Bill C-30 (39th Parliament, 1st Session) Committee on Feb. 20th, 2007

[David McGuinty, Liberal, Ottawa South, ON]

Madame Nadeau, for many decades there has been discussion between Ontario and Quebec about getting some of Quebec's hydro power. Why has it taken so long? How much power is now being shipped into Ontario, and what do you contemplate for the future?

[Marie-Josée Nadeau]

We needed the available resources. We have been intensifying our development in the last ten years or so. We now have power to sell. We are undergoing negotiations with Ontario for a long-term contract.

The various elements of these negotiations are still private, but as I stated earlier, we are now building an interconnection with Ontario to transmit 1,250 megawatts of power from our hydro facilities. The interconnection will be in service in 2009. From then on we will be contemplating a long-term contract for at least that capacity.

[The Chair, Conservative, Laurie Hawn]

Thank you very much.

Mr. Lussier, you have seven minutes.

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

Thank you, Mr. Chairman. Thank you to the panellists for their presentations.

My first question is for Mr. Fortin, but Ms. Nadeau can answer as well.

Bill C-30 proposes modifications to a number of acts: the Canadian Environmental Protection Act, the Energy Efficiency Act and the Motor Vehicle Fuel Consumption Standards Act.

In your two documents, Ms. Nadeau and Mr. Fortin, you mentioned that there may be two acts that are not affected by this bill. I would like to know your opinion about the Canadian Environmental Assessment Act and the Fisheries Act, which limit hydroelectric development.

Should Bill C-30 have included provisions to amend those two federal acts? Do you have any suggestions for us in that regard?

[Pierre Fortin]

Thank you, Mr. Lussier.

With respect to including those two acts in Bill C-30, I do not know whether the issues are the same. As Ms. Nadeau and I mentioned, the Canadian Environmental Assessment Act, which was reviewed three or four years ago and will be up for review again in another two or three years, imposes much stricter constraints on hydroelectric development. Ms. Nadeau gave an example where she compared the approval processes for thermal plants and hydroelectric projects.

However, cooperation between the federal and provincial levels has improved over the past few years. Things are not yet perfect, of course, but there have certainly been some improvements regarding processes and cooperation between the two levels of government.

As for the Fisheries Act, you are probably aware that Bill C-25 is before the House of Commons, having already passed first reading. It is a big bill. We are currently preparing a file on the bill and we hope that we will be able to have discussions with your colleagues on the fisheries and oceans committee.

I certainly agree with you that the two acts are linked and that each has an impact on the other. There have been improvements, and we hope that Bill C-45 will bring further positive changes. Nonetheless, it is clear that our sector has always been treated much more rigorously and strictly.

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

You added that the current regulatory environment does not encourage wind power development. What did you mean when you said that?

[Marie-Josée Nadeau]

Thank you.

I would like to thank you for your question about hydroelectric development and the approval process, because it gives me the opportunity to say clearly that Hydro-Québec does not recommend that the current act be amended.

The main problem that we have is that, owing to a Supreme Court ruling, the federal government exercises its jurisdiction in environmental areas through the Canadian Environmental Assessment Act. When it comes to assessing hydroelectric development projects, the Quebec government has longer and broader experience than the federal government, which is to be expected. I have no axe to grind here. However, we need to avoid having different timetables or duplication of two parallel systems. Each jurisdiction can carry out its responsibilities, but greater harmonization between the two levels of government regarding the timelines for the process and better knowledge of the files will certainly contribute to streamlining the process. Emphasis needs to be put on reaching the finish line.

Regarding the fisheries issue, special attention needs to be paid to the regulations. The development of wind energy is hampered by rules that change from one year to the next, whether we are talking about actual rules or tax incentives. Investors need stability and predictability. Having rules that are clear, specific, stable and predictable will definitely provide an incentive to the sector.

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

I would like to continue, Ms. Nadeau, with the distribution of energy east-west and north-south, with the American States.

Hydro-Québec's major dams have been recognized by the State of New York as a source of renewable energy. Is Hydro-Québec certified by the State of New York as having that status?

[Marie-Josée Nadeau]

That kind of certification does not really exist, but our energy is recognized as renewable energy. The problem that some people have had in interpreting the rules is that, by claiming us as a source of renewable energy, the Americans thought that we were trying to tap into their tax incentives, which was absolutely not the case. We simply wanted hydroelectricity to be considered a renewable energy.

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

That is sort of where I wanted to lead you since I would like to explore the issue of the credits that the State of New York grants to its electricity distributors.

Do you intend to get involved in this credit process with the State of New York?

