Natural Resources Committee on April 16th, 2007

[Tom Wallace]

I believe 23% is the right figure.

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

Thank you, Mr. Chair.

[The Chair, Conservative, Lee Richardson]

Madame DeBellefeuille.

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

Thank you very much for your presentation.

I also understand that we consume a lot of electricity, especially in Quebec, as you say, since electricity is abundant there. We tend to consume more electricity because the rates are low. And we do consume more. A lot of efforts have been made both at the federal level and in Quebec or in other provinces to make citizens aware of the fact that they must reduce their consumption; that is the purpose of all of the programs that offer incentives to citizens to encourage them to consume less energy.

I am a member of the committee and sometimes I have trouble getting my bearings. I try to understand how the new programs work as compared to the old ones, and I receive a lot of calls from citizens everywhere in Quebec. They are wondering about the transition from one program to the next. I would like to take advantage of your presence here to ask you to explain to me how the transition works between two programs that are very similar. What about the citizens?

I would like to ask another question of Mr. Wallace or Ms. Buckley. In 2007, Hydro-Québec will be spending $245 million in order to reduce energy consumption, $105 million of which will find its way into the pockets of Quebeckers. That is twice as much as in 2006. I am curious about the objectives of your energy efficiency programs. I think you referred to this on page 27. Under the former government, the programs were about the same. The government said that these programs were not sufficiently productive, that they would be assessed and that new ones would be created. This is what we now have before us.

I would like you to provide us with your assessment indicators. At the end of 2007, what indicator will allow us to really determine whether the programs are reaching the energy efficiency objectives? How will we, as parliamentarians, be able to evaluate whether these programs have really reached their objectives? I imagine that you have an evaluation grid that will allow us to see whether that is the case. Could Mr. Wallace or Ms. Buckley answer my question?

[Tom Wallace]

I can maybe speak of one program in particular, on the renewable energy side, and maybe Carol can speak on the energy efficiency side.

The major new initiative, at least in my branch, that we announced, was the eco-energy for renewable power initiative. The previous program that was in operation provided the subsidy of 1¢ per kilowatt hour over ten years, but only for wind energy. The new program will extend that to include wind, energy produced from biomass, energy produced from low-impact hydro, and solar. It's a broader series of energy technologies that will be eligible for the program. That's, I guess, the principal difference between the program that was in operation and the new program.

With respect to how we will measure, of course, the target for the program is 4,000 new megawatts of generation, but exactly what target we reach will depend a little bit on the mix among how much small hydro we get, how much biomass we get, and how much wind we get. It will really be up to the market to determine what the generation mix is. The program will by and large operate on a first come, first served basis. We may or may not reach that 4,000-megawatt target, but the energy target will be met almost by definition, because we pay 1¢ per each kilowatt hour of electricity produced from these new sources.

In the case of biomass, for example, one of the issues in our terms and conditions was whether and how we could be assured that biomass projects would lead to reductions not only in greenhouse gas emissions but in other air quality-related emissions. The proponents, as a requirement for getting assistance, will be required to provide us with information on the impact on air quality of their projects. That will again provide us with an ability to know over time what impact we are having not only on the growth of renewable energy but on some other indicators.

[Carol Buckley]

I will reply in English in order to be clearer.

To answer the first question, how do you organize a transition, we had a fairly major transition from a slate of 16 energy efficiency programs to four or five in industrial buildings, residential, and the industrial and transportation sector. We organized the transition over the past year as the programs were being designed and developed for the new slate of programs, and the transition is actually fairly simple because we go down below the program level to the activities. Some activities will be maintained under new programs that we were running under old programs. For example, the Fuel Consumption Guide is one of our most requested publications that Canadians use to choose between different automobiles or light trucks to see which of them is most fuel efficient. We will continue to develop that popular guide that Canadians like to use, so that will remain unchanged. Similarly, our training of R2000 and other energy efficient house builders will continue unchanged. So there's not an awful lot of transition for activities that go on without change.

Some activities are new, and we've had to develop and ready those for a launch on April 1 of this year. The incentives for small buildings and small industry are new, so we had to design a new platform. Some activities are winding down, such as the element of a home retrofit program where we paid for the audits. We no longer do that, so we terminated the agreements we had with the delivery agents and now we're involved in training and certification of those delivery agents. So we have changed our activity from one area to another. We're no longer providing incentives for large commercial buildings. We've done that for eight years and we've trained over 3,000 architects and building designers, and we think they've got a fair amount of knowledge now, so we wound down that activity. We see working with our colleagues in the provinces and with the industry associations about where we should put our efforts. That's how we organized the transition.

You've asked about the difference in outputs between the two programs. I didn't come ready to make those comparisons here, and they're quite difficult comparisons to make because many of the old programs were ending at the end of March 2007. Some of them ended at the end of March 2006. So it's hard to compare programs that weren't necessarily going to continue with the programs we now have.

