International Trade Committee on Nov. 29th, 2022

[Francis Bradley]

With regard to the top three priorities for an electrification strategy, I think the first priority would be having a clear understanding of, to put it bluntly, who pays and who pays for what. The desire to lower our carbon footprint is something that will fall disproportionately on different people depending upon what the resources are that are available in their jurisdiction.

If decarbonization is essentially a public good, then the question is to what degree that should be borne by the ratepayer versus the taxpayer. When costs are borne by a ratepayer—that is to say, it goes on somebody's electricity bill—it also falls disproportionately to people who are lower income, as opposed to when it's borne by the taxpayer where there is a more progressive approach to that.

I think the first thing is a clear understanding from the federal government's perspective of what the costs are going to be and how they're going to be borne.

I think the second thing is a road map of how the different levels of government are going to be able to work together. We talked earlier about these regional tables, and they may be a critical piece of how we can get alignment across different levels of government.

The third piece, and part of the road map, should be an indication of how we're actually going to get things built, and get things built more easily. It is hugely complicated to build infrastructure, whether it is a transmission line, a hydroelectric plant or a wind to hydrogen plant, for example. There was a recent announcement of a proposed plant in Labrador that can be built in 18 to 24 months, but it's going to take eight to 10 years to get the permits and to go through all of the hoops that are required to build that. Clearly, being able to figure out how we can actually get things built more efficiently needs to be part of the road map as well.

[The Chair, Liberal, Judy Sgro]

You have 30 seconds left, sir.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Mr. Bradley, what do you think about the need for interties between provinces? Is that something your association considers?

[Francis Bradley]

Yes. The future is going to require every type of non-emitting electricity. At the grid scale, we're going to need more hydro; we're going to need carbon capture utilization; we're going to need wind; we're going to need solar; we're going to need distributed energy resources, and we're going to need more transmission to be able to move this between different jurisdictions, absolutely.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

On to Mr. Carrie or five minutes, please.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Madam Chair.

Thank you to the witnesses for being here.

Coming from Oshawa, I know that manufacturing is incredibly important to us in Ontario. With the study, I've become extremely concerned. We've heard some overall themes of concern, as repeated today, around the sense of urgency and certainty in policy.

Ms. Citeau, I believe you mentioned competitiveness.

We've heard from other witnesses that we have to stop these self-inflicted wounds. We've learned that we can't out subsidize the U.S.A. We had witnesses here before the fall economic statement. The auto parts industry said the IRA was the fix for the build back better bill.

We knew this was coming. It was passed on August 16. It was introduced in the United States, I think, last spring. Now we're finding out that a lot of this fix is going to be in the spring budget—a year after these messages have gone out to industry. It seems that's the problem. It seems that Canada is always responding and reacting instead of getting ahead of it.

Companies like Toyota were in front of us, and they've said that the window for investment is closing. They are concerned that firms will be penalized for choosing to build vehicles and batteries in Canada. The CME said the IRA could result in the flight of capital investment out of Canada to the United States. These things are understandable because if you're a company and you're going to make a once-in-a-generation investment, with the political climate in the U.S—the Republican Lindsey Graham made some statements—these incentives may only be there for a short period of time. We therefore wanted the fix in the fall economic statement. It looks like we're not going to get any clarity or certainty, at least not until the budget.

I'm very concerned. The Americans were even told that there's a naughty and nice list here in Canada. Some companies are naughty and get punished, whereas in the U.S. everybody is nice, so everybody can take advantage of these incentives.

I think my question would probably have to be to Ms. Citeau and Mr. Scholz.

What impact is the flight of capital flight out of Canada into the United States going to have on your industries?

Maybe we can start with Ms. Citeau and then talk to Mr. Scholz.

[Claire Citeau]

Overall, I think our members are asking that Canada have two things: a competitive access to global markets and also that it remain a competitive jurisdiction. Any investor, whether in Canada or around the world today, looks at where their best return on investment will be and where to access key markets.

Canada and the U.S., being integrated and so close to one another, compete quite a bit from that perspective.

On the food manufacturing side of things, yes, the level of investment does impact the competitiveness of the sector, and the IRA adds pressure. As I briefly mentioned, it's the same on biofuels. The IRA introduced a set of measures that will ultimately impact the investment climate in Canada and will perhaps discourage companies from investing in Canada or discourage Canadian companies from investing further in Canada or perhaps encourage them to invest elsewhere.

