Natural Resources Committee on June 4th, 2007

[Chris Campbell]

Again, I should have that in front of me. Those forecasts are in some of the documents we put together. In terms of the number of jobs and the capital costs of installation once this becomes commercial, we don't see that as being very different from the offshore wind industry that's developing in Europe.

If there's a hard question for me, it's really that we have a bunch of countries right now that are all chasing that economic opportunity from wave and tidal energy. We all see that until we reach the point that there is a dominant technology, there is the opportunity to be the country where things are manufactured, where projects are designed, where projects are developed, and where teams can deliver these projects worldwide.

We just see this as in fact another sector that our power technology industry and our shipbuilding and our marine operations industries would add to their order books. In many instances, we're not actually talking about something that creates an entirely new industry. Certainly for the next 10 to 15 years, we're talking about providing additional work to industries that already exist on our coasts.

[The Chair, Conservative, Lee Richardson]

Thank you, Mr. Campbell, and thank you, Madame DeBellefeuille.

Ms. Bell.

[Catherine Bell, NDP, Vancouver Island North, BC]

Thank you.

Thank you to the presenters for your very interesting viewpoints.

I am going to try to ask three quick questions, first to Mr. Marshall; he's been let off the hook so far.

You said that the federal jurisdiction is limited. We know that energy is mostly provincially regulated, and that makes it difficult to come up with national strategies. I just wondered what problems this creates for you as an interprovincial system operator. What kinds of problems do you see all these different regulations causing?

I guess what I'm thinking of is if we're going to move to an east-west grid, what needs to change? What steps need to take place in order to move to the development of an east-west grid?

[Bill Marshall]

We face some problems because we operate cross provinces, whereas most of the system operators today in Canada are operating only in their jurisdiction. B.C. Transmission Corporation operates B.C., Alberta System Operator operates Alberta--so every province has just that province, in terms of operation.

We have to do reliability coordination for the Maritimes, so we have to interface with Nova Scotia, Prince Edward Island, New Brunswick, and northern Maine. We have four different tariffs, and operationally we would have a more efficient region if we had one marketplace and one dispatch across the region. That's one. We don't have that. We have parties that take advantage of the tariff for some things but then stay outside the marketplace for others. So we have people doing a mix of things, and we don't get the most economic solution for the region because essentially there are vested interests in each province and they're looking after their particular interests.

One is on a transmission tariff. How do you come up with a tariff that covers across the regions? You need to have the regulators and the governments in each of the regions accept that that's a reasonable approach in order to recover the costs of the use of those assets across the region. We have not been successful in getting an acceptable maritime approach to do that.

[Catherine Bell, NDP, Vancouver Island North, BC]

Thank you.

For Mr. Jaccard, you talked about coal plant projects without carbon capture and storage. I'm curious, because I don't know what you're getting at. Is that what's called clean coal technology? I'm wondering if you can explain that to me. I'm not really clear on these generation plants. You said there were going to be over 100 of them built in North America. That's not just Canada, I'm guessing. Maybe you can give me a little more information on that.

[Prof. Mark Jaccard]

Yes, and you've given me an opportunity to plug my last book, which was called Sustainable fossil fuels: the unusual suspect in the quest for clean and enduring energy, which won the Donner Prize last year as the top policy book in the country. In that book, I look at all energy sources, large renewables, traditional ones like hydro power, the newer renewables that we're looking at, nuclear power, and I look at how you could use fossil fuels, coal, oil, and natural gas, without having greenhouse gas emissions.

Over the years we have pointed the gun at the fossil fuel industry, and let's say the coal industry in particular, by saying we didn't want the amount of particulates coming out of coal plants or we didn't want the amount of acid emissions coming out of coal plants. So the regulatory hurdles for the coal industry have changed over time, and I think with each one of those hurdles, as they've developed the technologies to respond to society's demands, they've called that clean coal.

The definition of the words “clean coal”, if you look at it historically, has actually changed over time. Fifteen or ten years ago, the coal industry, when it referred to clean coal, meant a coal plant that would have captured most, certainly the sulphur dioxide emissions, so we're really talking about the emissions that cause acid rain. Then, of course, the goalposts shifted on them, and globally and nationally we've said to the coal industry, if you still want to burn coal, now we're worried about greenhouse gases as well, so you have to worry about carbon dioxide, for example, in particular.

Then we looked around—and that's the research I did for my book, and it's work that I'm doing internationally with experts around the world—and realized that there are actually configurations of technologies where you can either capture the carbon dioxide straight from the smokestack or you can gasify coal and create a synthesis gas, which you can separate eventually into a hydrogen-rich stream and basically a pure carbon dioxide stream. You can capture the carbon dioxide, ship it by pipeline, and, for example, inject it into the earth as a way of permanent storage. So that's evolved to become the definition of clean coal.

