Natural Resources Committee on Feb. 14th, 2013

[The Chair, Conservative, Leon Benoit]

Good afternoon, everyone. We're here today to continue our study of innovation in the energy sector.

We have three groups of witnesses today.

Here with us in the committee room from the Canadian Electricity Association is Francis Bradley, vice-president, policy development. Welcome to you, sir.

With us by video conference from Surrey, British Columbia, from the City of Surrey, is Robert Costanzo, deputy manager, operations; Vincent Lalonde, general manager, engineering department; and Bruce Hayne, councillor. Welcome to all three of you.

By video conference from Chatham, Ontario, from Spectra Energy is David Simpson, general manager, in-franchise sales and marketing and customer care for Union Gas Limited. Welcome to you, sir.

[David Simpson, General Manager, In-Franchise Sales and Marketing and Customer Care, Union Gas Limited, Spectra Energy]

Thank you very much.

[The Chair, Conservative, Leon Benoit]

We'll have the presentations today in the order listed on the agenda.

First of all, thank you all very much for being with us today.

We'll start here in the room with Mr. Bradley from the Canadian Electricity Association.

Go ahead, please, with your presentation.

[Francis Bradley, Vice-President, Policy Development, Canadian Electricity Association]

Thank you, Mr. Chair.

The Canadian Electricity Association is the voice of Canada's electricity industry. Its members represent the entire electricity value chain, from producers and distributors to residential and industrial customers across the country.

The electricity grid is the largest and most complex and interconnected machine in North America. It's safe, solid, and well maintained, but it is starting to show its age. Much of Canada's power generation and transmission infrastructure was built more than 50 years ago, when Canada's population stood at 20 million. Today, with more than 34 million Canadians, per-household energy consumption is often double, or triple, what it was in the 1960s.

A recent Conference Board of Canada study entitled, “Shedding Light on the Economic Impact of Investing in Electricity Infrastructure”, projects that an investment of $347.5 billion from 2011 to 2030 is required to meet electricity demand and to power Canada's future.

Increasing the grid's capacity by renewing and expanding infrastructure to meet our customers' power needs is a tremendous challenge. But there is more. Despite the fact that aggressive energy-efficiency programs exist all over the country, a fundamental renewal of infrastructure is needed.

Compounding the challenge, but also providing a great opportunity, is the need to improve both environmental performance and operational efficiency by replacing analog equipment with new cutting-edge technologies. In short, our existing electricity infrastructure must not only be renewed, but the system itself must be transformed. This is where innovation comes in.

We recognize that innovation in the electricity sector is essential for developing a safe, reliable, and sustainable energy future for Canadians. As we turn over our aging infrastructure, innovation provides an opportunity for us to replace assets with newer and better versions.

The electricity sector is stepping up the pace of its innovative process. Innovation is defined in a number of ways, but for us, it means, quite simply, creating and putting to use smarter or more efficient products, processes, services, technologies or ideas that yield environmental, societal and financial benefits.

Some Canadian electric utilities are implementing innovation directly related to operations on the ground, such as SaskPower's demonstration project near Estevan, Saskatchewan, that will capture and store a million tonnes of carbon dioxide a year. That's the equivalent of taking more than 250,000 cars off the roads.

Others are innovating through the development of processes and services, such as electric vehicle charging stations, infrastructure, or new conservation programs that require collaboration behind the meter.

Innovation is not limited to technological advancements. For an electric company, innovation can mean introducing an internal program for employees to dramatically reduce health and safety risks, or identifying new ways to reach customers and communicate with them. From an electric company's perspective, what matters is being able to either directly or indirectly use innovation to meet new challenges posed by environmental, social and economic sustainability.

In 2012, CEA's sustainable electricity awards recognized several companies that were working on innovative approaches to project financing, effective engagement of stakeholders, and the optimization of wind generation.

Let me elaborate a bit more on the wind power optimization project, given it's unique approach and the amount of cooperation shown by governments and industry alike.

The wind power optimization project, PowerShift Atlantic, is a four-year clean energy fund project funded through Natural Resources Canada. It's a collaborative research project by New Brunswick Power, in partnership with Saint John Energy, Maritime Electric, Nova Scotia Power, New Brunswick System Operator, the University of New Brunswick, and the governments of New Brunswick and Prince Edward Island.

