Thank you, Mr. Chairman.
Members of Parliament, fellow panellists, other guests, good morning.
Thank you for the opportunity to speak to you about TransAlta's efforts to develop carbon capture and storage in Canada, and how those efforts will be achieved, in large part, through the Government of Canada's ecoENERGY program.
My name is Don Wharton. I'm the vice-president for sustainable development at TransAlta.
I'll just say a word about our company. We have approximately 85 power plants, just under 10,000 megawatts of generation. That makes us roughly the same size as BC Hydro. We are Canada's largest investor-owned utility, and we have a broad portfolio of generation fuels, including coal, natural gas, small and large hydro, biomass, and wind. It may surprise you to know that TransAlta is Canada's largest investor-owned wind developer and that more than 22% of our power generation comes from renewable sources.
Today, our business strategy is focused on clean energy in two primary areas: renewables, such as wind, hydro, and biomass technologies; and clean energy technologies, particularly carbon capture and storage. With regard to CCS, our primary efforts are focused on an initiative referred to as Project Pioneer, a beneficiary of the government's ecoENERGY program. We're pleased to have Canada as a partner in this project. I'd like to describe briefly that project.
By 2015, Project Pioneer will be one of the largest fully integrated CCS systems in the world. It will be built as a retrofit to our Keephills 3 coal-fired power plant and will use chilled ammonia technology to capture and permanently store one million tonnes of greenhouse gases per year, or about a third of that plant's emissions. This will make Keephills 3 one of the cleanest coal-fired power plants in the world.
Together with the Governments of Canada and Alberta, we have formed a consortium of partners to finance, design, build, and operate this project. TransAlta's partners include Alstom, Capital Power, and a pipeline company, who together bring expertise in all elements of the project. Based on detailed engineering work this year, we expect to begin construction in 2011. Pioneer will be operational by 2015 and will run for a 10-year test period from 2015 to 2025. It may run longer. The captured CO2 will be transported to both a sequestration site at a nearby saline aquifer and an enhanced oil recovery project in a mature oil field about 50 kilometres away. It's important that we develop each of these storage options since both will be required to handle long-term CO2 supply from CCS projects.
Additionally, TransAlta is developing a highly aggressive knowledge transfer program to convey the knowledge we gain from Project Pioneer. As recipients of significant public funding, we have an obligation to maximize the knowledge value from this prototype project. We are developing plans with academia, institutions, industry associations, such as the ICO2N group, which you'll hear from later this morning, and other CCS projects across the globe to leverage the learning from this effort. In turn, we expect to learn more from them.
I'd like to turn now to our perceptions of the benefits of CCS. The benefits from Project Pioneer are both environmental and economic. On the environmental front, Pioneer will remove about one million tonnes of CO2 annually from the environment, the equivalent of taking approximately 160,000 cars off the road each year in Canada. In addition, the project will also reduce SO2 and particulate emissions from that project.
On a broader scale, Canada's greenhouse gas emissions from coal-fired generation are about 90 million tonnes a year. Globally, coal-fired generation represents the world's single largest industrial source of carbon emissions. It is TransAlta's view that CCS is one of the very few options we have to make large reductions in these emissions within a relatively short timeframe.
There are also important socio-economic benefits that have received little attention, particularly in areas where enhanced oil recovery is possible. In assessing Project Pioneer, TransAlta conducted an independent analysis through Wright Mansell Research, which concluded that over the 10-year life of the project, Pioneer would extract at least 22 million barrels of incremental oil production through enhanced oil recovery; increase federal, provincial, and local government revenues by as much $1.2 billion from taxes and royalties; and increase Alberta's GDP by between $2 billion and $3 billion over a 14-year period. This analysis would indicate that the return on investment in Project Pioneer and the federal ecoENERGY program and other government funds is quite worthwhile.
Let me speak a minute about the ecoENERGY program. It has been instrumental in making this project a reality. In total, Pioneer will receive $773 million in government funding. The Canadian government is contributing $342 million to Pioneer and the Alberta government $431 million. The remaining portion will come from industry and market sources. There's no question in my mind that without this funding, Pioneer would not proceed—at least at the pace required to meet global greenhouse gas reduction objectives.
We are in the early stages and there has been a lot said about the economic viability of CCS. This issue is the single biggest challenge facing CCS today. But I must say that most of the debate about costs has been speculative, based on hypothetical numbers and little experience. I would put industry, as well as others, in that same boat.
We need to prove the costs out, good or bad, and push hard to drive down capital and operating costs through optimization, scale, and technological improvements. Only then will we really be able to tell whether CCS has a long-term future as a major tool in the fight against climate change.
In addition, the Canadian regulatory framework has not yet put a price on carbon, which will provide the ultimate benchmark for new clean technologies. If CCS, once mature, can remove large volumes of greenhouse gases at or near the price of alternative solutions, it will become a tremendous asset.
However, as with many new technologies, there's a financial gap that needs to be bridged to encourage the private sector to invest time and resources to make CCS a viable clean technology in the long haul, before there is clarity on carbon prices and technical reliability.
Thankfully, through its ecoENERGY funding for CCS projects, the Government of Canada has gone a long way to bridging this gap.
Let me speak for a moment about the need for Canadian leadership in this area.
Last month I was fortunate to represent TransAlta in a joint Canada-Alberta CCS trade mission to Europe. We met with companies and governments in Norway, the U.K, and Germany, and also in Brussels, all of whom were engaged in CCS in some fashion. While these countries have been the early leaders in developing CCS, every country that we visited said that Canada was seen as being positioned to become a world leader, if not the world leader, in this area. Why? Because we enjoy the fortunate coincidence of supportive government programs and policies, solid industrial infrastructure and expertise, great geology, and good public support.
As I conclude my remarks, let me leave with you with a few key points.
First, coal will remain part of the global energy mix for the 21st century. Coal provides more than 40% of the world's electricity and will be maintained as a viable part of the global fuel mix. It's cheap, plentiful, and is deeply embedded in the global economy. Half of the electricity in the United States comes from coal. It's not going away anytime soon.
Second, technology is the key. TransAlta believes that CCS is one of the few technologies that can deliver major greenhouse gas reductions globally in the next 10 to 15 years. More than 90% of today's emissions from coal-fired power generation can be captured by CCS.
Third, governments need to bridge the financial gap. This is not a lasting financial commitment, but an initial investment to catapult CCS technology to the point where it's a viable and a competitive solution to preserving the value of Canada's energy resources. Nothing will reduce Canada's environmental footprint or give us greater economic benefit and national security than clean coal.
Finally, there is a leadership opportunity. This can be Canada's significant contribution to the world's climate challenge in the next decade. With five major projects currently in development in Canada, our country is ahead of everyone else in achieving the G8 target of having 20 CCS projects in place around the world by 2015.
CCS is essential if Canada and the world are to address the carbon challenge, and Canadian governments have been instrumental in funding and supporting this solution.
Thank you.