Natural Resources Committee on April 18th, 2007

[Richard Thorne]

The solar perspective is very similar to that of wind. A lot of it is capital-intensive, so we find that our feedback is positive on these incentives from the tax base. A lot of the limitations that were in class 43.1 were removed in class 43.2, so they've now taken off the restriction on the size of the implementation that can now use that incentive, as well as photovoltaics that are used in building-integrated construction. So some limitations have been taken off.

From our point of view, this is an important incentive from the federal standpoint. The customers certainly use that in their investigation of the implementation of solar power. It's probably one of the ways the federal government can continue to support our industry and further investigate even more incentives in that regard.

So we're glad to see that it has been extended and that some of the limitations have been taken off. It's important.

[Jacques Gourde, Conservative, Lotbinière—Chutes-de-la-Chaudière, QC]

One of the problems with renewable energy was that production costs were higher than in the case of hydroelectric power. It seems that over time, energy costs have risen, while the cost of producing renewable energy has declined.

How long do you think it will be before renewable energy costs can compete with the cost of producing more traditional forms of energy? What supportive measures does our government need to introduce to compensate for the time needed to make renewable energy truly competitive and expand production in Canada?

[Denis Tanguay]

What sets our industry apart from that of my two colleagues here is that we do not produce electricity. The competitiveness of the geothermal energy industry does not lie at the production level. The issue is more the substantial initial capital costs associated with the installation of a geothermal system. In this regard, the important difference between geothermal energy and other forms of renewable energy is the fact that we think about energy in terms of kilowatt-hours, cubic meters or litres of oil or gas. In our industry, we think more in terms of calorific power, that is joules or BTU value, because we do not produce kilowatt-hours that are sold to the grid.

To answer your question as to whether we can compete or how long it will take us to become competitive, I would answer that we are fully capable of competing at this point in time. The problems we have pertain to manpower training, the professionalization of the industry, the creation of an infrastructure to support growth and the development of policies to give geothermal energy a profile as a major player on Canada's energy industry landscape. I say this because despite substantial initial costs and substantial investments to install this kind of system, there are at present funding formulas in place that make installation possible. From the customer's standpoint, it's a totally beneficial and cost-effective option. To our way of thinking, we are competitive, hence the reason why grants are perfectly appropriate. However, until now, we have focussed on manpower training, a far more important consideration for us than grants or subsidies.

[Robert Hornung]

I mentioned earlier in my presentation that I thought the crossover point between wind and other technologies would be somewhere between 2010 and 2020. Does that mean federal support will be required after 2011, when the existing ecoENERGY for renewable power program is likely to end? Probably yes, unless we see a strong market signal coming through an emissions trading system. That will depend on the limits that are set and everything else within that system. But I think there's a possibility that it will continue further into the decade.

You contrasted wind and hydro. I just want to remind the committee that provinces like Quebec are aggressively pursuing wind energy because they see it as a tool that will help them more strategically manage their hydro resource. Because wind energy production peaks in the winter, it provides an opportunity to save and store hydro power in reservoirs so it can be utilized in the summer months. From a Hydro-Québec perspective that's very important, because Hydro-Québec gets paid most for its exports of electricity in the summer, when demand is highest in the U.S. So wind facilitates the more strategic management of hydro-electric resources.

[Richard Thorne]

Again, from a solar perspective, we wouldn't exactly know when the crossover point would be.

I think one of the other unknown elements involved in all energy production is the amount of support it gets from many levels of government. So when you look at the nuclear industry, which started in the forties and continues today, the amount of money being poured into that industry that is not factored into the cost per watt is somewhat unknown from a support perspective.

I think all of the renewable sectors could probably easily compete if we had the same type of support.

Bear in mind that all energy produced in Canada has ramifications. When you build a dam, you can certainly look at the amount it costs to put in concrete, but when you look at the number of trees and animals displaced, it's pretty hard to put a cost on that.

Again, there's a lot of controversy that goes with all energy development, except sometimes in the renewable field, particularly with solar power because it's so passive. It can be put on roofs, it can be built into roofs, it can be built into windows or into all sorts of infrastructure already there and that we're using.

So when you talk about the cost of energy, again, it's really hard to wrap one's arms around each watt, but I would say that if the solar industry had as much support as other industries did, we'd be very successful in Canada.