I think these questions will have to be looked at on a sectoral basis, whether food manufacturing, canola or biofuels. We're happy to have our members circle back, but perhaps a more definitive and precise policy—

[Colin Carrie, Conservative, Oshawa, ON]

Send that to committee because I have about a minute left, and I wanted to hear what Mr. Scholz had to say. Could you give us some policy recommendations before the budget so that we can give that signal of certainty to those investors? I'm worried we're going to be losing these once-in-a-generation ones.

Mr. Scholz, could you please elaborate on what impact it's going to have on your industry if we see this capital flight from Canadian markets? You did talk about some policy around the clarification for ITC and labour. Could you get those recommendations to committee if we don't have time to go over them today?

[Mark A. Scholz]

Yes, for sure. Thanks for the question .

At this point, I think it's difficult to determine or quantify what the true financial and investment impact is going to be. I think for the first time Canada has at its southern border Americans wanting to “one-up” Canada, particularly when it comes to clean investments.

One of the things I want to point out about our policy proposal, which I've given to the clerk, as well as complementing the clean technology investment tax credit.... What we're proposing is something that would allow Canada to be a pioneer, a trail blazer when it comes to the decarbonization of a critical industry, the energy services space. That is not only going to be continuing to develop lower hydrocarbon-based resources but will also be at the front lines of things like the lithium extraction in western Canada, hydrogen, geothermal, helium.

If you talk to anybody on this committee here, all of the witnesses, we're so aligned on so many issues because I think it's going to take a community of industries that will really have to work together in collaboration to achieve some of our clean-growth strategies.

Again, I think it's hard to say at this point and to really quantify what the impact of investment is, but in Canada there's a huge opportunity to make some critical investments in our space. That's what we're advocating for, and that will allow us to be trailblazers when it comes to resource extraction within our subsurface resources.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Scholz.

We're on to Mr. Miao for five minutes, please.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you, Madam Chair, and thank you to all the witnesses for your appearances today.

Mr. Bradley, to reach our goal of net zero by 2050, Canada's clean energy resources will require transformational investments to modernize our electricity grid, as you mentioned in your opening remarks. We heard about this from the Canadian Nuclear Association last week as well.

Can you expand a bit on the road that you see wireless technology playing in grid modernization.

[Francis Bradley]

Yes, absolutely. Thank you for that.

Again, that's going to be foundational as well. I talked earlier about needing all of these resources and all non-emitting resources. We're going to need hydro and wind and solar and distributed energy resources and so on. However, our ability to actually maximize all of those resources and to be able to do so in an efficient manner is also going to require a deployment of new technology, everything from AI to quantum computing by the time we get to 2050.

In terms of wireless technology, that is going to be really the kind of.... We're moving from a backbone of wires that simply move kilowatt hours to a backbone that's also going to be moving the information that will be required to manage this system in the future.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you for that.

The next question I'd like to ask of Mr. O'Connor through the Chair.

What sort of economic spinoff do you anticipate that the clean technology tax credit laid out in the fall economic statement will have on Canadian renewables industries? Could this result in more jobs in renewable energy, as well as an increase in exports?

[Don O'Connor]

I'm not sure the investment credits will be large enough to offset the threat posed by the subsidized production in the United States. We have a number of projects in development in Canada that have not yet reached a final investment decision. I'm sure the fact that the U.S. production will come into Canada subsidized, thus lowering the selling price that a Canadian producer will achieve, could have negative impacts on companies when they go to make that final investment decision.

[Wilson Miao, Liberal, Richmond Centre, BC]

Could this result be more jobs in the industry, from your perspective?

[Don O'Connor]

We could have more jobs if these projects in Canada are actually finally built in Canada. There are a number of projects that have been announced, but at least the same number companies that are working on that haven't yet been announced. We're talking about investments of billions of dollars and 40-50 jobs per plant, that kind of thing, so there's big opportunity.

[Wilson Miao, Liberal, Richmond Centre, BC]

Thank you very much for your answers.

Next I would like to go to Mr. Wilson. In your report entitled “CanREA’s 2050 Vision: Powering Canada's Journey to Net-Zero” you referred to Canada as having untapped potential in wind energy. Could you expand on where you see this untapped potential for wind energy in Canada, and are there any barriers to having wind energy in Canada?

[Evan Wilson]

Thank you for the question.

When we talk about the untapped opportunity for renewable energy in Canada, we are really talking about opportunities that exist across the country. Right now we are in the midst of conversations and procurement processes really from coast to coast as we see conversations in Nova Scotia, Quebec, Ontario and Saskatchewan as well as a real boom in the deregulated market in Alberta.

