Natural Resources Committee on March 26th, 2009

[The Chair, Conservative, Leon Benoit]

Good afternoon, everyone. Welcome.

We're here to continue our study on the contribution of integrated approaches for providing energy services in Canadian communities.

We have four groups of witnesses today. Each group is welcome to take between five and ten minutes for its presentation.

We have a number of witnesses today. From Benny Farm, we have Alex Hill, general manager for green energy, and Daniel Pearl, partner. From the Canadian Urban Institute, we have Glen Murray, president and chief executive officer, and Brent Gilmour, director of urban solutions. From the Minto Group, we have Andrew Pride, vice-president, Minto green team, and Greg Rogers, executive vice-president. From the Town of Two Hills, we have Trevor Nickel, representative and assistant general manager, Highmark Renewables Research LP and Growing Power Hairy Hill LP, and Shane Chrapko, representative and chief executive officer, Growing Power Hairy Hill LP. That's so everyone knows who is here.

Let's go in the order the groups are shown on the agenda. We'll start with Benny Farm. Alex Hill will be making the presentation. Is that correct?

[Daniel Pearl, Partner, L'Office de l'éclectisme urbain et fonctionnel (L'OEUF), Benny Farm]

Actually, I'm going to start. I'm the architect from L'Office de l'éclectisme urbain et fonctionnel. I'll present in English, but I certainly welcome questions in French.

It's a real honour to be invited here today.

Benny Farm was a project built in Montreal in 1946-47, just after the Second World War, with over 300 original units. Over the last 15 years, our firm, along with many social activists in Montreal, fought to recycle the buildings at Benny Farm. Today we're here representing Green Energy Benny Farm, which came out of that fight and is a partial success in recycling the project.

One hundred and forty units were renovated for affordable housing. A special strategy was put together as a pilot project, funded by the Green Municipal Fund, a very generous donation from many levels of government. This project was to be a pilot project to look at community energy services.

The lessons learned are quite vast and wide-ranging. Alex Hill, the project manager, who's been looking after the construction over the last few years, will talk about the details. I'm going to try to talk about the larger-scale issues.

The first issue is the lack of our projects across the country understanding the notion of resilience. Thomas Homer-Dixon, a well-known writer here in Canada, talks about the importance of dealing with the disastrous situations of the extremities of weather. Right now, the notion of having a central energy loop possibly allows a project, on its own, to be resilient against large disasters. So it's not simply a question of energy savings; it's a question of understanding not to count on grids and on transferring energy thousands and thousands of kilometres away.

This central energy loop has also a capacity to make sure projects always stay up to date. Right now, we don't have proper sources of energy such as hydrogen energy, let's say, and because of this, they cannot be added later on to projects that don't have a central loop. The majority of our projects have no resilience in order to be able to change as the technologies change.

One of the key components that we're learning lessons from, in Europe especially, in the concept of co-housing, a component very specifically related to housing, is that at some point, if a project's profits are taken out by an ESCO, an energy services company, then really long-term people, appropriators in the project, lose their connection to a project.

The perfect example is Benny Farm in Montreal versus Regent Park in Toronto. In Toronto, none or almost none of the units are being renovated in a project two and half times the size of Benny Farm, because no one could renovate the image of the project. At Benny Farm, because the veterans always stayed present, there was always a strong idea of the image of the project. Therefore, we can go in with technologies and modify it technically, but you have to understand the socio-cultural component as well.

Another important lesson learned is that affordable housing projects in Canada need more help on central district energy systems in the private market. As taxpayers, we pay for them when we put in short-term goals of energy systems that can't be retrofitted over time and when we don't understand the cost increases. When affordable housing is no longer affordable because energy costs are higher than inflation, then the people living in the project no longer can live in the project. By going to geothermal, to solar hot water, we're giving a notion of economic resilience to the people we're actually housing.

The other issue is that you can't simply look at energy. You must look at the air quality in the envelope. They go together. I think that right now there's an interest in moving energy, not understanding that our base budgets in affordable housing don't properly cover the envelope.

Finally, I think one of the key lessons is that everybody to date who I've seen present in front of this committee has talked about new construction and district energy systems in new construction. Benny Farm is an example of how to do it in renovated and new housing combined. If we're to count only on the new construction going forward, we will come nowhere near meeting our goals for greenhouse gas emissions across the country. We have to come up with strategies on how to partner different owners and get over the legal challenges that are related to this. That's probably one of the biggest problems we have.

[Alex Hill, General Manager, Green Energy, Benny Farm]

Thank you, Danny.

Thank you, to the committee, for the chance to speak today.

I'll just quickly tell you about Énergie Verte Benny Farm, which is the not-for-profit, community-owned energy company that has grown out of the Benny Farm project.

We're currently working on three priorities right now. One of them is installing and operating the geothermal and solar system at Benny Farm and selling the energy back to the housing projects to generate income for our activities. We're also working with a number of other social housing groups and tourist facilities and individual homeowners to investigate the potential of implementing similar projects and strategies in their own developments. And our most recent program is a buyers group for homeowners to install solar hot water, which is a new initiative for renovating existing homes.