[The Chair, Conservative, Lee Richardson]

Thank you.

We're going to move to round two. I would suggest that we might want to limit this next round to half an hour, because we have some other business we need to discuss at the end of the meeting. So I'm going to try to get through this.

We have Mr. Russell, Mr. Ouellet, and Mr. Del Mastro in this next round. So if we have any time for one more round after 15 minutes, we'll give it a try.

We'll go ahead with Mr. Russell.

[Todd Russell, Liberal, Labrador, NL]

Thank you, Mr. Chair.

Good afternoon to each of you, and thank you for coming this afternoon.

Just by way of comment, I'm certainly interested in the proposal you're developing for northern and remote communities. Coming from Labrador, I'm very knowledgeable about the cost of energy and the whole issue of diesel and what that does.

I'm not sure how much you know about the Ramea project, but could you comment a little on the Ramea project and how it's been integrated with diesel and how it's going forward, just so we have a case in point to deal with here.

In Newfoundland and Labrador—just as another case study, so to speak, if you want to use it in that fashion—why is there only 0.4 megawatts of production? What are the challenges you see in terms of wind energy there?

And then I have a more general question. It seems that each of you is trying to plug into the existing systems, which makes sense, I guess, to a certain extent. Is there any thought on how each of you would be integrating, thinking theoretically, outside of what currently exists? Is there any thinking going on now about how you would integrate geothermal, wind, and solar power outside of what currently exists?

[A witness]

Outside of nuclear, oil, and gas.

[Todd Russell, Liberal, Labrador, NL]

Yes, outside of that. Was there any thought of that, because each of you seem to be plugging into what already exists as another input. But taking you three presenters, is there any thought on that?

Those are my three questions.

[Robert Hornung]

I'll start with the first two and then I'll let my colleagues take the first crack at the third one.

Ramea Island is a remote community in Newfoundland that was completely powered by diesel generation sets. Six wind turbines have been installed there by a company called Frontier Power Systems. As I noted earlier, those turbines have now produced enough electricity to offset about 15% of the diesel fuel usage. There is discussion now about expanding that project and actually bringing more wind turbines on-site in Ramea.

There's also been some analysis done in Newfoundland of applying that concept, done essentially as a pilot project, across remote communities throughout Newfoundland. So that work is being looked at by Newfoundland and Labrador Hydro at this point in time.

You're right that there are 0.4 megawatts, and those in fact are from the Ramea project in Newfoundland. But Newfoundland and Labrador Hydro have recently signed two power purchase agreements for two wind projects that total 51 megawatts. Those will be built on the island.

One of the challenges in Newfoundland with wind development is not the wind resource—you probably have winds in Newfoundland like nowhere else—but the very small, isolated grid on the island of Newfoundland. Therefore, in managing the variability of wind you have fewer options, and it takes time to assess the best way to do that.

Where there is some tremendous additional potential, of course, is in Labrador . There have been proposals made by some private sector organizations for projects as large as 1,000 megawatts of wind energy development in Labrador, tying into existing transmission infrastructure around Churchill—

[Todd Russell, Liberal, Labrador, NL]

I'm very much aware of that.

[Denis Tanguay]

I'll talk a little about energy integration.

To answer this question I think we need to look at the situation from the building point of view. Again, it's the question of energy services that we're seeking in energy integration. The bottom line is that geoexchange and solar power make a very good combination in terms of two technologies being combined together. Geoexchange provides heat and cooling, and solar energy, for example, provides hot water within a building. In remote communities it can easily be combined with wind power as well. The only thing you need for this whole system to work properly is some backup power in case you don't have enough wind.

The thinking right now on energy integration is being done more at the building level, but I guess eventually it will include wind power as well. It's something I've spoken a number of times about with the energy minister in P.E.I.

Again, being on an island, they are very interested in producing their own energy to stop exporting money outside the island. This question of integrating the three energy forms that we're representing here today is very dear to Minister Ballem in P.E.I. It is being done right now, but mainly at the building level.

[Richard Thorne]

From the solar perspective, we love the term “integration”, mainly because it is part of an energy that integrates extremely well. We've seen that now in Ontario with the standing offer contract, in terms of having the ability.