[Marie-Josée Nadeau]

Yes, as soon as the markets are clear. That is why we are recommending that Canada set up an energy trading market. That way we can trade credits. We can have our credits recognized and accumulate them. We need to have a trading and transaction mechanism.

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

Have you looked into the process of trading credits with the State of New York and found that Quebec would have its provincial credits penalized because of its exports?

[The Chair, Conservative, Laurie Hawn]

Keep your answer short, please.

[Marie-Josée Nadeau]

Quebec's provincial credits will not be penalized. We sell to an energy exchange, and our energy is recognized as being clean energy. We are not worried about penalties. The challenge really involves large dams versus small dams.

[The Chair, Conservative, Laurie Hawn]

Merci.

Mr. Bevington, please.

[Dennis Bevington, NDP, Western Arctic, NT]

Thank you, Mr. Chairman, and thanks to the panel for a wonderful presentation on renewable energy.

Certainly the concepts you have talked about, like the 40- to 50-year lifespan of the investments we have to make in the technologies for coal plants and hydro plants, are significant investments for Canada. We need to understand how these fit into a national perspective.

We haven't talked a lot about transmission here, but I've heard some things. Certainly the concept of an east-west grid linking Canadian provinces where appropriate and economically feasible would serve very well to build a conduit for renewable energy. You can't put renewable energy in a pipeline, but you can put it on transmission lines, and it is the likely means to deliver renewable energy across the country.

To TransAlta, the linkage is maybe to British Columbia, and in the past you've had opportunities to share with British Columbia. I know you've had difficulty establishing a large wind resource in Alberta because of the intermittency of the supply there. Do you think there are solutions that could come with better linkages to British Columbia and better understanding of the regulatory regimes between the two provinces, to allow you to utilize the storage capacity in British Columbia to develop your wind resource?

[Don Wharton]

I think the short answer to your question is yes. Any increase in transmission capacity benefits the system as a whole and benefits the companies who are prepared to use the system to lower emissions. You're quite right that today TransAlta already moves electricity into B.C. It's stored there in hydro capacity and then returned back to the system. So it's a very efficient way of maximizing the efficiency of fossil generation and using the attributes of hydro.

We would certainly say that transmission growth is an important element of any effort by the electricity sector to manage its emissions. At the same time, electricity markets in Canada are still quite regional, so it is not a small challenge to think about growing transmission capacity across the entire country. But it is a long-term opportunity that we should be studying quite carefully.

[Dennis Bevington, NDP, Western Arctic, NT]

Thank you.

Mr. Hornung, we have an incentive program in Canada that is about half that of the United States. Has that differential between the incentive programs been an issue in developing wind power in Canada?

Second to that, what will be the impact on your industry for the development of carbon credits? We've been hearing rates between $30 and $50 a tonne. What would that do to the industry?

[Dr. Robert Hornung]

In response to your first comment, yes, there is a gap between support levels for wind energy in Canada and in the United States. In Canada, support is 1¢ per kilowatt-hour production payment incentive. In the U.S. there's a 1.9¢ production tax credit. That does make the U.S. a more attractive market, I think, from an international investor perspective. I think we've seen a bit of the impact of that, for example, in terms of where some of the manufacturing investments are going in North America at this time.

There's no doubt that having a price on emissions will indeed have an impact. Obviously I can't, off the top of my head, provide you with “this much equals this”. But from our perspective, if you're looking at offsetting, for example, coal-fired generation, which is close to a tonne per megawatt-hour, the economics can change fairly significantly with a form of pricing on emissions.

[Dennis Bevington, NDP, Western Arctic, NT]

Okay.

Ms. Nadeau, the investment that Hydro Québec is making in hydro power—Hydro power in Quebec is in some cases used for heating homes thermally, is that correct?

[Marie-Josée Nadeau]

Yes.

[Dennis Bevington, NDP, Western Arctic, NT]

Certainly there are more efficient ways of providing heat, through geo-thermal, through air-to-air heat pumps. But at the same time, is Hydro Québec developing those programs to offset the additional use of thermal electricity?

[Marie-Josée Nadeau]

Most Quebec houses are heated with a hydro-electricity source. My answer to your question is “Let the client decide”. We're not pushing them in any direction, but we have fairly good rates.

[Dennis Bevington, NDP, Western Arctic, NT]

Right now, you're considering the import of liquefied natural gas to Quebec. Terminals are being considered for areas there. I don't know if Hydro Quebec supports that. But that kind of investment is going to set you in a course towards fossil fuels rather than renewable energy. What's Hydro Quebec's position on the development of liquefied natural gas in that province?

[Marie-Josée Nadeau]

Hydro Quebec has been a silent observer, and I will be that silent observer today.