From this work we've identified a few potential recommendations that could help the committee. I'm trying to be a bit specific here, because these needs that we've found have sprung up directly from helping other housing projects.

Energy mapping of Canadian cities could be a very valuable project to engage in, something similar to the solar map that's been done by Natural Resources Canada to see the photovoltaic potential across the entire country. If we had a database of energy use within different buildings, which engineers could refer to quickly, you could identify the potential of cooperating with other buildings for integrated and district energy systems.

One of the biggest problems with green energy systems is the increased risk. Homeowners and developers take on 10% to 15% additional cost. With that comes an associated risk, and also the risk from the complexity. They need support from the design side as well as from the financial side, and also from the coordination and management side to manage that risk. It's not simply a financial question.

We're working with the provinces and cities on building codes. We have national guidelines for water treatment. When it comes to things like solar energy and other new technologies, the codes can become so complicated at the local level, they can prevent implementation of these kinds of technologies. If we had a national guideline, it would at least give a baseline for municipalities and provinces to work from. At that point they could come up with a streamlined approach.

Support to cover design premiums for integrated energy systems, such as the CBIP program, is a thing to consider.

I would say that another very important aspect is to consider all distributed energy generation as energy efficiency, and not as actual energy generation. It's an upfront cost of energy investment for a longer-term energy saving from these projects. This would help to get around some of the monopoly issues related to Hydro-Québec, as an example, whom we deal with in Montreal, and in other parts of the country as well. How support is given to these projects could look very different from what it does now.

Finally, I would just say that the distributed energy production put into building projects, such as solar, geothermal, and wind, should be considered alongside coal, natural gas, and oil energy production as the baseline, not alongside hydroelectricity. Because of the interconnectedness of the North American grid, it's actually fossil fuels they'll be replacing and not hydroelectricity.

Thank you very much.

[Daniel Pearl]

I'd just like to complete the presentation with a last statement of our lessons learned from Benny Farm, which is that the money saved by not duplicating expertise ended up costing the project more than if we'd actually had more resilience within our design team.

We feel that a lot of the projects we look at now across the country have not been tried and true-tested in Canada. There's more experience in Europe.

We would like to make sure there's an understanding of the duplication necessary in pilot projects to learn more, and not put the residents at risk from having too low a budget and too little understanding of that component.

Thank you very much.

[The Chair, Conservative, Leon Benoit]

Thank you very much.

Thank you both.

From the Canadian Urban Institute, go ahead, gentlemen, with your presentation as you choose, for up to ten minutes.

[Glen Murray, President and Chief Executive Officer, Canadian Urban Institute]

Thank you very much.

It's a great pleasure to participate in this on behalf of the Canadian Urban Institute.

Very briefly, we are a national urban policy and research institute. We receive no direct funding from any government in Canada. We generate and raise all of our money ourselves through services and membership, and we have worked for 20 years now in the area of energy sustainability.

You would probably know some of our projects. We were the catalyst that brought together the deep lake cooling technology in Toronto, which we brought back to Canada. I think it's probably one of the most successful and greenest energy solutions in Canada, and we've done extensive work on it.

I'm going to try to save some time by giving you our most fundamental recommendation at the beginning, and then I'll repeat it at the end, because I know you're very busy and have heard a lot. In-between I'm going to turn it over to my colleague, Brent Gilmour, who will give you some examples of what I'm going to describe.

We spend less money than any other country in the world on planning for land use, transportation, and energy. If you went through the entire OECD and tried to find one of the biggest differences between countries, you would find that we do less planning than almost any other country—and it's a disaster. When we spend large amounts of infrastructure money, we usually do it with less planning than almost any other country, with some disastrous consequences. Arguably, federal government involvement in infrastructure over the years has been one of the biggest subsidies to sprawl compared with any other source. I will leave that for questions, if you want to ask. But the federal government can wreak havoc on a city planning process.

Our biggest recommendation is that you fund plans, not projects, and you put more money into energy, transportation, and land use planning, and you drive integrated planning. Every single municipality, large and small, has an official plan. You've heard from Okotoks and Guelph. You've heard about the work we've been doing with the City of Calgary. With many of them, including Calgary, the aim was to integrate energy planning into official city planning processes. If you go to Calgary's website, it shows the Calgary's plan is probably the best plan any large city has now done. The savings in costs between a business-as-usual development of energy, land use, and transportation systems in that city is about $30 billion. And given that the public purse is tight these days, it would seem that smart grid and smart growth should be met by smart spending.

I won't get into the details of it. If you'd like us to, we can in questions. But I think it gives you the integrated solution. In the case of Calgary, halfway through this process they stopped their official planning process and redirected 30,000 hectares of development and changed their density requirements. We're talking about Canada's oil capital. The reason they did that was not just to reduce their carbon dioxide emissions—which they'll do by about 50% under this plan—but also because the cost of building out cities in the traditional way we've been doing the last 30 years was just prohibitively costly to Calgary, and you couldn't justify it to citizens and taxpayers.