The program will run until 2014, piloting technology that allows utilities to remotely shift energy usage to specific appliances in homes and commercial buildings in order to optimize wind generation. While current research is focused on wind energy, the learnings may be relevant for optimizing other sources of renewable energy generation in the future.

Innovation is always a work in progress, and we must continue to find new and better ways of delivering our products to the customers.

As far as the main thrust of your study goes, over the past few years, only innovations involving our sector have led to major changes, not only in how we use electricity, but also in how we think about it.

Not very long ago, fixed to the side of your house was an electric meter with moving dials and mechanical parts. While it's possible, depending upon your home province, that some of you may still have electromechanical meters, odds are that for most of us those old meters reside in the same part of our memories now occupied by rotary-dial telephones and eight-track tapes.

Customers can now access the data they need to actively manage their electricity consumption. They have gone from passive consumers to active participants in the market. They understand the value of every kilowatt-hour of electricity used in their home.

For example, time-of-use rate pricing introduces market signals that shift electricity usage to off-peak hours, which can lower customer bills while alleviating system constraints. Also, smart meters have enabled the two-way flow of both electricity and information between electricity producers and customers. This is a fundamental shift from that one-way grid, a shift that allows the integration of both distributed power generation and advanced energy management tools.

Real-time system operating information results in distribution networks that are used and expanded more efficiently. Smarter distribution networks and dispersed energy storage devices allow utilities to reduce and respond more quickly to outages. Automated switching devices also make this system more responsive to outages, and limit the impacts to fewer customers.

The net result is significant improvements in the frequency and duration of outages. Modernized customer service systems allow customers to interact with their electric utilities in a way that best suits their lifestyles in real time using customers' preferred means of communication.

While utilities are pushing the innovation agenda across the country, significant barriers to integrating innovative technologies and innovative approaches to customer service remain. The most prominent barriers experienced in our sector are higher costs for new technologies relative to the incumbent technologies and the high standards for technology reliability and certainty.

Reliability, of course, is essential for the electricity sector. In fact, it is a regulatory requirement. This requires that new technology be grid ready.

Transforming Canada's electricity sector and achieving our social, environmental and economic targets hinges on a lot more than just the industry's plans and actions.

Governments, regulators, civil society, and the broader public must be involved in the conversation if we're to be successful in transforming Canada's electricity system. Our industry has made significant progress in implementing innovative technologies and approaches across the electricity production and delivery system, but significant challenges remain, particularly in regard to large-scale renewal of infrastructure across this country.

Because of infrastructure investment requirements—this is actually a global trend, not strictly a Canadian phenomenon—there is upward pressure on electricity prices across the country. While innovation cannot fully alleviate that pressure, because there's simply no avoiding the fact that our infrastructure is aging, it's doing three things that are very important.

First, innovation is ensuring that tomorrow's technologies are considered when building today. Over time this will lower operating costs, improve asset management, and reduce societal impacts from power interruptions.

Second, innovation is making the grid more dynamic and more flexible in terms of its capacity to adapt to change. That change could last a few minutes, as with outage situations, or a few years, as with the integration of electric vehicles or distributed power generation.

Innovation by power companies is bounded by time, as little as a few nanoseconds to as much as a few generations. And as far as the amount of investment goes, time considerations must weigh heavily in determining what customers are charged.

Fortunately however, innovation is providing a third benefit, and I have tried to give you a sense of that today.

The relationship between the utility and the customer is changing. Communicating by mail six times a year when the bill comes in is no longer sufficient. The reliable and efficient production, delivery, and use of electricity is too important to be left to a passive utility-customer relationship. Therefore, innovation for our industry goes beyond technology and speaks directly to the need to engage customers in the discussion, understand their preferences, and assure alignment across the entire value chain.

Both industry and customers are already seeing value from this innovation.

Thank you. I would be happy to answer your questions.

[The Chair, Conservative, Leon Benoit]

Thank you very much for your presentation, Mr. Bradley, from the Canadian Electricity Association.

We go now to the second presentation, which is by video conference from Surrey.

I'm not sure, gentlemen, how you're going to handle the presentation from the City of Surrey. Is one person making the presentation, and if so who is that?

[Bruce Hayne, Councillor, City of Surrey]

Thank you very much, Mr. Chair.

It's Councillor Bruce Hayne here. I'll be giving a brief overview of the project. Then I'll be handing it over to Mr. Vince Lalonde and Mr. Rob Costanzo to give technical details on the project.

