Natural Resources Committee on Dec. 6th, 2012

[Robert Dutton]

We have not taken this internationally. We're really focusing on trying to establish a toehold with our peers and competitors within the western Canada sedimentary basin. We don't enjoy international operations any longer, so we don't necessarily have international exposure.

[The Chair, Conservative, Leon Benoit]

Thank you, Mr. Anderson.

We go now to the official opposition.

Mr. Julian, go ahead, please. You have up to seven minutes.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you very much, Mr. Chair. I'll be sharing my time with Mr. Nicholls.

I thank our guests today. You're giving us a lot of food for thought.

I'll start with you, Mr. Gora. You said you didn't mean to be critical, but...well, obviously the government is falling well short of where it needs to be in terms of providing supports. When we look at what's happening with research and development, the ending of SR and ED, and when we look at what's happening with energy efficiency programs being wrapped up, we're seeing that this government is falling far, far short of what's needed.

We have a worldwide market of $1 trillion, moving to $3 trillion, and we're seeing from this government systematic cutbacks in the kinds of programs that can actually facilitate research and development here in Canada in green energy. The reality is that we're falling further and further behind. It's simply not taking advantage of where Canada should be.

I'll start with you on the issue of tidal power. We have the world's largest coastline. We should be innovative leaders. We have one project in Nova Scotia, as you mentioned.

Do you not see this as a sea change that the government has to go through to support these green technologies and look to providing support, not only for the project in Nova Scotia but for projects right across the country?

[The Chair, Conservative, Leon Benoit]

Mr. Gora, go ahead, please.

[Christopher Gora]

I'll answer that question by saying that we're at a stage, in terms of tidal energy particularly, where we need to cross what is essentially a difficult gulf—namely, from a pre-commercial stage to maturing the industry as a real and viable generator of power, a real player in the industry.

I would underline that it certainly will require collaboration and support from academia, industry, and government. The sea change is coming. I certainly witnessed it in the U.K. in the sense that there were strong policies, with strong support and a strong desire to coordinate these three sectors of the industry.

My point is that I think Canada can look to the U.K. as a good example of that, and build on what it's already done.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

We have to note that Canada is the last in the industrialized world in public investment in R and D, last in patent development, and second-last in the production of doctorates, so we obviously do need to go through this sea change that you mentioned. The current attitude of the current government simply isn't acceptable.

I'd like to move on to the QUEST folks. You mentioned that energy efficiency programs are the foundation. We've seen ecoENERGY wrapped up. Do you feel the government really should be investing in energy efficiency?

Certainly in the official opposition, the NDP feels very strongly that energy efficiency programs are a real foundation for bringing to bear energy savings both for individuals and also for the types of communities that you're envisaging.

[Mike Cleland]

I'll start, and I'll admit to something of a conflict of interest: I was the assistant deputy minister of Natural Resources Canada in the 1990s and was responsible for a lot of the energy efficiency programs there. They grew a lot after that.

The basic point I want to make is that there is a foundation of basic energy efficiency programs that you need to have, including information—what I'll call, if you will, the wholesale end of energy efficiency--where national leadership is absolutely critical. A lot of the retail energy efficiency programs should be delivered, I believe, by the provinces and by utilities through demand-side management programs, but without that kind of federal infrastructure, that foundation, it's really very difficult to do it. I think the federal government has provided leadership on that over more than two decades, and that needs to continue.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

I'm going to pass my turn to Jamie Nicholls.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Thank you.

I'm going to continue with questions to QUEST.

Mr. Gilmour and Mr. Cleland, this is obviously not the first time you've testified before this committee. You're somewhat veterans of this process.

I believe in 2009 there was a federal road map developed about integrated community energy solutions. I'm sure the government has acted on some of the recommendations in that road map, but in the interests of improving performance, could you maybe address some of the places where we could improve on that road map and achieve the targets that were set out in it?

[The Chair, Conservative, Leon Benoit]

Go ahead, Mr. Gilmour.

[Brent Gilmour]

Thank you.

One of the key aspects of that road map that was endorsed unanimously by the Council of Energy and Mines Ministers in their presentation of it at the rollout in 2015 was the actual application of what people had encouraged and thought was beneficial from both a federal and provincial standpoint.

In the lead-up to that, the thought was to invest in the demonstration and pilot projects to help understand what the cost opportunity or benefit might be and how you could advance certain applications, whether it's run of the river, as we're hearing about, or other types of applications, such as a thermal grid network opportunity or solar thermal energy or all of the above. That was one area I think we would like to continue to see move forward, that opportunity to partner with industry. We're starting to see those initiatives, such as SDTC, being a key aspect for that.

The other area we were hoping to see was a continued focus on the policy application. In that road map they outlined the importance of energy efficiency, as we've just touched on. I think that underscores the notion of infrastructure. Infrastructure is something that isn't always seen as directly aligned with energy, but it is. We have to realize that the important part was understanding that as you invest in infrastructure across Canada for roads, water, sewers, buildings, or transportation, that has an energy impact and has an energy demand.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

So all those investments should be looked at with a sustainability focus.

