Thank you very much, Mr. Chair.
I would like to thank the committee for the opportunity to tell you about our organization and about renewable energy in Canada.
Innergex has been active since 1990. We have been developing renewable energy for a little over 22 years. Also in 1990, I started to become interested in the renewable energy industry. Innergex now has 22 run-of-river power plants, five wind farms and one solar farm, for a total installed capacity of just over 1,044 MW. That represents approximately 300,000 households. So almost 1 million people benefit from this green energy in Canada.
The approximate value of our assets is $2.4 billion. We have an investment plan for projects that already have long-term contracts for another $1 billion for five years.
We are a Canadian company that works exclusively in renewable energy. As I just mentioned, our three energy sources are hydroelectric energy, wind energy and solar energy. Those are the three main technologies that we use to create energy. We have decided not to work with other forms of energy produced in Canada or anywhere else. We only produce renewable energy.
We do not manufacture turbines or solar panels. We use them. We like to work with manufacturers on coming up with innovations, which can be very diverse. I will give you a few examples a bit later.
We also integrate innovation into our projects when we are able to have partnerships with municipalities and first nations. We feel that innovation plays a major role in the development of sustainable projects.
“Sustainable energy development”
also means involving people from the community.
We are also interested in another form of energy called stream energy, found especially in river environments. A company in Quebec, called RER, developed a product that we feel has a promising future. The problem is the production cost, which is still quite high. But we are very hopeful that, with a few projects and some volume, this technology will evolve the way wind energy did. We feel that with industrial mass production, the cost of those turbines will become very competitive.
I am talking about innovation, although we understand that hydroelectricity has been part of the Canadian heritage for a long time. This technology is well known, but in many ways, at Innergex, we have done a lot of work to improve this product and tailor it to a number of Canadian conditions, particularly in British Columbia, where we are very active in building new power plants. We have changed the bypass valves, as we call them.
Let me quickly explain the problem. We know that rivers go up and down in British Columbia. In many rivers, salmon or fish are often downstream of a section that is very steep, and that is where you find a greater hydroelectric potential. We operate in those sections. When there is a power failure, we have to shut down production and, suddenly, the downstream level goes quickly back up. So we have worked with the industry to install bypass valves, meaning valves that are able to carry the flow that turbines use to produce electricity, disperse it right away and regulate the downstream flow. It is rather technical, but I would say that this innovation now makes it possible to use or set up hydroelectric facilities in rather sensitive areas that, otherwise, would not have been able to develop in an environmentally-friendly and sustainable way.
Turbines have also been effective in countering erosion. In working with the industry, we have found metal composites to protect the turbines from the erosion that occurs. In British Columbia, grains of sand got into the penstocks and eroded the turbines prematurely. By working with the industry, we have found a way to increase the service life of those turbines.
There are also paths for the future in what we understand about renewable energy in isolated networks. We might consider developing batteries to store energy when we are able to produce it. As for wind energy, we know there is wind, but not constantly. If we were able to store that energy with batteries at a competitive cost, we could supply isolated villages and even contribute to the network by increasing the capacity and availability of the megawatts produced.
It's the same thing for compressed air. We could consider using energy during the night to compress air and use it to make energy during the day. It's the same principle for hydrogen. We can use the excess energy from wind farms or small hydro-electric plants to produce hydrogen that could then be burned in a combustion engine to maximize the potential.
We also spoke about partnerships. You have often heard partnerships mentioned. It's a reality for us. To develop hydro-electric projects in the regions, we forged partnerships with the first nations. We have two currently, and the first nations hold up to 50% of the project. We have provided all the capital and engineering infrastructure to help develop these projects. These projects would not have seen the light of day if we hadn't taken this approach. We think this approach is very innovative because we had to set up the financing, convince bankers to do business with the first nations and have guarantees for these plants located on reserves. We had to work with one of your departments, Aboriginal Affairs and Northern Development Canada. In working with them, we were able to reassure bankers so that these kinds of projects can be carried out.
Our greatest challenge is the fact that renewable energy requires a lot of capital, and it takes time for it to amortize. For a hydro-electric plant or wind farm project to be profitable, it has to be considered over 20, 25, 30, if not 40 years. In order to invest the capital, we need long-term contracts or a way to ensure we will have stable revenues to amortize that capital. Overall, the production costs consist of about 80% fixed costs and 20% variable costs. So we cannot be exposed to rapid variations in the price of the energy we sell.
When we can be granted long-term contracts through public partners, we can focus on development. The life of a hydro-electric project, from the moment we conceive of developing a project, to its realization and up to the point it is used commercially, that takes about five to eight years. It takes at least three years for the environmental study, and two to three years for construction and negotiating the long-term contract. During that eight-year period, we can't be exposed to significant price variations because we cannot change the construction cost.
So those are our greatest challenges. We're not asking for charity, but we hope to be able to look at the cost of electricity in the long term, not just the short term. We need only look at the cost of a barrel of oil or the cost of natural gas in the past 15 or 20 years. The cost of a barrel of oil has fluctuated a lot. In the late 1990s, the price was $13 a barrel, then it peaked a few years later at $200 a barrel. During the same period, natural gas varied between $2 a gigajoule and $8 to $9 a gigajoule to settle at its current $3.50 a gigajoule.
We need a long-term vision and support that comes from long-term contracts. It would enable us to invest capital in the long term. Without that, it is very difficult for us to develop.
Thank you.