Environment Committee on Nov. 2nd, 2020

[Raj Saini, Liberal, Kitchener Centre, ON]

I agree with you, but also they have ZEV standards.

[Brian Kingston]

I'm not aware of the Chinese—

[Raj Saini, Liberal, Kitchener Centre, ON]

They do have ZEV standards. B.C.; Quebec, and 10 states, including California, and also the European Union have ZEV standards. They've made them voluntary, but they're discussing putting in regulations. I'm just curious. When half of the smart money, the $300 billion from global automakers, and I've given you the list of countries.... In order to even specify it more—

[The Chair, Liberal, Yasmin Ratansi]

Thank you very much, Mr. Saini.

Now we go to our third round. With five minutes, Mr. Albas, the floor is yours.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you again, Madam Chair. I also want to thank our witnesses for being here today.

I would like to go back a little bit to the electricity association. From a bigger perspective, if everyone who wanted an electric vehicle in Canada got one—so supply and demand issues to the side, and everyone woke up and had one—what would the increased electricity demand be?

[Francis Bradley]

I don't think anybody's calculated exactly what that increase in demand would be. The challenge, of course, is when that demand would occur and what impact it would have on the system. The challenge is to make sure that we have a smarter grid and smarter systems so that we can, in fact, optimize our networks and charge them off-peak.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Yes, because again, Mr. Kingston had noted that the prices are coming down and supply is, hopefully, going to come faster than the 2030 timeline, but can the existing electricity system manage an increased pickup in demand?

[Francis Bradley]

Yes, the system broadly can. At a local level, when you're talking about individual feeders, that's where there are challenges at the distribution level. At the same time, we're also looking at greater systems and technologies in place, so that we can manage when we're going to be charging those vehicles. In fact, we can optimize the existing transmission and generation networks if we're able to use the off-peak power that currently, in some cases, results in water being spilled at dams and negative pricing in markets. This actually makes for a far more efficient use of the overall system.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Okay, so there are small communities like my community of Summerland, for example, which owns its own electrical infrastructure. Obviously, if there were increased demand and usage, that would have to come from somewhere to modernize to make sure that it's there. Therefore, I take your point that there's a lot more than our simply writing and edict and saying how many cars we want and getting that out tomorrow.

I have one other question for you. Speaking of Summerland, Jai Zachary runs a business, ElectroMotion. He's done a number of presentations about energy in my region. He's said that we lose about 40%, sometimes more, in power transmission, due to heat alone. So, is the infrastructure that we send...? For example, in B.C. we have Site C, which is eventually going to come onto line. That's a very expensive project.

I'm sure I just woke up Elizabeth May again. Sorry, Elizabeth, you were awake the whole time.

The issue is that even if you have clean power, a lot of it's been lost through the old infrastructure that connects cities with this power. Do you have anything to say on that front, in terms of heat loss?

[Francis Bradley]

Well, I mean, overall we're looking at upgrading systems throughout the network. We're looking at $350 billion in investment over two decades to make sure that the system we're building for the future will be more efficient and able to meet our requirements in the future.

Yes, technology from the 1950s and 1960s is not as efficient as the technology that we would be building today. That's the first part. The other part is, of course, that yes, demand will increase, but when is that demand going to happen? If we can shift that demand, it means we don't actually have to build as much infrastructure. We can just optimize the systems we have and optimize our existing networks.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Even if you updated the line transmission technology to the most modern standard, would there still be a lot of power loss? That, to me, is a question here. The lines, I would imagine, are very expensive to lay.

[Francis Bradley]

It's a question of physics, quite frankly, and there are different technologies. You see an increase in use of direct current in long-distance transmission because the line losses are not to the same degree as you would find in AC systems. There are a lot of technological fixes that can occur, but quite simply, it is a matter of the physics of moving electricity over long distances.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Okay, so where do you see the biggest issue with our system?

[The Chair, Liberal, Yasmin Ratansi]

Mr. Albas, you have about 15 seconds. The biggest issue, he can answer that later. Thank you very much.

We now go to Monsieur Baker for five minutes, please.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thank you, Madam Chair.

Thank you to all of the witnesses for being here today.

Mr. Kingston, my first questions are for you. What is the cost differential for the manufacturers, on average, of manufacturing an EV versus a conventional car, assuming that all other features are the same?

[Brian Kingston]

I'm sorry, but I can't give you an accurate number on that, just given the variety of models and makes out there.

What I can point you to, though, is that a recent study by McKinsey, which looked at what manufacturers spend on EVs and how that compares to the numbers for other vehicles. On average, a manufacturer is losing around $12,000 on an EV that's sold, because of all the technology costs that go into that vehicle. That is a built-in incentive, if you will, provided by the manufacturers.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Is that $12,000 a loss relative to a conventional vehicle or is that net loss?

[Brian Kingston]

That's a net loss.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

That's a net unit loss. I assume that includes the amortization of all the R and D and everything else that's gone into the innovation required to develop and build that car. Is that right?

[Brian Kingston]

That's right, and I'd be happy to share the study, if it's of interest.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Is that your position, though, that the average profit margin on EVs in Canada is a negative $12,000?

[Brian Kingston]

No. That's a global study that looks across all automakers, so I can't give you an accurate number. You could assume it would be in that wheelhouse, but I can't give give you an accurate number.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Okay.

I come have a business background. I used to be with the Boston Consulting Group and have done a lot of work in the auto sector and other sectors. Obviously, as the volume of sales of a product increases, the cost per unit decreases.

If we accept that $12,000 negative—and I'm not saying we do—presumably the profit margins increase substantially if the volume of sales goes up. Let's say the government required that a certain percentage of cars sold in Canada were EVs—say, 25% or 50%—by a certain date? What would that do to those profit margins?

[Brian Kingston]

First of all, if you put in place a mandate like that without consumer incentives, it wouldn't actually do anything until the price came down. That's your first challenge. You can't create the demand. You have to have the demand occur naturally, because the price—

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Mr. Kingston, I've heard your pitch for incentives.

I guess what I'm trying to get at, though, is that if the profit per vehicle went from a negative—which is what you're asserting it is—to a positive, then wouldn't that mean that the automakers could provide the incentives for the consumers in the form of reduced prices? That's what happens in every other product category, and that's what's happened with your conventional vehicle.