact I'm sure you've all seen pictures of buffalo grazing back on some land that GCOS first started developing originally.
I think that's something we shouldn't worry about too much, but it's something we need to insist be done.
Water usage is a significant problem. Right now it takes anywhere from two to five barrels of water for every barrel of bitumen that's extracted, synthetic crude that's produced. We have large tailing ponds, which don't seem to settle as well as they should.
The Athabasca River has finite quantities of water, and although Canada is blessed with huge resources, unfortunately they are not always in the right place at the right time. So water will be a challenge.
The use of natural gas as a fuel in the oil sands is, frankly--and I'm sure I'm not the first person to say this--like turning gold back into lead. We have a relatively clean fuel in methane that's being used as a fuel source to extract relatively low-grade bitumens and synthetic crudes. The reason for its use is purely historical. That gas was stranded gas up there in Fort McMurray forty years ago. It made complete sense to use it. We did not know about the implications for global warming and so on, and it made complete sense to use natural gas.
But today we have to find replacements for natural gas because there simply won't be enough of it to build the oil sands to the level of three million to five million barrels a day that we're seeing projected.
GHG emissions are also, of course, a significant concern. We need to make certain that we triage fossil fuels in general and oil sands as well, as part of that in terms of their GHG emissions over time.
Infrastructure requirements, workforce availability, access to market costs--I'm not going to address those particularly today, but suffice it to say that it does tax the infrastructure in other ways, and so on. Labour is certainly in acute shortage in Alberta, and it drives up costs, and so on. So we need to set a solid platform under which oil sands development can go forward.
Research and development are aimed at developing those oil sands in an environmentally responsible way and at reducing costs. Indeed, technological innovation can unlock vast quantities of energy supplies.
Just completely apart from the topic of oil sands, the next slide shows how technology alone contributed to the tripling of an oil reserve in the North Sea. It was first discovered in 1986. The area under that curve shows you the amount of proven reserves with the technology existing in 1986.
Over the next decade, the next slice was produced by developments in technology, through which that much additional oil was able to be recovered. A further five years of R and D and technology development allowed the amount of the third slice of reserves to be unleashed from the same field.
Let's turn back to the oil sands. Hopefully, I am convincing you that technology can address many of these problems if it's pushed in the right way. Indeed, potential sources of fuel and hydrogen for the oil sands are very desperately needed so we can use them instead of using natural gas. We have work under way now, anywhere between pilot plant and at semi-commercial scale, to gasify petroleum coke that's produced up there, which will produce syngas, hydrogen, and heat.
You can also use bitumen residues such as the asphaltenes, the very bottom of the barrel that have the lowest value. You can gasify raw bitumen.
We could take coal up there and gasify it, or we could even gasify biomass, at least, possibly, some pine beetle logs in combination with some of those other feedstocks. In fact, biomass has been shown to have some benefit in co-gasification with some of the others.
A study that my own organization is doing right now is actually looking at all these different alternative sources of fuel and trying to, from an engineering and economic point of view, provide the private sector with some of the right answers for replacing natural gas as a source of fuel and hydrogen. Nuclear is an option.
In fact, I just returned from visiting, on Monday and Tuesday of this week, the advanced nuclear reactor in Idaho. It is part of the DOE...800 square miles of territory where I think I was just about stripped naked before I was allowed on there. There is some fascinating work going on there, which we are beginning to participate in, where nuclear could be a very exciting source of heat to process oil sands, coal, and others. It can be used to upgrade coal to liquids and gases and so on. Geothermal is another potential source as well.
On the next page we can see that we do have an issue with GHG emissions, but the industry is working hard to address these, in the sense that you can see that the solid line shows you that emissions per barrel are decreasing over time, but because of the increasing production, we're seeing the total emissions increase over time. We must look to ways to minimize and reduce GHG emissions. Indeed, that's being done through new technologies that are being tested in the oil sands as we speak.
I apologize that these graphs may not appear terribly clear, but I'll just very quickly mention that the THAI process uses no water to speak of at all. In fact it uses underground combustion, driven initially ignited by fuel gas and then driven by air to improve the viscosity of the oil sands and to allow it to be collected in a pipe sitting underneath and pumped to the surface.
