Natural Resources Committee on Feb. 26th, 2013

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Calkins.

We go now to Mr. Nicholls, and he will be followed by Mr. Allen and then Ms. Liu.

Go ahead, please, Mr. Nicholls.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Thank you, Mr. Chair.

Mr. Egan, I have a question on Energy Technology and Innovation Canada.

There are 20 projects and 9.5 million in funding, I believe. Is that amount given out every year? What is the funding breakdown among partners, by percentage?

[Timothy Egan]

That is financing that has been raised in this roughly first year of operation. It's not an annual contribution; these projects are being funded, and then as they wind down, new projects will come forward that will receive funding.

As to the ratio of dollars, I don't have the precise number, but it's leveraged roughly one to five on utility dollars to non-utility dollars, I believe. I'll confirm that for the committee.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Thank you.

I was speaking last week with researchers at the University of Alberta in the energy sector. They told me that industry, when financing innovation, tends to be a bit risk-averse in order to protect shareholders' interests.

I have two questions for you.

Can you give us an idea of what kinds of projects industry would fund if it had a public partner to share a greater part of the risk? Perhaps you could give an example from integrated community energy systems.

My second question arises because things such as the energy framework initiative are asking for carbon pricing. I heard this quite a bit in Alberta last week, that it can be a driver for innovation.

Could you address those two questions?

[Timothy Egan]

The first one is on the kinds of projects. If there were a public partner, what kinds of projects could we move forward? In a sense, it all depends on the amount of capital that can come to the table and who the partners are.

I noted that we're in conversation with SDTC—early stages—about a possible cooperative relationship to leverage public money. I noted NRCan money in our water heater project, where we're leveraging for the taxpayer, through the federal contribution, about $9 of private sector money. We think it's a very good return for the taxpayer in that case. It's project to project. It will depend on the initiative.

To your question about how risk-averse the corporate sector is, look, I think any investor is going to be prudent in the management of their capital and they're going to look for the best possible return on the investment.

Utilities.... My member companies aren't interested in proprietary technology. Their fundamental interest is in flow-through of natural gas to end uses.

Our work is on bringing commercialization of technology into the market and then acting as a bit of a test bit, if you will, to provide opportunities to test those kinds of technologies.

How those move forward, again, will depend on who the partners are and what kind of capital can be leveraged. Utilities have a certain constraint in that because they are regulated entities. There's a limit to how much ratepayer capital they can bring to the table because the regulator determines how ratepayer capital will be used.

There is an opportunity to bring shareholder capital to the table, but you often have instances where you have a significant asset base, which is obliged to serve the customer in a particular way, so there are limits on how effectively you can use shareholder capital. It's not as cut and dried as it might seem at first blush.

The point I wanted to highlight was that the utilities are actually putting capital on the table in an effort to leverage new technology applications.

On your last point about referencing the energy framework initiative and the idea of carbon pricing, at this point, as CGA, we don't take a position on carbon pricing. At various times in the past we have, but—

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Sorry to interrupt you, Mr. Egan. Is CGA not a part of the energy framework initiative?

[Timothy Egan]

The energy framework initiative was an initiative of four associations, including the CGA, that launched a series of discussion papers around energy.

What I'm saying is that at this point we don't take a particular position on a carbon tax or on carbon pricing. We acknowledge that carbon is part of the discourse. We would argue that the best way to achieve emission reductions is by driving efficiency and innovation, and through those things emission reductions evolve.

One of the best examples of this is the innovation that's come with the greater use of natural gas in the United States, which has that country delivering on carbon objectives without any carbon pricing mechanism.

Our approach is, look, let's drive energy efficiency, let's drive innovation, and the emission profile will—

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

I would just like to share a quote—

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Nicholls. Your time is up.

We now go to Mr. Allen for up to five minutes.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you very much, Mr. Chair.

Thank you to our witnesses for being here.

Madame Labrie, I'd like to start with you, if you don't mind.

How long was that time period from when you developed the pilot installation, with, you said, about 20 types of feedstock that you've been developing, to where you're ready to go to this commercial...?

[Marie-Hélène Labrie]

The company was founded in 2000. We started at the R and D phase, and in 2003 we started operating our pilot facility. Then we moved to the demolition facility starting in 2009.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

So it's roughly nine years.

You said it was a 38-million litre facility. As part of that pilot process, what did you determine was the scale that was going to be needed to make this economic? I would just like to understand that.

And are there any lessons learned in what you've gone through to this point in time to understand whether these projects would be economic at smaller scales or bigger scales?

[Marie-Hélène Labrie]

That's a good question. Basically, when we developed the technology we were able to test the technical viability. As we scaled out the technology, we were looking at the best business model and the size of our full-scale commercial facility.

We quickly realized that we needed to be profitable at a low scale, given that we want to focus on waste and residues and a wide variety of low-value feedstock. That was the vision from the beginning.

We cannot expect to have a large volume of residues in the same location, so we have to be flexible in that sense. That's why we developed a modular approach that is based on a standard facility that takes 100,000 dried tonnes of feedstock and produces 38 million litres of biofuels.

It's quite small. The approach is the centralized facility. However, the approach is based on a modular facility where if we want to double the capacity, we can add another module. Our vision is to have between two and four modules on the same site.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

What is your catchment area for the residue that you're getting now? You said you were getting some of this from the tipping process. How big an area will you be getting your feedstock from today?

[Marie-Hélène Labrie]

Usually we're located on a landfill site. For the project in Edmonton we're located on the site of the integrated waste management centre, where you have the recycling, the composting. In Mississippi, the approach is the same; we're located adjacent to a landfill site. In Varennes, we'll be located on the site of an existing corn ethanol facility, but it's an industrial park.

Usually it's close to where the feedstock is located, and in most cases right on the landfill site.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

So even the used utility poles and residue from that were all being delivered to that site as well?

[Marie-Hélène Labrie]

This one is the demonstration facility. We're located just in front of the sawmill that recycles those power poles, yes. But this is more of a demolition facility. If you look at the three commercial facilities, usually it's on the landfill site or an industrial park. In this case, it's located adjacent to a corn ethanol facility, given that we have the same customer, the refiners.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

What is the SDTC contribution towards the facility, and so far what have you found for your energy requirements to actually convert the material in this four-minute process from waste to methanol to ethanol?

[Marie-Hélène Labrie]

For the demolition facility or the...?

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Yes.

[Marie-Hélène Labrie]

I'm sorry, I don't have the exact figure of the SD Tech Fund contribution for the demolition facility. For the NexGen Biofuels Fund, right now we're in phase two, and we're receiving a smaller amount because this is really a percentage of the pre-engineering phase. Based on the agreement we have with the SDTC NexGen Biofuels Fund, this could go up to $33 million.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

What have you found are the energy requirements for the conversion from waste to methanol to ethanol? How much energy do you need to actually do that?

[Marie-Hélène Labrie]

The process is an auto-thermal process, so there's no energy needed to convert the solid material into the syngas. Basically we just start the process, but there is no energy requirement to transform the solid waste into the syngas. Overall, there's an energy efficiency where we produce four or five times the energy that we actually need. So it's very efficient from an energy perspective.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

It would be nice if you could share some of that technical piece with the committee, if you would, just how that process happens. It would be nice to understand that.

[Marie-Hélène Labrie]

So you would like me to explain....