So you have to integrate economic, land use, and transportation planning, because it's actually a matter of the synergies between good land use and transportation planning and energy planning. So if you worked with provinces, because this is a provincial area of jurisdiction.... Every official municipal plan in Canada, I believe, without exception, has to be approved by a provincial government, and becomes—usually by cabinet—provincial legislation and policy, implicitly and explicitly. You should take the models that municipalities and provinces across Canada are already doing and fund these and the plans, so that they decide what energy technologies do, based on good research and good planning. Then you can make the selection, not on a project-by-project basis, but based on an integrated understanding of how demand-side solutions should work, first, and supply-side solutions, second. And they can select how to do it most cost-effectively, or how they can get the least expensive and most effective technologies that are most durable over time. That's how you produce the greatest economic and green environmental dividend. That's our essential recommendation.

I'll turn it over to my colleague Brent, who'll give you some examples focusing on Calgary's energy mapping and energy sustainability plan.

[Brent Gilmour, Director, Urban Solutions, Canadian Urban Institute]

Great. Thank you.

One of the key things we forget is that municipalities in Canada do actually plan energy. Traditionally, most of their specialization in terms of energy planning has occurred in two areas, our local utilities and those responsible for our provincial level. However, municipalities are involved, both directly and indirectly.

They've been involved directly through setting up various types of corporations--you've heard a lot about district energy--and they've also been involved in energy services, whether that's poles and wires or also looking at energy efficiency improvements.

Indirect involvement, although this is where it becomes a little bit difficult to understand, is where it really happens. It's actually in the land use planning. Particularly when municipalities go and think about compact mixed-use development, a term that you often hear in planning, that is actually connecting a number of issues related to energy. But it's also occurring in the way we plan for transportation, such as transportation-oriented development.

One of the key things that help bring this together is a hierarchy, in this case an energy decision-making hierarchy, that actually helps us understand where our energy use occurs. In planning, it actually occurs at the infrastructure and land use level.

What it means, though, is that what we plan today impacts every single decision in terms of energy for 10 to 20 to 30 years. Buildings and site designs are actually also impacted by the thought that went into the land use planning. This means that land use, in terms of site design and development, really occurs every five years, but at the end of the day, energy-using equipment is also affected.

Those are the three different layers. A good example of this is district energy, which you've heard about. Most district energy systems that communities use tend to be more efficient in terms of distribution and management of energy, as well as economically feasible; there's a relatively constant demand for their service, such as a high-density mixed area of land.

Decisions, though, that are made at the regional or municipal level in terms of density and mix of uses can have a direct impact on the viability of a district energy system. What you plan today will actually dictate what's going to happen 50 years from now. That's how energy actually starts to occur, and that's how the thinking of decision-making processes result.

One of the key things that communities are doing across Canada to help understand how their land use planning is impacting on energy consumption and demand in communities is integrated community energy planning. It's something that we're starting to see as a requirement for some jurisdictions, particularly in British Columbia; they are now requiring communities to do community energy plans.

What integrated community energy plans really do, though, is help to connect energy supply and end use in terms of where energy is going to be used--transportation, water, waste, and so on--into the decision-making process by municipalities.

How does an ICEP actually do this? Well, it's a three-tiered process.

It starts at reducing energy demand within the built environment first, and looks at encouraging the application of renewable energy sources second. Then, what it really tries to do is link the built environment, transportation, land use designations, and what we're hearing a lot about today, renewable and alternative technologies, into informing long-range planning, whether at the provincial, regional, or local level.

We were asked last July to help the City of Calgary assess how it was going to achieve its greenhouse gas reduction goal--a community-established goal--of 50% reduction below 2005 levels by 2050. It was quite an ambitious goal. They recognized, though, their challenge: they will be adding 680,000 people over the next 28 years.

What we were really asked to do was threefold. First, we were asked to identify the different types of alternative energy sources that were applicable to that built environment in that community, and to really help them identify where they could go in that community. This led us to understand that connecting the land use and the built form, in terms of energy decisions, was not an easy thing to do.

We actually helped them do that through an illustrative process. You'll see that in your presentation outline; it's actually a map. This was able to show us the clear linkage between land use planning and energy efficiency.

Overall, the land use planning process helped them figure out where different types of systems should go. Whether it was district energy, whether it was photovoltaics, whether it was solar thermal, or whether it was, in this case, geo-exchange, which you've heard about, this helped them figure out where the technology could go.

When Calgary originally started, they were thinking of locating all their development traditionally, on the outside, as the city was growing out. What Calgary really took away from this whole process, what they recognized as they started to go through the energy planning process, was that they wanted to create a place for people to live, grow, and be viable in terms of economic investment, and that resulted in trying to pull things together.

That's what we helped them to do, through an energy process. We came up with a new metric, gigajoules per hectare, and that helped them understand where they should be making their investments in terms of energy infrastructure.