[The Chair, Conservative, Leon Benoit]

Okay. Please give your name before you start speaking, so your comments can be attributed appropriately. Thank you.

[Bruce Hayne]

Certainly.

[The Chair, Conservative, Leon Benoit]

Go ahead, please, with your presentations.

[Bruce Hayne]

Thank you, Mr. Chair. Thank you for inviting us to testify today to the Standing Committee on Natural Resources.

We'd like to start off with a brief overview of the project for the organic waste and biofuel facility.

The catalyst for this was really two overriding documents. I'll be brief here.

The first one was the City of Surrey's sustainability charter. This was a document that the City of Surrey put into place starting in 2008. It's a comprehensive document that is sort of an overriding policy document that guides our decision-making in all areas of social, environmental, and economic factors, with the addition of sustainability over the next 50 years.

The second document that played into the decision to move to this biofuel facility was the Metro Vancouver integrated solid waste and resource management plan. This plan mirrors many of the City of Surrey's sustainability goals, but it also has some very specific waste diversion targets, for example, 70% waste diversion by the year 2015.

With those two documents, the city decided to move toward a more integrated form of waste collection and waste diversion, and also decided at that point to look at a biofuel facility through our waste collection. The idea is that we would collect kitchen scraps and kitchen waste, add that to yard waste, collect them curbside, and take it to a biofuel facility. The biofuel facility would turn that into a natural gas, and we would use compressed natural gas trucks to collect the curbside waste, thereby creating a closed-loop system. We're well on our way to doing that.

At this time, I'd like to turn it over to Mr. Rob Costanzo, our operations manager, to give you some of the details on that.

[Robert Costanzo, Deputy Manager, Operations, City of Surrey]

Thank you, Councillor Hayne.

Thank you, Mr. Chair and committee members. I'm Rob Costanzo. I'm the deputy manager of operations for the City of Surrey.

You have in front of you a PowerPoint presentation. I'm going to reference each slide as I go through it.

Slide 4 illustrates the high-level four-phase approach the city engaged to implement its system. I'm going to speak to each of those phases in turn.

Slide 5 shows how one of the initial studies we engaged in was to determine whether the city had enough feedstock within its own curbside material to justify the implementation of a biogas facility.

To that end we looked very closely at the garbage collected from residential waste, and we conducted a series of seasonal composition studies to determine how much of that garbage comprised organic material such as food waste and kitchen scraps. We found on a consistent basis that approximately 65% of that material comprised organic waste. So on that basis, we determined that would be enough to move forward into a further study to determine the size of facility we would need to develop and what additional materials would need to be brought into that facility to increase the capacity. In our case, we were looking at a facility that would process both residential waste from the Surrey residential curbside program and also waste from the institutional, commercial, and industrial sectors.

If you turn to slide 6, you'll see that one of the challenges we had back in 2010 when we initiated our study was that there were very few municipalities in Canada that had initiated or engaged in waste collection using compressed natural gas garbage trucks. The industry traditionally has used diesel vehicles, and there seemed to be a movement in the United States, particularly within the waste management industry, to leverage the CNG vehicles, particularly now when compressed natural gas costs are very low relative to diesel costs.

We found that globally the uptake is significant in countries outside of North America. The United States, for example, as you see in slide six, has possibly 110,000 CNG vehicles, which represents only 1% of all CNG vehicles. Canada is much lower at 12,000 vehicles. But if you look at slide 7, we have found that the uptake in the last six to seven years has been quite significant. So we know that the uptake is growing substantially. Waste collection transfer vehicles account for about 12% of total vehicular natural gas use at present, and they represent a fast-growing segment in the natural gas vehicle industry.

The International Association for Natural Gas Vehicles estimates that there will be more than 50 million natural gas vehicles worldwide, or about 9% of the world transportation fleets, within the next 10 years.

On that basis we felt our risk was relatively low and through additional market sounding we found that the industry was ready to move in that direction but they were really waiting for a municipality to move forward with this kind of requirement. The City of Surrey mandated natural gas vehicles. Otherwise there are very few government incentives to move in that direction for a private entity.

Slide 8 simply reflects one of the environmental benefits of the CNG vehicle, which is that it produces 23% less in carbon emissions and 90% less in particulate emissions than does a vehicle powered by diesel.

