Natural Resources Committee on March 26th, 2009

[Andrew Pride]

If I understand your question correctly, we constructed a net zero project that produced as much energy as it consumed. Further to your question of whether it is affordable, we have feed-through tariffs here in Ontario, so putting photovoltaic cells up on the roof pays somewhere between 40 cents and 80 cents a kilowatt-hour, an astronomical sum of money, which makes the project a bit more affordable for people to use.

Overall, I would say that you can build a single family home that is tighter and more efficient, using way less natural resources, from wood to energy to electricity to water, and have it as a wonderful example of why you should buy, but unfortunately, the price goes up and it becomes a more expensive home. Your overall operating cost as a homeowner is lower, your mortgage cost is a little bit higher, and your expenditures are way lower, so you wind up with an overall affordable situation. Your cashflow is always positive, but your home price goes up.

The consumer today looks at that first home cost and says, “Oh, I don't want to pay that much money”. The federal government looks at first home costs, where the GST rebate comes in at $400,000, and for anything below that, you're okay. If I add $100,000 to the home, a $325,000 home now has GST applied to it. That's all because of renewable energies that are being put on the roof and because of having a better and efficient home. It's a more cost-effective solution for the homeowner, but they have to pay GST and all these other things because now it's an expensive home. It doesn't make sense.

We really need to see a way to say that renewable energies and energy efficiency should be excluded from the price of the home. The consumer really needs to understand that. I think that's where we can all start delivering a better message. It's the cost of home ownership that's important; it's your mortgage cost and your utility costs that add up to what a home price is, not $300,000 or $400,000.

Overall, yes, it's very affordable. Yes, it's great for the environment. But we have bad marketing and bad education out there from the entire community and we need to do better at that.

[Daniel Pearl]

I have literally just a one-sentence comment.

Mr. Shory, one of the things I also teach is sustainable design. When our students do their first energy audit on a single house, they come to the conclusion that we can save 75% of our energy costs by turning a single house into an apartment building or a townhouse. So literally the first step, before we look at district energy, is understanding how to live in a more dense and sustainable fashion. In some ways, I think the technology is way more expensive and is taking away our capacity to multiply and replicate the example across the country.

[The Chair, Conservative, Leon Benoit]

Mr. Anderson, go ahead.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

I would like to follow up on that with Mr. Pride. We had some folks in here from Alberta who did have a figure on what the extra cost was on their development in terms of the market. Do you have a figure that you're willing to give us on what the extra cost would be if we were to develop a neighbourhood of these houses?

[Andrew Pride]

We're still working through the exact numbers. One of the difficulties we're having today is that there are very few people to feed into the green-collar jobs. There's a real lack of capacity in the industry today to provide the necessary equipment and the necessary labour to build high-performance buildings. That's a huge restriction that we have today, so to get firm pricing is a very difficult thing to do.

We're anticipating looking at somewhere in the order of a $300,000 home becoming a $450,000 home, so it's in the order of $150,000. Interestingly enough, a $600,000 home becomes a $750,000 home. It's not a percentage increase, necessarily; it's just a fixed cost to increase to a higher level of efficiency.

Again, when we look at efficiency, we're always looking at reducing the amount of materials and energy needed and then putting technology on top of it afterwards to get it to a net zero perspective.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Thank you. That's actually pretty close to the number we heard from the other folks as well.

I don't think I have a lot of time left here--

[The Chair, Conservative, Leon Benoit]

You still have six minutes.

[An hon. member]

That's a lot of questions.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Six minutes? Good. I do have a lot of questions.

I would like to address the issue of monopoly regulators. You had a couple of comments on that, but I would like to hear from the other folks on the issue of monopoly regulators versus the challenges of deregulation. I would like to start on this side of the table, because I think Alberta is in a situation that is a little different. In Saskatchewan, we have a monopoly regulator as well, and I know that restricts some of the development. I am interested in your conversation on that.

[The Chair, Conservative, Leon Benoit]

Mr. Nickel.

[Trevor Nickel]

Right.

In Alberta, the production of electricity and the retailing of electricity is almost completely deregulated, but the distribution of electricity and the transmission of electricity is still a monopoly. Unfortunately, if you want to sell electricity, you have to go through the distribution of electricity. So there's some of that still going on.

I can speak very briefly to two particular examples of working with the energy companies, and one case is Saskatchewan. An anaerobic digestion project was put up in Saskatchewan, at Cudworth—a very good project, very good technology, should have worked. However, dealing with a monopoly power company in Saskatchewan proved to be too much of a management burden for that company. There were other problems, but that could be pointed out as one of the reasons that particular project is a complete failure at this time.