[Glen Murray]

Coming back to that, if you take that model going forward, you understand the natural environment. You can do different things in Montreal or Toronto. You obviously couldn't do deep lake cooling in Edmonton, but its unique geography, the unique resource space, the population growth rates, the nature of what the industry is in a community, and the configuration of the built form--how you co-locate where people live compared to where they work--are the things that really allow you to reduce demand and to derive more efficient supply.

If you look at what Calgary has now that most other major municipalities in Canada don't have, Calgary has the most cost-effective and appropriate technology fit for suburban low-density communities. They have the right kind of technology solutions, solutions that they know are going to work for their downtown, and for their airport they've configured a whole other range of existing, already commercially viable, deployed technologies. It allows you to accelerate that.

They're also not just looking at the cost side. Because they're using it and embedding it in their official plan and working with the Government of Alberta to do that, they're actually understanding that you allow more intense, higher-quality development and that you can actually identify greater opportunities for introducing technology in a way that maximizes jobs and investment and drives economic value, so that you're actually building the tax base of the municipality rather than doing it by building the tax burden. I think it was about a $17 billion cost, but the savings annually are $1.5 billion, so the payback is about eight years.

That is not counting any benefit. There's no return on investment counted in that. That's just simply on one side of the ledger, the actual cost savings operationally from capital.

We're now looking at doing this smartly and doing it in a way that clusters commercial activity in the way they did in Markham, Ontario, where IBM doubled its presence because of energy resiliency. You can start to use this as an incentive to cluster and to strengthen economic investment in business clusters and new business clusters in communities if you integrate it into your economic development policy.

We think the federal government, if it spent smart, would be able to support smart growth, and that if it respected provincial and municipal jurisdictions and played the role that it should play nationally, it could be a very effective player in this transformation economically, environmentally, and socially.

Thank you.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Gilmour and Mr. Murray.

Now we'll go to the Minto Group for their presentation. You have up to ten minutes. Go ahead, please.

[Greg Rogers, Executive Vice-President, Minto Group]

Thanks very much for having us here.

I'm Greg Rogers. I'll just do a quick introduction. Glen actually captured a couple of thoughts around my page, so I thought I was going to be a couple of minutes shorter, but I came up with some extra stuff while I was sitting here.

In any event, I'll give you a little bit of background on Minto. We're a developer of houses, condos, and commercial buildings. We've built about 60,000 homes in Canada, a few million square feet of commercial buildings, and we own and manage 16,000 apartment buildings in Ontario.

In the year 2000, Minto made a firm commitment to the environment. Since then we have been constructing every one of our new high-rise buildings to a LEED standard. All our new homes from this point forward are going to be constructed to an Energy Star standard, and we also formed a department to help us define, measure, and reduce our carbon footprint, with a long-term goal of getting that footprint down to zero. That department is headed by Andrew Pride and has a staff of 12 people. We invest in them to help us invest in turn in environmental initiatives.

We've made pretty good progress so far. We've received a number of national and international awards for our efforts, most recently at the sustainable buildings global conference in Australia, where Canada came number two to Germany, so we are on the map.

There certainly is a lot more we could be doing. Some of the new things that Minto is doing soon to help us become even more well known globally will be the LEED certification of Minto Midtown, a 900-unit building in Toronto. It will be the largest certified residential building in North America, so we are making some progress.

We're making progress in two ways. Andrew will talk about one, which is is top-down. It includes major initiatives such as gas turbines and other innovative research that we've looked at. The other is ground-up: we educate, empower, and reward our staff in the pursuit of carbon footprint reduction, because a lot of the ideas rest on the shop floor. These two methods are really a metaphor for broader policy initiatives that we'll talk to in a minute.

At this point I'll turn it over to Andrew to talk more specifically about some of the things we're doing.

[Andrew Pride, Vice-President, Minto Green Team, Minto Group]

Thanks.

I applaud the committee for taking on any right approach energy systems, because it isn't easy, and it's worthy of note. It's not just about one solution, or one technology. It's about integrating many technologies and many solutions from the point of a single home, to a large condominium community, to a new development, to a new community, to all our existing buildings. How do we integrate that all together? It's a pretty big challenge. I think we're pretty fortunate today to be here with you, because we can share some of our examples. We've integrated all of that together. We've looked at it together. We see a lot of barriers out there in the system, but we see a lot of opportunity.

One of the big things we've seen as an organization is that we lead by example. We live what we preach, what we build and what we deliver to our consumers. That's a pretty big example, and that's a big message I'd like to leave for this committee, that you need to lead by example.

We don't find that there's any one idea that's no good. Little ideas can magnify into huge ideas. Take a simple thing like two-sided photocopying, which is a pretty straightforward and simple thing. You have a two-sided newspaper, so why can't you have it on paper? Just by doing that, we saved $50 per employee. By looking at the conservation of natural resources, we can see that there's a bigger play at energy savings, cost savings, overall productivity and efficiency. There are a lot of little things we can do to make big ideas work. Integrating all of that together is a huge challenge, but we can do it.