Slide 9 describes the approach we took to maximize output from organic waste. We implemented a system two years ago, which we piloted over the course of a year and a half, to determine how we could leverage and maximize that organic waste output. We engaged a three-cart system. Residents are required to place organic waste in one cart, and this waste is collected every week. Their garbage and recycling carts are emptied on a bi-weekly basis. It's forcing residents to remove the odorous waste on a weekly basis.

Through that process, we found that after a year, that waste, the garbage tonnage, dropped by approximately 50%. Conversely we saw a significant increase on the organic waste side. There was almost an equal increase on the organic waste side.

More important is customer satisfaction. The customer's acceptance of this sort of program is very high at 90%. On this basis, we initiated a request for proposal in 2011 and awarded that request for proposal in late 2011 to BFI Canada, or Progressive Waste Solutions, and initiated our program on October 1, 2012. It was four months ago that we initiated the program city-wide to 100,000 households across the city.

Slide 10 talks at a very high level about some of the benefits we found through our process.

The process we engaged not only has economic benefits, on which I'll get into more detail further on in the presentation, but it also has significant financial benefits. Moving toward the CNG system and the type of system that the city engaged resulted in a $3 million a year savings for the city. Those savings were based on the change in waste collection frequency, having a fully automated collection system, fuel savings with natural gas approximately 50% lower than diesel costs, and lower disposal costs associated with organic waste.

Currently in this region, the cost of garbage disposal is very high. It's at $107 a tonne and the region will increase that rate to $180 a tonne by 2015. Organic waste disposal is at less than $50 a tonne.

Slide 11 shows that already in the first three months of the program, from October 1 to December 31, we realized a waste diversion increase from approximately 15% to almost 70%. We've almost met our goal. We anticipated that it was going to take at least two years to reach that 70% diversion, but we're already there.

As far as public consent goes, there's a very high desire to move toward greater waste diversion, and we were able to gauge that through significant public consultation. We're seeing that success now at curbside. This means the facility we're now proposing to develop will already have a significant amount of material ready to be delivered once it's developed.

[Bruce Hayne]

I just want to speak for a moment about the citizen and community engagement that it took to create this very speedy reach of those diversion targets.

We engaged an outside media and public relations firm to develop a rethink waste program in the city. It was a multimedia campaign that heavily used an outdoor campaign with transit advertising, community prints, and a significant online component as well to engage the community. We also created an app in the city that allows citizens to see a number of frequently asked questions about waste diversion and that sort of thing, and it provides a schedule for which bins go out on which week and so on. During the beginning of the program, we also put up moving billboard signs in communities of when waste was to be collected that week to get people into the habit of getting their garbage cans out on time and on the right weeks.

This significant communication plan with the community meant that we quickly reached a 69% diversion target with our waste and are already meeting that 2015 goal from the region. It's proving very successful so far, but it's extremely important to the success of the program to have that kind of citizen engagement program and to get buy-in from the community in order to move forward successfully with it.

[Robert Costanzo]

I'll conclude the presentation. There are three slides left with respect to what's left in our plan.

We are about to embark on a request for qualification process to attract a partner to develop the biofuel facility. The city is very grateful to have received funding from the P3 Canada Fund, late in 2012. P3 Canada will provide up to 25% of the capital cost of the facility. The facility's cost is estimated to be $68 million, so that's approximately a $17-million contribution from the federal government in that regard.

Following the request for qualification, there will be a request for proposals in mid-2013, the selection of a partner late this year, and then move toward construction of the facility, which we expect to be operational by 2015.

As far as the system-wide benefits are concerned, I'll refer you to slide 13. The environmental benefits are that 80,000 tonnes of organic waste will be diverted from landfill annually. Currently much of the waste within this region is trucked on a daily basis to a landfill that is 350 kilometres northeast of the region. This will effectively cut off the transition of that waste from this region to a distant landfill. The future facility is estimated to produce approximately 320,000 gigajoules of natural gas, which equates to approximately 6.9 million litres of diesel annually. It's quite significant. We estimate that would fuel approximately four times the fleet size that it takes to collect waste in the city of Surrey. That gas will not only be used by the city, but it will be placed on the market. It's a carbon neutral gas, given that it's stemming from organic waste—food waste and yard waste—versus a gas stemming from the grid.

The CO₂ equivalent reduction is estimated to be approximately 23,000 tonnes.The significance is that it will offset the City of Surrey's corporate emissions, which are estimated to be 16,000 tonnes per year. As far as the economic benefits are concerned, as I mentioned earlier, our annual saving in waste collection is approximately $3 million per year. Annual fuel savings, alone, are $1.2 million, which is incorporated within that $3 million savings.