On the other hand, in our project we worked very closely with the power distribution company and we were able to overcome some of the burdens, which they weren't able to overcome, because of the looming field of competition in that environment.

I don't have any experience with Ontario, so I'll pass on that.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Are there any recommendations you might have, as well, while you're going? But I want to hear from each group, as well.

[Trevor Nickel]

For small power producers, the right of access to the grid is important. In Alberta, if you get a permit to produce, you must be connected. There will always be an argument about who pays for how much of that connection cost, and that's fine, but you have the right of access to the grid. It is different in other jurisdictions, and that is a problem for getting these projects hooked up.

[David Anderson, Conservative, Cypress Hills—Grasslands, SK]

Anybody else?

[Andrew Pride]

Being Ontario-focused mostly, we're in a mostly regulated electricity supply and an unregulated gas supply. It's a double-edged sword. Clearly to us, the benefit of being deregulated is massive. If we disconnect subsidies to electricity, we'll actually see real conservation happening. When the electricity market opened up in Ontario, on the residential level we saw a lot of activity of people trying to reduce their consumption and trying to change their behaviours. Frankly, behavioural change is around 25% to 50% opportunity on energy savings, so it's big. So if we get real price-point drivers, that would be really important to us.

The downside is that apartment buildings and commercial buildings can be gross lease opportunities or situations, where the landlord is paying all the cost and the user is using all of the commodity. There's a disconnect there. Now you're increasing the cost for the landlord, but the user continues to use as they would have, because they're not seeing that price point. I think there's a regulatory fix that needs to happen first to make sure those who are using are paying and those who are supporting that, enabling that, are not paying for it. Then going to a deregulated marketplace becomes much easier, much more straightforward.

So I'd say fix the regulations so that if I use, I pay; if I'm not using, then it's not my responsibility. Let the person using it pay for it, and then open up the market so the real price drivers come out.

[Glen Murray]

I would agree with everything that Andrew said.

The other challenge, both in the public sector and in the private sector, is that the technologies that are the most energy efficient tend to be the most expensive upfront, and one of the problems for municipal governments, which are very constrained, is that their capital budgets and their operating budgets are separate. So municipalities will buy street lighting, for example, that is the least expensive, but 86% of the cost to the municipality is in the life cycle of the operations of that.

There is some excellent work that has been done and is continuing by Bob Page, who took over from me as chair of the National Round Table on the Environment and the Economy, which is your agency to advise you as parliamentarians. It has done world-recognized work in this area about how to manage market shift, because you have the older technologies that may be cheaper, but how do you transition that?

I would say the Government of Canada, Natural Resources Canada, your own department, have done some work. I went to brief the Swedes, the Norwegians, the British. I was in London. I was invited by four or five national governments that are leading, ahead of Canada, that are representing work that the taxpayers of Canada paid for in this very area. So you might want to invite Bob Page to come to speak to you and ask him that question, because I don't speak for the national round table any more, but I can assure you they could answer that question in full.

There are some ways that you could help. Going back to Mr. Regan's comment before the question, the federal government could help municipalities by creating the situation, as with individual citizens and businesses, to amortize those costs against the lower operating cost, if you could provide depreciation allowances or tax write-offs that levelled the playing field for them. If you don't want to put a price on carbon, which is how the Swedes have done it, I'd love to hear the argument against a proper carbon pricing system that must include cap and trade in carbon. I've seen five countries do it, and they are so far ahead of us and their tax burden has been reduced and their energy sectors, including oil producers, are doing better.

I spent three years studying this. We have large support in Alberta, in the oil patch, for these kinds of things. And you now have a chair out of the oil patch who I think would agree with me--Bob Page--that you can get a mechanism that will get you a bigger economic bounce, help you fund carbon storage and sequestration, help clean up Canada's oil industry at the same time, and help municipalities and individuals fund and remove the financial barriers to our local governments and to our citizens being able to manage and make the right financial choice. If you talk to all of us, I think we would all agree that the pricing problem is a very real one.

I suggested I wasn't going to talk about pricing because I said if you fund plans and not projects the project will fund by the plan. If you can get the pricing right and end the perverse subsidies, you'll stop penalizing all of us. I think every one of us would tell you the current taxation and pricing system penalizes us. It makes it inherently more expensive to do the right thing.

I don't think that's anyone's agenda here, Mr. Anderson. I think we would be on the same page.

