Natural Resources Committee on April 16th, 2007

[The Chair, Conservative, Lee Richardson]

Welcome back. We'll begin meeting 42 of this session of the Standing Committee on Natural Resources.

I have a short bit of housekeeping to do before we begin, if I could beg the indulgence of the witnesses particularly and the committee. I just received word that the operational side has been approved by the whips, and this will clear the tracks for a visit to Churchill Falls on April 30. So I need a motion to that affect.

Monsieur St. Amand.

[Lloyd St. Amand, Liberal, Brant, ON]

Thank you, Mr. Chair.

I'd be pleased to move that the proposed operational budget in the amount of $34,001 on the study of the greening of electricity consumption in Canada, for Monday, April 30, be adopted.

(Motion agreed to)

[The Chair, Conservative, Lee Richardson]

We'll be getting further details on the logistics, but essentially it's one day from Ottawa, returning to Ottawa the same day.

I think that's all we need to talk about at the moment. If there's anything else, I encourage members to send me a note so we can take care of it at the end of the meeting.

I'd like to proceed with our witnesses today, pursuant to Standing Order 108(2), our study of greening of electricity consumption in Canada. We're going to hear first from the Department of Natural Resources, then the Canadian Electricity Association, and then the Canadian Gas Association.

I want to welcome Tom Wallace and Carol Buckley from the Department of Natural Resources. Perhaps you can give us your opening comments, at your discretion, and then the committee can ask any questions they might have arising from your remarks, or other questions.

Tom will begin.

Thank you very much.

[Tom Wallace, Director General, Electricity Resources Branch, Energy Policy Sector, Department of Natural Resources]

Thank you, Mr. Chairman. It's a pleasure to be here.

We have provided committee members with a deck called “Electricity Supply and Consumption in Canada”. We thought it might be helpful to the committee to provide a bit of context for the electricity sector in Canada: responsibilities of the provincial and federal governments; some of the challenges facing the electricity sector in Canada; and some federal government support programs for meeting one of those challenges, which is ensuring a more sustainable, environmentally benign electricity supply.

Carol Buckley will be able to give the last half of the presentation, which will drill down further into electricity consumption patterns and some of the potential for energy efficiency in Canada and some of the NRCan programs directed at bringing that about, if that would be helpful.

I'll speak then to the first half of the deck. In terms of electricity supply, Canada is fortunate in that our electricity supply is among the most diverse in the world. We also have a very high percentage of energy that is produced by virtually emission-free sources. You can see in slide 3 that 59% of our electricity comes from hydro and an additional 15% from nuclear. It's quite a bit different in the United States, for example, where 72% of their electricity comes from fossil fuel generation. We rank a surprising seventh in the world in terms of total electricity generation. For a relatively small country like Canada, that's fairly significant. I think it speaks to our electricity needs, but also the potential we have in this country for generating electricity economically.

Provincial governments, of course, determine their generation sources, and the mix across Canada differs significantly and very much reflects the resource endowments of the respective provinces. You can see on slide 5 that four of our provinces--British Columbia, Manitoba, Quebec, and Newfoundland--are really dominant hydro producers. Saskatchewan and Alberta generate most of their electricity from fossil fuel sources, as well as Nova Scotia. Ontario and New Brunswick have a more mixed supply, with nuclear, coal, and hydro contributing to the mix.

The trade patterns of electricity are quite interesting and are shown on slide 6. The bulk of trade and electricity is north-south as opposed to east-west. British Columbia, Manitoba, Ontario, and Quebec are major exporters and on occasion importers of electricity. The flows of electricity north and south tend to be very much higher than the flows of electricity east-west, reflecting in part the long distances between provinces in Canada and the population being essentially strung out along the border. An exception with respect to interprovincial trade--and I know you're going up to Churchill Falls--is that about 60% of the total electricity traded from one province to another is accounted for by electricity sales from Newfoundland to Quebec from Churchill Falls.

Here are a quick couple of slides on responsibilities. Of course, provinces are really responsible for the development, pricing, generation, transmission, and distribution systems. The federal government really plays a more complementary role. We're responsible for international and designated interprovincial power lines. The National Energy Board regulates electricity exports. The Canadian Nuclear Safety Commission regulates nuclear safety. A number of federal agencies undertake research and development, including NRCan, AECL, and the National Research Council. The environmental impacts of electricity generation are very much an agenda item of Environment Canada and Natural Resources Canada.

Four big challenges facing the Canadian electricity sector are: ensuring an adequate supply; ensuring a reliable supply that operates 24 hours a day; ensuring electricity prices that are acceptable to consumers and allow for economic growth; and ensuring the environmental sustainability of electricity generation.