Look at what we've done historically. We have projects that have moved on from a condominium size that started at 22% energy savings, and we've climbed up to 40% energy savings. We can do this as a developer because it makes sense. We have the financial economics to do it. Forty percent isn't enough; we need to go beyond that. We've looked at innovations from eight years ago, where we had an all-off switch that turned lights off simply at the front door. How much easier is it than just pushing a button and having all the lights go off in your apartment unit? These are very simple things. We do that right across the board in every home that we sell, every condo that we sell, empowering our residents to actually themselves conserve.

This all came from an integrated approach, putting everyone who's involved in the design of a building in a room together, and asking how we can do better. The brilliance that can come out of people is amazing. When you put your heads together, you'll come up with ideas, and some of those have really good economic return.

Some don't have really good economic return, like a distributed energy system. We experimented with one in 1998, 1999. It was very expensive to implement, very expensive to put together. The results were brilliant. We could get really good output from it, but it's a matter of getting that cost down and getting it out there in the public so we can use it more often. So it's really a challenge for us.

We can innovate as far as we can. We've looked at doing better fresh-air systems for condominiums; we've looked at using rainwater, stuff that falls free out of the sky, as water for irrigation, water for toilets—really simple things. There are massive regulatory barriers around doing that. Nonetheless, we can still put it together and make it work. We found great success in that.

We've taken that same approach to our existing portfolio. What can we learn, what can we integrate into our existing buildings to make them more effective? Frankly, that's where our challenge is. It's not the new stuff that's coming out; it's already regulated quite well. We really have to look at our existing building stock and ask how we can make our existing building stock more energy efficient, more natural resource conservation-oriented.

We created a number of years ago something called a comprehensive natural resource management plan—a focused effort on all of our buildings to see how we could reduce our environmental footprint, how we could reduce our carbon footprint. It gave us some return, and we're getting there, to that 40% mark again, but we seem to be cut off at 40%. We need to get beyond that. We need to innovate beyond that. I think Glen hit it beautifully when he said had we thought 20 years ago about a development in a community we were building, we would have had the opportunity at that point in time to put in the right systems and infrastructure to make sure we could have an almost net-zero community.

We started in our single-family home side last year by building a net-zero home out in Manotick, just south of here, which I invite any of you to come out and see at any time. It's open all weekend long. It generates as much energy as it consumes. It's all renewable energy, very simple to use, very simple to see. You can touch it, you can feel it. It's darned expensive, but it works really well, and it's really the future of single-family home construction, as far as we can tell.

It's working really well for us. We started integrating our single-family homes, our community design, our existing buildings. Overall, we've seen 20,000 tonnes of greenhouse gases reduced, and we see that as being just the start, the tip of the iceberg.

We need to work harder at changing what our culture is like, changing where we're going, and reducing the barriers.

I'll let Greg close out from there.

[Greg Rogers]

Thanks, Andrew.

We are only replacing our existing building stock at the rate of some small percentage per year. It's the existing building stock where we feel the focus is most important.

Speaking specifically to energy, it's a much bigger picture than that, but for energy alone there are three parts, in our view, to an integrated approach to energy supply.

Number one is that distributed energy has a future. Gas-powered turbines, locally distributed, are more efficient than a central plant because you can heat hot water with them. We don't do that in the central plants as they exist today. There's a recovery there. They're not going to burn any more fuel than the large plants will, so there's a future there. Solar also has a future, but the problem is regulation. We put a gas turbine in a hotel downtown and it took us about a year to get through high-pressure gas problems, to get through the fact that this might be an industrial production site, of all things. Any sane person would not have done what we did, because it just wasn't worth the brain damage.

The second thing is demand load reduction. Planning is a great idea; integrated planning is a good idea. There are other things that we can do to inform, empower, and reward our people for conservation. We can sub-meter our apartment buildings. You wouldn't believe how aggressive people will be about turning off the lights in their apartment buildings if they know that they can save a couple of bucks a month. You know what? We're not allowed to do that in Ontario because we're not allowed to sub-meter apartment buildings. So that savings is just not there. We're regulated at every turn against doing things that we think are the right things to do.

I would go into government procurement, the third way that I think we have to approach this. Government is a big buyer of goods and services, and a user of energy. I have a building downtown right now where I have a choice. I can install energy-saving equipment for a million bucks and save a pile of money and energy, or I can install not-so-efficient equipment for half a million bucks. If I install the million-dollar equipment, with a private sector tenant in place I can recover the cost of that, and it's a neutral cost to the tenant. He doesn't notice a thing. He gets a better building, he makes a contribution to the environment, and there's no change because I use the cost savings on energy to pay for that additional cost of the equipment. PWGSC's policy is in fact against that. Their answer is no, put in the wrong equipment and that's just the way it is.

I don't want to paint a picture that people are being malicious or mean; it just happens to be the way a lot of policies work. We're talking about a new world, a new age, where we have to incorporate into our economic system the environment where it's not been accounted for before. It's a big job, but there are a lot of small places where we can start.

