Natural Resources Committee on Jan. 29th, 2013

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

Thank you very much for that. I appreciate it. I have only seven minutes, and as Mr. Trost said, it goes by very quickly. Certainly when we look at the fact that we've lost half a million jobs on this government's watch.... We've never lost as many manufacturing or value-added jobs in our history as we have over the last six years.

I'd like to move on to Mr. Levy. There is a very interesting group of statistics here on the R and D budget for wind energy: Canada's spending is lamentably low. It's about 7% of Germany's spending, 5% of Spain's, 4% of Denmark's, and a tenth of Norway's. Other countries seem to be far ahead of us in terms of R and D in wind energy.

I recall that one of the members from your association, Sean Whittaker, appeared before this committee in April 2010 and said at the time that the cuts to ecoENERGY were something of real concern to the association. “While Canada's commitment to ecoENERGY is declining, the U.S. commitment to their incentive is actually increasing quite rapidly”.

My question to you is this. We're seeing this government falling lamentably short on investments in renewable energy. It just doesn't seem to get the importance of renewable energy. How do we address this issue when Canada is so far behind our major competitors in investments in R and D on wind energy? What impact do you think the cuts we're seeing in programs like ecoENERGY are having in getting us even further behind?

[Tom Levy]

That's a good question. ecoENERGY is the equivalent of a production tax credit, which is what has just been renewed in the U.S. We no longer have that in Canada. It was in fact an immensely beneficial program that allowed the growth to go from where it was in 2005 and before that to what it is today, which is quite remarkable.

The benefit of R and D is somewhat of a different fold. It is one that sees opportunities to maximize the investments we have made in wind energy and other renewables to ensure those are operating efficiently, and that when we do bring more on those continue to operate efficiently. The investments the government makes today will continue to have benefits in the future as well, as the system operators become more comfortable with the various tools we are suggesting need researching, such as forecasting and other integration tools. It's a tough question to say how do we catch up. I think we continue to make investments and continue to top up the clean energy fund and other sorts of funds that have seen those investments in R and D be made.

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

Thank you for that. The facts are quite astounding that Canada is this far behind, spending only a small fraction of what our chief competitors are spending in terms of wind energy.

My final question goes to Mr. Whittaker from SDTC. We're looking at a global market for renewable energy. As you know, it's about $1 trillion now. In the next 10 years, it's going to be $3 trillion. Canada gets a minuscule part of that. I'm wondering to what extent you are seeing support from the federal government now for SDTC. For example, what are you receiving in this fiscal year, and to what extent is that adequate to finance the race that Canada is losing, where other countries are investing far more in renewable energy? Canada simply isn't there.

[The Chair, Conservative, Leon Benoit]

Mr. Whittaker, I need a short answer. Mr. Julian's time is up. Go ahead, please.

[Rick Whittaker]

For sure. Thanks for the question.

Obviously, we are very thankful for the support the government has given us. As this committee probably knows, we do have a recapitalization request in front of the government. In budget 2011, we received $40 million. We have put that to good work. We will continue.

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

So it's done?

[Rick Whittaker]

It will be done, yes. It's done.

[The Chair, Conservative, Leon Benoit]

Sorry, Mr. Julian, your time is up.

We will go now to the Liberal member on the committee.

Mr. Hsu, welcome, first of all, to our committee today. Go ahead for up to seven minutes.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Thank you, Mr. Chair.

There are going to be a number of random questions.

First, to Mr. Levy, it was almost an offhand remark you made about WESNet and about it running out of NSERC funding. I was wondering if you could elaborate a little bit about how it's running out of NSERC funding and why it might be important to not run out of NSERC funding.

[Tom Levy]

For full disclosure, I sit on the board of WESNet. The WESNet fund is primarily driven through NSERC, and that has a time allotment of, I believe, five years. We have just received a one-year extension as some activities continue. Essentially, what we were told is that there is no more money, and there is a lot of competition for other sources of NSERC funding, and WESNet has essentially run the course.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Why do you think you should get one dollar that somebody else doesn't get?

