Natural Resources Committee on May 14th, 2007

[The Chair, Conservative, Lee Richardson]

Yes, for all of us.

[Dr. David Lewin]

With respect to my own company, EPCOR, we try as best we can to anticipate the changes in regulation, not only provincially but also federally, that are coming down. That was really what forced us to pursue supercritical technology with respect to the third unit we built at Genesee, starting in 2002. It has been in operation for almost two years now, since 2005. We try to anticipate changing regulation with respect to all of those emissions I mentioned: NOx, SOx, particulates, mercury, and CO₂.

On the CO₂ front, with the supercritical technology, given that it's an 18% improvement in thermal efficiency, you're getting on an intensity basis a reduction of 18% in terms of CO₂. So that's a major improvement with respect to that technology.

With respect to NOx, SOx, and particulates, we were able to take advantage of what we call “best available technology economically achievable”. It's a long phrase, I know, and we refer to it as BATEA. We were able to take advantage of that technology that's available, so we were able to introduce low-NOx burners, and they're working extremely well, way below the provincial standards. With respect to SO₂, we were able to put in a flue gas desulphurization unit, bearing in mind that the coal in western Canada is very, very low in sulphur anyway. It's only 0.2% sulphur, whereas in eastern Canada and the eastern U.S. it's probably around 3%-plus. With respect to particulates, we're able to capture 99.8% of those.

We have been working over the past few years on mercury reduction with the province. As a result of that, there is now a new standard in place that by 2011 we have to capture 70% of mercury.

That has happened with respect to currently available technology. With respect to the future, then, we're focusing our attention, particularly, because of our coal, on coal gasification, because it demonstrates that it can reduce all those emissions that I mentioned down to even significantly lower levels: NOx, SOx, particulates, mercury, and CO₂.

[The Chair, Conservative, Lee Richardson]

I appreciate what you're saying, and I'm going to ask Mr. White if he wants to comment. It's unlikely from what both of you have said in your presentations that you will meet the required standards in the time required. That may be presumptuous, but that appears to be the case. So what are you going to do in the meantime if you can't meet the standards that have been imposed?

Mr. Lewin, I'm going to ask Mr. White.

[Dr. David Lewin]

Sorry, that was the piece I didn't recall. On the CO₂, for example, in the short term we would have to resort to offsets, so we would have to go to the marketplace to purchase offsets or invest in projects elsewhere that actually reduce CO₂, so we can on a global basis bring the--

[The Chair, Conservative, Lee Richardson]

I'm sorry to interrupt you, but we are running out of time.

Mr. White.

[George White]

I have two comments. My initial reaction to the CO₂ issue is that we're trying to solve the problem in one swoop. It's going to be extremely difficult for our industry to do that, and that's going to manifest in what people come to tell you--that the lights will go out if that's what the regulation is going to be. That's true. We cannot do without coal-fired power plants in the parts of the country where we have them now.

My calculations tell me that 50% of the acid gas problem in Ontario is due to emissions from the United States that flow north over the border and 30% comes from the motor vehicle problem. Somewhere between 12% to 15% comes from the point sources--coal-fired power plants. If those plants were refitted with brand-new current technology--and most of them have no technology on them today--that 12% to 15% would be reduced to something like 2% to 3%. We'll never get it to zero, but significant improvements can be made using existing technology. Certain power utilities in the country and in the United States have gone to that kind of technology.

Trying to do without those plants is going to lead us in one direction, and doing nothing with them will lead us in exactly the opposite direction. There is some middle ground here with the acid gas problem.

With the carbon dioxide problem, conventional plants will take us, as Dave has said, to improvements that are 20%, maybe better, on an intensity basis. But proper integration with biomass, alternate fuels, and producing other than electricity at these plants will also have the effect of allowing us to avoid using other fossil fuels. That can then become a credit toward the power plants that are there now.

[The Chair, Conservative, Lee Richardson]

Thank you very much. That's very good.

We'll proceed now to questioning. We'll begin with Mr. Russell.

[Todd Russell, Liberal, Labrador, NL]

Thank you, Mr. Chair, and thanks to each of you for being here.

I will say to Mr. White that the rest of them are absolutely as old as they look.

How does coal-fired electricity generation compare to other types of electricity generation in cost?

[George White]

In much of the country the price of power is regulated, so we end up with situations where there's a very determined type of approach to telling what the price of the electricity is going to be. That determined approach is based on the mix of various forms of electricity production in the area. It's provincial here.

So if you go to Quebec, it's all hydro that you can build over a long period of time. You'll find that power rates are relatively low compared to the rest of the country. If you go to Newfoundland, where they have to pay a lot of money for their heat and hydro and they have a lot of oil plants and that kind of thing, power is quite expensive. So there are differences between power rates in different parts of the country, even where they're regulated.

In Alberta the rates are not regulated. Power rates there last year averaged something like 8.1¢ per kilowatt hour. That's almost an average for the country. There are places where it's lower and there are places where it's higher. But it depends on the mix of fuels and the mix of generation possibilities available.

[Todd Russell, Liberal, Labrador, NL]

Is it still feasible to build coal-fired plants?

[George White]

Yes, I believe so.

[Todd Russell, Liberal, Labrador, NL]

Do you still make a healthy profit?

[George White]

In a regulated environment, the price of the power would be adjusted to take care of the capital costs or any additional bells and whistles that would need to be put on these plants.

In a non-regulated environment, the power producers would then dispatch into the system at a different price than they would have had they--

[Todd Russell, Liberal, Labrador, NL]

You said that leadership will come from industry with guidance from government. What's driving the innovation in the industry right now? What has driven it over the last 10 years?

[George White]

It has been the price of power.

There's been tremendous pressure on the industry to make sure power rates are reasonable for the country. Canada, as a country, has relatively low power rates. But we compete internationally, and our labour rates are much higher. If you go to China or Japan, power rates are much higher, but their labour rates are lower. So there's a trade-off. We enjoy quite low power rates.

[Todd Russell, Liberal, Labrador, NL]

But that wouldn't be driving the technological advances in gasification or reducing CO₂ or putting scrubbers on for reduction of NOx or SOx, right?

[George White]

Well, on the acid gas emissions, the regulations, in a lot of cases, have driven whether these plants are retrofitted or not.

Right now, we understand that carbon dioxide is an issue. We sell coal. We're not in the power business. But we recognize that our customers do have the issue.

We try to keep our costs down and keep our coal prices within reason. It's a commodity, a long-term contract, within the country. But ultimately, we see being able to assist the industry by making a separate business case whereby we're going to gasify coal for another reason.

[Todd Russell, Liberal, Labrador, NL]

Mr. Lewin, has your association looked at the recent environmental plan by the Conservative government?

[Dr. David Lewin]

Yes.

[Todd Russell, Liberal, Labrador, NL]

Have you looked at the targets and things of that nature?

[Dr. David Lewin]

Yes.

[Todd Russell, Liberal, Labrador, NL]

And have you anticipated what's coming down?

[Dr. David Lewin]

We did our best to anticipate. I must say that we didn't anticipate as strenuous targets as we saw.

We were hoping we would have a little bit more time to change out the capital stock. As you have older capital stock coming up for renewal, it makes sense to put the best available technology in place.

[Todd Russell, Liberal, Labrador, NL]

With these new plants, with what you say is 20% intensity reduced, would they meet the government standard?

[Dr. David Lewin]

We're still working with government with respect to their clean fuel standard and the expectations there. So until those discussions are complete and we understand what those numbers are, I can't say. But we're hopeful that they would.