The cost of the CNG vehicles is approximately 20% higher than traditional diesel vehicles, but the return on investment is very fast, at two years. The typical life of these vehicles is approximately 10 years. Annual savings of organic waste versus garbage disposal will be approximately $600,000 per year. The sale of the renewable gas is estimated to be between $4 million and $5 million.

What's very important is that there's a real made-in-Canada story here. The CNG trucks used by the city are comprised of Cummins Westport CNG engines. The head office for research and development for that engine is in Vancouver, B.C. The bodies of the trucks are from Mack, which is a U.S.-based production, but the truck is assembled in Quebec, in the city of Saint-Nicolas.

With that, we thank you again for allowing us to provide our presentation, and we look forward to your questions.

[The Chair, Conservative, Leon Benoit]

Thank you to all of you from the City of Surrey for your presentation.

We'll go to the final presenter now, by video conference from Chatham, Ontario. On behalf of Spectra Energy, we have David Simpson, general manager, in-franchise sales and marketing and customer care with Union Gas Limited.

Sir, please go ahead with your presentation.

[David Simpson]

Thank you very much, Mr. Chairman and honourable members.

As mentioned, my name is Dave Simpson, and I'm the general manager of sales and marketing and customer care for Union Gas, which is based in Chatham, Ontario. On behalf of Union Gas, I would initially like to thank the committee for inviting us to present our perspective on technological innovation in the natural gas sector.

Over the next few minutes, l'm going to touch on a few key innovations that have helped us move our product more efficiently and others that are helping our customers use it more efficiently. I'm also going to talk about a few of the most promising areas we see for future innovation.

I did provide a few slides.

If you would turn to slide 2, I would point out that Union Gas is owned and operated by Spectra Energy. Spectra Energy operates a diversified portfolio among four different business lines: western Canada transmission and processing; Union Gas; DCP Midstream, which is a natural gas liquids joint venture with ConocoPhillips; and Spectra Energy Transmission.

As you can see from the bullets on the slides, Spectra Energy is deeply invested in Canada. In fact, the majority of our employees are here. We have made significant investments, paid millions in federal taxes every year, and our Spectra CEO, Mr. Greg Ebel, a former president of Union Gas, is a Canadian. Greg was actually born in Ottawa and worked for a time as a senior adviser on Parliament Hill.

I draw your attention to the third slide just to call out that Union Gas is essentially two businesses in one. We are a distribution company delivering natural gas to about 1.4 million homes and businesses across Ontario. We have more than 67,000 kilometres of pipeline in the ground, and we deliver not just to residential customers but also to industrial and power generation customers. As well, Union Gas is a storage and transmission company. We own and operate the largest underground storage facility in Canada, one of the largest in North America, at Dawn, which is a town just southwest of Sarnia, Ontario.

Natural gas already makes an important contribution to Canada and Ontario. It's plentiful and affordable, cleaner, and we believe with new technology applications, it will play an increasingly important role in the future of the Canadian and global energy supply mix.

One important note is that natural gas is filling the gap as the province of Ontario closes its remaining coal-fired power plants. As Ontario moves toward more renewables such as wind and solar, which represent about 4.8% of our energy needs, natural gas is the on-demand power source that is responding when the wind isn't blowing or the sun isn't shining. My point is that natural gas has a foundational role to play in any energy plan.

The last slide, slide 4, shows that we've seen some innovations in the natural gas sector that have definitely moved us along. For example, on the transmission side, over the past two decades we've seen compressor improvements in the stations that compress and move the gas through our pipeline system—noise reduction, efficiency improvements, pipeline coatings, and the use of plastic pipe.

From an end-use perspective, we've seen tremendous innovations to the residential building envelope—insulation, windows, and high-efficiency furnaces and water heaters—driven in part by a steady evolution in building codes and standards. This is reflected in lower average gas consumption. For example, consumption for our residential customers has dropped by 30% in the last 20 years. This reflects not only the significant improvements in building envelope and space heating efficiencies, but also customers' continuing energy conservation activities.

Union Gas has played a significant role in driving energy conservation and market transformation in all of our customer market segments through our demand side management, DSM, programs.

Union's programs span all of our customer segments, from the smallest low-income residential applications to the very largest industrial process improvements.