In terms of adequate supply, the Canadian electricity sector is increasingly facing challenges, as shown in chart 10. For the last 15 years or so, we have seen a steady increase in peak demand for electricity while generation has not really kept pace. As a result, the reserve margin, the surplus of generating capacity over peak demand, has declined on a national basis to about 15%, which is getting pretty tight.

In terms of reliable supply, of course, the seminal event was the 2003 blackout. Since then, there's been quite a restructuring of the system for managing reliability in North America. Canada and the U.S. have established an international electric reliability organization, and the system has moved from one where electricity standards were voluntary to one where they're mandatory. This has been a fairly major occupation within my branch. We've been working with the provinces through the Council of Energy Ministers to ensure that, on the Canadian side, we have the capacity to have mandatory reliability standards here. And we're pleased to see that all of the provinces have committed to taking the steps necessary to do that.

Canada is fortunate. Because of our resource endowment, we have relatively low electricity prices relative to the rest of the world. You can see that in slide 12. Canada and Norway, because of our vast hydroelectric potential, are well-positioned, particularly vis-à-vis countries in Europe, or Japan, where the electricity prices facing consumers are considerably higher.

The prices, however, vary quite a bit across the country, depending on resource endowment. As you can see on chart 13, the provinces that are the major hydro producers generally have the lowest electricity rates in Canada. You can see Vancouver, Winnipeg, Quebec. Generally, electricity prices are considerably lower than in those provinces that rely more on fossil fuel generation. But you can see, vis-à-vis the United States--that's our principal trading partner--that even the higher-cost jurisdictions in Canada are still relatively competitive with the United States, and many of them are quite a bit lower.

There are, however, a number of factors putting upward pressure on prices. Of course, high and rising fossil fuel prices are a big factor. As we move up the supply curve for hydro, resources become more and more expensive. Some jurisdictions have faced very significant electricity price increases as a result of these pressures.

The fourth challenge is really environmental sustainability. Although 75% of our power is generated from zero or low emissions sources, it's responsible for more than 15% of Canada's greenhouse gas emissions, 27% of sulfur dioxide, and 37% of mercury. Coal-fired generation is the largest contributor to these emissions.

On the final slide, before I turn it over to Carol, of course, the federal government has recently put in force an array of initiatives to support the cleaner sources of power. The eco-energy for renewable power program provides a one-cent-per-kilowatt-hour subsidy for the low-impact renewable energy sources, wind, small hydro, biomass, etc.; an eco-energy technology initiative, which provides support for research development and demonstration; the eco-trust for clean air and climate change, which provides a fund divided among the provinces; and most recently we have announced, with Alberta, a CO₂ capture and storage task force, mandated to provide recommendations on a large implementation plan for large-scale CO₂ capture and storage in Canada.

I hope that gives you a bit of a sense of the tree tops, I guess, of electricity consumption in Canada.

With your permission, I'll turn it over to Carol to get a little bit more detail on consumption.

[The Chair, Conservative, Lee Richardson]

Thank you, Tom.

I should have mentioned that Mr. Wallace is the director general of the electricity resources branch in the energy policy sector of NRCan.

We're now going to hear from Carol Buckley, who's the director general of the office of energy efficiency.

Ms. Buckley.

[Carol Buckley, Director General, Office of Energy Efficiency, Department of Natural Resources]

Thank you.

From the supply and some of the issues facing us there, I'm going to talk about demand, the use of electricity, and what we can do about that.

We will be starting on slide 18, which is a picture of electricity consumption in Canada by sector. We see that electricity use has risen 22% over the past decade and a bit. There has been a 25% increase in the number of households in Canada over that period, a 24% increase in commercial and institutional office space, and a 45% increase in industrial GDP, so as the economy rolls along, so does our demand for electricity.

On the next slide, we give a snapshot in 2004 of what the different sectors rely on electricity for. In the residential sector, we see that space heating, water heating, and appliances are the lion's share of our demand for electricity. In the commercial and institutional sectors, motors, the plug-in load--such as computers and other equipment that gets plugged into the wall--and lighting make up the lion's share of the uses of electricity. At the bottom of that slide is a list of the different industrial sectors and their share of industrial electricity use. Of course, we could go into even more detail and look at the breakdown of motors and lighting and other uses for electricity within each of those sectors, but I held it at this level of detail.

On the next page we say that managing electricity use through conservation activities and efficiency activities brings great benefits. It's through other activities as well, but I'll concentrate on those two.