There were many myths around installing solar and having small islands of power generation across a grid infrastructure, mainly from a safety perspective. When you shut down a portion of the grid you want to know that there's no energy production on that grid so that the people who are servicing the hydro lines are well taken care of from a safety standpoint. But it's been well shown across the globe, on any of these installations, that a lot of the modern technology easily accommodates any of these safety features.

Because we are small islands of production, it integrates extraordinarily well, and that's from the electrical standpoint. As with geothermal, Denis mentioned we have the hot water, but we also have the air heating. When you combine all three elements into the building infrastructure, where you can have solar heating the air from solar walls, heating the water for hot water processes in manufacturing as well as in buildings for hot water supply, and then look at the production of electricity from solar, that's pretty well getting maximum integration for your dollar value.

[Robert Hornung]

I'll add quickly that on the large utility-scale production, the work that's going on in integration does deal with existing sources. In terms of the renewable perspective, the main links that are being looked at for wind are wind-hydro linkages in provinces like Quebec, B.C., Manitoba, and Newfoundland.

At the level of the building, it's interesting. The small wind energy sector in Canada has not had the same sort of takeoff as we've seen with large wind energy systems. That's because we, frankly, don't have the same sorts of policy framework and supports in place to actually facilitate the deployment of small wind.

We actually have in Canada half of the world's manufacturers of small wind turbines that are rated between 20 kilowatts and 100 kilowatts. All of those companies have survived because they export technology. They don't have a domestic market for that technology. Until that happens, the analysis of how this integrates with other things at the building level is a kind of futuristic thing.

[Todd Russell, Liberal, Labrador, NL]

Thank you.

[The Chair, Conservative, Lee Richardson]

Mr. Ouellet.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

Thank you, Mr. Chairman.

For starters, I'd like to come back to Mr. Gourde's comment about the capital cost allowance. The three of you were being very kind, in my opinion, when you claimed that everything was going well. However, I think you have some major problems on your hands. You should be asking for a great deal more. Fortunately, Mr. Thorne told us earlier that the nuclear energy industry received more funding than all of the other renewable energy industries in Canada combined.

Were you aware that several years ago, the Canadian nuclear industry was being funded to the tune of $500 million per year, whereas the combined funding awarded to all renewable energy industries totalled only $5 million per year? Last year, Canada's nuclear industry received $175 million, whereas once again, you received a mere pittance. It defies comprehension. We shouldn't be deluding ourselves into thinking that we're going to develop solar energy. There are people like Mr. Allen—and I can understand him—who don't know that solar energy is one of the most powerful energy sources. He was surprised to hear that. I can understand, because nothing has been said about this energy source. You continue to be short-changed.

Yet, your industry's potential is enormous. Your lovely chart ignores geothermal energy. But the fact is that in the United States, research into geothermal energy is being funded. How much is Canada spending in this area? Nothing, or almost nothing.

Recently, the Massachusetts Institute of Technology found that geothermal energy in the United States could produce anywhere from 255 to 5,000 times more electricity. The potential of geothermal energy is enormous and Canada has even more geothermal energy than the US. All existing and future buildings in Canada could be heated by geothermal power. Passive solar energy could be used to heat all buildings in Canada. Why isn't this being done? Because there has been no incentive on the part of the federal government. That needs to change. At one time, work was being done in this area, but Mr. Mulroney closed down the research labs on Montreal Road in Ottawa.

Clearly, we are wasting energy producing greenhouse gases, when we could be avoiding this. You three are the only ones capable of preventing greenhouse gas emissions. However, there's no question that more funding is provided to research on oil than on passive solar energy, despite the incredible potential of this energy source. Therefore, there's a very real problem here. Capital cost allowances are just a minor problem. There is no incentive or money to develop renewable energy sources.

I'm astonished, Mr. Tanguay. Why did you not address the need to conduct in-depth research on geothermal energy?

[Denis Tanguay]

Your presentation covered a lot of ground. I'd like to focus on the question of taxation.

Let me first say that this is our first opportunity to appear before a committee to present the work the coalition is doing, and I hope it won't be the last. It's all part of the way in which an industry is run. Since we've reached the stage where we're becoming more vocal, you're going to hear a lot more about us in the years ahead.