[Tom Levy]

Because there is still need for additional R and D, and for the activities that WESNet undertook under four primary themes—forecasting, integration, interconnection, and the other I can't recall-—we still have a need for understanding how those activities can impact the existing wind fleet and future wind fleets.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

For Mr. Whittaker, how do the changes in the scientific research and experimental development tax credit affect your partners, if at all?

[Rick Whittaker]

That's a great question.

I will frame that question around the federal R and D review that was done, which pointed out Canada's relative position on direct versus indirect mechanisms, such as SR and ED, which is an indirect tax measure. Organizations that focus on direct funding—SDTC is one—are disproportionately smaller than our competitors. The recommendation to re-shift that balance is a good one, especially given that all the countries we compete with have more direct funding mechanisms as a proportion than indirect. In terms of impact to the folks we deal with, most of them are small and medium-sized enterprises. In fact, 86% of the folks we invest in are small and medium-sized enterprises. They're the ones that have the most difficult time accessing funds like SR and ED. For them, seeing the shift into direct funding mechanisms is very welcome.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

You're saying that grant applications for these SMEs take less time and effort than applying for the SR and ED tax credits. Is that what you're saying?

[Rick Whittaker]

It's not the time and effort that goes in. In fact, it probably takes more time and effort to apply for a grant. The ability to get it and actually put it to work and the net benefit you receive from it is greater for the smaller and medium-sized companies.

Imagine taking the equivalent of a $3-million investment in a small company versus the tax break. That makes a huge difference to them and their consortium.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Okay.

I have a question for Messrs. Gray and Wamboldt. Is it fair to say that a barrel of synthetic crude produced a year from now will be produced in a way that's cleaner and safer and cheaper? Is that fair to say?

I seem to see that as time goes along, the cost of producing every barrel is less and the environmental impact is less. It seems that there are a lot of technologies in the pipeline to continue that trend. Is that a fair assessment?

[The Chair, Conservative, Leon Benoit]

Let's start with Mr. Wamboldt.

[Bradley Wamboldt]

What I would say is that with associations such as COSIA allowing our technical folks to work with technical folks from other competitors as well as with universities, without the shackles of IP, etc., what we're seeing is the opportunity to lead certain technologies. In other words, people aren't working on the same things and getting the same results. We're actually able to build on each other's work.

So I would say that yes, I think we should see an accelerated pace of technology innovation that will lead to lower environmental footprints per barrel in the future.

[The Chair, Conservative, Leon Benoit]

Go ahead, Dr. Gray.

[Dr. Murray R. Gray]

I would agree, although it is important to keep in mind the timeframe for technological innovation. The history of the industry has been to develop better and better operating practices and better operating expertise, which drives down the energy intensity and drives down the water use, as Mr. Wamboldt said.

Any new technologies that come in usually have a three-year to five-year horizon, minimum, before they start to have an impact. So year by year, you can see improvements just by doing a better job with the existing infrastructure. Three to five years out is where you start to see the benefits of technology-sharing and new technology.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Perfect.

One of my motivations for a question like that is to ask a bigger question on the value of every barrel of oil produced from the oil sands. If it's produced a year from now, what is the total value to society and the economic value and the value to the natural assets we have? Is it possible that producing a barrel a year from now could actually be more valuable because it will be cheaper and safer and cleaner?

Mr. Wamboldt, do you have any thoughts on that?

[Bradley Wamboldt]

I think I understood the question to be whether the oil will be more valuable in the future than it is as produced today? Was that the question?

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Yes.

[Bradley Wamboldt]

I'm not quite sure how to answer that other than to say that producing oil today is what funds the research that's going into these improved innovations.

To get back to Dr. Gray's point that there is some time required with respect to the development of these technologies to bring them on board, certainly the observation I've had, working in this field for a little bit, is that these goals are not mutually exclusive. In other words, generally we find that if we can do things more efficiently, it is economical and reduces the footprint on the environment. So continued incremental change, followed up by some of these technology game-changers, is the way forward.