Since 1997, when we first began offering demand side management programs, Union Gas has helped deliver more than 5.5-billion cubic metres of natural gas savings, and reduced carbon emissions by the equivalent of removing effectively two million cars from Ontario's roads for a year.

In other words, gas utilities like ours are key players in the continuing drive to use energy more efficiently and deliver better environmental outcomes, higher productivity, and affordability for Canadians.

l'd like to spend my last few minutes talking about what we see as some prime areas for innovation. In a side note, I am going to focus on taking a few technological innovations more deeply into the implementation and commercialization phase. These specific applications have made some early technological progress; however, they have not migrated to full-scale application.

Much of the innovation that I'll mention revolves around LNG, or liquefied natural gas, and CNG, which we've heard mention of, which is compressed natural gas.

LNG is natural gas that is supercooled to extreme, extreme low temperatures and then stored in a highly concentrated liquid form. It takes considerable energy to manufacture LNG, but the versatility and the possible applications of this fuel are quite diverse.

Compressed natural gas, as the name implies, is compressed through the compression process under higher pressures and stored in cylinders.

There are three main items I'd like to mention.

The first is LNG for heavy trucks. Canada was an early leader in natural gas vehicles, or NGV, developing innovative vehicles and station technology, as well as codes and standards. Today, with the lowest natural gas prices in a decade, LNG is more economical, at about 40% to 50% cheaper than diesel, and has up to 30% fewer emissions than diesel.

We're seeing a growing trend toward LNG for heavy trucks in the United States. You may have heard of America's natural gas highway initiative. This is where more than 100 fuelling stations are already in place or under way across the country. Here in Canada, we're seeing pilot projects in Quebec, Alberta, and British Columbia start to emerge.

Areas ripe for continued innovation include technologies that enable traditional diesel-powered engines to run on liquefied natural gas, incorporating LNG technology into transport truck manufacturing, and updating vehicle standards, siting of LNG plants, and refuelling depots.

The second item I will mention is LNG or CNG for communities that are difficult to reach by traditional pipelines. These communities are what we call “off pipe”. They are typically remote applications that it would be cost prohibitive to connect by pipeline, but LNG and CNG are now giving us new ways to think about fuelling these communities, which are often located near or right next to such industrial sites as mining operations, which also require heating and power generation.

Currently Union and other utilities across Canada are working with the Canadian Gas Association to identify some pilot projects to utilize these applications. The federal government in fact spends a significant amount of money to aid in the transport of diesel fuel up to many of these communities.

We believe CNG and LNG could be more cost-effective and better for the environment. The Canadian Gas Association is pursuing efforts to better define this opportunity. We believe there's merit in having government engaged in such efforts to help identify the economic, environmental, and social benefits that might be realized.

To put the savings opportunity into perspective, in 2012 Union Gas was able to successfully construct and run a pipeline to a rather remote community in Red Lake, Ontario. This community is located closest to, but fairly far north still, of Thunder Bay, Ontario. The potential savings for residential customers who are converting their equipment to natural gas could be upwards of $2,000 to $3,000 per year. This project of running the gas distribution system to the municipality and the mine in the area was supported by Union Gas, the municipal, provincial, and federal governments, and the Goldcorp mine itself. It's a great success story for a northern community that's been trying to get clean and affordable natural gas to their town for over 25 years.

The third and last technology I would mention is combined heat and power. This technology exists and there are small applications where it typically ranges from 500 kilowatts to about 5 megawatts of power production. Combined heat and power refers to the process that utilizes fuels like natural gas to generate electricity through a turbine or a reciprocating engine. Now the waste heat that is a byproduct of the power generation process is captured and used as useful energy for heating applications. The result is higher energy efficiency and lower emissions. There are several applications that can leverage this technology, including commercial and industrial processes, greenhouse operations, and, even at the local level, models for district heating and cooling systems.

Those are my comments, and again I would like to thank you for your attention and your interest.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Simpson, from Union Gas, and to all of the witnesses for your presentations. We'll go now to questions and comments

I just want to inform members of the committee that Ms. Liu wants to have her motion discussed. We'll end this part of the meeting at 5:15, so we have an hour and five minutes or so, and then we will go to Ms. Liu's motion.

We'll start questions and comments with Mr. Trost, for up to seven minutes.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Thank you, Mr. Chair.

I'll start with my comments to the gentlemen from Surrey, but I have a bit of a story to tell, first.