Below that is an example of how asphaltenes--this is the very bottom of the bitumen barrel in the oil sands--can be treated essentially like pulverized coke, mixed with surfactants and a little water, and burned in a typical combustion nozzle.
In the OPTI/Nexen plant, which they had the foresight to go ahead and build, they are actually gasifying the bottom end of the barrel, one of the options I showed to produce heat and hydrogen.
The third planned upgrader at Suncor will gasify petroleum coke to do the same thing, so we are making progress in this regard.
If we turn to the next page, one of the problems confronting innovation in the energy industry is.... First of all, a slightly cynical comment that I made at the start: when times are busy and times are good, they're too busy making money, and when times are bad, they have no money to do the R and D. That's not entirely true, but there is some element of truth to this.
Far more important, though, is the capital intensity and the long-time scales of major energy investments--20 to 50 years, major capital, billions of dollars--and those aren't going to be put out there by private sector companies with shareholders unless we have certainty in terms of some regulatory and other regimes in place. That's in complete contrast to the IT sector, where, if they have a bit of a bust product, they can cannibalize that and replace it in six months.
Often, indeed, as you see, we all have these kinds of things. I'm sure mine is out of date, and I only bought it a year ago. So that's the IT industry; it is not the energy industry.
They also have a great deal of difficulty in differentiating their product. The energy industry produces either electrons or gasoline or bitumen or synthetic crude, and it's all the same to a customer. So if you put in a big investment because you go with a highly advanced technology, how are you going to recover that cost when your competitor can put in a really cheap and perhaps environmentally less sensitive process producing the same commodity that consumers treat exactly the same?
The energy industry...particularly the service and small companies are innovative, but they're just not recognized for innovation as much as they are...and perhaps they need a little kick in the pants at times to be a little more innovative. I'm sure there are some things that this committee and government can think of to help them do that, but again, I think it's the certainty of the investment cycle they're dealing with that would help more and more.
The last few slides address the question of innovation. I believe that technological innovation is a key to being able to increase supply in the oil sands, which we badly need, but in a responsible way.
It is my personal position that the innovation system in this country is not working. We put billions of dollars into the front end of research and development, and we are not seeing the benefits coming out the back end. There is a relatively simple reason for that. As the next chart shows, innovation is a supply chain. That shouldn't come as a surprise; any other industry has a supply chain. You have knowledge and idea creators; these are people in universities and government labs. You have the market at the other end, where economic benefit is derived. In between you have many other steps that are complex and difficult, and they cannot be performed by the same performers.
Government labs cannot and should not commercialize. Universities should not commercialize. The private sector shouldn't try to do basic R and D. So you must have this supply chain of organizations with different sets of skills along the way to ensure that an idea is transmitted all the way to a product with an economic benefit.
To show you just how badly Canada is unfortunately doing, working with some international colleagues, including Michael Porter--I can't claim that this is my work, but I am involved with this group--we've developed some benchmarks for international innovation competitiveness. It's based particularly on two metrics: R and D ratio, and high-quality people producing a certain number of opportunities per $1 million of investment in R and D.
The best practice numbers are listed across the top. You can see where Finland is, which is often regarded as an innovative economy, and you see where the U.S. is, according to those benchmarked best practices. If you look at the last line, you can see where Canada is, and above all you can see that the R and D ratio is horribly squinted. The ratio for the private sector is on the left and public money is on the right. So the best practice is three parts of private sector investment to one part public investment. When you look at Canada at 1.18:1, there's a long way to go.
We can't just berate the private sector to do more R and D without any incentive. We need to find ways of encouraging the private sector to do more R and D to improve that ratio. Of course, the alternative would be to cut back on government R and D, but I'm not sure that's a good solution. A balance is important, and these are the ratios we need.
So we're seeing an imbalance in knowledge push versus market pull. We in Canada have what we call supply-side innovation economics: “Discover it and they will come”, instead of “I need it, invent it for me.” We need a balance of those two. For not one moment would I decry money to universities for basic research. We need to do that, but we need those pieces that pull technology from the other end, and very little has gone into that difficult part in the middle.
So we need to integrate the innovation supply chain. We need shared definition, vision, and objectives. We certainly don't have that. We need policies around innovation. I don't know whether it's too harsh a criticism to say they're non-existent, but they're certainly non-holistic.