It is just a matter of getting the right policy solutions in place, and I would use your own expertise. I would start with the national round table, which I think are recognized as world leaders, to answer that question for you.

[Daniel Pearl]

I have one more comment, Mr. Anderson.

[The Chair, Conservative, Leon Benoit]

Be very brief, please.

[Daniel Pearl]

It's an excellent point. We're working on a new project now, again, a sustainable net-zero community energy project by 2020. One of the problems we have with a monopoly system is that if you try to get the promoter, the land developer, to put in an infrastructure underneath the road, he needs first of all to get permission from the municipality to put the infrastructure in, and he needs to have some idea that eventually there won't be a monopoly on the distribution of energy in that loop. If we don't get either of those solved now, we're building a community a bit like Rome, where the roads are there for thousands of years, and if we have to rip them up every time to put in the district energy system in order to share that energy, basically we are removing the whole concept of resilience, which is the way I started off the day.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Mr. Anderson, Mr. Shory.

Now, on the five-minute round, Mr. Tonks.

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

Thank you very much, Mr. Chairman.

This has been a very comprehensive discussion from a variety of perspectives and a number of things come out. Across the country, there is no one-size-fits-all matched to the energy menu of choices and technology to the plan development. But if I can be a little more.... There are rural applications, there are suburban, and there are urban applications with respect to the experience in Toronto.

Glen, you mentioned the Toronto district heating and cooling example as a best practice, and I certainly would agree with you on that.

The issue of smart growth and intensification is a lesson well learned. The objective of these hearings is to attempt to have a strategy where instead of this experiential looking backward and repeating the mistakes of the past, we're looking at the opportunities to take large developments off the grid, and in fact not only take them off the grid, but offer the opportunity to contribute to the grid and reinvest those moneys into sustainable development parts of projects.

Now, in Toronto, as in many of the large urban areas, the challenge is that you don't just have a single development; you have a 60-acre brownfield site with a choice of options. In a mixed-use development, you can try to include many jobs that would be localized to reduce commuter times to try to add to your transit system in a sustainable way, to serve that development but also to integrate with the rest of the system. So the issue becomes very much what you have said: it's matching a planning template to an action plan that's going to add the value.

My question is whether there is a pilot project in Canada that has attempted to look at those objectives--some of which I mentioned--that could be used as an option of choice that could be looked at by large cities right across the country. It would have the costs and benefits worked out and the financial backing that would be required that wouldn't be sort of a grant on a specific road improvement or a specific infrastructure piece, but would be a more comprehensive grant and support regime for the concept of that sustainable community. In Toronto, I can think of a half a dozen right away, a mixture of industrial and commercial and residential uses with a transit system that's localized but is part of the growth strategy for the Toronto area. So is there an example, or would you support a pilot project that would attempt to have the objectives and meet them through the program that would be suggested?

[Glen Murray]

Well....

[The Chair, Conservative, Leon Benoit]

We have about a minute for an answer. Great question, though, Mr. Tonks.

[Some hon. members]

Oh, oh!

[Glen Murray]

The best answer I could give you is Calgary. I think that's the best model. If the federal government told the Government of Alberta that they would fund matching dollars, but Alberta would have to follow the energy plan that they have now approved with the City of Calgary, and get the right technologies and follow the plan through to all of the savings, that would do it.

Ontario Power Authority looked at the Calgary plan and said exactly what you said, all kinds of good things. They knew we'd been involved with a deep water cooling. They looked at Guelph, looked at the brown...the areas that are at risk, and they asked if we could do the same thing. And I'm hoping the Ontario government, when they come to our friends here in the federal government and say let's replicate the Calgary model, because now that everyone can sell into the grid...but how do we know that it's not a free-for-all and chaotic? How do we make sure that we're getting the right technologies that are actually durable, sustainable, get the kind of energy efficiency reductions in place and do that?

Guelph is another Okotoks. I think what you just heard from our friends here near Vegreville.... But you've got those. But I think the plan is important. There's lots of good stuff happening in Quebec right now. They have traditionally had integrated energy planning, and they're arguably ahead of many. You could take up any of those. And what Daniel said earlier about the relationship between price and plan is also important.

The federal government simply said that the provincial governments and municipalities have official plans; they're legal documents that determine what plan to use, they determine everything. We will use those. We won't micromanage the country; we will use the provincial and municipal official plans. And as long as energy is in them, we will fund that plan, and the cities and the province and the private sector can then develop the partnerships and deliver the energy. It would be a pretty fast and efficient system to rebuild our energy infrastructure.