Obviously, to the extent that you don't use an energy form that's based on a carbon form of generation and supply, such as electricity, you're going to improve your environmental impact, because energy is responsible for so many emissions; managing your electricity use has a strong impact on environmental protection, which is a strong objective of the Government of Canada. It's also a strong objective of many of our colleagues in the provincial and territorial governments.

Energy security is also a reason that governments, including the federal government, are interested in energy efficiency and managing electricity use to conserve our supplies of electricity and other sources. This is particularly resonant in provinces like Ontario, for example.

For consumers, the benefits of saving electricity revolve around saving money in the economy. In 2004, we estimate $14 billion was saved in energy, a portion of which--probably about half--was electricity savings, so there are lots of reasons to manage electricity use.

Slide 21 shows us that across the world, in very diverse economies, managing energy use--not just electricity, but managing energy use--is often about half the strategy to managing climate change. In independent research in very different economies, energy efficiency--managing energy use--is shown to make up about half of the identified savings. Of course, managing electricity demand is part of managing energy use, depending on how much of your energy comes from electricity and on how much of your energy comes from carbon-based electricity.

The next slide breaks it down in Canada. There are a number of studies I can quote here. I stuck to one that we did in conjunction with some of our colleagues who are in this room today--the Canadian Gas Association, for example. In this study we looked at the potential through energy efficiency and energy conservation. They found that these measures, if implemented by governments across Canada, could reduce the growth in energy demand by half, and about half of that would come from electricity savings.

The slide breaks it down by the different sectors. In the residential sector, for example, electricity savings of up to 27% were possible. A study like this is very useful to us and to the government because we want to plan and develop our policies and programs and see what kind of potential we should be addressing with our programs.

On the next slide, we've broken down a more technical look at the source of electricity savings when you manage electricity use. We see that major appliances, the standard appliances we use in our homes for washing and drying and cooking and so forth, have improved in their efficiency so much that absolute electricity use has declined by 12% over the past decade. The bad news is that all the other things we plug into the wall that use electricity have had an electricity growth of 71%. So while we're doing really well in some things, a whole new platform of goods that are using an awful lot of electricity have grown up, and we have to get a handle on that.

Some of the other improvements in efficiency over the past decade or so are noted on the slide.

So what can we do about managing electricity use? Governments have a wide array of instruments available to them. Some are open to all levels of government. Some are open to one order or the other--for example, regulations. The federal government has the authority to regulate the import of energy-using equipment and the shipment of those products across borders, but the provinces have the jurisdiction to regulate the sale within a province. Any jurisdiction, obviously, has the authority to put in place technical, training, and financial incentives, research and development. Building codes are under provincial jurisdiction, which has an impact on electricity use, and then there's labelling, taxes, and so forth.

Moving now to the recently announced new programs in energy efficiency, these are colleague or sister or brother programs to the ones that Tom Wallace just mentioned, the eco-energy efficiency programs partnering up with the eco-energy renewable programs. We have a home retrofit program that is intended to cover 140,000 homes over the next four years, and we expect about 23% of the savings that home owners will put into place will be electricity savings. We're offering incentives to small and medium business--that's both industrial businesses and commercial businesses--as well as small institutions. We'll cover up to about 800 of those, and about 40% of their savings will be from electricity.

On the next slide we have other programs we offer that don't have a financial incentive associated with them, but they will also result in electricity savings. We're working on better training for builders so that they build homes that are at a higher level of efficiency, home retrofit information, and for industry, technology transfer on more energy-efficient technologies, including electricity-using technologies. We estimate about 60% of the savings in the industrial sector will come from electricity savings.

The last slide I have deals with regulations. I just wanted to wrap up with one minute on regulations, because these are electricity-using products, and we have a significant regulatory agenda here in Canada. We regulate more products, according to an APEC study, than any other country in the world. Canada regulates 47 products. The United States regulates 39, followed at some distance by China and Korea and then Europe, way down the list. We are also a leader, in many cases, in terms of the stringency of the performance of our standards.

We have the intention to bring in 30 new standards or improve the rating requirement of products in the coming four years under the eco-energy regulations, and we were looking for changes to the Energy Efficiency Act under the Clean Air Act in order to broaden our powers, but we can still proceed with 28 of the 30 of those regulations regardless of the changes to the Clean Air Act.

That concludes my description of electricity demand management.

There's a remaining slide, for your information, that lists some of the products we're intending to regulate over the next four years.

Tom and I would be happy to take your questions.

[The Chair, Conservative, Lee Richardson]

Thank you very much. That is exactly what we were looking for. It's a really good overview, and I very much appreciate the time and effort you took to put that together.