Maybe I'll leave it there.

[The Chair, Conservative, Leon Benoit]

Thank you very much.

For the last presentation, or presentations, I have Trevor Nickel, from Highmark Renewables, and Shane Chrapko, from Growing Power Hairy Hill.

I just want to say that I watch this project with particular interest because it is in my constituency and I went to university with the two gentlemen who started the original feedlot, which is the seed of all of this, Bernie and Mike Kotelko. I've watched this grow and am looking forward very much to an explanation of this, what has become a very sophisticated operation.

[An hon. member]

I think you're giving a speech.

[The Chair, Conservative, Leon Benoit]

I do very little of that. It's my turn.

Go ahead, for up to ten minutes, gentlemen.

[Trevor Nickel, Representative, Assistant General Manager, Highmark Renewables Research LP and Growing Power Hairy Hill LP, Town of Two Hills]

Thank you very much.

It's a real pleasure and a real honour to be invited to come and tell our story to this committee. We were asked to share with you a little bit of the history. It's a bit of a story that spans a decade, and you may imagine that over a decade we accrue enough policy recommendations to fill up a book, so we'll try to keep those near the end and focus on the story.

You mentioned Bern and Mike Kotelko. Around 1999 they were at the genesis of this project. They owned a very large feedlot that produced 500 metric tonnes of manure a day. A soil scientist came to them and said, “Hey, what are you doing to the soil? There may be some issues that are building up over time”, and there was some disagreement. Obviously, manure is a good thing and it's a natural product for the soil, but there can be too much of a good thing. So they looked for ways to get the same value that they were getting using that natural product as fertilizer out of the manure technologically.

I've said manure about ten times in the last two minutes. Get used to it.

So they looked at all the available technologies. They looked at composting, they looked at drying and pelletizing, they looked at burning, they looked at gasification, and they looked at anaerobic digestion. It turned out that anaerobic digestion is about the best way to approach some waste management issues. Not only does it produce renewable energy, it also allows you to recover natural products. We can get into all the technical details on that without going too much further at this time.

It turned out, though, that there was no good anaerobic digestion technology available worldwide that could handle feedlot manure, due to scale and due to the fact that everywhere it had been developed in the past, everything was easy, liquid, nice, beautiful stuff. Feedlot manure isn't. So clearly there was an opportunity to develop a technology that would work. So a little company was formed to co-develop that technology. We put that together--well, I wasn't there yet, but it was put together and around 2002 they built a pilot plant on a lab scale. In 2003, after thinking that pilot plant was working well, they started building a commercial-scale demonstration plant that at that time was the largest anaerobic digester in the world. This was just a demonstration facility. You know, you're talking about scale. In 2005 that plant was commissioned. It can handle 20% of the manure produced at Highland Feeders. The total is 500 metric tonnes a day, so it's handling 100 metric tonnes a day of manure and produces a megawatt. When it was commissioned it was the largest in the world. It's been eclipsed, but it's about to become the largest in the world again, and I'll tell you a little bit about that.

In 2006 we deemed it a qualified success, a bunch of patents were filed, and I joined the company to write a business plan. We presented that business plan to the board in November 2007. In January 2008 Shane and his brother were brought into the company to really provide a lot more horsepower in the intellectual property development area. Subsequently, we divided the company into two: one that owns intellectual property and one that owns physical assets. It's the physical assets that are doing what we're all talking about today, this integrated community energy solution.

It's not just an anaerobic digester any more. What we're building at the same site where we built the pilot plant is a 400% expansion project of the anaerobic digester. That's a fourfold expansion. We call the new thing Growing Power Hairy Hill. That expansion also integrates with it a medium regional-scale ethanol production facility. So it creates--with the feedlot, the anaerobic digester, and the ethanol plant--what we call a virtuous loop. All the byproducts from each of those processes--manure from the feedlot, low-end heat from the anaerobic digester project, and distiller grains from the ethanol--become the input products for the next process down the line. That's true integration. What we're able to do with that integration, with those three facilities on site, is produce ethanol with an energy balance that far exceeds anything that's even in the lab for cellulosic ethanol, and we're not doing anything different. We're still doing moonshine, essentially. We're able to get a 4.4-to-one energy balance out of that. Corn ethanol in the States, for example, is at best 1.4 to one. Diesel fuel is 0.8 to one.

That's all due to integration. We can also reduce the amount of water that's used. Amazingly, by adding an ethanol plant that uses as much water as a feedlot to a feedlot, you only increase the amount of water 25%. All the liquid waste that comes out of the feedlot ends up being processed through the anaerobic digester and all the pathogens reduced out of that.

I've gone off my notes.

I do want to highlight that Growing Power Hairy Hill is a $100 million project. It's under way. We're doing the first phase, which is the anaerobic digestion phase, right now. We started construction of that when we got our permits in November. The second phase, the ethanol plant, is under way pending financing, which should close fairly shortly.