Again, it's a very simple mathematical proposition. If you at all agree that we should take seriously what the Intergovernmental Panel on Climate Change tells us, in terms of where greenhouse gas emissions should be 43 years from now in 2050, you can't keep building coal plants that emit greenhouse gases around the planet, and yet we are. Certainly, the developing countries are, but so are the rich developed countries.

I was on a group called the China Council, which was advising the senior Chinese policy-makers throughout the nineties up until a few years ago, and it was quite clear that the Chinese weren't going to go anywhere as long as the rich countries weren't doing this as well.

That's what I talked about in my introductory remarks. If I run out the numbers here, I see that we can't be building in North America—so that's the United States and Canada—coal plants that still emit greenhouse gases. We won't get to those 2050 targets. I'm saying that with almost 90% certainty.

[The Chair, Conservative, Lee Richardson]

A brief question, and brief answer, I hope.

[Catherine Bell, NDP, Vancouver Island North, BC]

Okay.

To Mr. Campbell, then. You mentioned that the federal budget included a reference to tidal power and some support to level the playing field with renewables. I just wondered if you know if there's going to be any more money, if you've heard anything, if this is going to be long-term funding or if this is just a one-off for this year.

[Chris Campbell]

This is an adjustment to the accelerated depreciation and flowthrough provisions that now apply to wave and tidal energy. So it's the same fiscal treatment, and wave and tidal energy would be eligible for the 1¢ kilowatt hour, just like the other renewables. What we don't know about is the technology innovation fund or the technology fund being talked about by Environment Canada.

[The Chair, Conservative, Lee Richardson]

Thank you.

We're going to turn now to Mr. Allen.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you, Mr. Chair.

Thank you, everybody, for giving your testimony.

I have a couple of questions. The first is for Mr. Jaccard and Mr. Marshall.

All regions in the country are going to be competing to attract industry based on power rates. That is a key factor to getting industry in and promoting economic development. When we talk about a concept like a carbon tax—suppose we buy into that—some regions have many more alternatives to explore regarding different kinds of generation sources, whether these are tidal, wind power, or whatever.

As Mr. Marshall said, wind power would potentially be 1,500 megawatts by 2013 in the region.

If we say that, and a utility undertakes using wind energy and developing it—and New Brunswick and the east side could do that—how do we combat the factors that Mr. Marshall talked about, concerning balancing this with generation, so that we have reliability on our system in the Atlantic or across regions? Technically you're relying on other provinces to help balance your load, and you need that generation from other sources.

How can we deal with this jurisdiction, Mr. Jaccard, first, with a carbon tax, and how do we help utilities get over that provincial jurisdiction issue?

[Prof. Mark Jaccard]

I'm not sure what you mean about provincial jurisdiction or if you're just talking about jurisdiction over electricity. Is that what your point is?

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

That is jurisdiction over electricity and the development, because each province has that jurisdiction. But as we heard Mr. Marshall say before, it's a complex web in the region.

If I go to wind power, how do I know that my buddy is going to be there to support me, because part of this is reducing our emissions, right?

[Prof. Mark Jaccard]

Right. If you put in a carbon tax, all you're doing is changing one of the many parameters that different jurisdictions look at when they negotiate with each other.

There were no carbon taxes in the 1990s when I chaired the B.C. Utilities Commission. But I had to chair regulatory hearings in which reliability and interconnectivity between British Columbia and Alberta, or between British Columbia and Washington State to the south—or how Alberta interacted with Washington State through British Columbia—were issues that had to be deal with.

If you're bringing up the issue of east-west connectivity, I have to say that I'm not a fan at all. I believe that if our political process gets involved in trying to decide which are the best projects to get greenhouse gases down, we risk spending way more money than we want to.

You talked about attracting industry. That would be the case when you put a large tax burden on Canadians to subsidize east-west connections. What's optimal for electricity consumers might be to interconnect with the United States and reinforce those connections. In fact, that will be part of the most economically efficient way of getting our greenhouse gases down: developing green resources that are beneficial to our neighbours to the south.

I would rather not decide that at the political level. When you talk about whether or not one region sees its cost go up more than others, that is absolutely the case.

I'm busily involved in policies that will minimize that, but if one region is causing more emissions, and you're trying to invest money to reduce emissions, I don't see how you avoid that. We're pretending if we think that everybody pays the same amount.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Mr. Marshall, your comment was, how do we share this? And we are all in it together to lower emissions. I guess I'm not getting it.

[Bill Marshall]

I'm going to agree with Mr. Jaccard, and I'm also going to disagree with him. Regarding his proposal on the carbon tax, you need the right price signal long term so that people can make the right decisions that have a value in terms of addressing climate change in the long term.

I think your concern, Mr. Allen, is if you do that, you would increase the price of electricity, and that increase in one region relative to another would drive jobs away and not allow that industry to continue. That's the issue.