[Brent Gilmour]

Exactly, and that was one of the underscoring aspects encouraged by the road map: to understand what that impact might be.

[Jamie Nicholls, NDP, Vaudreuil—Soulanges, QC]

Mr. Cleland, you mentioned signals. Other witnesses who have come before the committee have said the same thing: that the role of the federal government can be to send a signal to investors and basically globally about the direction we're going.

We see that the government has $1.3 billion in oil industry subsidies, and I was somewhat shocked that your organization receives $75,000. Was that the number? That seems to be sending a signal that.... I would prefer to see a stronger signal sent, putting your organization higher in terms of the importance that's given to investment by the federal government.

How could we strengthen this signal toward the transition to renewables and what you mentioned, the multi-modal energy, and how we can develop systems that use multiple sources of energy? How could the federal government send that signal?

[The Chair, Conservative, Leon Benoit]

Could you be very concise, Mr. Cleland, as Mr. Nicholls' time is up?

Go ahead, please.

[Mike Cleland]

I'll be very brief.

First, I would not want to comment on the number with respect to subsidies to the oil and gas industry. I'm not sure that I know the facts.

We listed several areas where we see the federal government having a role in support of what we're doing. The answer would be to continue doing what you're doing. Brent talked about demonstration projects. That would be a big step, and that would be new money. That would be the prize, if you will.

The other one that is really obvious is that as you support infrastructure development, as Brent said, that be taken into account in projects. Of course SDTC, which is increasingly working in this area, maintains support there, and I encourage it to work in this area.

[The Chair, Conservative, Leon Benoit]

Thank you very much.

Thank you, Mr. Nicholls and Mr. Julian.

We go now to Ms. Duncan. Welcome to our committee today.

Do you want to question the witnesses? Go ahead, for up to seven minutes.

[Kirsty Duncan, Liberal, Etobicoke North, ON]

I have seven minutes; okay.

Thank you, Mr. Chair, and thank you to the witnesses.

I have a question for Mr. Gora. How would you qualify the current state of funding of R and D and innovation in the Canadian energy sector, please?

[Christopher Gora]

I can qualify it by our own experience, which is that it involves a very critical mix of R and D tax credits, because in our business with our long development timelines, we spend a lot of money on labour and on capital costs because we're building demonstrators, we're using test sites, and that sort of thing.

Having the tax credits at our disposal is very important. So is the project funding for demonstrator projects, etc. That allows us to engage with industry and other potential investors to participate in projects and effectively leverage the money we've received. Again, SDTC has been very useful in this regard.

The creation of FORCE and the support for FORCE from various levels of government is a great signal. That is one aspect that has put Canada on the map in terms of the tidal energy industry. People around the world now recognize that Canada is a player and has this resource. For us, of course, that provides us with an opportunity to test at a larger scale in what is a very energetic place.

[Kirsty Duncan, Liberal, Etobicoke North, ON]

In order to keep the industry moving along, you've been very clear about SR and ED. What specific recommendations would you make to this committee in terms of project funding? You've made some recommendations about tax credits. I'd like to hear about project funding. I'd like to hear what recommendations you'd make regarding SDTC and even non-fiscal policies, please.

[Christopher Gora]

In terms of project funding, because this is going to be and still is relatively unproven technology, there is a certain discomfort among investors who have a range of options in front of them in terms of the energy projects they can invest in.

One of the keys to creating a viable tidal energy market or industry, for example, is to actually build in or introduce some safeguards or some initiatives that provide that level of security. Feed-in tariffs are just one example of that kind of mechanism, and so are power purchase agreements. I acknowledge that's not necessarily within the jurisdiction of the federal government, but that at least provides a solid foundation on which project developers can bank, because they can now show that there's a revenue stream for the life of the project that will enable them to raise more funding.

In terms of the specific—

[Kirsty Duncan, Liberal, Etobicoke North, ON]

The more specific you can make it, the clearer the recommendations will be to the committee.

[Christopher Gora]

Sure.

Again, one of the recommendations is.... I know there was a feed-in tariff introduced with wind through the WPPI initiative. I don't have the full name in front of me right now. That was an example of a mechanism that probably spurred on a great deal of project development. That, again, is a very important point.

There are probably going to be a few more pre-commercial projects as we get into multi-unit arrays and that sort of thing. Real, substantive funding to enable those kinds of projects to go forward is extremely important. SDTC comes to mind, but only as one potential source of that project support.

[Kirsty Duncan, Liberal, Etobicoke North, ON]

What would be other sources beyond SDTC?

[Christopher Gora]

I've already mentioned tax credits. We have a situation in which effectively we need a fairly significant source of funds for our projects. Where do those funds come from? For us, they come from our investors. The way we get investors is to demonstrate that this is an industry that, even if it's not mature today, has a strong possibility of becoming a significant player in the energy production field, which means that there are potential revenues there.

From the government side, what does that mean? That means for us that the government has taken a really substantive interest in the resource, that it's dedicated resources to identifying areas that are going to be good energetic sites, and that it's actually starting to put into place policies and mechanisms for leasing those sites, for actually making those sites available to project developers.