You don't build a $100 million project without having some pretty significant economic returns available for investors to get in on this. We all know that renewable energy doesn't necessarily provide the type of investment returns that, say, an oil and gas or a gas drilling play would in Alberta. It's only the integration that allows us to provide the types of returns that investors like.

We can go into why integration has lower risk and all sorts of that stuff in questions. I do want to just highlight a few reasons why anaerobic digestion technology at the centre of an integrated project is really important. It applies really well to all forms of organic material. And I don't like to use the word “waste”, but I'll say it now: anything that stinks when it rots can have the energy that's inherent in it recovered. And cities and towns produce an awful lot of this waste. There's some leadership in towns--Edmonton is one of them--to reduce it, but there's still an awful lot of waste out there. The food processing industry produces an awful lot of waste, and agriculture, as you know, produces an awful lot of odour. Currently only the largest projects of these types are economic. That leads us to go into some recommendations.

Because the capital investments are larger than any food processor or farmer can reasonably float, and liquidity challenges are ongoing, there is some room there for incremental government support. We see some leadership out of the United States in the 2008 farm bill. They're offering 70% of projects as loan guarantees. This is something that we really see as leadership and as really interesting.

There are some other items in section 9 of the 2008 U.S. farm bill that could apply, not only to farm integrated energy solutions, but also to community-based and city-based, municipal-based integrated energy solutions. The structure is there.

Anything we can do to de-risk the development of clean tech, putting a price on carbon, all of these things that have been talked about so much--the smart grid--anything we can do to invest as heavily as possible in research and development and commercial demonstration projects.... We've talked about multiple iterations of pilots. There is some real value in investing heavily in these areas. It really helps us get around the curse of resources, sometimes known as the Dutch disease, and coming from Alberta we sure know what happens at the end of a Dutch disease cycle.

I have about another minute, and I might ask Shane to finish it up for us.

[Shane Chrapko, Representative, Chief Executive Officer, Growing Power Hairy Hill LP, Town of Two Hills]

Thank you for having us here.

As Trevor touched on, the real story for us is the integrated nature of a digester next to an ethanol plant next to a feedlot. The three previous companies were talking in municipal terms, and you might wonder how this relates to a municipal value. Right now we are taking tens of tonnes of waste that would normally end up in the landfills out of the cities and towns. It's going into our digester and we're making energy out of it. So that's very much a waste-to-energy story, and it's a good one.

Trevor mentioned the energy balance that we have is 4.4 to one. That means one unit of energy goes into our facility and we get four out. With traditional or conventional oil, one unit of energy goes in and you get 0.8 out. It's a huge difference. You hear a lot about cellulosic ethanol. It's one to four; so one unit goes in and four come out. But it's five years out, and it has been five years out for the last twenty years or whatever.

We're there now, and my message is that dollars will flow to the jurisdictions that have policy that supports renewable energy. Our current facility is a $100 million project. There is room for five or six more in Alberta, next to big feedlots. If the correct policy is in place, there will be many more. It won't have to be the very large ones that get funded.

We went around the globe looking for investment, because they said that it won't happen in Alberta because all the policy goes for traditional oil. Recently Alberta put the RFS in, and it's a low-carbon RFS. They announced it; it's not law yet. That made all the difference in the world. So dollars will flow and there are billions of dollars at stake. Billions of dollars are going to flow and are flowing around the globe and they will go to jurisdictions that have favourable policy.

Some of that policy is support for low-carbon fuel, and some of the ideas there are the RFS loan guarantees, or lift to equity coming in from outside the jurisdiction for renewable fuel. There are many different examples of that.

I don't know if I'm over the minute now.

[The Chair, Conservative, Leon Benoit]

Thank you very much, gentlemen. We appreciate your presentations very much. All of them were very interesting.

We'll go to questions now.

I will let you all know that channel 1 is the English channel. With the second questioner you probably will need that.

We'll start with the official opposition, Mr. Regan, up to seven minutes.

[Geoff Regan, Liberal, Halifax West, NS]

You presumed I would speak English, Mr. Chair.

You were right. After all, our witnesses are, for the most part, anglophone, I guess.

First of all, I want to thank all witnesses for coming today. Some of you have come quite a distance, and I'm sure we all appreciate it.

And I want to reassure Mr. Nickel that although downtown Ottawa may not be a farming area, some might say that Parliament Hill is no stranger to manure, so I wouldn't worry about using the word.

In this study we're interested in highlighting the kinds of things you're all involved in, but we're also interested in looking at and understanding what the barriers are in terms of the federal government. What barriers are there that need to be removed, and what should the Government of Canada be doing to accelerate the use of renewable energy or the use of integrated energy systems across the country?

With that in mind, I'd like you to comment on the federal stimulus package. Do you think it's doing enough in terms of supporting integrated energy projects? What should it be doing differently?

There are really a bunch of questions in one.

[Daniel Pearl]

Thank you very much.

It's a very interesting question, because in Quebec we have two particular challenges. One is that our energy costs are far too low. It's interesting that the federal stimulus package doesn't easily address some of the local challenges we have on trying to bring forward geothermal and solar hot water to some form of equivalency that is necessary, given the fact that our electrical costs are so low.