I think Mr. Jaccard's proposal was to increase the carbon tax, so that the investment decision is made based on that, but then you take the money from the tax and provide it back to the end-use customers in that region, so that they are not disadvantaged from that decision. That may actually help to preserve the jobs in the industry in the region.

It also would do something else. In my view, it would actually help promote east-west transmission. Mr. Jaccard is opposed to subsidies or policy decisions, but this is where you have to go.

Today, there is a larger market price or value to selling hydro energy north-south into the U.S., because there's no value put on the carbon, although there are some markets in the U.S. that do put value on it. You can collect more in emission value by selling in the U.S. than you can by selling it in Canada.

So if you put the right prices on it in Canada, there would be an incentive to build the transmission east-west and sell it into the Canadian market, and then take that additional money and put it back to end-use customers, as Mr. Jaccard proposed in his suggestion. The Canadian economy may benefit from this.

Today, there's an unlevel playing field, in terms of going to the largest market and getting value. I'm not saying you need a subsidy, but there is greater value in getting the right price on the emissions, so that you make the right economic decision.

That will bring in more markets in Canada, as well as in the U.S.

[Prof. Mark Jaccard]

I agree with Mr. Marshall's comments.

[The Chair, Conservative, Lee Richardson]

We'd better move on while we have such agreement.

Do you have a short question, Mike?

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Yes.

[The Chair, Conservative, Lee Richardson]

All right. Please be real quick.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Mr. Marshall, on the east-west grid, given that you made the statement that there are no common tariffs or sets of rules, if we were to go down the road with an east-west grid, would you see that as being regulated by someone like the NEB, so that there would be commonly regulated access and tariffs?

[Bill Marshall]

I don't know if we have to go there. Each province has a tariff today. The transmission assets are built, collected, and paid for by use of the transmission system in each of the provinces. You could build some east-west transmission. The role the federal government might play in this case might be to give some subsidy in getting some of the transmission built, but then let the energy flow.

Today's transmission lines were built back in the 1970s and 1980s north-south into the U.S. markets, so the cost of that transmission is small in comparison to the cost of building new transmission that would connect across Canada. I think there's a help in terms of trying to get some of that transmission built, but it could get rolled into the tariffs of each of the regions, and it would be paid for by customers and users across the system.

Getting the carbon prices right so that energy costs and value are at the right market price will help pay for transmission across the region.

[The Chair, Conservative, Lee Richardson]

Thank you very much, Mr. Allen.

Thank you for the answers.

We'll turn now to Mr. Tonks.

[Alan Tonks, Liberal, York South—Weston, ON]

Thank you very much, Mr. Chairman.

Mr. Chairman, on behalf of the committee, at least from my own perspective, these witnesses come at a time when we have a draft report that is prescriptive at this point. It seems to me that in the draft report we don't have a link between issues related to storage and those related to alternate technologies that are interdependent on the interface.

From their own perspectives, the witnesses have talked about tidal, not only as a power source but also as a storage technology, in particular with the huge coastline opportunities we have, particularly on the east coast where there's a dependence on coal technologies.

My question is to Mr. Marshall first, and the other witnesses can make a comment. From the strategic planning approach, we went to Churchill Falls and saw the lower Churchill. We listened to the first nations people with huge concerns with respect to a second-phase hydro implementation. The committee heard about the strategic direction that your regulating entity, and I'm using that very loosely, your coordinating entity—

How much does tidal work with respect to the strategic future? If it is being considered seriously from that perspective, with respect to a future grid change, or service and consumer change in Atlantic Canada, Maine, and in that part of the United States, what do we need to do to make it a reality?

It seems to me there's a lot of opportunity on wind and on the use of tidal, but it's mostly talk at this point, as opposed to really saying, here's a chronology, this is what we can do, and this is what the future, at least for Atlantic Canada, would look like in terms of a power plant.

[Bill Marshall]

You're right. There's tremendous opportunity for wind, and we're going to have a lot of wind. The opportunity on tidal is more long term.

As Mr. Campbell said, you look at prices of $400 a megawatt hour, similar to solar, in order to get some of these tidal demonstration projects up. It's not going to compete. Today, you can get wind projects at $80 or $90 a megawatt hour. So essentially tidal demonstration projects are five times the cost of what wind is.

We're a ways away from getting tidal developed on a commercial scale. That doesn't mean we shouldn't be pursing it; I definitely think we should be pursuing it.

Operationally, there are issues with tidal, just as there are issues with wind. It's very predictable, and as Mr. Campbell said, it's predictable 20 years into the future, but the fact of the matter is that it comes and goes four times a day. So you have it and then you don't. You have to have other resources behind it in order to integrate it into the power system.

That's the same issue with wind, because of the intermittent nature of wind. If the wind is blowing, you've got energy; if the wind's not blowing, you don't have it. If the wind's blowing too much or there's a storm, the turbines have to shut down or they're going to blow apart, so you don't have it.

It's the integration of that. You have to have resources behind for both of those technologies.