Evidence of meeting #7 for Natural Resources in the 40th Parliament, 2nd session. (The original version is on Parliament’s site, as are the minutes.) The winning word was green.
A recording is available from Parliament.
Vice-President, Marketing, Union Gas Limited
These are early days, and any time you launch into something as significant and new as this, there are entry barriers from a pure economics standpoint.
We're looking for some seed money and some support so that investors like us who are investor-owned are actually willing to step up and make these investments and be helped along by some of the immediate economics. Once commercialization starts to take place and you start to get momentum, the actual cost of these systems will decrease in the long run. So that is one of the issues.
The Burlington service centre is a good example. It cost us about a 25% premium to build it to gold LEED standard. When we did the economics, the actual payback is there, but you have to front-end the capital to get the long-term operational savings to make the economics work. So there is a front-end cost to this.
Conservative
Bradley Trost Conservative Saskatoon—Humboldt, SK
Let me put out this question, which probably won't apply to the private sector but may apply to municipalities.
Would it then be an idea for other levels of government to front the capital to municipal governments on a sort of loan program, so you are not bound by the five- or seven-year restrictions depending on your province? Would that be a way to get around it? The message seems to be that we put more into capital, and then we save on operational costs. Would that be an idea? I'm not arguing for it; I'm just putting it out there, and I'm curious to hear your response.
Vice-president, Marketing and Business Development, Terasen Gas
Being a private sector guy, I would say that municipalities would benefit from dollars for feasibility studies and analysis. Putting dollars out that may or may not go anywhere--in other words, analyzing whether or not there's an opportunity there--is a bridge to get over.
I think there is capital that can be brought to bear so the municipality doesn't have to tie capital up in things that others will put the money up for. It can be directed to other things that the private sector won't, can't, or shouldn't invest in. So there is a window there to help move those things along.
It's encouraging that municipalities are working with credible players, because the danger with these things is that people leap on the bleeding edge versus the leading edge technologies and stumble, have a problem, and then forever things fall by the wayside because we've thrown our money away on something that doesn't make sense.
Conservative
Bradley Trost Conservative Saskatoon—Humboldt, SK
I need a quick response as I think my time is bleeding away here, and I have a couple more questions. Do you have anything more? If not, I have another question here.
Liberal
The Vice-Chair Liberal Alan Tonks
Mr. Trost, I'm sorry, your time is gone. I'd like to give you some of my time, but the motivation behind it would be immediately suspect.
Mr. Cullen, if you could take the chair, I'm going to take the questions that I was on the list for, if that's all right with the committee.
Liberal
Alan Tonks Liberal York South—Weston, ON
Thank you very much. This is very helpful. I'm particularly taken by the sense of a framework in British Columbia that is communicating down from the utilities through the province into the municipalities.
I would like to use my area as a case in point. I have a 70-acre site that used to be a brownfield site mainly occupied by Kodak Canada. I would really like to position this site as an opportunity, since it's in the transit hub and there's public ownership of part of the site, for some type of an integrated energy systems approach that has been the focus here.
How far along are other provinces in terms of developing that kind of framework? The City of Toronto for example, could take the same approach as has been taken in British Columbia. How far along, to your understanding, are they? Are they as enlightened...? Has Mr. Smitherman touched the sensitive nerve through a policy proposal? I'd like to have a feeling for that so I know where to go when I leave this room and start to hammer away at some doors.
Project Manager, Distributed Generation Strategy, Customer Care and Conservation, B.C. Hydro
Sure.
I'm not sure how far along other jurisdictions are. We do keep an eye on what's going on elsewhere, but I have to say Ontario does appear to be leading. Certainly that new act is quite interesting, and it is quite interesting to folks in B.C. who are looking at that. But beyond that, I don't really have any experience.
Liberal
Alan Tonks Liberal York South—Weston, ON
Mr. Stout, would they call you in and say, if you can do it--it ain't boastin'--tell us how to do it?
Vice-president, Marketing and Business Development, Terasen Gas
Well, in our experience, you have to find a willing developer, a kind of progressive developer that's willing to take on the land and step out with it, and a municipality that's supportive of the whole concept as far as changing zoning and working around some different avenues go. I think it's a question of getting the collaboration on that side, and it really pushes from the bottom up, from the community level up. B.C. does have a slightly different framework overlying that, but some of these projects had started down the road before the environmental rules and such were in place in B.C., so stuff has happened on that front.
Liberal
Alan Tonks Liberal York South—Weston, ON
Regarding the urban-rural opportunities, one size does not fit all, but what about something that is suburban-urban? Have you had experience with respect to matching the tools that are available to both those types of settings?
Vice-president, Marketing and Business Development, Terasen Gas
I won't claim that we have, but I'd point you to a project that's in Alberta. It's owned by ATCO Gas, and it's in the town of Okotoks, just south of Calgary. It's a fully residential subdivision with single-family detached homes. It has a combination of geothermal and solar thermal heating systems backed by natural gas that have been operating for a couple of years. It's a stand-alone community, and it's all single- family residential housing. So it can work.