At the moment, in order to try to get around that, we have some subsidy programs, but we find that the subsidy programs are what we call one-term subsidy programs. They actually help capital costs. They don't actually understand the long-term costs of running equipment related to district energy systems.

One of the models we tried at our Green Energy Benny Farm is to make enough profit and to hold onto enough money from not giving all the savings to our residents--which goes against the whole principle of affordable housing--to make sure we can do the long-term maintenance, have some risk management and some risk capital, in a certain sense, and make sure the whole system doesn't close down. We need some understanding that right now, particularly in Quebec, we sell the energy to the States at twice the cost, but locally we don't charge for it at the right cost. That right now is a big blockage.

Ontario is an example. You can sell solar energy, and the government will pay you about ten times what they'll pay us if we sell some extra energy to the grid in Quebec. One of our other products following Benny Farm will be a new sustainable community of about 3,000 or 4,000 units. We're trying to work with an organization out of England called BioRegional One Planet Living, which involves trying to live within your ecological footprint. We almost have to start buying energy from Ontario in order to work on our project in Quebec. I think that highlights one of the problems we have at the moment.

It's actually an ethical question. I think Alex very clearly stated that we should be looking at the fact that every time we use a kilowatt of electricity for heating, we're missing the opportunity to displace coal to our neighbours to the south, and even to the west, because even in Ontario there's a cocktail formula that's not pure on electricity. In Quebec, technically speaking, we only have nine grams of carbon in one tonne of energy. That's really a problem, and the package didn't seem to address that issue.

[The Chair, Conservative, Leon Benoit]

Thank you.

[Geoff Regan, Liberal, Halifax West, NS]

Mr. Pearl, I'm likely to use up my seven minutes on this question. I'm going to add one more thought to it, if I may. You raised a question in relation to feed-in tariffs and their importance. Perhaps others could discuss that. I don't know if there's a role for the Government of Canada, but if there is, I'd like to hear that as well.

Thank you.

[The Chair, Conservative, Leon Benoit]

Mr. Murray, go ahead, please.

[Glen Murray]

Thanks.

I think when you've been mayor of a large city—I was the mayor of Winnipeg—you look at the federal government's spending capacity and you just get overwhelmed. In the last term of Parliament, federal spending increased by nearly $40 billion. That's more money than all the major municipalities in Canada have to spend annually. Since then, the federal government's spending increase, not its total budget, is more than all municipal and regional municipalities--small, rural, large. You're now talking about one order of government that has increased its spending and imprint on the economy by more than one entire order of government spends, and that is increasing.

You have less money right now in Canada in the hands of municipalities than most others, and Canadian municipalities are twice as dependent on property taxes as any other source. We've been cutting consumption taxes and sales taxes. There is no appropriate carbon price. I don't know how you meet climate change without a carbon tax. You can call it anything you want, but people should be honest with people. I chaired the national round table. I was grilled by this committee. I think you got three years of excellent reports, and you didn't take any of the advice.

You need a carbon pricing policy that is coherent. You do. Because right now what you're publicly subsidizing in the federal government to an extraordinary level are brown buildings, sprawl, and brown technology. I would challenge you to do something, as a government. Look at how you're spending money and look at how you tax. Look at all the things that you want more of in this country--green energy, the kinds of things my friends from Alberta have--and then look at why it isn't happening.

There is a price barrier because you subsidize brown buildings; you put a premium on green buildings. Every single road, every single sewage and energy system in low-density areas when I was mayor, including in my own city, could get public subsidy because there are built-in green subsidies. People who live in highly transit-friendly neighbourhoods that are walkable, whether they're rural or urban, because there is a form for both, pay higher taxes and get less subsidy than any other group of Canadians. It's not a political issue--right or left, I don't care. There is an argument from either perspective to do that.

So that is one challenge.

I get back to the idea of planning, because I don't think you're going to pick the solutions. Mr. Chairman, from your own constituency you get a sense of the inventiveness of Canadians in solving problems.

These technologies that you've heard about all work, and they're all unique. I grew up not far from Benny Farm. If you have a framework, if you have a proper plan that lets these people know--because they can't decide what the most appropriate technology is for rural Alberta or for urban Montreal--if you actually provide an energy plan that identifies, that understands the geography, understands the age and nature of the buildings and gets the right technology solutions, and you spend through those plans and allow the projects to flow through those plans with provincial and federal support, your shovels-in-the-ground criterion--which I think was meant with the best of intentions to accelerate funding--is not going to work. If you fund the plans on the tables rather than the shovels in the ground, you'll get a lot more happening, because you'll allow the private, public, and non-profit sectors to accelerate these things and you'll unleash the creativity that you sought here.

That's how I would structure my approach to federal spending if I were in your shoes, which I'm not.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Murray.

Mr. Regan's time is up, but I do want the others to have a chance, Mr. Rogers and Mr. Nickel.

Mr. Rogers, could you go ahead with as brief a response as you can give?