With respect to the third question--how do we measure the impacts of the programs we've put in place--the Treasury Board of Canada requires us to prepare very detailed volumes called Treasury Board submissions, which have very detailed descriptions of all of the outputs of our programs, including the outcomes that we wish to make happen. For example, each of our programs will describe what activity will take place in the economy. We would translate that into the energy savings. So we have to calculate the savings associated with different types of energy, and then we calculate those into emission reductions. So, for example, for the eco-energy for industry program, we have as a target 0.4 to 1.7 megatonnes. We will be tracking the impact of the program year by year and reporting publicly, and we will report to Parliament on our progress, so we will be able to keep track of that.

[The Chair, Conservative, Lee Richardson]

Thank you very much.

Mr. Bevington.

[Dennis Bevington, NDP, Western Arctic, NT]

Thank you, Mr. Chair, and welcome. It's not often that I get to speak to the same witnesses twice in one day, but it's a pleasure.

I'm interested in a number of things that you brought up here. Of course, many of them relate back to ideas, concepts, and visions that people have for the future of energy in Canada. I look at your provincial generation mix, reflecting the variation of resources across the region.

One of the major issues that has come up in Parliament this year, and which the government is supporting, is the idea of greater interconnection between provinces to take advantage of the opportunities in Canada to increase our use of renewable and clean energy in the electrical generation field. I would think that what we need to see is this vision expressed in some fashion in terms of the potential we have across Canada for the use of renewables and how in the interrelationship between regions of the country, which may have wind power and which may have hydroelectric power, they can take advantage of the opportunities that exist between them for prosperity and sharing. I would think this would be part of the development of an electrical strategy for the country. I just wonder if any kind of work like this has been done through your department.

[Tom Wallace]

The question of development of an east-west grid in Canada is, I guess, one that's a perennial issue that has been studied from time to time. The federal government had a program of fostering regional interconnections for about 25 years, between about 1970 and 1995. The program at that time would provide loans at crown corporation borrowing rates for half the cost of studies of major new east-west interconnections. That policy existed in the federal government for about 25 years but was wound up in the early or mid nineties in conjunction with program review.

Since then, there have been a number of developments under study by the provinces for developing new interconnections. I guess the ones people talk about the most are a major project in Manitoba called Conawapa, into Ontario; the efforts of the Government of Newfoundland to develop the lower Churchill development, which is an ancillary development to Churchill Falls, which is already in existence; and there's a proposal to develop the Slave River deposit in the Northwest Territories and move it down through Alberta to Saskatchewan. There are a number of these initiatives that are really under review right now. In some cases, it's a matter of negotiations.

[Dennis Bevington, NDP, Western Arctic, NT]

There is no overall direction being provided at this time by the federal government for the types of interconnections?

[Tom Wallace]

No, the federal government has no specific policy supporting them, although in the $1.5 billion eco-trust announcement that was made recently when the Prime Minister and Premier McGuinty were in Ontario, the hope was expressed that some of that money could be used to help.

[Dennis Bevington, NDP, Western Arctic, NT]

Now moving to the energy efficiency side, I notice that basically, right now in Canada, we're using about 300 petajoules of electrical energy for space and water heating in residential and commercial buildings. Of course, that's resistance heating of product. Most of this can be modified to other forms of energy. I would say that's one target we really can look at in terms of solar, biomass, or alternative uses of fossil fuels.

In fact, if you look at the situation between Quebec and Ontario, where Quebec uses a great deal of clean energy electricity for resistance heating in buildings and Ontario is using natural gas at about 30% efficiency for generating electricity, the formula between the two regions is skewed. You could simply use the natural gas in Quebec at 100% efficiency—or 93% efficiency in homes—and use clean electricity in Ontario from Quebec. There are some relationships in the use of electricity in space heating and water heating that I think need to be examined.

As well, the numbers give you 200 petajoules for lighting, between residential and commercial. Could we look at a measurement that would raise the standard of lighting in this country so that those numbers could be significantly reduced over a period of time? This is the great debate between compact fluorescents and LEDs and other forms of lighting, but it's a definite target area.

I'd just like you to comment on those two subjects.

[Carol Buckley]

For the first part, we do have information, we work with the industry, and we have direct financial incentives to support solar and biomass heating in different applications in both of our programs. So it's definitely something we support through financial incentives, but just as important, we work on standards and information and training to increase familiarity for consumers potentially able to choose these technologies, but who may not have the same level of comfort with these as they do with regular technologies that these work or are available. Much of the work we do, which may not be so visible to those outside our area, is the work we do with industry associations and consumers to try to demonstrate the ease of getting some of the cleaner technologies into play and to increase their familiarity with them. That speaks to your first question.