The issue of how the geothermal energy sector is taxed is somewhat more complex because the greatest potential identified for the short term is the renewal of heating plants in Canada's industrial sector, particularly in Quebec and in Ontario. The institutional sector presents no special interest from a taxation standpoint. Therefore, no special attention has been paid to it, for obvious reasons.

We are very pleased to see that geothermal energy has been included in the new tax provisions. Now, at least, the industrial or manufacturing side of things is covered. We can't complain and we are extremely pleased. Our challenge is to determine how we can influence energy policies to promote the more rapid expansion of geothermal energy in sectors that traditionally, do not come under federal jurisdiction, notably the institutional sector which includes hospitals, schools and so forth. I admit that there is a tremendous amount of work still to do.

In terms of buildings, in my opinion, every building in Canada should indeed be heated and cooled through the use of geothermal energy. Where there is sufficient land available, this option would work for most buildings. However, the use of geothermal energy is precluded by certain geological conditions.

Before we go overboard promoting one particular form of energy, whether it be nuclear or geothermal energy, in my humble opinion, we should start by the building sector. If we continue to put up buildings that are improperly constructed or poorly insulated, what good will it do to install a geothermal heating and cooling system, when the cold winter air can creep in?

With your permission, I'd like to go back five years in time. Four or five years ago, I was working for the Association québécoise pour la maîtrise de l'énergie. As you well know, this association is involved in promoting energy efficiency. We made a presentation at the time to the Conference of Ministers of Energy and Mines in Halifax asking to have revived the famous National Energy Code for Buildings, which called for the construction of energy efficient buildings.

This particular code was developed in 1995 but has not been adopted by any one government. The idea was revived four or five years ago and it has now become a priority for Canada. The question is whether the federal and provincial governments will finally agree to put in place a building code in order to construct more energy efficient buildings.

That's the fundamental question we need to ask ourselves before we even get to the question of what system to install in these buildings to better heat them. My starting position is that all homes should meet the R-2000 standard. Then we could go on to develop a geothermal energy system that would be twice as compact, two or three times more cost- effective and capable of producing all of the energy people need.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

That's precisely what we said recently.

I have a question for Mr. Thorne. With regard to passive solar energy, CanSIA can't do anything right now because it has nothing to sell. We're talking about building design methods.

What steps can the government take to promote passive solar energy?

[Richard Thorne]

There is actually a company based in Ontario, Conserval Engineering, that produces a product called the Solarwall. There are products that are available and actually manufactured in Canada that do heating through solar thermal. A lot of it, though, tends to be based in the manufacturing facilities because they don't use a lot of windows. So the solar wall or thermal heating for air works very well when you have a very large wall that's exposed to sunshine. If it's broken up by windows it makes it a lot harder to obviously implement that type of product.

There is Canadian technology available. Their focus is large walls and their focus is new buildings.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

You're talking about active solar energy, while I, on the other hand, am talking about passive solar energy. A solar wall is an active energy device. Solar energy can be generated through the use of a solar wall, a neutron or a window. What can CanSIA do? I know that your hands are tied and that you don't have the power to move the passive solar energy file forward. My colleagues here are unaware of the situation. They believe that this form of energy hasn't been developed here because of a lack of solar energy in Canada.

Comparatively speaking, the quality of the sunshine here in Canada is about the best in the world. East of the Rockies, the sunshine is extraordinary and yet, there is no move afoot to exploit passive solar energy. The technology has been around for the past 25 years. I simply wanted to point that out, so that everyone here understands that our lack of action on this front is due to lack of government assistance. I'm quite familiar with this file. I was in your shoes a few years ago. Since it has nothing whatsoever to sell in the case of passive solar energy, the government needs to step up and offer incentives to building designers.

[The Chair, Conservative, Lee Richardson]

We have to move on. That's 10 minutes.

Mr. Del Maestro.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

Mr. Chairman, I took a little longer than I planned to, and I apologize for that. This is a topic near and dear to me. Moreover, it's unfortunate that we have only an hour and a half to discuss these three very important issues. A full afternoon should have been set aside to discuss each separate topic.

[The Chair, Conservative, Lee Richardson]

I'm aware of that, and that's why I let you go on for twice the amount of time as the other questioners had.

[Christian Ouellet, Bloc, Brome—Missisquoi, QC]

The fault is mine and I apologize.