A few years ago I had someone from the natural gas industry in my office. They were talking to me about how they had approached the City of Ottawa to convert its bus fleet over to natural gas. This person had offered an eight- or ten-year guaranteed contract on prices on everything and had worked out the economics. Without federal or provincial funding, it would have worked for Ottawa, saved it money, saved it all sorts of things and it would be environmentally friendly. The city council here in Ottawa dismissed it after a few minutes to an hour of discussion on it. This brings me to the projects you have.

We often have heard about people who have been promoting new ideas or new technology, but you guys are the customers effectively here. What made you adopt a new technology? What was it about innovation that made you say, “Okay, we think we can change this”? Other people I've talked to said that often inventors, new people with their technology, are enamoured with it but they don't quite realize that the marginal benefit that the customer, be it a government entity or a larger corporation or somebody, will get isn't worth what it is.

What was it that caused you guys to say that this project makes sense on the bottom line for the taxpayers of Surrey, it makes sense for us? What were the elements that were important in the innovative technology for you?

[The Chair, Conservative, Leon Benoit]

Go ahead, please, gentlemen.

[Vincent Lalonde, General Manager, Engineering Department, City of Surrey]

For us, the decision to go to the CNG trucks was fundamental to the premise of having a closed loop system. We believe it was important to remove the organic fractions from the garbage. To motivate people to do that, we thought that the notion of adding value to what people do would then make them adopters of the system. I think an integral part of the success of our system, why so many people caught on to what we're trying to do with the organics, had to do with their understanding that we could turn around used organics to create methane, and then power the trucks that pick up the garbage. That was a value proposition that people could sink their teeth into.

To do that, we needed trucks that could run on CNG. There were some concerns at the time, so we took a pragmatic approach whereby we piloted the collection for a year, but we also piloted an actual new CNG OEM truck to also gauge the satisfaction of the performance of the vehicle, which turned out to be very satisfactory. That gave us the confidence to move on to do our entire fleet with it.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Okay.

Your numbers seem to indicate you're getting about a $7 million a year return. They're various, and we're trying to piece them together, listening to your report. If this were a private entity and you were looking at return on investment and you put together the City of Surrey's money and the federal government money, this would still be a pretty decent return on investment. Is that correct? Putting everyone's money together, you'd be getting 10%, 15%, I don't know what percentage per year. Is this profitable for you?

[Vincent Lalonde]

Right now, it saves us $3 million a year, compared to our previous costs. One of the important things to consider is—

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

On top of that you gained revenue, and it was about a $50 million project?

[Vincent Lalonde]

There's $3 million in savings on our waste collection side; you're correct. That is based on the frequency of collection, the automation, the trucks that use fuel that costs less. On the biofuel side, yes, $4 million to $5 million of sales are projected from the biofuel plant, but we also have to pay a tipping fee for the green waste we're going to put in. To answer your question, you couldn't do a plant and accept free green waste and make a profit at it. You could accept green waste at a competitive tipping rate, which is a lot less than garbage rates, but you would still have to charge for people to dump there to produce the fuel.

You can't produce enough fuel to pay for the plant unless you get some revenue from the organic waste being dumped there. We have two sides to the equation. How much money can the plant make? How much can the city save from dumping at $50 a tonne versus dumping at $107 a tonne? But we still have to pay the $50 a tonne, if you understand.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Okay.

I'll put a quick question to the Canadian Electricity Association.

One of the frustrations I sometimes hear about is that in Canada, with our monopolies in most provinces, people who have new, innovative ideas for the electrical grid, the electrical system, have frustrations getting through. It may just be inventors not quite realizing their products.

What recommendations would you give to this committee that we could pass along so the system could be more open to new innovators, the engineer, the scientist who's got a great idea that could be helpful on efficiency, production, distribution of power? What are the sort of things you're looking for so your industry can cooperate more fully with the people who are new and innovative?

[Francis Bradley]

That's an excellent question. It's certainly something we think about and are concerned about.

A couple of weeks ago I spent a day with a number of people across the country in the utilities distribution business and with Sustainable Development Technology Canada. They brought us together to look at 10 potential pilot projects that are being developed through SDTC's SD Tech Fund virtual incubator. I would suggest that we do have processes, thanks to organizations such as SDTC, that are bringing forward those new technologies. I would suggest that the government continue to support Sustainable Development Technology Canada, because it is playing an active role as an incubator.