Really when we're talking about the untapped resource, we are talking about the opportunities to deploy wind and solar in all of these jurisdictions. There is likely to be a pretty great opportunity in provinces like Alberta and Saskatchewan and Nova Scotia, where there are highly emitting grids and there is opportunity to deploy wind and solar to reduce emissions in those grids as we move forward to net zero 2035 for our grid. Really we do see lots of opportunities here.

I would say that in the context of this conversation, really the competitiveness challenge that we are seeing from the Inflation Reduction Act in the U.S. is a barrier, or it will become a barrier very rapidly. That's why we advocate for the government to have a rapid response both on the programming side—and we have seen pieces of that with the fall economic statement—and on the policy side. If we get a longer-term view of the target price, that does send a signal to bring on renewable energy in the provinces that require a heavier decarbonization lift.

The clean electricity regulation will send a signal to all of the system operators to begin preparing their plans and their grids for a decarbonized system. Then we think on the programming side seeing the launch of the refundable investment tax credits and the finalization in the 2023 budget will be very helpful. We would also be eager to see the launch of the pan-Canadian grid council so we can talk about some of the great modernization that is required to ensure that we can affordably and effectively reach net zero by 2035.

[The Chair, Liberal, Judy Sgro]

Thank you very much, Mr. Wilson.

We go now to Mr. Savard-Tremblay for two and a half minutes.

Go ahead, please.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you, Madam Chair.

My next question will again be for Mr. Wilson of the Canadian Renewable Energy Association.

A number of witnesses appearing before the committee have told us about their concerns in their respective fields. They fear a loss of investments, and even the relocation of production and activities to the United States, if the American inflation reduction bill passes.

Do you share these kinds of concerns for your sector?

[Evan Wilson]

Yes. The fear for our sector is that the benefits and the long-term policy certainty or the long-term program certainty that comes out of the IRA cause quite a number of our members to have concerns that capital and financing that they require to deploy and operate their projects in Canada will take more interest in opportunities in the U.S. Quite a number of our members are multinational organizations with development teams across North America, so you have project developers who are competing with their own colleagues in house for access to board decisions to move forward with projects, and quite a number of these members are saying it's becoming a lot more competitive when they are making presentations to their board about making final investment decisions. The IRA and the benefits of the IRA and the long-term vision that is provided by the IRA are just making the U.S. a focal point, and it's making it very difficult for us to remind decision-makers that there are opportunities here in Canada.

That's why the IRA response is so critical, because even within organizations you're hearing developers who are located in Canada seeing the senior executive and senior boards' attention going to the U.S. because it looks as though the U.S. not only has a better and more generous environment but also is paying more attention to renewables, and it seems to be a place for longer-term investment.

I'm certainly hearing this, but I'm also hearing from members that a full-voice response from Canada—which we saw the beginnings of through the fall economic statement—really allows them to refocus decision-makers on the Canadian market, and we think that a very quick response here can effectively bring investments into the country.

[The Chair, Liberal, Judy Sgro]

Thank you.

Mr. Cannings, go ahead, please, for two and a half minutes.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you.

I'm going to continue with Mr. Wilson and basically follow up on the question I asked Mr. Bradley about the strategic steps the federal government has to take. He asked who pays and how we are going to build out this infrastructure. Perhaps talk about what your feelings are in terms of what the federal government should be doing to help build the infrastructure we'll need, whether it's by having interties that will balance electricity demands between provinces or renewables and base load, smart grids, energy storage.... Could you just give us some thoughts on that, on what you think the federal government should be doing to actually help build that infrastructure?

[Evan Wilson]

Thank you for that question.

I would echo the commentary about the importance of the regional tables for those discussions. Every province is going to have different needs when it comes to decarbonization, specifically decarbonization of the grid.

I mentioned earlier that we do see opportunities from coast to coast to coast, but we also think and understand that the need to decarbonize the grid, let's say in Saskatchewan, is going to be different from the infrastructure needs to meet growing demand in Ontario. We think that, overall, the work that we can see coming out of these regional tables is going to be critical, and it is going to be what, hopefully, sets the strategy for what's needed in the individual provinces.

We also urge the government to launch the pan-Canadian grid council that was promised in the 2021 platform. We expect that bringing together experts from all across the country, experts from across industry, academia, indigenous communities, provinces and municipalities to talk about what these priorities should be in order to develop a grid strategy or a grid modernization strategy will be very critical.

Right now there are a lot of conversations going on, but they're happening in a lot of different rooms. Having a pan-Canadian grid council that can speak holistically about everything we need to do to bring the country together on this heavy lift will be critical as we get closer and closer to 2035, and the best time to start that is now. We'd like to see that launched to start discussing the strategy in earnest.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you.