We have over 200 government programs, federal and provincial, in innovation. Most companies are totally confused as to how to go about applying for them, or they get so little money out of any one that it's not worth applying for. We need to condense those down to perhaps 10 or 12 instead of having this incredibly complex mix.
The organizations involved in innovation are diffuse and uncoordinated. They're not linked in a supply chain way, and the metrics and benchmarks we use are totally out to lunch in most cases. In a lot of measures that are used--unfortunately by government--numbers are more important than quality. You are rewarded based on the number of start-ups you do, not on how many survive and generate billions of dollars for the economy. You are rewarded on input dollars and not on output measures. We must change that kind of thinking. We must integrate there and balance the supply chain for effective product delivery.
Again I want to address part of the problem here, which is the funding dilemma. In the next set of curves, which are perhaps a little difficult to follow, if you look at the line that decreases rapidly from the left axis, that is public sector funding as you move along the curve from idea to product. Private sector funding, however, very low at the idea stage, increases rapidly as you get near to a product with economic benefit.
Set against that, you clearly have increasing political risk--I'm sure everybody around this table understands that better than I do--as you put larger and larger dollars into fewer and fewer projects. I don't think any government, provincial, federal, or whatever else, would want to be putting hundreds of millions of dollars into a project and then see it fail--I'm sure it's the opposition's job to raise questions about that--but somebody needs to do it. You see increasing financial risk as you come earlier in the stage of development in the innovation supply chain as perceived by the private sector.
So you get stuck with this piece in the middle, which is, masochistically, where Energy INet chooses to work. It is the most difficult area to work in because it has reduced public expenditure, for the reasons I've indicated; it has reduced private sector expenditure, for the reasons I've indicated; and the net dollars there for the most difficult part--a pilot plant, demonstration plant, commercialization--make up the most underfunded part of the innovation supply chain.
Let me close by coming back to Canada's responsibility. We at Energy INet have a very strong group of people working with us. In fact, we're simply acting as a coordinating mechanism for a movement that really suggests that Canada has a responsibility to become a responsible energy superpower. The benefits from it are environmentally responsible energy supplies; fully utilizing our rich endowment of all energy resources, as I've talked about; and working to eliminate carbon and other detrimental releases. I think you can see some of the reasons that's justified.
As I said, by doing that we will contribute more than anything else to the reduction of environmental contamination and environmental releases in this world, and we can earn a lot of money in the process. We can earn a lot of export revenues.
That said, I'll turn to my last two slides. The first one explains why Canada should focus on energy and energy technologies. Many of the reasons there are obvious. I've talked about them already.
We also have a surrounding infrastructure in Canada with investors who understand energy and energy technologies and are prepared to invest in them. We have banks and capital raisers who are very skilled at raising money for energy projects. We have universities that are eminently qualified to graduate skilled, technically advanced energy workers. We have great energy R and D and laboratory R and D capability in Canada, and we have an energy industry that has a great reputation around the world. If we focus on responsible energy development, I truly think we have an opportunity in Canada to contribute to global sustainability.
My last slide and my closing comments list my views on government's role in an energy future: to show leadership and embrace the vision of Canada as a world benchmark in terms of integrated energy production, combined with minimal carbon releases; to provide increased certainty for investment decisions, with clearer long-term policy frameworks, so that the private sector can go ahead and make those decisions, make those investments, that it is capable of making today; and to absolutely accelerate the implementation of responsive, simplified, and coordinated regulations, because that's a nightmare for most companies. Again, it's a barrier to companies wanting to introduce new technologies and to make long-term investments.
I also personally believe it is government's role to share technology innovation and implementation risks. I am not sure it is government's role to be part of that in terms of doing, being a performer and a deliverer of technological information. Rather, it should find ways in which the risks the private sector could take will be mitigated by some practice involving the government.
Finally, the government must strengthen Canada's innovation supply chain such that outputs truly do come from inputs, and we get technological innovation that will drive this country forward, particularly in the energy industry, as a result.
Mr. Chairman, I apologize for having taken far too much time. I appreciate your generosity.
I also must apologize to the committee for going on to subjects that are beyond oil sands, but I think it puts them in the right context.
Thank you very much.