Liberal
Alan Tonks Liberal York South—Weston, ON
I have one final question. In terms of your rhetorical question with respect to finding a receptive developer, have cost-benefit analyses been done that one could take under one's arm into a developer to say, listen, here are some examples where the cost-benefits and the paybacks are within a competitive regime with respect to traditional energy applications and planning applications?
Vice-president, Marketing and Business Development, Terasen Gas
As I say, we have some in the projects we've developed. I think Dockside Green in Victoria is another example. You've heard of that. So there are practical examples that can be pulled out to show people how it's worked through with the energy proponent as well as with the developer. It's a bit of an iterative process, but it can be done, for sure.
NDP
The Vice-Chair NDP Nathan Cullen
Thank you very much, Mr. Tonks.
Now we'll go to Mr. Anderson for five minutes.
Conservative
David Anderson Conservative Cypress Hills—Grasslands, SK
In the future, as these develop, do you expect to see them as being primarily private, municipal, or tied to utilities? I'm interested in that, because there were a couple of comments made about things like having to shut down your vehicle plug or having your appliances shut down while other people need the energy or whatever. I don't have a problem with that if you belong to a community where it's voluntary, if you've had a private developer and you've chosen to buy a place there, and that's part of the rules, but at a municipal level, it starts to concern me because you're pulling power from one section to another.
I'm just wondering what you see in the future, how you see this developing.
Project Manager, Distributed Generation Strategy, Customer Care and Conservation, B.C. Hydro
Maybe I'll take that question, because I think I uttered those words, and I'd like to contextualize this.
This is the utility of the future, and we would never do that to customers who didn't agree to it or sign a contract with us. They would get reduced electricity rates if they were entering into a contract whereby Hydro could come and shut down a smart appliance or take energy from their electric car. It would never be done willy-nilly. We would never do that.
Regarding your question on partnerships or who would own it, B.C. Hydro is at the beginning of developing a distributive generation strategy. Actually, I'm leading that initiative. One of the things we're looking at exploring is creative partnerships. So in some cases there are communities across B.C--and Mr. Cullen is probably well aware of these--where reliability and energy security are huge issues, and there may or may not be private sector solutions there. So there may be a need or a reason or a compelling rationale for why Hydro might step in. I'm not saying we would, but I think the door can be open at this point to explore those creative partnerships in which potentially a utility or a municipality and/or the private sector would be involved. We're seeing this increasingly in the U.S.
In Austin, Texas, the utility basically bought an asset, put it in a children's hospital that was having reliability issues, and paid for it. It's run by the hospital, and the hospital reaps the benefits. It did that because it was cheaper for them to do that.
Conservative
David Anderson Conservative Cypress Hills—Grasslands, SK
I have a concern about this, because in my province we do have monopoly energy providers. I'd be interested in the other gentleman's observations on this as well.
Vice-President, Marketing, Union Gas Limited
On the gas side, currently we do have interruptible rate schemes. A customer can contract for a firm supply, or some portion of that firm can in fact be interruptible on four hours' notice. They would actually load-shut, but they know what they're doing. They're sophisticated customers. They see some advantage to that and they contract that way.
But to speak again of the green energy bill just introduced in Ontario, that bill now allows for utilities to invest in renewable projects up to 10 megawatts and actually put those into rate base. That, then, sort of opens up the door for even a utility like Union Gas, a gas utility, to actually invest in a renewable project up to 10 megawatts, put those costs into rate base, and be awarded the regulated rate or return for those projects.
Conservative
David Anderson Conservative Cypress Hills—Grasslands, SK
So will that restrict the size of the projects? My next question was going to be about how big you see these energy partnerships being. Do you see them being complete municipalities in some of the larger cities? The opposite side of that is how small they can be. I brought this up last week. I live at the end of an electrical grid. How big do they have to be to be feasible?
Vice-President, Marketing, Union Gas Limited
I think it'll vary. We have 650-megawatt combined gas plants being built in Ontario, where you see partnerships, where you see OPG partner with TransCanada, for example, as investors in that. I think there's a variety of ways of doing that. In terms of regulated and monopolistic utilities, I think the intent here is to actually limit them to those small projects, not the larger ones. Other investors can come in and invest for the larger projects.
Conservative
Vice-president, Marketing and Business Development, Terasen Gas
On that front, maybe in B.C. it's a little bit different. We'll find out. We're probably going to push our regulator a little on the framework of things. We see a model whereby that regulated utility would be allowed to invest in all these kinds of projects and attach them into that utility so there's some scope and scale and some security and reliability benefits for each of these communities, which don't need to have each one meeting stand-alone criteria.
That said, this would not preclude municipalities from either partnering on those things, owning a piece of it but getting the expertise that goes with it, or generating a royalty stream. For example, we have communities that were serviced with natural gas many years ago and they attained a franchise fee; a portion of the revenue that goes to the municipality. They use it for general tax purposes.
I think there's a variety of models that can work. The key is having the right credibility, I think, because you want this thing up and running and reliable in the long run for folks if you're going to get this to promulgate and more people to buy in and make it work across the country.