Tom may want to come back on that, but before he does, I'll finish up and say that improving the performance of lighting is definitely something on our radar screen. It's a very important initiative we started a year and a half ago with the lighting manufacturers and with the provinces and territories and many of their utilities, in order to design a strategic lighting initiative for the country, basically putting together a strategy to improve the performance of all types of lighting. I expect we'll see regulatory action in due course with respect to this initiative. It's absolutely important to us.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Bevington.

Mr. Allen.

[Mike Allen, Tobique—Mactaquac, CPC]

Thank you, Mr. Chair.

Thank you very much for the presentation. I have about five questions; two of them are just quick clarification questions, I hope.

The first one is on slide 8, where you talk about the federal government playing a complementary role in key areas. I certainly understand the exports through the NEB, but the slide also says the federal government is responsible for international and “designated” interprovincial power lines. Could you just clarify what “designated” means?

[Tom Wallace]

Yes. Under the National Energy Board Act, the government has the power through the Governor in Council to designate an interprovincial power line as coming under federal regulation. This is an amendment to the act introduced I think in the early 1990s, but it's actually never been exercised. I guess we just haven't had the interprovincial power lines that would raise the issue since the amendments were made to the National Energy Board Act.

[Mike Allen]

Thank you.

The second question is on slide 10, which is a concern when you look at our reserve margin, which is going down. We certainly noticed that in the last number of years in Atlantic Canada, where you start to see the demand going up and the reserves going down, which puts us in a pretty tough position. Right now you're talking about our reserve margins being about 15%.

I seem to recall that an optimum margin is somewhere between 20% to 25%. Would you care to comment on that and on what some of the utilities are saying about it?

[Tom Wallace]

I believe the rule of thumb I've heard is about 20%. I know that Hans Konow is going to be a witness, and he's nodding. Subsequently he may be able to shed some more light on this, but 20% as a rule of thumb would be a more comfortable margin for most of the utilities; 25% is getting a little bit high, as a result of overbuilding in the past, but I think 15% is probably getting a little bit tight for what people would be most comfortable with.

[Mike Allen]

Okay.

Slide 13 talks about residential prices as well. All the stats you've given have been for the residential side. Certainly, I can understand that, but the other side of this is the commercial and industrial rate structures. How do those commercial and industrial rate structures compare? I know the commercial and industrial rates are typically quite a bit lower. I'm a little bit concerned about the competitiveness of our industries if our electricity rates go up too much.

Do you have any data on that?

[Tom Wallace]

I don't have the data here today. The data we're presenting is from a Hydro-Québec publication, which is one of the best publications comparing electricity prices across jurisdictions. That information is available for both, as there are a lot of tables for the industrial sector and the commercial sector. If it would be helpful to the committee, we'd be pleased to provide you with a copy.

In terms of the overall message, I think you would find a similar pattern that industrial electricity prices in Canada generally still compare favourably with those in the United States. I don't have the data with me today, but we'd be pleased to provide you with this very good source of information for understanding electricity prices.

[Mike Allen]

On slide 16 you talk about the eco-energy renewable power. There are four examples, which use wind, biomass, hydro, and solar. It's particularly relevant when you talk about a 1¢-per-kilowatt-hour incentive over ten years for new projects constructed in the next four years. Realistically, you're not going to build any hydro project over the next four years unless it's already sited or it already has environmental permits. So wouldn't the logical contenders, which is not such a bad thing, be the wind and biomass and solar?

[Tom Wallace]

I think we're talking about relatively small hydro projects here. In fact the criteria is that it be EcoLogo certified to benefit from the subsidy. We do anticipate, in places like British Columbia, for example, that a number of projects will be supported under this initiative. It's not a program that is really directed at assisting big hydro, which tends to be economic in its own right and, as you say, has a very long lead time, beyond the horizons of this program.

[Mike Allen]

The last question I have is on slide 22. You talk about the potential energy savings in each of the categories. In residential, there are savings of up to 27% by 2025, industrial savings of 14% by 2025, and commercial savings of 23% by 2025. With respect to each of these categories, are you assuming those to be steady-state savings, or front-end-loaded savings, or are you assuming we'll achieve those more towards the 2025 timeframe? That means something completely different to me, depending on what your assumptions are.

[Carol Buckley]

First up, I'd say these aren't savings that we're planning. This was a study that was undertaken for a federal-provincial-territorial work group. It's based on whether certain actions are taken across the economy. It's based on the technological opportunities and instruments that are available to governments. These are the potential savings that could result. They are spread over that period of time, so some of them might be front-end loaded, as you describe. Some might require major changes in equipment, which doesn't happen very frequently. That's why going to 2025 is useful, because we can pick up some of those that will be economic that you can't pick up in the nearer term.

To summarize, there are a large number of activities, including actions taken by governments, that could put these savings in place. The study helps us identify those potential savings in terms of the sectors and the uses of electricity and other forms of energy, and what kinds of policy instruments governments could consider if they want to see those kinds of savings.

[Mike Allen]

Are those assumptions available?