I would like, on behalf of the committee, to recommend it to the researcher. In terms of first draft, this is a really good way to start off--where we are, what the problem is--and perhaps we might append many of these statistics to the report when we're done. It's a very good conversation.

Thank you very much.

We're going to start with Mr. St. Amand.

[Lloyd St. Amand, Liberal, Brant, ON]

Thank you, Mr. Chair.

If I may just echo what Chair Richardson has said, thank you very much for the presentation and the compelling detail you have provided to us, detail that says to me that we are, as Canadians, spending relatively little compared to other countries for electricity. It certainly seems to be the case. I'm not sure there's a direct tie-in between the relatively low price we pay and the consumption, but I dare say there probably is.

I'm just wondering, particularly with respect to other countries where the price is considerably higher, if it can be quantified. I appreciate that it's apples to oranges, but is the per capita usage or consumption of electricity in Japan, for instance, appreciably less than it is here in Canada?

[Carol Buckley]

I don't have those statistics in my head, but we can obviously provide them for you.

I can answer the question more anecdotally by saying that if we make international comparisons of Canadian practices to practices in other countries, we do see quite significant evidence of more conservationist behaviour, whether it's in the size or the frequency of the multiplicity of electricity uses in a home. For example, we see the industrial sector avoiding electricity use in some sectors, using other fuels where possible. Very regional, local cost-related behaviours will grow up, and when you have relatively inexpensive electricity prices, you see different industries grow up. The aluminum industry in Quebec is an example, and in B.C., because of the availability of low-cost and high-volume electricity.

We also have to think of that as policy makers. One of the reasons I wanted to spend a minute on regulations was that we enjoy relatively low electricity prices. We have put quite a lot of emphasis on addressing consumers' choices with respect to equipment through regulations so that we didn't leave it to their choice, given the relatively low prices, to buy any product they could, but we would be more aggressive than some other countries in taking the least performing pieces of equipment right off the market.

When I found that only 6% of the European Union's motors would meet our 1997 motor standard, I was at a loss to figure out why. I realized they probably have more natural conservation behaviour than we do, and we have to work harder at putting the tools in place to manage the demand.

[Lloyd St. Amand, Liberal, Brant, ON]

This is also anecdotal, but I recall attending the opening of a plant or some such place. Speaking there was the assistant deputy minister of energy for Ontario, an impressive woman who made the point that—I'm using her phrasing—we are energy gluttons. At least Ontarians are energy gluttons, only part of which is explained by climate forces relative to Florida, because compared to the state of New York, which enjoys or tolerates a climate similar to Ontario's, the per capita consumption of electricity is appreciably lower.

If I may, I have one last question. It concerns page 15 of your well-organized deck. I think I understand it. The red slice of the pie I clearly understand, and transport as well, but what exactly is “other energy”--that 36%? It's carved out separately, of course, from industrial.

[Tom Wallace]

A large part of that is petroleum and gas in all sectors.

[Lloyd St. Amand, Liberal, Brant, ON]

Thirty-six percent of electricity is utilized in order to obtain power?

[Tom Wallace]

Pardon?

[Lloyd St. Amand, Liberal, Brant, ON]

I'm sorry, I mean it's used to produce energy.

[Tom Wallace]

Yes. I believe the 36% is primarily production of oil and gas and not the energy sector.

[A voice]

Yes. The slide shows total greenhouse gas emissions. It's the contribution of other consumption and production of oil and gas to emissions.

[Lloyd St. Amand, Liberal, Brant, ON]

I ask that only because--

[The Chair, Conservative, Lee Richardson]

Excuse me, we have a speaking order, and Mr. St. Amand has the floor.

[Claude DeBellefeuille, Bloc, Beauharnois—Salaberry, QC]

Mr. Chairman, I have a point of order. There was no simultaneous interpretation when the person at the back spoke.

[The Chair, Conservative, Lee Richardson]

If you're recognized by the chair, you can raise a point of order.

Do you have a point of order?

[Claude DeBellefeuille, Bloc, Beauharnois—Salaberry, QC]

When the witness at the back speaks, there is no interpretation.

[Carol Buckley]

I will repeat my answer. He said that the other energy sources, that account for 26%, are sources of energy other than electricity, for instance oil, gas and others. We are talking about greenhouse gases produced by other forms of energy.

[Claude DeBellefeuille, Bloc, Beauharnois—Salaberry, QC]

Thank you.

[Lloyd St. Amand, Liberal, Brant, ON]

I have a last question, if I may, Mr. Chair.

My query is based on what had been my understanding--that the transportation sector is responsible for or accounts for about 12% of greenhouse gas emissions--but that seems to be rather understating it from what I see in the chart.

[Carol Buckley]

Yes.